www.guerillastocktrading.com I have got oodles of interest on my pair trading article and the play I entered in both Apple and Research In Motion. I...
www.guerillastocktrading.com I have got oodles of interest on my pair trading article and the play I entered in both Apple and Research In Motion. I went long Apple and short Research In Motion. The approach of matching a long position with a short position in two stocks of the same sector is called pair trading. This forms a hedge against the sector and the general market that the two stocks are in. The hedge created is essentially a gamble that you are placing on the two stocks; the stock you are long in against the stock you are short in. As its name suggests, a pair trading line of attack is a double-pronged method, where two apparently unrelated option or stock positions are opened simultaneously. The tactic can give somewhat of a safety net to defend against an unexpected move in a certain sector, while capitalizing on a specific equity’s relative-strength backdrop. In effect, a pair trader hedges his or her bets, opening positions in two interrelated equities or indexes and working them against one another, choosing 1 call (bullish) position and 1 put (bearish) position. The duo of positions then collectively gives money-making returns amid a number of outcomes. For instance, I had a great point of view regarding Apple, but a pessimistic sentiment concerning Research In Motion. I went long on Apple whereas I shorted Research In Motion. I also had an uneasy sentiment concerning the entire technology sector. By taking a short position in Research In Motion, it …
www.guerillastocktrading.com Made by George C. Lane in the late 1950s, the Stochastic Oscillator is a momentum guage that tells us the location of the current close compared to the high/low range over a specific number of periods. George Lane MD (1921 to 2004) was a Medical Doctor, stock trader, author, teacher, and technical analyst. He made and popularized the Stochastic Oscillator, which is one of the main indicators used in the present day amongst technical analysts. Word on the street from an interview with Lane, the Stochastic Oscillator doesn’t follow price, it doesn’t follow volume or whatever thing like that. It follows the speed or the momentum of price. As a imperative, the momentum changes direction before price. Therefore, the Stochastic Oscillator can be used to detect bullish and bearish divergences to forecast reversals. I choose to trade the Slow Stochastic for the reason that it’s more smoothed out than the Fast Stochastic making for fewer head fakes. The variation between Fast Stochastics and Slow Stochastics is just a moving average. When calculating Fast Stochastics using the values of 5 and 5, the first 5 is the raw value for Stochastics, while the second 5 is a 5-period moving average of the first 5. When using Slow Stochastics, the first two 5’s are the same as with the Fast Stochastics, with the third 5 being a moving average of the second 5. No you are not having an acid flashback, you read that right, a moving average of a moving average. Do not …
www.guerillastocktrading.com There is a stigma on the subject of being in the wrong in technical analyst circles. This shame is so rampant that it leads celebrated technical analysts like Arthur Hill, thought of by many to be the grand daddy of contemporary technical analysis and inter-market relationships, to say he is a commentator only and will not offer real buy or sell recommendations. Come again! Provided you believe in what you advocate, why not present buy and sell recommendations for no other explanation than to prove you can make money with technical analysis! That is something that I will always look down on John Murphy and Arthur Hill about. I say put your money where your boasting is and stop hiding behind this terror of being incorrect and coming up with some dumb excuse that you are a market reporter only. That is a big cop out. However worse than chickening out is to re-trace your trend channel lines and hope no one will become aware of the place you had it beforehand. That is technical analysis deceit and something I myself witnessed 5 other stock technical analysts do over the previous couple of weeks. No one is ever not to be faulted in their technical analysis. Everybody gets it incorrect. Thus if getting it wrong from time to time is a crucial part of what it means to stock trade then why are so many technical analysts terrified to admit when they get it wrong? Why do the bulk of technical analysts act like they are neutral market commentators for …
