As the site name suggests, hedgeagainstspeculation.com, I also thought it might be useful to give my opinion on how to best use the stock suggestions you see. First of all, let me start by saying every trader is different. Cliché I know. But it is true. When I suggest a stock, I am usually bringing it to your attention because the chart of the stock tells me one of several things: it is about to break out, it just broke out, or it is forming a chart pattern that I find interesting. But just because I am seeing something in a chart does not mean it will happen, or that you should make the trade in that stock. With the exception of one or two chart patterns, I always wait for the breakout before I take a position. This usually, but not always, helps to ensure that I am right. Take for example one of my suggestions from the other week, EGOV. I thought it was forming a nice chart pattern. It gave a false breakout on the 16th. Following my own trading rules I got in. After three days, the stock had basically gone sideways. While it may have gone up from here on out, I decided to exit the trade because the stock did not do what I thought it would. I take a small hit at the chance of profit. Eh, oh well. You have to risk to win. That is the name of the game.

This little story brings me to my next point. Which is do not make a trade until you have answered a short list of questions that I find to be very important. The first two are the obvious two: which way am I expecting the stock to move, and where is my entry point? Next comes a tougher question. How much money should I risk, or what should the size of my position be? Then an even tougher question. If the stock goes against me, at what point do I get out? And finally is the toughest of all. If the stock moves for me, when do I take a profit?

The first couple of questions, I usually address with each post, but these other several questions I have been kind of avoiding. And for several reasons, the biggest of which is that I don’t know you, your financial situation, or your risk tolerance. The exit strategies I have set for myself I laid down on paper, and defer to them in ALL situations. When I first started trading, I could find good stocks, and get in at relatively good prices, but my exit strategy was weak, and I ended up either leaving money on the table, or taking larger than necessary losses because I was not being disciplined. The way I do things is based on percentages. I relegate only a certain percent of my money for any one trade. Next, I do not take on a full position right away, but usually limp in as the stock continues to go in my predicted direction. Finally, my stops are based on the percent of the investment I feel I can accept losing. Besides, there are plenty of stocks out there, so if the current stock is running dull, why not preserve the capital and put it into something that will turn a profit.

So here are just a couple suggestions for the yet to be savvy trader. When you see a stock chart being analyzed, do not make the trade unless you truly see the patterns taking place, ie support/resistance, reversal patterns or continuation patterns. Just because a pattern suggests a certain price target does not mean that is the definite place to exit. What if the stock falls just short of that, or what if you get out at that point, and the stock continues to move right on through the target. In both places, lack of proper exit strategies would leave you at a loss of either real or potential value. And in each instance, you would be kicking yourself. In this case, as I approach a price target, I usually don’t exit automatically, but instead tighten up my stops. I may not make the full profit if the stock does stop at this point, but I also keep my position in case that double I just hit turns into a homerun. Finally, lose the ego. Brag about the successful trades once you exit them, but until then, stay humble. This will give you the confidence to keep investing, but will also allow you to follow your rules should the stock go against you. I consider a successful trade to be any trade where I follow my rules, win or lose. Staying humble is the most important part of being successful. There is nothing more efficient at turning small losses into huge ones than hope and ego.

Happy Trading

-Dylan

I still like the stocks I brought up yesterday. I also did a search looking for stocks that have pulled back and may be ready to bounce. I came up with 19 stocks from this search. Here they are: TSN, SWIR, XRTX, CLI, WSO, ALE, ACS, OTTR, CRR, CIEN, PAG, NHP, NPO, STLD, APD, SPSS, HME, DFS, SLGN. Some are better charts than the others, but it is for you to decide which you like and which you don’t. But here is one of my favorites. ALE had a really nice move from $35 in mid march up to $43 in early May. It has since pulled back to support around $40.50 and had a nice move up yesterday on good volume (sorry, I didn’t check news to see what may have caused it). I am looking to get into it cheap early on today because I expect it to continue its move. The next levels of resistance are $43, then $44.50, then $46.

