Coaching Call Week 15

Just before Rob's weekly call I opened a position on MET. This was a classic swing entry following all of my rules and I triggered the entry manually by watching the intraday chart. It just happens that I caught a pullback that was 1 cent above the previous day's high. There was a deeper pullback later, but I was complimented on this being a good trade that followed my trading rules. In general, coach Rob was pleased with what he was hearing as I described the few open positions and trades that executed over the past week.

I was stopped out of my short position on TTI in a weird way. It seems I entered a bad stop-loss and bought it back for a very nice ~7% gain. I'm not really complaining, because that's a killer return in 2 days, but I would have squeezed nearly a percent more if I didn't accidentally violate my own management rules. We reviewed what happened there followed by other open positions and how they closed out.

I expressed some regret about not entering a trade yesterday on LNC, which had a very nice pullback and at this time it was going up very nicely. Coach Rob wasn't pleased with the emotion I was expressing on missing this trade on LNC. I can appreciate this, since there will always be missed trades and there's just no reason to be bothered by missed opportunities. The reason I didn't enter that position is that I was totally exhausted on Monday night. In retrospect I think I did the right thing by not trying to make such judgements when I'm unable to focus because of lack of sleep. I saw the direction, realized it was probably a good trade to enter and I was right. Cool. The fact that I didn't risk the entry under such a weakened mental state is probably a good thing. This is akin to not shopping or playing poker online after having a few drinks, no?

As pleased as Rob was with my progress, he remarked that that I was showing him the trades I wanted to show him. I quickly offered to show him the ones that went against me, started to pull up OSI & CEI, and he had a little chuckle.

After this run-thru of my current positions, coach Rob spent some time talking about Options. As you probably know from my previous posts, Rob is very knowledgeable with trading Options. The primary reason I'm focused on stocks is to reduce the complexity and practice all the good habits of a Professional Trader without having to deal with the additional complexities involved with Options. Options offer a lot of leverage, and good trading practices are essential in order to not have your account decimated by that very same leverage. Remember, the Bid-Ask spread insight I've offered in the past? When your trades come with a 5%-15% built-in loss, you better have your timing and discipline well honed.

Coach Rob covered how a Trader can leg out of an Option Spread depending on your outlook for a particular stock. He also went on to describe a way to aid in timing entry and exit based on the behavior of the Bid & Ask on a specific Option Contract. I'd describe it to you here, but why not sign up for coaching with Rob and get it directly from him? Tell him Mark sent ya! ;-) I can tell you that all such strategies are judgement calls and this is just another source of information to help you determine timing.

Before wrapping up this post I want to give credit where credit is due. Rob Craig has been a tremendous help in bridging the gap between the theory of trading taught in the classes to the actual practical application of that knowledge. My rapid progress is due in large part to the personal attention and feedback. If any of you are entering the Teach Me To Trade or Star Trader coaching program, I highly recommend asking specifically for Rob Craig. I inadvertently stole (or maybe borrowed) Rob's saying and titled a post last month based on it: Discipline, Patience & Timing! This was something that Rob ingrained in me right from the beginning and I didn't even realize I was quoting him when I titled my post as I did. Most of the practices and habits that I've formed have been forged out of Rob's guidance and I'm confident that if I consistently put all these practices together, I will be a successful professional trader.

Market Study for 2006-10-02

Happy Monday to all! You may be wondering: why would Mark consider this to be a happy Monday with the market selling off today? I'm happy because I closed out most of my long positions for some reasonable profits last week and have since opened 3 short positions that seem to be developing nicely (virtual trades still, mind you). I've also been holding a long position on GM (bought @ $31.20 on 9/26 : +7.35%) and reentered a position on AT&T that isn't moving my direction yet (bought @ $32.45 on 9/26, current gains: -0.75%), but still looks good and it doesn't seem to be overly likely that I'll get stopped out.

The short positions I opened today (10/02) are: OII ($30.26 : -0.55%), JOYG ($36.86 : +0.96%), TTI ($23.82 : +3.2%). We'll see how these develop soon enough...

Bad News: lost ~2% on both OSI and CEI which leads me to a new idea of not entering long positions on 3 letter stocks that end in I. I'm pretty sure that will keep me out of trouble in the future ;-). OSI faked me out and CEI had great Institutional buy-in interest, but the price just wouldn't budge up. It dropped low enough today to trigger my entry stop-loss and well, I'm out of the trade. At this point CEI looks like it's not going anywhere for a little while anyway.

Good News: gained enough on LNC, T, NAV and AMAT to be net positive, even after those drawdowns. Of course GM should contribute to that net positive when I'm ready to close it out. Isn't that how trading is supposed to work?

I've been predicting doom & gloom for the markets for the past 3 trading days. Well, maybe not doom & gloom, but it seemed like the market was due for a pullback. If you read my blog last week you'd know that I was a couple days early to the punch. As expected, the markets have seen a correction for the last couple days, but I'm not underestimating the bulls optimism as they've been pushing the market up until the bears finally held their ground on Friday and exerted some downward pressure today. There is a great deal of market optimism, but it seems to be a bit too shallow to support the last buying frenzy.

I've been keeping a keen eye for good bearish trades and had a plethora to choose from last night. I saw about a dozen Reward:Risk ratios of > 3:1 in my bears watchlist last night and cut it down to 5 that I flipped a coin on and decided to attempt entry today. As described earlier, 3 filled (the two that didn't were CMC &GGB, I'll reevaluate those two tonight). Two that I didn't attempt entry on, but made a very nice move down today are: HES and HP.

This post is titled Market Study for today so let's go on with the show, shall we?

The S&P 500 seems straight-forward enough, it looks likely to pullback to near the previous high or at least consolidate near it's closing value today.

The Dow-Jones Industrial Average seems to have been a bit more practical in it's last swing high, but still looks like it could close below it's previous high for the next couple days.

Everybody loves the NASDAQ right? There's plenty of optimism and fresh money that can be thrown into technology stocks to drive the NASDAQ up. Why do I say this? CNBC watchers have been told that money is being pulled out of energy stocks and is being put into the technology stocks. Of course that begs the question: are people so easily herded? Possibly, but of course, like any entity forecasting market direction, it's done with the other side presenting an equally convoluted case for why the market could likely go the other way. It's a fun game of semantics and opinion. So rather than speculating based on sentiment, let's read the story that the price-action (aka: mass-psychology) is telling. Considering the previous price-action that I've highlighted, we could certainly see some consolidation and volatility as it stumbles it's way up.

As always, form your own opinions and have a good laugh at me for sticking my neck out there and actually favoring a direction. Please remember that I'm an aspiring professional and I still consider my technical analysis skills in their infancy. I think we're in for some volatility more than direction for a while which is pretty good news for playing both sides of the market at the same time, although that does mean that you can get burned either way, right?

Thank you for your continued interest in my blog! Don't take what I write too seriously, I've been wrong before and I'll be wrong again!