As many of you know, I used to work as a lawyer and senior vice president of purchasing for the parent of Western Union (WU).
When I saw this picture last week, my immediate response was that retailers are not going to have a good Christmas. This picture represents 12% of the world’s container ships that are sitting idle in the ocean off Singapore. The article said that the cost of transporting a 40 ft container of merchandise from China to the UK has fallen from
“This question comes from David C, an active SpikeTrader – Alex” I have a question for the group regarding Entries. I have been having difficulty lately making the decision to pull the trigger on certain types of entries. I realized I don’t actually have a sound methodology/logic. I am curious as to what others do in these situations: I will give you two examples using Buy Stop Limit Orders:
- Gap Moves – Stock ends Friday at $29.90 with a high of $30.0. I place a Buy Stop Limit Order at $30.01. I believe the stock is ready to move higher. On Monday it gap opens at $30.50 and continues to move higher. What do you do?On the one hand the stock is doing exactly as you had hoped, but on the other hand, how long do you wait for a pullback, what criteria do you use, and if it pulls all the way back to $30.01 do you still want it?
- Failure to hit your Buy Stop – Price never gets to your Stop, it either declines or remains flat. I have seen some Spike members pass on this trade altogether, but sometimes they buy at the lower price. I realize both answers may be correct, by I am confused and would love to have more color on this.On the one hand, you bought the stock you wanted at a better price, but on the other hand, if you saw this type of price action on Friday (before you placed your order) would you still want this stock? And I know you are probably doing your best with your one and only Spike pick for the week, but would you change any decision for your personal account?
Of course the goal is to make the trade if the probability is still in your favor. I have closely followed the Spike group for a few months now and sometimes they take the trade and sometimes they do not.What criteria do others use in these instances? Personally, I have had several trades this week that gapped up on Monday and I did not make an entry. So far, they have gone on for much larger gains on Wednesday and Thursday. Last week a large gap down on Monday cost me 10+% on my SpikeTrade pick. I had believed that most of the time the gap is filled sometime during the day, but this was not the case with any of my selections. I had to decide whether to chase and for now I just watched.Appreciate any responses.David C
“This post is an email from Jock G who had helped me prepare my presentation on Trading Gold. I will be speaking baout it in Toronto on October 21 and in Las Vegas on November 20 – Alex”
Every time gold nears $1000, it gets “smacked down”. I wonder why….Put that into the context of how much easier it was to make progress BEFORE the first assault on the magic number of $1000:
Bernanke and the banksters will once again do everything they can to “smack down” gold if it does rise above $1000. You know that the gov’t leases gold to the “bullion banks” who then short it. (When gold rises, it creates doubts in the value of paper money). If they’re unable to constrain gold’s rise this time, it will mean “the jig is up”.Longer term, THIS could also be an important factor in breaking the FED’s hold on gold:China pushes silver and gold investment to the massesA report suggests that the Chinese government is pushing the general public into buying gold and silver bullion, which could have a dramatic effect on the markets.Author: Lawrence WilliamsPosted: Thursday , 03 Sep 2009LONDON -We are indebted again to Paul Mylchreest’s Thunder Road Report for news that will bring big smiles to gold and silver investors everywhere. Apparently China is pushing the idea of buying gold and silver for investment purposes to the general population in the way that Western television sells soap powder. If 1.3 billion Chinese citizens start buying gold and silver, even in tiny quantities, imagine what that will do to the market!The report notes that China’s Central Television, the main state-owned television company, has run a news programme letting the public know how easy it is to buy precious metals as an investment. On silver investment the announcer is quoted as saying ” China has introduced its first ever investment opportunity for silver bullion. The bars are available in 500g, 1kg, 2kg and 5kg with a purity of 99.9%. Figures show that gold was fifty times more expensive than silver in 2007, but now that figure has reached over seventy times. Analysts say that silver has been undervalued in recent years. They add that the metal is the right investment for individual investors and could be a good way to cash in.”What appears to have happened in China is a total relaxation of strictures on holding precious metals by the individual with the government pushing gold and silver as an investment option, seemingly at every opportunity. This is a far cry from the situation only a few years ago where the distribution of gold and silver was strictly controlled. Now, the Thunder Road Report notes that every bank will sell gold and silver bullion bars in four different sizes to individuals and gold related investments are said to be soaring in popularity.Around a year ago, Leyshon Resources managing director, Paul Atherley, in an investor presentation in London – and no doubt delivered elsewhere in the world too – commented that some employees at the company’s gold mining project in northern China would, on pay day, go to the local bank and buy a small gold bar as an investment and wealth protector. To an extent we put this down at the time to mining company hype – but this seems to be exactly the same phenomenon noted by Thunder Road. The Chinese are being converted from being the lowest per capita gold consumers in the world to a nation of small precious metals investors. Now, by next year, Chinese consumption of gold is likely to exceed that of India, which has been for years the world’s biggest gold market. And one suspects that the potential for gold purchasing by individuals is only in its earliest stages. As more and more Chinese move into the cities and individual wealth grows, this trend is only likely to accelerate.Paul ends the piece on Chinese gold and silver potential with the following comment: “Simply put, the Chinese government is trying to trigger a national gold craze…and it’s working. The Chinese public now has gold trading platforms on steroids…. …Also, for the first time in history, Chinese investors can even trade gold abroad (in London) with the swipe of a ‘Lucky Gold’ card. I can’t even get Bank of America to open a foreign currency account.”This may be an overstatement of the case from a precious metals bull – or it may not! Certainly if China is indeed pushing the public to buy gold then there may well be a hidden agenda here. It’s unlikely they are doing it and will suddenly pull the rug out from under millions of investors. A cynic (or a raging gold bull) would suggest that this will precede a move to switch a good proportion of the country’s reserves into gold which would have a huge effect on the global gold price and could prove disastrous for the dollar. Maybe it’s not in China’s interests to drive the dollar down too much until it has managed to divest itself of the huge dollar overhang (see the article on Chinese Sovereign Wealth Funds we published yesterday – Chinese sovereign wealth fund dumping dollars for strategic investments like gold ). The country may well already be, of course, surreptitiously building its gold reserves without reporting the build-up.If the Chinese are indeed beginning to buy gold and silver as the quoted report suggests then this has to be a strong signal that prices are going to rise, and perhaps rise dramatically, in the relatively near future. We await comment from other China watchers for confirmation of the gold and silver buying spree, but with global gold production at best flat and probably in decline, even a small increase in Chinese buying could have a substantial impact on gold and silver prices.(from Mineweb)Jock G
“This comes from Stephen M, a very active SpikeTrader whose performance won him an award for Q2-2009” – AlexCharles Biderman, CEO of TrimTabs was interviewed by Bloomberg on Aug. 28, 2009. Here’s what he had to say, “Investors who think the U.S. economy is recovering are going to get a big shock this fall,” said Biderman. “Companies and corporate insiders are signaling that the economy is in much worse shape than conventional wisdom believes.” His company, TrimTabs has reported that the actions of U.S. public companies have been bearish. In the past four months, companies have been net sellers of a record $105.2 billion in shares.He also said, “The best-informed market participants are sending a clear signal that the party on Wall Street is going to end soon. When corporate insiders are bailing, the shorts are covering and investors are borrowing to buy, it generally pays to be a seller rather than a buyer of stock.”
Now 5 days later, we have witnessed a 4 day selloff, a sharp surge in the VIX and a tripling of the volume as the SPDR GOLD TRUST has gapped and ran. This move is occurring despite a lack of significant selling of the dollar.Gee, I wonder where all of that big “insider money” is going? What do they know that we don’t? Will there be a replay of last Fall? Is a major bank in trouble? FAZ anyone? How bout some GLD?
“Ian F is a SpikeTrade Member. He sent this contribution from the UK” – AlexHere are my review notes in the ‘cold light of day’ from yesterday:These 2 first trades are examples of what NOT to do – but first some background.I returned from a meeting after the markets had opened. I immediately saw that the system had triggered 2 trades.What happened next is something I need to be extremely cautious of in the future.I immediately thought that because the system had triggered then I needed to be in the trade (albeit with a reduced amount of shares because I was late and the stock had run) and bought the other on the pull back at the buy price. Because I felt ‘rushed’ in making these trades I really ignored what was going on – if I had sat and analysed what was happening I would have realised that I was realistically too late to be entering these trades. I had thought that August was such a quiet month I was convinced that I needed to be ‘in’.What I was doing was trading on my emotions – I was not giving myself time to digest where the market was and the implications of my hasty decision making process.I thought because the system had triggered I had to be in – where as in reality my mind had not had time to adjust to such a rapid changing environment. I had not written these trades into my ‘manual’ trading log because I had been late from my meeting – this ‘manual’ log is my way of keeping me ‘on track’ – it enables me to know what my expectations for a trade are. If I have not got that how can I trade?What can I learn from this?I must incorporate some sort of ‘mental filter system’ that ensures that if I do not have the time to diligently write down the potential trades that may trigger – whether that be the WPT or my own system (which is very similar – I guess it mainly differs in the scan for trades process and I also look at shorts) then I really have no right to enter a trade. NO NOTES = NO TRADES.From now on this will be part of my trading strategy and it will be up to me to control my discipline.At the moment I am taking time out to type this into my Screen Trading Log as I feel this is a very important stage of my trading process. If I ignored this I might as well not trade – it is fundamental for me to feel calm and collected in what I am doing before entering a trade.The market has told me (again) that it is the boss, if I want to work with the boss I have to follow my strategy and system. Just like working for a boss, sometimes we get it wrong. If I was working for someone else and I got it wrong, they would want answers and he/she would want to know that I could learn from mistakes. If I am my own boss like in trading then I HAVE to acknowledge my mistakes and do something about it – this is my attempt to improve my trading in the future – I owe it to myself.Only last week I was telling my partner how much calmer I felt because I felt in control by writing my log diligently and following carefully what I was supposed to be doing. I also owe it to her to constantly be aware of my successes and failures.This was not about a failure in the system, this was about a failure in my discipline.