While I haven’t run a similar search for bearish stocks making this pattern, one bearish stock from my watch list is XNPT. This stock has been in a down trend ever since drop earlier this year. It consolidated sideways for a while, and then finally continued its downward move earlier this month. The chart pattern kind of reminds me of an inverted cup and handle, but just kind of. There is strong support at $37.50, but if it breaks this there is a very good chance it may go as low as $30 before finding another strong support area.

Happy Trading

-Dylan

Giant Interactive is a company that operates online games in the Peoples Republic of China. The company was founded in 2004 and is based in based in Shanghai, China. The company focuses on online games that are played through network game servers, in which thousands of players are able to interact and connect.
 
Being that the Shanghai Index is moving to the upside after being down for the past few months there will be more Chinese stocks that will be moving in the coming weeks. Please keep a close watch on stocks such as LDK, SOLF, CHNR, STV, SOL, TOMO, and RCH just to name a few of the stocks in the Chinese markets. This stock will be making huge moves going forward.

As for the U.S. markets the Dow Jones Industrial Average, Nasdaq, and S&P 500 have been continuing to move higher after breaking through previous resistance levels. I think they will all pull back to those previous resistance levels before heading higher into the summer. Many investors are sticking to their old game plans based on tradition sell in May and go away. From what I see I don’t think there will be a need to sell. I think the markets will continue to run higher until the end of the year with gold reaching as high as $1500 per troy ounce and oil reaching $130 to $135 per barrel by the end of the year.

By: Marlin Rolle

http://stockmp.blogspot.com/

Technically there is nothing more to report. If we get a pullback, which we might not because the futures are still showing strength, I will post a watchlist of stocks ready to breakout. To generate some much needed discussion on this site, I will likely post it as a comment under this article. Please do the same if you have stocks you like and feel strongly about.

Things are looking bullish right now, but there are still many unanswered questions as we head into the summer. These questions are ones to think about as we approach the 200 day moving average.

How much impact will the U.S. rebate checks have? Answer: I think people are more inclined to pay off their debts than go on a shopping spree…why celebrate when everyone is talking about a “recession”.

So are we in a recession? Answer: Many people are under the impression that we have bottomed and this is simply a slowdown. As mentioned in my previous posts, I am expecting a long leg down, so yes, we are in a recession and I think this recession will be longer than expected. This market is still overvalued and needs to correct.

But jobs and other economic data aren`t as bad as we expected. Answer to comment: A prolonged bear market and weakness in the job market is likely. Our latest job and economic data is simply lagging as usual. Maybe someone can answer this question for me…did the unemployment rate for April take into account that graduates just joined the work force? Would this skew the number upward hence the “unexcepted” smaller decline?

What will happen in the summer? Will the Fed continue to cut interest rates? Answer: Hopefully not, cutting interest rates will simply make inflation worse. The Fed will most likely raise rates again during the summer. This is when the next leg down will be…with it, more loan defaults may flood the market. When this happens, Wallstreet will have to do much more to forget we are still in a correction period.

So again, here`s my strategy for the week…if we close below 1400 I will short the markets, if we get a pullback I will buy if opportunities arise. I`m sure many of you may have other opinions in regards to the questions listed above, if so please comment and share your thoughts below

Richard
richard@hedgeagainstspeculation.com

If we are unable to pull through by noon of tomorrow, a sell off may begin. Again today’s volume was lower than usual…what’s worse is that we got more volume as we sold off right before the close. With the GDP results being released at 8:30am on the 30th, and FOMC at 2:15pm, what good news could there possibly be? We are at a critical point in the markets right now…be alert, we could shoot up or down from here. Wait for a confirmation and keep tight stop losses in place on all your long positions. I will likely consider taking profits in my long positions tomorrow afternoon if volume continues to be weak.

