Monthly Archives: August 2009

$VION; A perfect trade using the Morning Star Pattern

Posted by Investing Freak on August 28, 2009
General / Comments Off on $VION; A perfect trade using the Morning Star Pattern

Today I had a chance to experience those special conditions that cause a day trade to turn into great profits.
The stock chosen was VION. It was down 45% for the day on no news. (It is a Pharmaceutical so I thought some bad drug news came out).

As I watched the price slide down like a waterfall I saw a reversal form. This reversal in candlestick patterns is called the Morning Star.
The patterns is a bottom reversal signal. It is most effective following an obvious downtrend (in this case from 6.50 to 2.20)

According to Candlestick Trading Forum:
The Longer the black candle and the white candle, the more forceful the reversal.

The Pattern psychology for this specific pattern says that when the price goes down fast sellers get panicky. They keep selling off and as they are doing that bulls begin to step in.

Now that I have explained the pattern I used time to explain the entry and exit signals.
Entry 1: 100 shares at 2.90
This was an initial entry to test the playing field.
Entry 2: 100 shares at 3.50
I was looking for price to close above 3.25 for 2 consecutive candles to buy into strength. 3.25 if you can spot it is a resistance from earlier candlesticks.
Exit 1:     100 shares  at 4.01
4 is a round number so that makes it psychological for people to dump shares
Exit 2:     100 shares at 4.53
Looking at the far left 4.53 is around where the 2nd large red candle begins. and if you look up further more candles tend to end around 4.75.
Initially I had the limit sell order at 4.74 but I then decided not to push my luck.

Conclusion: After concluding the trade I watched the price go at high as 4.90 then in one big swing it crashed back down to 4.
Overall it was a great risk reward ratio and a well thought out trade.  Morning star followed by an initial entry to test strength of the pattern and if it goes your way add another position which will allow you to scale out.  Now this did take 2 day trades out so if you have under $25k account you will only have 3 trades in 5 days so it’s really not ideal to do every day.

Here is the image to illustrate all the text in this post. (Click to Enlarge)

vion-aug28-trade

 

Hope you enjoyed it and while I do understand this is not a stock pick because it is already gone I hope it serves as a teaching tool to how simple trading can be at times.
-K

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Fake correction followed by a fake rally?

Posted by Investing Freak on August 27, 2009
Market Analysis / 1 Comment

The past 4 days The S&P and many other markets have traded within a very narrow range.
There have been doji candles galore. trendlines, averages, bullishness ratios and even the Elliot Wave expert said rally is ending and a correction will come sooner or later that will surpass the march low.

I have taken the liberty to put up a few $SPX charts with possible short term outcomes.

The big picture is in the first image (Click to Enlarge)
I am looking for the S&P to go to 1010 to lure in bears and then bounce off the trendline and make a higher high to fool the  bulls and shake the bears. Then lastly (not in these pictures) I am looking at 950’s as a conservative bet.

spx-aug27-09Here is a closer look short term view.  Upside target is 1040-1050.
spx-aug27-09-closeI hope you enjoy my opinion and feel free to comment your own.
-K

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Shooting Stars are everywhere. Is it time to turn into a growling Bear?

Posted by Investing Freak on August 24, 2009
Market Analysis / Comments Off on Shooting Stars are everywhere. Is it time to turn into a growling Bear?

I noticed something strange today looking at my favorite timeframe. (half a day 🙂 )

Stars were shooting everywhere.
Many symbols like $SPX $SPY $INDU $OEX $COMPX $QQQQ etc had the shooting star pattern to an extent.
I chose to include only 3 to keep it simple

Now before I insert the image I would like to explain what a shooting star pattern is thanks to Stockcharts.com

Shooting Star: A single day pattern that can appear in an uptrend. It opens higher, trades much higher, then closes near its open. It looks just like the Inverted Hammer except that it is bearish.

Here is a visual aid to go with the definition.  (Click To Enlarge)

shootingstar

Now bear in mind this is my own opinion of what I see happening. My system has yet to give a sell signal but today I did receive a sell in GLD so if gold is losing value that means market is going down (most times that’s the correlation I’ve seen.)

Now listen up you Goldman Sachs!  Stop reading my blog and proving me wrong. Let the market go down like it wants to.
Thank you very much.

-K

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8-20-2009.. another repeat of 7-13-2009 ?

Posted by Investing Freak on August 21, 2009
General / 1 Comment

If you have been following my current picks page you might have noticed that most of the symbols received buy signals on 7-13-2009 which is when the March rally was coming to a correction but then bounced. Will we have another case of this with 8-20-2009?
I was hoping we wouldn’t that is why I posted those charts yesterday thinking  we had topped. Well my automated strategy was saying otherwise and I completely Ignored it.

Normally I would just update the current picks page but this time around I have decided to make a blog post.
———-

Market Indices and other important Quotes
(Note: I understand you can’t purchase an index so bear with me these are just signals)

Symbol

Buy Date

Sell Date

$SPX

8-20-2009

$INDU

8-20-2009

$COMPX

8-20-2009

QQQQ

8-20-2009

IWM

8-20-2009

SPY

8-20-2009

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Rest of the Symbols (More will be added per request)

Symbol

Buy Date

Sell Date

IYR

8-21-2009

AAPL

8-20-2009

DRYS

8-14-2009

SDS

8-20-2009

SRS

8-20-2009

SSO

8-20-2009

SKF

8-20-2009

UYG

8-20-2009

URE

8-21-2009

JNK

8-21-2009

HYG

8-7-2009

REW

8-20-2009

QID

8-20-2009

QLD

8-20-2009

XLF

8-20-2009

DIG

8-20-2009

DUG

8-20-2009

SMN

8-20-2009

VXX

8-19-2009

The VIX  ETF signaled a sell before the rest of the signals came in the following day. That is interesting.

-K

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Is the end (of this prolonged rally) Finally Here?

Posted by Investing Freak on August 20, 2009
Market Analysis / Comments Off on Is the end (of this prolonged rally) Finally Here?

Whether you have been a bull or a bear since March you have to be worried about what will happen from here.
Bulls might lose if market goes down and corrects itself, Bears might keep losing money being short (unless they hedge then they are neutral players).

Here is a chart of the S&P futures that I found interesting how it topped around 3:31Pm at exactly the first Pivot Resistance (R1) or 1007.75.  It’s been downhill from there so far.

Have we finally reached the top?

Have we finally reached the turning Point? (Click to Enlarge)

As I write this the ticker is heading towards 997.75 which is the first support for Friday.
UPDATE: WE HAVE HIT the first support line of 997.75 and might bounce or crash through.

Update #2: here I am 8 hours later and the futures have made a 360 degree turn. They now hit R1 (red line) of 1011.25.

es-topped-82009-2

What do you think? I am also long the Volatility Index (VIX) Via September 40 calls (got long today) because I think we are entering volatile markets again and that would be great.

-K

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Sell Tech?

Posted by Investing Freak on August 16, 2009
Market Analysis / Comments Off on Sell Tech?

If you check the Current Picks Tab you will see I have updated it again.

After running my strategy… $COMPX , $QQQQ, $IWM, $IYR, $QLD, $URE are all on the SELL list.

I am wondering if the tech sector (COMPX, QQQQ, QLD) is the first one to lead the next correction or if it is just lagging the seemingly never-ending rally of the current market.

Stay tuned and keep checking my twitter for more info. (either on the right column under “Latest Updates” or at http://www.twitter.com/investingfreak )

-K

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