Many investors hold long positions as August ends–some because they sell calls against stock, others because of asset allocation, still others because they aren’t paying attention, etc. For those thinking about hedging a long portfolio, here’s an idea that might help. For others, like myself, who are die hard volatility traders, this idea will work almost as well as options or inverse index ETFs. The VXX is the ETN of the VIX and trades about 3X the S&P. The common method of measuring volatility in the stock market is the VIX, an index based on a ratio between purchased calls vs. puts. Mostly the VIX declines when the market either rallies or goes into a period of complacency or reduced movement. Sort of what happens during the summer months as the big boys go off to the Hamptons to relax. Eventually, they come back and more often than not, they reverse August’s action and jam the market into a decline.The VIX, and the VXX, goes up as a sort of “Fear” indicator (more puts being purchased than calls). This is how the Sept-Oct. period got the nick name of the “Death Season”. Now, I have no idea if history will repeat itself and fireworks will replace August’s inaction, but it is my nature to bet against the extremes. Since the market is at an extreme with complacency or lack of volatility, I’m interested in the other side of that trad, and will use the VXX to implement that strategy. The one thing I’ve learned about volatility is that it is “extreme” reverting, not “mean” reverting as most of the trading books claim. Price is much more likely to revert to the mean, or an average, and volatility seems to seek the extremes, sort of like water in a pan that is tilted back and worth so it laps at the edges.
Here’s a potential trade that offers lots of promise, but is ST/OB so not suitable for next week’s Spike pick. SYT is all about long bases and moves within the Bollinger Bands. After hitting a yearly high around 51 in January, SYT has been grinding sideways, oscillating back and forth between the bands. Note on the weekly chart that all this sideways stuff is along the 50% Fib retracement from the 2008 high to the 2008 low. Now on the daily, the squeeze is in play and SYT has touched the upper band signaling it is ready to move. I’m inclined to wait for some sort of retracement–maybe 1-3 days–to the rising EMA before buying. Eventually, we should get a nice rise out of this long base and lots of chances to trade it back and forth from the rising EMA to the upper bands.
[Stephen A is an active SpikeTrade Member, one of only two who received a diploma for excellent picks in Q2-2009. He sent us this contribution today – AE]I encountered a situation yesterday morning that I’d read about but never really experienced, that of a big price move resulting from a volume burst in a very-low-volume stock. I thought it was pretty interesting and might be of value to other new traders.Steve AMy SpikeTrade pick for the week is NSTC, has been a relatively low-volume stock, about which I said in my pick sheet comments that watching NSTC was “like watching paint dry”. Although most of the time that’s been true, on Tuesday morning August 18 I changed my opinion.We’ve all read that it’s prudent to be wary of low-volume stocks, as price can be moved quickly by a sudden burst of traded shares. As a recent arrival to the world of trading, I hadn’t actually experienced this, at least to the degree that I did last Tuesday.
The table shows the minute-by-minute action in NSTC from the open Tue Aug 18 7:30 am through 8:23 am MDT. During this period only a few hundred shares were bought or sold in any given minute, and many minutes went by with no trading at all. From 8:07 to 8:08 100 shares were traded, and from 8:08 to 8:09 another 100 shares were traded. A minute went by, and suddenly between 8:10 and 8:12, a two-minute span, volume rocketed to 54,690 shares.What happened to price?
The chart shows, bar by bar, the languid activity in NSTC leading up to Bar 21. Prior to this bar there were few buyers and sellers; then suddenly there was a preponderance of buyers, and price took off. The stock rallied from about $5.35 to about $5.75 within two minutes, a rise of 7.5%, on a volume of 54,690 shares!I had gotten pretty bored watching the inaction on the screen, and at about Bar 19 I went to the kitchen to get a cup of coffee. I returned during Bar 22 and uttered an expletive. It is always a shock when a trading truism that begins as mere words in a book becomes a screaming reality. I hadn’t yet entered an order, since the behavior of the market was seeming (to me) so unpredictable and I didn’t want to get knocked about, and so I wasn’t able to reap the windfall.So, the lessons that I took away from this are:
- Don’t take sleepy stocks for granted
- Big price movements on low volume really happen
- If I had truly wanted to enter, I should have been ready
- Because I really didn’t want to enter into what I thought would be a risky trade, I shouldn’t brood over the missed opportunity, or begrudge the stock its spectacular jump.
Best wishes,Steve A
I am a new Spike member and am viewing videos in the vault. I’ve just watched Jeff P’s presentation on how he selects his Spike pick every week, and I wanted to know if he or any other Spike member could or would recommend a stock screening tool that would screen stocks as his would as he described in his video presentation.I use Qcharts.Thank you,Lynne B