ABR

Here is a stock that came up on one of my new scans. I may buy this stock today, but only if it is able take out it's previous day's high.

I've been posting a lot of long candidates recently, and very few short candidates. This is because my long positions that I have are doing very well, and the short positions I have are going against me, or are going sideways.

The fact that longs are rising, means that I am not touching them. The fact that shorts are going against me means that I am weeding them out from my portfolio. This effect has caused my account to become overwhelming long; about 80% long in fact.

It is this through this process of blind selection that makes it appear as though my account is always "trying" to get on the right side of the trend. And the stronger the trend, the more it "tries" to align itself with the trend.

FO

Notice the new 20 day high on this one:

URRE

This stock went up a lot today:

IAT

This stock is going up at this particular moment in time:

Broke: The New American Dream video

The following is a clip from Michael Covel's new documentary, Broke: The New American Dream. The amount of wisdom compressed into a 1 minute and 16 second clip is amazing:

WRES

Psychologically, I know, it is difficult to buy a stock after it has already risen 30%, but I have learned that your entry price is actually not a particularly important piece of information:

BBP.v

Unless something dramatic happens on the open Monday, I will buy this stock:

IO

This stock's price made a new high:

HH

This stock exhibited favourable price action on Friday:

ERTS

Here's a stock that I find interesting. Notice how this stock is continuing to fall even though the general market is now up for a 6th straight day. This stock is, therefore, very weak on a relative strength basis.

This stock was taken from my public chart list:

Jack Schwager Interview

Last weekend, I stumbled upon an interesting interview of Jack Schwager by the Financial Sense News Hour. Jack Schwager is, of course, the author of the Market Wizards series of books, which I consider absolutely essential reading.

One great dilemma I find when it comes to trading books is that the traders that are the most successful, tend to be the least likely to bother to take the time to write a book. Put another way, if you are a trader working with, say, 100 million dollars in the market, why write a book revealing your technique?

In my opinion, this is a very major catch-22, and contributes to making learning how to trade successfully quite difficult. And this is why I believe that Schwager's books are so interesting, as they shed light on traders who otherwise would be still be unheard of today.

PDS

Here is a new stock that came up on one of my scans. I find this stock appealing due to it being in an uptrend, and also because it is forming a 20-day breakout.

I bought this stock $6.23, which was the high for the day at the time. My rationale for buying a new high for the day is that, in my experience, if a stock puts in a fresh high, then it will usually make another high later on.

If this breakout fails (which happens most of time), then my stop at $5.74 will be hit, and this will result in me losing 1.8% of my total account equity. Otherwise, I will hold the stock for as long as the trend persists:

KEX

This stock made a new 20-day high on extremely heavy volume:

GIS

This stock is making a new high:

WSTL

Out of the approximately 6,000 stocks my scans go through, here are 3 that look good:

MSTR

JAG

PLM

This stock is currently in an uptrend. On top of that, it also has a very favourable chart formation:

GLD

I have seen a ton of failed breakouts this summer, but I still think this breakout has potential. The reasons I think this breakout has potential are as follows:

• Breakout occurring on strong volume
• Most other commodities and commodity currencies are falling, so gold is doing well on a relative strength basis. For example, yesterday, stocks were down, oil was down, natural gas was down, the Canadian dollar was down, the Euro was down, but not gold and silver.
  
• The long, medium, and short term trends are up (this is key):
  

SGG

This ETF, which follows the price of Sugar, is currently in a strong uptrend. The ETF is a bit illiquid though:

CM

There is a lot of talk about this correction signaling the top of this rally. This is entirely possible, but I really do not know what the market will do next, personally. My game plan is if the market continues to decline, then I will replace the weakest longs with new shorts. On the other hand, if the market resumes its uptrend, I will hang tight.

Below are some stocks that my scans picked up that either are weak, or look like they are rolling over:

RAX

MDRX

SHLD

SGR.v

Here is a stock that is behaving well this morning:

SKP.v

This stock is currently in a strong uptrend:

HPOL

This stock had a strong week. I'll be keeping my eye on this one.

UQM

Friday's close looks constructive. This stock is still in an uptrend:

GCA

This stock is showing significant relative weakness:

RIGL

Just looks weak:

STAR

This stock is making a new 20-day low:

NSU.to

I have developed several new scans that I am very excited about. I am hoping that these new scans, along with some other minor tweaks to my system, will help improve performance, which has not been great over the last 2 months:


If you are like me, and have not been trading well lately, then I recommend reading this superb post by the Art of Trading. This guy is truly a professional.

IDG

I will be keeping my eye on this for a potential short:

HA

This stock is up 5 days in a row. Will it make it a 6th?

