Lasertrader's Place

A Potpourri Of Trade Ideas and Setups

Sign That The Top Is In For A While?

Posted by lasertrader on April 25, 2014

I haven’t written a blog post in quite some time because I have been focused on enjoying life. I received an email yesterday that raised a red flag for me. I haven’t seen an email like this since just before the dot com bubble burst. It truly shows that the public is fully engaged in the market. I said to my wife, maybe this email will mark the day the market moves down for an extended time. Today’s price action certainly supports this thesis. Who knows what will happen in this liquidity driven market but when I receive an email like this from a cousin sending it to the extended family distribution list it surely is significant.

Here it is…….

 

Family and Friends

At the beginning of this year I decided to get back into the stock market because I came to the realization that where we had been keeping our money wasn’t even keeping up with inflation in some cases.

As a Christian, I became intrigued by a guy named Sean Hyman who talked about a Biblical Money Code. Sean is a former pastor turned investment analyst. Bottom line is that I subscribed to his newsletter and started investing in some of his stock picks, In the past twelve weeks since I started, my combined investments that Sean recommended are already up over 8% and I still have 40 weeks to go before a year is up. I feel like I have just completed an MBA in investing after listening to Sean teach me and a few thousand others each week about how to invest safely. Sean is also a frequent guest speaker on Fox Business News, CNBC, etc.
If this is of interest to you, here is a link to a recording of him speaking to the Upper Room Church in Bastrop, LA, last Friday night. It is very educational from both a Biblical and an investment point of view.  http://bit.ly/1kaeGGv
Sincerely,
xxxx xxxxxxxx

Posted in Uncategorized | Leave a Comment »

Comments to another trader

Posted by lasertrader on January 6, 2013

A while back I posted some portions of an email exchange I had with another trader friend that is still refining his trading business. I received a number of comments asking for me to do more of this. I just wrote him another email and thought I would share it..for what its worth.

The question was why did I go long TLT today..what is my target..did I buy stock or options..why didn’t I short TBT. Here is the TLT daily after the close.

The email to my friend was as follows:

“Hi

On TLT there is a big old support line that goes all the way back to the beginning of last year at 118. When an oversold stock pokes down below a line like that and starts back up immediately there is a very high probability of it continuing for a few days or maybe a full recovery. This is one of the highest probability trades I know. It’s the inverse of a failed breakout

In my trading account at TD Ameritrade they don’t give access to shorting the leveraged long ETFs so I cannot short TBT. In fact I have very little interest in those leveraged ETFs and really don’t trade them much except under certain intraday into the extended hours situations. I can short TBT in my Interactive Brokers account but really don’t use that account much. Can you short the leveraged long ETFs in Tradestation? I do know why IB lets me but TDA doesn’t and can explain sometime.

I did the TLT trade with options to define my risk if I woke up on Monday and for some reason they gapped down big. As far as a target, I didn’t have any but I do have one rule with options. If I can get a 30% gain in a day I take it. Then I look to re-enter. When I bought the options I put a 30% gain sell order in immediately then I left for the day. I came back after the market closed and saw the trade executed while I was gone and I was out with my nice gain…easy money. 10 contract at 30% was $210 in my pocket. This was a small cash flow trade that was intended to help pay the weekly bills which are modest in my new lifestyle. That trade paid for the groceries we bought as well as the other items we bought at Lowes while I was away in the afternoon.

I trade to make money, I trade high probability setups that I like and I really don’t care what or how other twitter people are SUPPOSEDLY making their money. The more you read of your guys the more you will sit there questioning yourself. There was a short period of time last year before you were looking for a new place to live that you turned everything off and did your own trades and were making money. I could sense you felt excited, proud and confident. You should go back to that mode and do your own thing and learn what works for you. You know everything you need to know now, in fact many times more that some of the best traders. Until you figure out what works for you on your own you will not make money. You will be in a mode where you win some and lose some and probably break even. That’s a good hobby to fill the time but I prefer to do this to make money.

Maybe for you its a learning situation (but again I don’t know what else you need to learn) but I wonder why you spend time trying to figure out why a twitter guy is in NFLX puts. You shouldn’t care. If it doesn’t look like a short then go long or do nothing. I was long, it didn’t work and I pulled it with a few cents gain. Just remind yourself that the twitter guy you mentioned put on a big short position in FB and got his head handed to him and his rationale for the trade was a lockup expiration…that’s not a reason to take a trade for a pro. He’s an author that makes money from books and from what I have seen a poor trader. The only good trades he makes are things I never saw an entry for and just mentioned after the fact. Maybe I don’t read all his stuff and he posts his exact entries in real-time so I’m sorry if I missed it. I don’t read twitter much. For me twitter is entertainment, especially now that I don’t have a TV to watch football. The majority of “people” I actively follow on twitter are news sources to see whats going on in the world.