But with that said, keep this is mind:

“From watching CNBC’s ‘Fast Money’ tonight it seems that everybody thinks the market is set up to roll over here. That sentiment alone makes me think we’re headed higher. On-Balance Volume on the S&P 500 is hinting at an upside move too. As always, time will tell…” (Trader Mike)

Richard
richard@hedgeagainstspeculation.com

So correct me if I’m wrong, but it looks like we have an inverted head and shoulders pattern in a downtrend. This indicator is usually the first sign that a bearish trend is about to end. Typically, a short-term uptrend will follow after the price breaks the neckline looking something like this:

Now compare the above chart with the latest S&P500 chart. This is what you’re looking for:

The head and shoulders bottom or inverted head and shoulders must follow an extended price decline or downtrend. Price makes a low which forms the left shoulder and bounces to a minor high. Price then achieves a major low which forms the head, then bounces to form one more minor high. Price declines again but does not penetrate the major low before it bounces, forming the right shoulder. The minor highs are connected with a trend line which may slope upward, and this trend line is called the neckline. An upside breakout from the neckline is the buy signal for this pattern, which confirms that a lasting low has been made and that a reversal of the downtrend has been made.

Do you see a resemblance? I think we see a bullish trend within a bear market. Further, there is a higher right shoulder, this is an even stronger signal. Some people may draw the head line or neckline where resistance is. I however drew the neckline a little bit more accurately. After breaking 1366, a short-term uptrend should have followed which we got. Now we have another obstacle to pass…the 1400 resistance. We tried breaking this resistance last Friday (April 19, 2008) but failed. After failing, a pullback was needed before testing this mark again. We made progress this week but unfortunately we’re sitting right at resistance again.With news that tax rebates are going out Monday, we have a much better chance of breaking this level than last week. This stimulus plan will begin earlier than previously announced, and “should help Americans cope with rising gasoline and food prices, as well as aid a slumping economy”. But will these rebates actually “trigger a spending spree” (YAHOO!)? I highly doubt it! This along with the inverted head and shoulders pattern should push the S&P higher, closer to the 1440 mark (200day moving average level), but anything could happen when and if we get there.

Richard
richard@hedgeagainstspeculation.com

But remember traders, any bad news will drop the S&P back to the 1345 mark. Again, we are right at resistance, anything can happen…if you missed the rally, don`t just blindly get in, wait for a breakout before putting your money into a company. We are still in a bear market, so the overall trend is down. Yes, companies like INTC, IBM, GOOG and CAT all reported fantastic earnings last week, but they are all international companies. The U.S. economy is still struggling…with all these earnings due out this week, people are ignoring the Fed cut. With the markets shaping up, will they cut interest rates or will they leave it at status quo? This outcome will definately move the markets! If we do head higher to 1430 we should be anticipating for a long leg down. I still stand by the fact that we haven`t bottomed yet so be careful out there. To prepare yourself for the long leg down, I would load up on QID and SDS. I`ve mentioned these short ETFs many times before. They`re at a resonable price right now and by buying these ETFs you`re making money whenever the market heads down. It wouldn`t surprise me if we had a miserable summer and fall this year. By the end of 2008 many traders will lose confidence in the stock markets. If that time comes, we (readers of Hedge Against Speculation) should make lots and lots of money. In a bull market, all traders look like genius` but in a bear market, only smart traders make money. A professional trader makes more money in a bear market than they do in a bull market.  

Remember, the goal of this blog is to help traders become responsible traders. Hence the title “Hedge Against Speculation”. Don`t take unnecessary risks in the market, use the information we provide you to hedge yourself against any risk in the markets. If you`re unsure as to where the markets are heading, don`t guess. Engaing in a course of reasoning based on inconclusive evidence are for amateurs, be a responsible trader and wait for opportunities. I don`t want to see any of my readers lose money in the markets

Richard
richard@hedgeagainstspeculation.com

By: Marlin Rolle

http://stockmp.blogspot.com/

I would wait for an up move in any stocks that you are watching that moves past and stays above the previous day’s high.  Here are just a couple stocks from my watch list as well as a couple others that I saw recommended on another blog I came across.  I’m sorry, but I don’t remember which blog, otherwise I would give them the proper credit for several of them.