www.guerillastocktrading.com Institutional traders have targeted trade the trend investors like us. With cold, evil, fashion, Institutional stock traders are selling into the up swings and covering shorts into the down swings to compact the swing range too narrow for most of us. This has created both to the upside and to the downside over the previous week. What has spooked bears like myself is that a certified higher low is now in place with confirmation on today’s chart. Like I wrote about last week, the life cycle of the previous downtrend channel has completed. We are now in nomad territory where a different channel is being formed. We do not have enough information yet to determine if we are going into a sideways trading channel, or an uptrend channel. When there is no clear trend, then what must trade the trend traders do? Walk to the sidelines and the protection of cash. At present we have been in cash two times over the past several weeks and when we thought a new trend had been established making us jump back in, it turns out we were head faked and murdered. I do not know about you but I’m weary of getting my butt kicked by the better prepared and armed Institutional traders. Someday we might have a Traders Bill Of Rights where the battlefield is made just, but for now, inequalities continue to exist amid professional and amateur traders such as Institutional traders have access to all limit orders, they have direct access to market makers and can make non-open …
www.guerillastocktrading.com I have been receiving emails from subscribers asking me to give my thoughts on SPY and if I’m still short this market. No doubt this is a tough market to earn money in whilst we have the kind of sideways trading we have had this week. But the last thing you want me to do is to take some type of balancing on both sides of the fence tactic like John Murphy or Arthur Hill have. You would like me to give you my belief of the stock market and how I am playing it right now, not a spectacle about how I don’t give buy and sell recommendations and rather only comment on the technicals. I declare if you are incapable of forming specific buy and sell thoughts based on your technical analysis, then what good is your technical analysis? The only logic for why we do technical analysis is to make money. If you are not making money with your technical analysis then it is rubbish to you, you might as well throw what you are doing in the garbage. The Russell 2000 and the Nasdaq are leading the S&P 500 and the Dow down. This is a bearish sign for the wall street. The S&P 500 is in a downtrend. It has strengthen from the strong downtrend we had a few days ago. Does this indicate our shorts are in danger? No. It is still a downtrend. Not as strong a downtrend as we like, but all the same a downtrend. I am holding my short position on Consumer Services (SCC). SCC is in a very weak uptrend. The same logic applies to specific stocks as it does the key indices. It’s …
www.guerillastocktrading.com The S&P 500 took major technical damage on today’s chart as money continued to gush out of stocks and into the shelter of bonds. If you keep track of bonds then you know that massive buying in bonds has been going on for sometime now. The question that we all wondered was why were institutional investors still buying bonds in such large numbers. We bet we at the moment are aware of the answer by performing technical analysis on various markets and searching for connections linking them. This inter-market investigation of connections among a variety of charts has given us some interesting insight into why institutions have been purchasing bonds for the last 5 months. It has to do with lumber. No I am not a single fry short of a happy meal. When the price of lumber drops, bonds predictably go up. If you think about it, it makes wonderful sense. Lumber prices go down when demand falls off. In a recession large ticket items like home construction are hit hard since no one can afford to buy a house or even a car. This drop in demand for lumber makes the price of lumber drop as well. Seeing as home construction and the financing of homes, together with equity lines, make up such a huge percentage of our GDP, the drop in home construction implies unpleasant things for our economy and stock market and great things for bonds. What especially gets me furious at myself is that I didn’t see the spot on Fibonacci 50% retracement on the S&P 500 on Monday. I …
www.guerillastocktrading.com Caution! Some traders will find this episode is very impolite. Every now and then the only technique to train a big cheese is to offend them and hurt their feelings. Break them down from their overconfident, I already know it all dais. You have been warned. I’m nauseous and weary of reading every one of these performance news stories with reference to how awful the stock market is and all the wealth that has been lost over the last few weeks in the stock market. Pardon? I’ve increased my capital on the short sell side. The only question I have for you is why aren’t you? We know the reason why. If you are not making money on the short side of this stock market it’s for the reason that you are lame. You are brainless. Just take a deep breath and disclose to yourself that you are in fact half the investor you thought you were. The reason why half? Consider a quarter. It has two sides heads and tails. Provided you take away one of the sides, it is no longer a quarter. By way of definition a quarter has two sides. Now think of your trading style. Provided you aren’t ready to go both long and short as technical analysis and market trends dictate, then by definition you are not a trader for the reason that a trader is able to do both. I do not wish to take notice of any excuses either like, I don’t have a margin trading account so I can not take the short side. Pay attention you dummy. There are many bear market ETFs out there that you can purchase …