You made some good trades this week so should be happy, that’s all that matters. Did you write about them in a trading journal? Write to yourself why you took them, how you managed them, how it felt when you booked the gain or loss and what you would do different next time. Even if you never go back and read what you wrote again, you will be reinforcing the right behavior for next time. There are hundreds of good setups every day..to make money you have to execute in a way you feel comfortable. Do that instead of reading the CWS tweets, or trying to figure out why another twitter guy is doing something.

I fell asleep at 8 last night and already have my 8 hours now..maybe I can get a few more before the sun rises.

B

Posted in Uncategorized | 3 Comments »

Happy Holidays

Posted by lasertrader on December 22, 2012

Happy Holidays and a prosperous and healthy New Year to all my trading friends.

I know it has been quite some time since I have posted on this blog. The past year has been a very busy one as my wife and I have done a total change in lifestyle. We sold all our land possessions and just moved on to a sailboat where we will live and cruise the eastern seaboard of the United States, the Bahamas and down the islands into the Caribbean. I still plan on trading for a living however my time frame will have to change due to intermittent internet access. For the last 15 years I have had access to internet full time every day so my trading style has been very short term from day trading to swings of 1 – 3 days. Now that I am on board the challenge will be to develop a longer term style and I hope to post about what I learn here.

My inspiration for this lifestyle is a fellow names Pat Schulte who is currently on a boat named Bumfuzzle. Pat is an ex Chicago pit trader who lives on his boat with his wife and two young children. He has circumnavigated the world, all the while trading to support his lifestyle. If you are interested, he just published a book that details how he does it.

I have also started a separate blog to talk about our adventure. The link is in the left sidebar as well as here.

Posted in Uncategorized | 1 Comment »

Using PEAD (Post Earnings Announcement Drift) To Give You An Edge

Posted by lasertrader on January 21, 2012

Although I had been trading for some time, I always had the same struggle many traders have. This is the challenge of how to build the best list of stocks to trade to increase your odds of being in a successful trade. As a technical chart pattern trader I look for certain chart patterns that offer a high probability of success if the pattern is broken in a positive way (for longs) or a negative way (for shorts). Finding these patterns has become very easy these days. Just watch the charts that are continuously posted by traders on the Stocktwits stream. There are so many there that look good we should all be rich and famous. In fact, there are so many to choose from where do you start? You can’t possibly trade them all.

If you have been trading technical chart patterns for a while you realize that in may cases the patterns that looked so good in advance failed miserably shortly after you got into the trade. As an example, in 2008 Thomas Bulkowski studied the failure rate of 14,000 “long” chart patterns in the Bull Market of 2003 to 2007 and found the failure rate to be 28%.  To be successful as a technical trader you need to define an edge that works for you. The edge is a method of building a list of stocks to trade that will increase the probability of the technical pattern playing out in your favor. If you just randomly grab chart setups off Stocktwits, most likely Murphy’s Law will prevail on the stocks you choose to trade and those will be the patterns that fail. There are many methods you can use to get your edge. Maybe you trade stocks in strong sectors. Maybe you jump on news stories. Maybe if in the upcoming State of The Union Address the President mentions some sector focus for the coming year and you look to trade the stocks in that arena. Maybe you just have a set list of stocks that met some criteria you defined and trade technical setups on just that list. My core list and what I feel provides my edge is based on the PEAD concept.

PEAD stands for Post Earnings Announcement Drift. I was first introduced to the PEAD concept several years ago by Pradeep Bonde when I joined the Stockbee Service where the focus is on developing solid methods for being successful at trading. The PEAD concept was first described in a 1968 academic accounting research paper by Ball and Brown and further explored in detail in a 1989 paper from Bernard and Thomas. I will provide some additional links to articles about PEAD for you to explore at the end of this post but the basic premise of PEAD is….

“Post Earnings Announcement Drift (PEAD) is the tendency for a stock’s cumulative abnormal returns to drift in the direction of an earnings surprise for several weeks (even several months) following an earnings announcement.”