F

I think this stock has the potential to go higher. Getting stopped out at $6.97 says I'm wrong:

VG.to

Here is a highly volatile stock that may have potential. To me, higher volatility means smaller positions:

MMR

I bought this stock recently. I like how it is making a new 26-week high:

NOK

Because the general market is strong, I am mostly long stocks. But I shorted this stock anyway, as it is doing much more poorly than the general market, and was making a new low.

BBP.v

This stock is up over 700% since its bottom in October. But who knows when the trend will end...

AYR

This stock is currently in an uptrend:

FSLR

This stock is extremely weak relative to the general market

CUZ

I don't have a position in this one, but I think it looks rather weak. Notice the bearish upper shadow on today's candle:

THQI

I shorted this stock on Monday. I shorted it because a long was stopped out, and also because the stock made a new 20-day breakdown:

The Futility of Picking Tops and Bottoms

Here is an ETF that made a new 52 week low yesterday. This ETF follows the price of Natural Gas, and what I find interesting is that it is now down over 98% from its highs made last summer.


Over the last year, I have listened to various fundamental and technical rationalizations as to why Natural Gas was a good buy at various points in time. Some of these arguments included:

• RSI being "deeply oversold"
• 38.2% Fibonacci level hit
• Bullish divergence on Stochastics
• Hammer candles on daily chart
• Being at support on weekly chart
• 50% Fibonacci level hit
• Various fundamental arguments too numerous to go through
• Sentiment being overly bearish
• 61.8% retracement level hit
• Undervalued versus Oil
• Volume showing capitulation

Unfortunately, none of these techniques proved effective. But there was one technique that did prove profitable, and that was, of course, trend following. Trend followers do not, as Ed Seykota puts it, "predict a nonexisting future", but follow price where ever it may lead.

Currently, a similar situation is unfolding in the general stock market. The S&P 500, surprising the vast majority of traders (including myself), has continued to rally. Every attempt to pick a top in this market has so far failed, as this chart shows:

The chart above shows a failed wedge pattern, and also a failed H&S pattern. Currently, the market is showing an overbought reading. Will this mark the top of this rally? It certainly could be the top- I really have no idea-, but an overbought reading means nothing to me, personally.

Turtle Trader Scan

I developed a new scan that seeks out stocks that are making fresh 20 day highs/lows. I felt motivated to do so after re-reading Michael Covel's The Complete Turtle Trader, which, I have to say, is probably my favorite market related book.

In my opinion, there are certain advantages and disadvantages associated with using a 20 day breakout. The advantage is that, if a trend does emerge, you are getting in closer to the top floor, and riding it down (or vice versa). The disadvantage is that, by doing so, you are often getting in before a true trend has emerged, which may increase the probability of being whipsawed.

To develop a scan, similar to what the Turtles would have used (although they traded futures), you would have to go to Stockcharts.com, and get it to look something like this:


In any case, I will continue to pursue 52 week highs/lows, and 26 week highs/lows, but will throw in a few of these 20 day breakouts from time to time for diversification purposes.


The stocks below are examples of 20 day breakdowns:

SNDA

This stock is making a new 20 day low:

SPAR

This stock, which used to be stellar performer, is now looking rather weak. I will only short this stock if the general market proves weak:

CSIQ

I did these trades this week:

• Covered SUN (Stop hit)
  
• Bought VITA
  
• Sold ROST (Stop hit)
• Shorted GENZ
• Bought IFN
  
• Sold VITA (Stock got crushed)

I was on track to make money this week, as most of my longs are performing well, until VITA gapped down 30% on Friday morning. I think VITA was a good bet that happened to result in a bad outcome.

In the future, if a stock has the same chart pattern and strength as VITA, I will buy it again. This is because I believe that buying in the direction of the trend gives me an edge, but it does not guarantee success. There is simply too much randomness in the market for anything to work all of the time.

Unfortunately, I have not made any great trades since the beginning of June. As a result, I have less capital in my account as compared to the beginning of June. And because of this, I am trading much smaller. I have developed a position sizing calculator, based of the Turtle Trading Method, that helps me determine my position sizes. For example, if:

• My account shrinks by 10%, then I trade 19% smaller
• My account shrinks by 30%, then I trade 51% smaller
• My account shrinks by 50%, then I trade 74% smaller
• My account shrinks by 70%, then I trade 93% smaller

I have often said that knowing how much to buy is more important than knowing what to buy. The case with VITA helps illustrate this point. A fully margined position in VITA on Thursday would result in complete equity destruction by Friday morning. But by following the rules of the Turtle Trader Method, any one loss is never a catastrophic loss.



Anyway, below are some stocks that are looking good:


This stock may be breaking out:

DIN

This stock is showing signs of relative weakness:

EAT

This stock is making a new 20 day low, and may be shorted by me if the general market proves weak: