$AGIO: A Chart to $STUDY. And Why I’m Watching $HAWK

Just as one should analyze and learn from mistakes, they should do the same for good trades.

I bought this:

I am happy about it. I played it well and I profited. That’s done. Time to move on.

Which leads me to $HAWK.

I didn’t buy this (why I didn’t is for another post, I guess):

But they sure do look similar, eh? Yeah, I said “eh”.

So what’s next?

AGIO:

More importantly:

That chart doesn’t require explanation.

Back to HAWK:

Pretty similar, eh?

What’s next?

 

 

People Like Coffee – $FARM

I’ve ignored this ticker multiple times because I figured it was farming related. Not sure why that matters or why I cared, but it happened. Turns out I’ve missed out on a big trend. But it may not be over.

$FARM supplies coffee shops. That is an easy trend for anyone to comprehend.

Now to the charts:

monthly:

weekly:

daily:

The stock is clearly in an uptrend. The weekly setup was one I really like, but it was missed. The daily still looks good to me and is playable.

Long Term and Multi-Timeframe Charts Notes – $BRCD

Some quick notes on long term charts and their usefulness for breakouts and trades, using $BRCD as an example.

1 – long term breakouts/charts like even numbers (especially $10).

2 – long term breakouts usually don’t succeed their first time. But a retest and then real breakout can be a great setup. $9 and $10 were too easy. Retest them once, twice, $8 too, now work on $11 for the second time. If that goes I thinks its a legitimate breakout.

3 – buyable long term breakouts line up on multiple time frames.

monthly: above

weekly:

Daily:

Needs some time and patience, but if this one goes it could be a good long term buy.

Swing Setup – $ASPX

This is a purely technical setup. I don’t know one thing about this co. and I’m not even sure when they report earnings. But it’s a nice technical setup for a swing trade.

Simple Weekly Chart: Base formed, appears to be consolidating recent gains.

Relative Strength: This is likely the best indicator for good short term setups. If the mkt is strong in the near future the stocks that held up from early sept – late oct are the ones you should be paying most attention to. ASPX shows nice RS and also has a nice volume profile in the last couple months. Very positive.

Daily Chart/Swing setup: 2 ways to look at it: buy a breakout (if it occurs) or anticipate a breakout.

If you plan to buy a breakout it appears that $28 is the level to watch for. On increased volume is ideal.

If you want to anticipate a breakout this chart seems useful:

Just an observation. Bios are extremely risky. Always do your own work.

How to Call Tops

*This is the first of a series of posts I may start to do about my mistakes (hopefully I won’t have too many to do…). These are the trades that I try to forget about and move past because they were so stupid. The trades that I don’t like to admit to myself, let alone other people. But, the trades that I really should be analyzing and learning from (opposed to analyzing the winners – that shit’s easy). 

Back to the topic:

I know how to call tops. So do you. I know this because I have done it in the past and I did it recently. You probably have too. It’s okay. Kind of. You just have to identify them, learn from the, AND DON’T REPEAT. I am writing this in hopes to learn from my shitty mistake.

Here’s a quick step guide on how to call tops:

1) break your trading rules

2) do things that seem easy/obvious

3) celebrate/talk about your trading

This list could go on and on but these points apply to the specific example I’m writing about.

So here’s the recent top I called/purchased/lost real money on…

I fucking nailed it too. Chuck Schwab says I bought it at 58.71. Just missed the ATH high.

Here’s how I did it:

1) Broke a basic rule: I have a personal trading rule that I only make trades in the last 1/2 hour of the day. This is just something I do to stay consistent and to avoid chasing (see chart above). I work a couple jobs and trade on the side so I can’t rely on myself to watch charts and prices all day. Good rule for me, maybe for others too, maybe not.

This personal rule stemmed from watching stupid moves in the first 1/2 hour of the trading day. They often don’t reflect what really happens with stocks/mkts. It also stemmed from analyzing closing prices and ignoring all intraday moves (read @jboorman, @bigwavetrading for good examples of this. Good follows).

I couldn’t find the exact purchase time on Chuck’s site, but I’m pretty sure it was in the first 1/2 hour to hour of trading. Because, “holy shit, this thing is going to $100. I gotta buy it!”

Stupid. Mistake.

2) Trading is easy. Watch the stocks that are going up. Buy the breakout. Go golfing.

Not so much. If you trade stocks you know when you are focused mentally and making sound decisions. What sucks is that you usually don’t realize you are making shitty decisions until they are over with (aka: you lost money). I was not focused when I bought this stock. I wasn’t thinking “risk first – what could/will go wrong”. I was thinking “this shit’s easy. Let’s make money doing nothing. Let’s go golfing” (I was actually in an RV driving to go golfing all weekend. Hilarious).

Stupid. Mistake.

3) The stupidest and most embarrassing of all mistakes: talk about trades, think you are smart, act like you know things others don’t, tell your friends how good you are!… Stupid. Mistake.

As I just said, I was in an RV driving to northern MN to go golfing for the weekend with a bunch of friends. Good times. I was prepared to trade that Friday. Almost to a fault. (Side note: not being prepared is another good way to call tops. I was prepared though. Scanned a bunch of charts all week. Had buy lists ready). I was almost too prepared though. When everything looks good and obvious and all stocks are going up it messes with your head and makes you want to buy/break rules/talk about trades/ect. That’s how the mkt works. Nothing new. It will always take advantage of human error.

So I was in an RV, prepared to trade, knew I wouldn’t be paying attention in the last half hour of trading, drinking coffee/whiskey/baileys. Delicious. Let’s make money. Busted out the phone, put in an order, bought $MBLY. Told my buddies what I was doing. Talked about trading. Went Golfing. Sold 5 trading days later for a healthy loss.

Stupid. Mistake.

Learn from it. Don’t do it again.

 

Quick Look at $SWIR

I like these quick blog posts. May keep doing them.

Check out $SWIR:

Monthly: lots of volume at the current and surrounding levels.

weekly: big time breakout. successful retest, so far.

daily: starting to setup pretty nicely.

Company is in a trend that has been picking up a lot of interest – ‘internet of things’, ‘machine to machine’ networking, ect.

Chart says, to me, that a short term breakout (daily) may lead a much longer term breakout.

These are setups I like to pay attention to.

Market Crashing? Buy Expensive Stocks!

Stupid advice, right?

Yes is the correct answer. So don’t make any decisions because of this post. Better yet, never make any decisions based on information from anyone but yourself. No one is smart. Nobody knows what which way the market will go. No one knows which way any stock will go. Make your own decisions. Take responsibility for mistakes and study them. Or plan to lose all your money.

Anyway…

The market is dog shit right now and I just bought a small cap, high growth stock with a PE of 430. Why? Glad you asked…

1) I have a personal strategy/style that I understand well and it doesn’t involve PE analysis (but I did read that catchy titles gets you more reads… suckers!)

2) I study market history and this stock has characteristics of many strong performing stocks from the past

3) I put a huge emphasis on risk management (as should you)

4) I know that I know nothing about the future of the markets. It could jump 10% tomorrow or drop 40%. You don’t know either.

5) I know that to make money one must take risks

So let’s look at the $QLYS purchase a little closer.

My strategy is to find huge winners and ride those trends (I’m still trying to figure out how to do it..). For those that share a similar style you know by now that relative strength (RS) in a specific stock during market pullbacks is often correlated with positive future performance. This post by @ivanhoff from the summer of ’12 introduced me to this concept and I have tried to learn from it since. However, there really haven’t been many serious pullbacks since then, until now. I’m not saying the market is in shambles right now. These pullbacks are historically normal. But many, many individual names are broken so that is enough for me to raise cash and search for major RS. $QLYS has it. Charts explain it best.

QQQ year to date. Doesn’t take a market wizard to know which way things have been going recently.

QLYS compared to QQQ – year to date. Up 30% compared to down about 1%

QLYS compared to QQQ since the beginning of September. This one tells the real story. Since the market has started to really struggle this stock has performed very well.

So let’s move to the next points – risk management and the overall market. The stock looks good, but why buy it today?

I put a lot of emphasis on the strategy of letting specific stocks guide me in and out of the market. I know I just used the QQQ as a reason to get into this stock, but in reality I would buy this stock in any overall market situation. It would just be easier to pull the trigger if we were in a bull market. I know that the stock matches up with a setup I am familiar with and like so why make it more complicated and get scared by the overall market? In an emotionless world, this decision would be exactly the same in a raging bull market or a massive selloff. The market could rip tomorrow and move up for years. Or it could sell off and start another great depression. Nobody knows. So don’t waste too much worrying about it. Now to the entry, just like any entry, in any market.

I use a simple spreadsheet:

Screen Shot 2014-10-15 at 8.34.16 PM

Tells you everything you need to know. Buy price was the price right around 2:30pm today (I like to make buy/sell decisions only in the last 1/2 hour of the day). Stop price is determined off a shorter term chart (stop is where I think the current uptrend is invalidated – depends on personal timeframe):

The main thing I can play with is the amount risked. I usually risk 0.5 – 1% and it’s really just a feel thing. Right now I am more comfortable with less risk so I am at the low end of my risk tolerance. If this trade starts off well I can always add to it.