If there is an earnings surprise and the stock pops up, it has a high probability of continuing that move up for quite some time. When I thought about PEAD as an edge it just seemed so intuitive. Since, in my mind, the driver of most longer term moves in a stock price is usually growth in revenues and earnings, why not make upside earnings surprise the core strategy of defining your edge? For the past few years I have defined my core strategy as being PEAD based and I built my list of stocks to look for technical setups from those that have had earnings surprises and price pops as a result. Once I have built the list I will watch those stocks daily waiting for them to set up a continuation pattern to trade such as a horizontal consolidation or flag.

Being successful at trading is not easy, it takes hard work and lots of preparation. Once you define your “edge” also known as your method, you need to do the work every day to find only the best trades to deploy your assets in.  One way to start implementing the PEAD concept is by using the Earnings Whispers site. Even without a premium subscription you can visit the site or subscribe to a free email that tells you the earnings beats or misses for each day. Then it’s up to you to track those that had a surprise beat or miss for follow on setups. If you search you will find earnings data from a variety of sites and services out there.

Recently I have been using a premium service from The Patient Fisherman called Bluefin to save me time in building the PEAD list. In Bluefin they are called the Post Earnings Surprise lists. Bluefin provides two lists that are continually updated. The first list contains stocks that in their most current earnings announcement they exceeded the analysts earnings per share (eps) estimate by at least 25%. The second list contains stocks that had a price move of 6% or more on the day of their earnings (with The Patient Fisherman’s permission, here is the 6% list published on 22 Jan 2012). I have found these two lists to provide more than enough opportunities to trade on a regular basis. I start with these lists and filter them so that I only have stocks that are over a minimum price and trade on average a certain amount of shares per day. Once the list is narrowed down I review it every day and set trading alerts on the best technical setups I can find that match my style.

Here are a few examples of stocks on the list that show successful follow on technical setups.

The above stocks are just a few of a large list. Not all work out as planned but if they trend and set up technical entries the PEAD effect increases your odds of having the trade be a profitable one. If you start making a list and monitoring the PEAD stocks you will find that they are often mentioned by others over time after they make a continued move. By doing your homework and monitoring the list each day you will be in the higher probability setups.

If you search the internet you will find many articles discussing PEAD. Here are a few to start with.

From Stockbee’s public blog

Earnings Season and the Cinderella Strategy

Paul Tudor Jones and Episodic Pivots

From Phil Pearlman’s Stocktwits Blog

Apple, Intel and Post Earnings Announcement Drift

From Matthew Weinschenk at Investment U

Using the Post-Earnings Drift: How to Find Stocks Set to Surge in Two Easy Steps

Regardless of whether you incorporate PEAD into your strategy or not, the most important thing is that you define your edge and have your own methodology to find the proper stocks to trade and the proper entries, exits and stops. Random approaches do not work and following others does not either. Be a professional and treat this as a business. The harder and smarter you work the luckier you get.

Posted in Uncategorized | 12 Comments »

A Quick Update To The Justim Mamis Cycle

Posted by lasertrader on January 14, 2012

Time for a quick update on the progression of the Justin Mamis Sentiment Cycle and the current market status. If you read the original post on this topic in December and the follow on post a couple weeks ago you will remember that on December 24th the SPY chart and Mamis cycle overlay looked like this.

Here is where we are 3 weeks later..

If the SPY/SPX continues to script it seems we are headed up to the highs reached last July beore we get some serious hesitation.

Watch for this cycle in the stocks you trade. You will see it quite often and in many time frames.

Posted in Uncategorized | 5 Comments »

Sentiment Cycle Update and Holiday Wishes

Posted by lasertrader on December 24, 2011

I would like to wish you all Happy Holidays. This is a time of year to make sure we appreciate and spend quality time with the most important things in life to us.. our family and friends. Thank you for coming to my space on the internet and reading my intermittent ramblings.

Because it is a fun post that received may “hits” I want to post a quick update to the Justin Mamis Sentiment Cycle article I wrote last week .

As a reminder, the Justin Mamis Sentiment Cycle looks like this.

Last Sunday I wrote how the SPX / SPY chart was looking like it was following this cycle very closely and posted this chart.

Here is an updated chart after this week’s action. Even though I have seen this cycle time and time again in many time frames, I am still amazed at how well and how often it can play out. It will be fun to watch as it continues to unfold.