First off is AOC.  This stock is kind of smushed up against its 200 day moving average.  This MA seems to be acting as resistance.  I am still anticipating a slight pull back before this stock moves on to higher highs, although it is also sitting on some long term support.  I just wanted to show this one, because if it does pull back slightly and then burst above the 200 day MA, it has the potential of going up $6 of $7 to $50.  And if it pulls back a little like I am expecting, this move could be relatively quick, like in just a couple of weeks.

Next stock, just going alphabetically, is CXO.  I pointed this one out in my last blog, and I have come to like the longer term investment type potential this stock possesses.  I have actually been limping into this stock over the past week or so, so I am putting my money where my mouth is on this one.  What makes me really like this stock are a couple of things.  First off, the overall trend is up, even in a down market.  Second, it is a steady trend, which isn’t ideal for trading, but from many charts that I have seen, where the price is moving in such a way, this lack of volatile swing/retracement type movements seems to bolster the long term movement of the stock.   Stocks with this type of chart just seem to not get as worn out during a move.  Finally, if you look back even over the past 1-2 weeks, while the overall market has been in a kind of limbo, this stock continues its steady rise.  Even on Fridays big down move, this stock made a profit.  And on average volume. I am looking for this stock to go sideways over the next couple of days, because it has shown a history of not getting over extended from its MA.

Next I’ll show a chart for EGOV.  This is setting up an ideal retracement type, almost a bullish flag pattern, that is just doing a little consolidation before a possible move up to 8 dollars.  The down move has been on decreasing volume compared to the upward move.  And just before this, it had successfully broken out of an inverted head and shoulders patter (left shoulder on 2/11, head in early March, right shoulder in mid march).  It is right near support at about $6.85, so if it is going to bounce, I would anticipate it being relatively soon.  My only concern is the distance it has pulled back.  Because of this I am not entering until it makes that first breakout.

Just a couple other stocks that I found from this other blog, CSR, JASO, SOLF, and XIDE.  I especially like JASO and XIDE out of these three stocks.  JASO had a nice breakout move yesterday on good volume.  Everything about this chart is bullish right now.  And that move yesterday is the type of move I am looking for in other stocks such as EGOV.  XIDE, on the other hand is starting to give some bearish signals.  I’ll show this final chart just to point them out.  This three month chart starts right where the uptrend for this stock began.  It is starting to give signals that this up trend is coming to a close.  Mainly, I am looking at the MACD.  There is a bearish divergence in the MACD.  This is when the stock moves to a new high (on 3/26), recovers, then moves to a higher high (on 4/7).  At the same time, the MACD makes lower highs that coincide with these peaks.  This is a sign that momentum is starting to shift in the stock.  Also, this stock recovered to support at the same level that the last drawback fell to.  Do I smell possible head and shoulders forming up here?  This is pure speculation right now, and I do not recommend entering this stock on the down side until some of these suspicions are confirmed.  Confirmation, like always is key, otherwise your trading becomes more like gambling, and you will just end up hurting yourself in the long run.

Happy Trading

-Dylan

“I’m looking forward to a big up day tomorrow. This consolidation looks pretty bullish, Baidu (BIDU) has a bull flag formation, could easily pop if it breaks out of 300 on heavy volume. We should be set to explode…”

Technically, Friday should’ve been an up day…but with earnings coming out, I should’ve known better that anything could’ve happened. Instead of reversing we followed through to the downside breaking support after poor GE earnings. Here’s a chart of the S&P:

If you’ve been following my posts, this chart should make sense to you. We had a chance to break above 1356, we did not…and because of this, our chances of a short-term bullish run were ruined. We were also unable to hold on to Thursday’s low, that’s when the sellers came in and pushed the market below the 50 day moving average. Unless we get good earnings this week and hold above 1345, testing 1400 is out of the picture. For the time being, the path of least resistance is down!

Richard
richard@hedgeagainstspeculation.com