So I pulled the trigger. But I always have a plan. I know that 4/5 stocks move with the general market. I know that the market is moving down. I am prepared to lose 0.50% of my portfolio. I almost expect to. But I also know that if things stabilize or turn up I have a great entry in a stock that has showed zero distribution while many stocks have been slaughtered. I’ll take that risk. I’ll also take that delicious segue to my final point.

You have to take risk if you want to make real money. If you don’t like taking risks the market is not the place for you. But you must understand risk and, more importantly, be able to define it and stick to your loss cutting rules. I am prepared to take a 0.50% loss on my portfolio. Is there a possibility that QLYS could gap down 50% tomorrow? Yes. That would suck. But there’s also a chance it triples in the next 2 years and I want to be a part of that.

My Process – Long $SMCI

Last week I bought some $SMCI at $20.00. Here’s a quick post on what got me there.

1) How $SMCI made it to my watch list: I find investment ideas two ways – screens in finviz and following a select group of people on Stocktwits (investingsocial, you know?). This idea came to me from the latter. My strategy can be defined as trend following or momentum investing and my timeframe is ideally months – years. I ride winners for as long as possible. A great source for ideas in that strategy is the Social Leverage 50 list (formerly Stocktwits 50). I do not pay for that service, but I capitalize on the free information that Ivan puts out on Stocktwits. This is pretty simple – I follow the @SL50 stream and if a stock is mentioned there that seems like a potentially good idea I add it to my watch list. My watch list is a google spreadsheet and I have a column where I keep track of the source of the idea (what screen it showed up on or who posted about it on ST). After looking back at this idea I thought I’d check out the new Stocktwits search function to see what actually caused me to put it on watch (the search function is pretty cool – put in two terms $SMCI and @SL50 and found the exact post I was looking for):

Screen Shot 2014-05-04 at 3.10.42 PM

I have followed Ivan and the Stocktwits 50/ Social Leverage 50 list long enough to know that they are trusted and smart sources that follow a similar strategy that I do. So when I see a name that is on that list I pay attention.

2) From Watch List to ‘Ready List’ – I have 3 lists that I try to add to and prune as much as possible – watch, ready, and action. Watch has about 200-300 names, ready has around 50 names and action has 0-10 names typically. One post by a source that I trust is enough to get a stock on my watch. I scan charts of the watch list every week to see what looks good technically. I keep this simple – weekly charts with minimal noise and monthly charts with price and volume only:

Screen Shot 2014-05-04 at 3.29.15 PM

Screen Shot 2014-05-04 at 3.29.04 PM

Looks good, right? On to the ‘ready list’. (not sure why I call it the ready list – should probably be the ‘getting closer’ list. whatever.)

3) Ready to ‘Action’ – this is where a bit more analysis goes in. Researching company, looking at growth numbers, checking when earnings are, checking what trend the stock may or may not be involved in and what potential catalysts may be. I’d like to elaborate more on this specific stock but the truth is that it was mostly a technical decision for me. And a post earnings play. I understand what the company does, but I’d be lying if I said I knew much more. And that’s okay with me because I know how to manage risk. This stock got earnings out of the way and gave some very clear levels to watch and pay attention to.

Main thing I noticed: 4 year breakout with major volume, a retest of the breakout and then a major bounce off those levels with volume.

Screen Shot 2014-05-04 at 3.42.46 PM

Then I look shorter term:
Screen Shot 2014-05-04 at 3.48.51 PM

Ugly bar on earnings day, but support between 19-20 is obvious. So then I set up a trade using a simple spreadsheet I created (example using a 100k portfolio).

Screen Shot 2014-05-04 at 3.55.31 PM

Some things to note: .33% risk is less than what I usually risk. However, overall market is not favorable for my strategy so I make changes to reduce risk (and stress). Another strategy is to relax and sit in cash until the overall market looks stronger. But I have missed some nice setups in the past because of that strategy. So I reduced position size but still made a move on $SMCI.
Another note: $18.75 is a fairly tight stop for someone who claims to hold stocks for ‘months to years’. But, just like the risk %, I don’t like the overall market action much right now so I tighten things up. If the market turns up things could work out well. If the market goes south, I take my small loss and learn from it.

That’s about it. Thanks for reading and please ask questions or give feedback.