Peace and Happiness to all

Bruce

Posted in Uncategorized | 1 Comment »

Are We Ready To Return To The High’s? – Justin Mamis Sentiment Cycle May Think So

Posted by lasertrader on December 18, 2011

Late last year I wrote a post about the Justin Mamis Sentiment Cycle. I won’t rewrite the details again but it can be read here . I like to use the S&P 500 / SPY charts as my proxy for the overall markets and like everyone else I have been sitting here trying to figure out where this market may be going over the next several weeks. Macro cross currents are dominating the news as well as our mindset keeping many out of the market, or leaning to the short side. As I was flipping my coin to make a guess I looked up at the wall over my desk and the chart of the Justin Mamis Sentiment Cyle caught my eye.

The similarity of the SPY/S&P 500 chart to the Mamis Cycle is uncanny. Lets first review the Justim Mamis Sentiment Cycle chart.

Now lets look at a chart of the SPY

The similarity is striking. Of course I’m not going to place a trade today on this, but if we break back over the green 200ma line again I think there is a very good chance we will revisit the previous highs quickly. I have seen this cycle play out enough times to feel there is a high probability of it working out once again. I am looking forward to seeing how this plays out.

Happy Holidays to all my fellow traders.

Posted in Uncategorized | 6 Comments »

It’s All About The Setup – The Key To Consistent Profits

Posted by lasertrader on December 4, 2011

Every day I see so many trade ideas on Twitter/Stocktwits, the financial media, free emailed stock ideas, blogs etc. The list is endless. With all these great ideas, why aren’t all traders rich and making money. All we have to do is trade those ideas. Why do many fail and lose. The answer is that most technical traders do not have a day in and day out process with a defined setup or setups that they focus on consistently. Most traders are continually looking for the next undiscovered indicator, the next holy grail or just plain following who they perceive as the new hot hand. They never take the time to define their own setup, their own business plan and run their trading as their own business.

The reason I am writing this post is because of a discussion that Pradeep Bonde of Stockbee has been having on his member site the past couple of days and is continuing. He has a free public blog and a pay service (I just noticed there is some additional material about the topic of this blog post in his public blog). The discussion is focused on setups. What is a setup, why it is important, why a setup has been at the heart of the famous successful traders like Livermore, Darvas, Zanger and O’Neil. With Pradeep’s permission I am providing one post from this multiple day interactive tutorial/discussion. Read it a couple of times. Post it on your wall. Ask yourself what is your setup that makes you money day in and day out?

A good setup idea can change your financial future forever…..

If you do not understand the concept behind setup selection you will struggle for many years.

Scanning for stocks is not going to help you. Preparing elaborate watch lists is not going to help you. Unless you understand setups as key to profitable trading you are unlikely to make much money.

IBD method might be about momentum/growth but ultimately it boils down to setup and IBD has very strictly defined setups.

Same way any successful trader has well defined setup and then they exploit it day in and day out in favorable market conditions.

If you have well defined setup , you would be able to instantly recognize good opportunities and enter or exit them.

If you have well defined setup, you will be able to prioritize ideas and not waste time on marginal stocks or others ideas.

If you have setup oriented mentality you will ask everyone who posts trade idea to find out what setup generated that trade.

If you have well defined setup you will know instantly your entry, exit stops rules and not be a clueless person post entry. You will not be asking others what you should be doing.

If you have well defined setup, you will not be easily influenced by any and every new tactic people talk about or sell as the new new thing.

If you have well defined setups you would not be making new rules and adjustment everyday.

If you have well defined setup you don’t need CNBC, Cramer, Stocktwits, Stockbee site, or any other distraction. All you need is your software to generate your setup idea and your own guidelines

Setup selection is the only way to eliminate the problem of cognitive load involved in trading.

Sooner you understand that the better it is. Key to “profitable” trading is setup selection.

In the beginning master just 1 or 2 basic setup. It will take you 3 to 6 months to perfect it. Most people who have very well defined setups have taken 5 to 10 years to arrive at it. This series of posts will help you compress that period to 3 to 6 months if you seriously put your heart or soul in to it.

and you just need one or at best two well defined setup ideas to make lot of money in the market.

A good setup idea can change your financial future forever…..

It is my contention that you only need to trade 2 or 3 solid proven setups that meet your risk tolerance and personal style to be sucessful in this business. For me they are Bull Flags, Bear Flags, Horizontal/Rectangle Consolidations within a trend. Many trade Cup n Handles, Head and Shoulders, Triangles, Diamonds and many more.

You dont need to trade them all. Stockbee continually refers to the risk of Cognitive load that most suffer from in this business. If you make it too complex or worry about too many things, your mind will become so overloaded you will find you aren’t effective and confusion or mental gridlock occurs. The key to success in this business is simplicity and repetition, doing the same thing day in and day out.

