Wednesday, March 31, 2010

If.. then.. else...

The biggest invention in computer language was the
statement If condition true then do something otherwise do something else. This is also critical in investing and trading. Many times what I found myself doing is I start of with a If condition that is true and am thrilled to rush into a position. What becomes increasingly difficult is even after the condition is not true any more and another exactly opposite condition has come to stay, I tend to get traders paralysis and eventually a "It will come back" or "I am in it for long term" syndrome. There are quite a few simple things that have come to help me. Stop loss, Stop Loss, Stop Loss. Nothing works better. It is the only thing that make me feel better when I loose on a trade. When I look back at a trade and find how much I saved because I only lost a very little it make me feel like a winner. Simultaneously looking at different time frames keeps me focused on the trend rather than narrowly looking at every tick of the trade. I keep Daily, 30min, 15min and 1 min chart all up at the same time. It is being aware of the forest while looking for he tree. For it is the tree that gives the fruit albeit bitter sometimes.

Today's market. We are still under the negative KOD influence on FAS. We have a lower low and lower high on FAS another negative. In the 15 min chart the 77 DOMA crossed the 172 DOMA to the down side that is another negative in FAS. In the 30 min FAS back tested the 77 DOMA and fell and is close to going thru a secondary trend line another negative for FAS. In daily chart everything is cool. DOMA is far away. Trendline is intact. RSI is at 70 and PPO is +6. Longer term I continue to be bullish. And short term I am partying with the bears.

Tuesday, March 30, 2010

Lets get real

These are both charts of FAS 15 minutes. They both have Dino's Octavia ( 8 divisions of the range from high to low). On left I am looking to see what percent of the recent rally have we corrected. Thats from 59.82 to 103. We have only corrected 7.5 points to 95.5 (about 17% of 43 points) that does not look like much to me. The FAS is sitting on the second fan. I would like to see 25% and more for me to become "un" bullish. On the right is focusing in on the decline so far. This is drawn to get an idea as to when I should play the long side from the trading account. (A small sum of money) Once again I will have to see FAS cross the DOMA clearly and that is about the same point as or DMRR signal of 3.2%. A lot happens on the day when everyone says nothing much happened today. I can't tell but something happened and we will see results in a day or two. I will let my DOMA guide. If I was playing short (pun intended) term I would stay short. The Dino's KOD is still active and it is saying down

Everything is coming up roses

Things don't happen exactly 100% UTAH all the time but when they do it is a joy. I know some Elliot Wave theory and how it works. Yes I have read the book by Bob Prechter. It was always a little difficult to trade with EW for me. Specially when for every count there are at least 2 alternatives. EW ticians are very dedicated and they have a lot of patience and they put in an enormous amount of time. Incidentally you can meet a lot of the very very good ones at our CIL. Give it a visit. Click at the bottom of the blog. The chart above is my EW count on FAS. According to this it is game over and it should be correction time. A good correction of 57% ( based on 2 and 4 ) on the total (103-11.6) should bring it to about 40. I will keep that in the back of my mind and see if other signals support that as we go along,

Monday, March 29, 2010

Dino's KOD ( Kiss Of Death)

Key Reversal: A sharp reversal pattern that occurs during a trend. In an uptrend, prices open above the previous day’s close, make a new high and then close below the previous day’s low. The greater range and volume, the more reliable the signal. This is always an outside day with a Higher High and Lower Low

Dino's KOD on the other hand happens when the Price reaches the high of the day within the first 5 minutes from the opening. The high may be higher or lower than previous days closing. The stock or the ETF may close higher or lower than previous days closing. It just can't go higher than what it recorded in the first five minutes. In the sense the game is over in the first five minutes. What happens in the next few days is what is important. This move has a high probability of success. When it is positive ( low of the day in the first five minutes) a long position is taken at the end of day and becomes profitable with 7 days. Sometimes it happens the very next day. In my chart the green ellipses are when the stock reaches the lowest levels of the day in the first 5 minutes and the red ellipses are the other way around. This is my own observation hence the name Dino's KOD.

Sunday, March 28, 2010

Indicators, Indicators every where not a.....

I started thinking about this blog and went and looked at the indicators on FSC. I was blown away there were 70+ of them. Some of them are different forms histograms vs lines If you take out volume and the different forms there are still over 50. That seems like a lot of indicators on just 2 variables price and time. I posted the observation on CIL and lucky me Anchak was there. He is like our YODA of CIL (Incidentally you should visit out CIL it is our TA board where we share and discuss all aspects of the market). Anchak broke down in simple terms as price, change, speed of change and range. Here is how I condensed them.

The one left is acceleration channel. They come in many form essentially you draw a mvg. avg. and draw channels at equal distances from it. Very seldom does price move equidistant above and below the mvg. avg. line. I created my own. One for the highs and one for lows. I maximized the number of points where the top just touches the envelope and another one where the maximum number of points where the bottom touches a second envelope. The way most people play envelopes is they fix the distance ( no maximization) and if price moves outside then buy ; when it comes back in sell; and when price goes below ( to be dramatic - pierces the lower band of the envelopes) sell short and cover when price comes back into the band. I have 2 bands. When price touches the upper line of the top band I check the RSI and PPO if they all agree I sell or sell short. On the down side when it touches the bottom line of the other band I buy after getting confirmation from PPO and RSI. CAUTION If the price moves outside the bands I abandon the trade.

This brings us to the second chart.
RSI is relative s
strength indicator. Quite widely used. With a 14 period. It compares the movement in the nth period to the average movement in (n-1) periods and assigns percentages. It is extremely useful in identifying extreme points. And another very important one I use is PPO. This gives the percent difference between the fast mvg. avg. (smaller number) and slower moving avg ( the larger number). The general theory is when fast moves below slow you sell ( short) and buy when fast crosses the slow to the upside. It is little after the fact I use it to add to my shorts or longs.

There literally 100+ indicators. It is not which indicator you pick that is important what is of higher importance is how well you use them. I will post a couple more another day

Could Have, should Have, Would Have

This being the end of the week It might be worthwhile to see what happened. We will use FAS. The FAS made a higher high and a higher low and closed higher. Right there the trend is intact. The high happened late in the week The short term DOMA 77 did not hold and we are approaching the 172 DOMA. The week prior the market acted almost the same. The rally started at 86.31 and ended after 10.53 points at 96.84 the subsequent decline was to 89.64 which was 7.2 points or a 68.3% "correction" of the rally. That is enough and quite a bit.
This last the rally was from 89.64 to 103The 68.4% erosion is 9.13 and 103-9.13 puts us at 93.87. I would watch this level quite carefully. The market correct itself as it goes along not waiting for a 20% drop in the value of the security. Each move is corrected before next move begins. Our current drop 103 to 95.94 this week is 7.06 is 53% of 13.36 point move which is within Gann guidelines. Should we get a buy signal DOMA 77 cross to upside and a DMRR 3.2% I would be buyer for short term.

Thursday, March 25, 2010

Not All Reversals are created equal

As noted yesterday, today was an outside day. Mr. market did not heed to my preferences. It went up and then came down. It would have maintained the trend without any question had it gone the other way around. First down then up. None the less. Few things to note It was A reversal not THE KEY reversal. What was missing was the high open or reaching the high very early in the morning. IMO what happened was when the market hit new high the window dressing started and money mangers who wanted to cash in and lock in some profits started selling which tanked the markets. I am not ready to call it a total trend change YET. Caution flag has been raised. My DMRR is at 1158 on the spx. My DOMA 86 on daily is 1116. I will lighten up my longs at or below 1158.

There is always a trading side for the short term. Otherwise what is the fun in getting up early in the morning and starring at the computer screen. BTW we have an excellent forum at CIL you should check it out. This morning I was adamantly bullish looking for may be 200+ day. However that was my PREFERENCE I have trained my self to live with what ever market throws at us. As soon as TNA went thru 15Min DOMA 67 I went short and I carried it home.
Looks like we are in some kind of 3. I will be watching other indicators. STO, RSI and MACD to time the sell tomorrow. I do not like to carry any short term situation trades home for the weekend. I also do not believe the uptrend game is over YET. The boys haven't come to buy with boatload of money with very high TRIN and big Adv/Dec ratios.

Wednesday, March 24, 2010

PIIGS do fly

Today started as any other day with some kind of a news break out. This time it was Portugal and the market had already reacted late night. The issue is the same they spent more money than they had ( kind of like us or US) and they could default on their loan. No one was coming forward to pay them another loan so they can pay the first loan. Every time this happens our US markets react almost the same way they drop and then rally. The degree of drop and the rally depends on at what point in the trend we are in. This morning as a situation play I bought FAS at 94.6x and later sold it at 96.93 . These are quick 2 1/4 dollars because of the situation. These are done with tight stop. Mine was at 94 Then there was B of A loan forgiving news. The FAS gave three chances to make money I took one and that is good enough for me. Portugal ,Italy, Ireland, Greece and Spain exhibit their problems with no solution and as long as US is not directly involved it will make us money.

Today was an inside day (Today's High is less than yesterday's High and Today's Low is higher than Yesterday's Low) in S&P 500. Many people believe that the bull and bears were at tug of war all day and no one won. I think something big happens on these days. There was either shot term distribution in a narrow price range or accumulation by the floor. Knowing that March end of quarter window dressing is coming up and that there is an easy chance to sell ; my bet is that there was inventory accumulation. Nothing else is implying a trend change we will stay bullish.
Given today was inside day there is excell
ent chance tomorrow will be an out side day( Tomorrow's High is higher than today's High and Tomorrow's Low is lower than Today's Low) I would personally prefer the low come first and then the high so the trend can continue. My DMRR is at 1152. Anything lower would make me reconsider my current bullish view.

Tuesday, March 23, 2010

Too Many Trades spoils the profits

These three pictures are all of TNA. They 5, 15, 30 min charts. They all have their own DOMA (Dino's Optimized Mvg. Avg.) The all work quite well 5 min You will be trading a lot. 15 not so much and 30 even less. I like 30 the best. Since exchanges are open only for 6.5 hours 30 minutes is preferred than the hourly which still has its place. I trade the 30 min chart but keep an eye on the 5 minute and look at 15 min less often. More frequently than not the first signal after a long rally to sell will be bad the second one I take. I am long
and will stay long until I get a
signal to sell. We almost got one today and I will wait

This S&P 500 chart is very important one to me. Here I join the low to high. Drop a vertical line from the high. Divide that into 8 parts. Draw parallel lines to Low to High line at these 8 points. My friend Kazoom (one of the best) wrote me C++ program that works like a charm. That low to high line is often the 45 degree line in Gann theory. The main thing I watch here is how far from the LH line are we trading. If the index is too far up it will come down; too far down it will come back up. Based on this and its own DOMA we are no where near a top.

This week and all the way into first couple of days next week is window portfolio dressing for the funds. Very strong positive for the market. Then there is earnings another positive for the market. I am not planning on shorting this market any time real soon.

Monday, March 22, 2010

Lets Keep It Simple

Moving Averages are one of oldest TA tools that many have used successfully in their investment. It is simple and easy to understand and easy to execute. Schwab does not allow you to execute conditional orders based on moving averages. So big bloody deal we do it manually. Many of you have heard of 50, 100 and 200 period mvg avg. I thought since each stock is different how can I apply the same mvg avg to all and be satisfied with it. So we have DOMA. It is Dino's optimized moving avg. You start with 50 period and adjust it up or down until you find where the ETF only crosses mvg avg the lease amt of times. This is not science. This is your comfort level. If you trade a lot ( WHY) you choose a short time frame and create a DOMA and you want to increase your profits and do not want to trade a lot ( right answer) you choose a longer time frame and create new DOMA. Buy when ETF goes thru to upside and sell when ETF goes down thru it. I take my profits when I see them

Another simple picture I keep in front of me is a daily chart. What happens to me is I get caught up in the moment in the news and the blogs and the chats I loose focus on where we are. A daily chart over a longer time horizon keeps me stay focused. These channels are extremely easy to create join the tops get a line; move the line so one end touches the low. draw the top line again (FSC does not draw parallel lines ). Looking at it today tells me we are due for a pull back. IMHO we should hit the bottom of the channel and make another attempt; fail ; and go thru the bottom of the channel for the pull back.

Tuesday, March 16, 2010

Always Bullish on ETFs

This is FAS on a 15 min. scale drawn using Free Stock Charts. FAS is in the decline phase of the rally from 86.xx to 96.xx. FAS dropped 1/4th rallied 1/8th ; dropped another 1/4th almost got the whole 1/4th back early in the morning; and dropped 3/8th but only rallied slightly over 1/8 which it gave back. It was another LL lower high and lower low day implying a downtrend. On spx it was an outside Day today closing lower. That is negative for the market.

On the right is spx 30 min chart from

1044.5. Many people thought that was starting of the end of the world. It turned out to be otherwise. SPX's current top is at 1069.84 and DMRRL is at
1147.6. DMRR Dino's Minimal Required Reversal it is the am
ount by which the issue has to go up/down before I would take a position. It is calculated by optimizing the return on options and number of plays. The green boxes are bull runs and reds declines. As such my DMRRL has not been crossed and I am not not short yet.