Ask yourself. What is your favorite and most profitable pattern? Can you define, entry/exit/stop for each of your patterns? Can you describe your your pattern and how to trade it in simple terms to someone else? Do you keep adding other indicators to your patterns? Do additional indicators help or do you imagine that they do?

A solid tradeable pattern can be identified just by looking at price and volume. Many including myself will argue that you can be profitable with just price and volume patterns on your charts. I will admit that I am not a purist in that respect. The fact of the matter is that Techical Analysis is being practiced by many and even has become the core of Financial Media that used to call it voodoo up until just a year or two ago. With that many eyes on Technical Analysis you may want to include a couple of indicators on your daily chart because so many eyes are on them that they can be self fulfilling. These could include the 20ma (because its the center of a Bollinger Band), the 50ma and the 200ma. Don’t get carried away. All you want is something to help you confirm the validity of your pattern. If it doesn’t do that, then take it off your setup.

If you enjoy being part of the community on Twitter/Stocktwits your goal should be the see how many setups you can post to the stream. Its amazing how focused you can get on your own setups when you place them in public for many to see. Your goal with Twitter/Stocktwits should not to be to get trade ideas. If you see someone post an idea, try to figure out what their setup is. How does it match your setup and can you learn how to make your setup more effective by seeing how others define theirs.

In my opinion one of the best ways to use Stocktwits is to take advantage of the charts posted on Chart.ly. Try this process. Identify, on your own, stock trade opportunities that match your setup. Post the chart to Chart.ly. Then..only after you posted your setup..type the symbol into the Chart.ly search box and look at all the charts of the same stock that have been posted by others. See if their setup matches your own. See if there is something you can learn from their setup on the same stock that will help you define your setup better.

ITS ALL ABOUT THE SETUP

I will close this post out with..a setup IS NOT

- something Cramer recommends

- a stock that is so oversold it “should” bounce

- a stock that is so overbought it “should” pull back

- anyone else’s idea you follow blindly that does not match a pattern you already trade every day

- any trade based off a macro theme such as “financials are toast, they will keep dropping”

- a hot tip you got from some “insider”

Posted in Uncategorized | 3 Comments »

Bounce Candidates

Posted by lasertrader on November 27, 2011

For the most part I am a momentum trader that likes to trade in the direction of the trend. When the markets are at a very “oversold” point and the prospects of a bounce in the near term exists I need to do some extra digging to find the setups I like to trade. That I will do later tonight after Football.

In the meantime, a friend of mine shared several of his charts early last week that could prove to be very good bounce candidates. This is his excellent work and if he had a blog or twitter I would be glad to give him direct credit for it. Each of these charts have solid patterns such as forming inverse head and shoulders, as well as cup and handles. They also have oversold indicators on the daily (what doesn’t though these days) and some have closed outside the lower Bollinger Bands for one or more days. Although they aren’t my setups, some or all of these could prove to be very good trades if we get a bounce this week.

TEX

RYL

PCN

MGM

IVN

IO

FLR

CIEN

BKD

APA

AKS

UMPQ

Last but not least TNA

Posted in Uncategorized | 1 Comment »

Short Ideas – Stocks That Will Get Hit From Europe’s Woes

Posted by lasertrader on November 18, 2011

I have mentioned on occasion that I like to find sector themes to trade. Although we are all “hopeful” and each day look for long setups should the market turn back up, it is good to have a solid list of go to shorts always on standby. Currently some of the best and most profitable shorts have been the high beta leaders  like NFLX AAPL CRM etc. These stocks can turn on a dime and require careful watching and wider stops.

Today I ran across an article on the Business Insider site titled ” 15 Companies That Will Get Smashed If Europe Goes Bust ” The list of stocks in this article are companies with very high business exposure to the European Economy. Since the basis of the solutions to the Euro Zone problems starts with cutbacks and austerity, these companies will most likely feel the effects on their bottom line for some time to come. If the technicals continue to exhibit breakdowns they should have a high rate of follow through to the downside. Below are the charts of these 15. I am going to keep them on watch for solid shorting opportunities. You may want to consider some as well.

XRAY

XL

WU

SIAL

PCLN

OI

MO

MCD

HAR

GILD

FSLR

CCE

AON

ADSK

ACN

Enjoy!

Posted in Uncategorized | Leave a Comment »

 
Follow

Get every new post delivered to your Inbox.

Join 94 other followers

%d bloggers like this: