Yeah, of course I know that huge gains are unsustainable, except for the very best of the best, and they definitely don't do it by trading on feelings, hehe. I'm also pretty emotionally removed so I think I have an advantage in that regard compared to a lot of people... I used to be an avid hold em player, I think that helped a lot. It teaches patience and the knowledge that the past has nothing to do with the future, among other things. The major thing that draws me to the psychological aspect of the market is that because you can see how many people bought at what price and time, etc., it's sort of like you're sitting at a huge poker table with millions of other players. And don't get me wrong, I know there's lots of things you can do to minimize you risk and maximize your potential for profits, but as all of us here know... there's a helluvalotta luck involved in both trading and poker.

gpathmedia:

Yeah, of course I know that huge gains are unsustainable, except for the very best of the best, and they definitely don't do it by trading on feelings, hehe. I'm also pretty emotionally removed so I think I have an advantage in that regard compared to a lot of people... I used to be an avid hold em player, I think that helped a lot. It teaches patience and the knowledge that the past has nothing to do with the future, among other things. The major thing that draws me to the psychological aspect of the market is that because you can see how many people bought at what price and time, etc., it's sort of like you're sitting at a huge poker table with millions of other players. And don't get me wrong, I know there's lots of things you can do to minimize you risk and maximize your potential for profits, but as all of us here know... there's a helluvalotta luck involved in both trading and poker.

I don't know a ton from poker, but I think it is the perfect background to trading. If you could correlate a lucky streak to a price trend, then there might be a 1:1 correspondence in the two disciplines. Or maybe you hit on something when you talk about reading the other people at the table -- this is still the study of human behavior, although I'm not sure the context could be called a market context quite. Greed and fear still prevail, no doubt.

I disagree about luck being a big factor in trading. You get the odds on your side and law of averages takes care of you. And the ones with huge gains that are sustainable are the market makers and specialists who scalp .01-.02 per trade and do uncountable numbers of trades per year. That's where the money is! The rest of us grind it out, aiming to beat the market by 25% -- and that is a sustainable goal.

In fact, I would say if you are relying on luck instead of the law of averages to be a successful trader, you will be out of the market in a year. If someone beats the market by 25% each year for 10 years, it's a bit disingenuous to say that was just luck. However, it may be luck if you manage to get 50-70% above the market - maybe you got some stocks that ended up getting bought out, etc.

I'm not planning on updating my write up right now, but I'm seeing some developments in the S&P chart I wanted to note. 

 

ONE... we're still stuck in the middle of the weekly downtrend channel.  Keep that in mind. 

 

TWO... the S&P did break below the rising wedge as anticipated and it has not yet changed course. 

 

However, THREE... the S&P hasn't really followed through.  In fact, take a look at my chart in the View From The Stable.  Note the purple short term down trend line.  We are bumping along below it, running on below average volume... which brings me to...

 

FOUR... we've bounced off 1260 twice in the last six trading days.  This has actually managed to set up a flag consolidation, which is a bullish indication.

 

What this means is the market, at least the S&P is currently trapped, lost, confused, fighting a balanced war.  We just appeared to have a bearish downside breakout from a rising wedge, but have since built a bullish flag consolidation.

 

What do my two indicators say?  Well, they haven't changed much.  The VIX is a tic below 20 and the SPXA50R is at 60%.  These are still in the overcooked range, but not extremely.  They easily could move deeper into the redzone or they could hang out right here for a spell.  The SPXA50R hung out above 50 for two months as the market topped in Apr-May.

 

Given this condition, here is what I want you to pay attention to:

 

1.  A move in the S&P 500 ABOVE 1290-1300 should mean we're about to run to about 1360 where we should hit more resistance.  At that point, we'll be near burnt and have to sell off.

 

2.  A move in the S&P 500 BELOW 1260 will confirm the current bearish breakdown and we should see 1200ish.

 

At this point, it's a flip of the coin.  There is no advantage until the S&P makes a decisive move.  With this outlook, the single best position right now is cash!  Capital preservation is a must.  It means you might miss a move, but it also means you'll still have your cash to deploy when Mr. Market is in a little more giving mood!

 

Giddy UP!  Horse

RHD is still moving up since Monday

NVAX nice trader last few days

CELL rising tide

GSIC looks good for Thursday

Hello bpmccauley1  I would just like to point out that 

James B. Rogers, Jr.

(born October 19, 1942) is an American investor and financial commentator. He is co-founder, along with George Soros, of the Quantum Fund, and is a college professor, author, world traveler, economic commentator, and creator of the Rogers International Commodities Index (RICI).

Jim Rogers used to invest in single digit stocks not (sub penny) and recommend them on CNBC and in Barrons Yearly Roundtable . I bought BEAV and AMT when they were both single digit stocks back in 2003 I sold too soon but got most of the recovery move up.

You can research stocks from the S&P 100 or 500 also

http://finance.yahoo.com/

http://finance.yahoo.com/

 

Good luck

P.S Here is another place you can look for ideas

MSN Stock Scouter

http://moneycentral.msn.com/

thanks alot for all the input guys and the links...I'll check them out. 

Horse, didn't mean for the forum to run off on penny stocks...sorry about that.

G'day mates,

 

I hope you were able to read my "Market Analysis Update" before the market opened.  I tried to get it out to you as quick as I could.  If I was on a timezone a little closer to yours, or I didn't have a day job, I might have been able to get it to you earlier.

 

Now, here is a good learning point for you.  It is important at all times to play what is in front of you!  Play the hand Mr. Market is dealing you.  Never get into a game of "I am right!"  When you try to play this game, Mr. Market WILL burn you!  Over the weekend, when I updated my Market Analysis, I wrote what I saw then.  That was a downside breakout from the rising wedge.  I had noted the downtrend line (purple line), but at that point, it wasn't significant.  However, we then put in the second bounce off of 1260.  The picture changed, at least for the very short term.  The more I looked at that S&P chart, the more I became convinced that the market wanted to move higher.  So, we became trapped between a breakdown and an upside breakout.  When this happens, we pull back the reigns and wait.  We go into capital protection mode until the picture clears.  Now, we see it broke to the bullish side.  I wouldn't necessarily "trust" this breakout.  Volume continues to be very light and this move just pushed the SPXA50R up to 70%.  In May, it hit 80% before finally retreating.  Based on this indicator (and I do trust it very much), a bullish rally right now can only go so far.

 

Money Flow:  I have mentioned a couple times about finding where the money is working and keep trades isolated to those strong sectors.  Yes, this is a "Livermore-ism" and I offered you a quote yesterday.  I'm in the process of writing a tutorial showing you how I find "the money".  Knowing 80% of a stocks price move is dependent upon the condition of the market and what sector it's in, this is a key point to the Time Value of Money.  There are times Mr. Market is very generous and shows his hand, showing exactly where the money is flowing.  There are other times, in extremely difficult markets, where he is not so generous.  Right now is one of those times!  Last night, I was working through a money flow analysis.  What I found was today's leader is tomorrow's laggart.  Now, often we hear this and it references future, a decent distance into the future.  What I mean is right now!  Last week we had a leader, this week we have a different leader, next week probably something different.  There is no consistency right now.  This market has some serious AD/HD.  I'm saying this to the beginners mostly.  This is an extremely difficult market!  At the same time, if you don't get discouraged, there is some great learning to be had from it.  In a market like this, the key to survival is CAPITAL PRESERVATION.  There will be better days where money can be made.  Livermore claimed he typically traded only a couple times per year, when the direction of the market was very clear to him.  The rest of the time, he was waiting, sitting on the sidelines, using cash as a position, preserving his capital for those better days.  If you trade, keep your trades small, don't go for any homeruns.  Most likely, you'll strike out!

 

Giddy UP!  Horse

bpmccauley1:

Horse, didn't mean for the forum to run off on penny stocks...sorry about that.

 

No worries, Brian.  Valid questions, just not a direction I care to take here.  Under $5 stocks (not pennies) are fine to trade and can offer some very good returns.  In fact, I'm currently long ACTU (priced in the $4ish range).  It's one of my very, very rare fundamental-based trades.  Back on subject though, I advise beginners to stick with the leaders (as previously mentioned) and you won't find any leaders in the penny range or even under $10 usually.

 

For all:  I don't want to get into a discussion on ACTU and for my own personal reasons, I won't answer any questions on the company.  Please don't ask!  I just told you I'm long the stock, so feel free to check them out.

 

Position:  Long ACTU

See Page 1 for Livermore's "Bucket Shop" rule.

 

From How To Trade In Stocks by Jesse Livermore:

 

I call this my "Bucket Shop" rule, because I learned it in the bucket shops where I worked all my trades with 10% margin. I was automatically sold out by the bucket shops if the loss exceeded the 10% limit.  The 10% loss rule became my most important rule for managing money. It is also a key "timing" rule... since it automatically sets the time to exit a trade. Never sustain a loss of more than 10% of invested capital. If you lose 50%, you must gain 100% to get even!

 

When a stock went against me, I never asked for the reason.  The fact that it had dropped was reason enough to get out. If I bought a stock with a certain scenario in mind for what I expected the stock to do--well, if it did not follow through with the expected scenario and go up immediately, I often just went ahead and sold it automatically--I had bought on the expectation that the stock would do something and it did not do what I expected--often that was enough evidence for me to sell the stock.

 

I have observed many times that people often become 'involuntary investors.' They buy a stock that goes down, and they refuse to sell and take their loss. They prefer to hold on to the stock and hope that it will rally eventually and climb back up. This is why the 10% rule is essential. Don't ever become an 'involuntary investor.' Take your losses quickly! Easy to say--hard to do.

Horse,

I would love your opinion on my charting ideas for ETFC (E-Trade).  I feel that the stock is currently undervalued.  Back around Feb 2008 the price was roughly $16 and since then has fallen dramatically to about $3.  There have been some spikes along the way but generally the stock has seen a downward direction.  About 5 weeks ago the price seems to have settled at $3 with out much change.  This happend directly after a very low point followed by a high and then settled at $3.  So again for the past 5 weeks or so the price has stayed there.  I am inclined to believe that because of the lack of activity the current price reflects that of the long term investors in ETFC.  So I'm thinking that this $3 price is a support price and should move upward from there.  I of course don't expect this to be a fast moving stock but I tend to believe that the price should generally move upwards in the future. 

Would you agree with my analysis or am I completely off base?  I'm totally new to this so I really have no clue...haha...just kind of trying to make an educated guess I suppose. 

Any input would be greatly appreciated.  I realize that the value is still low (under $5) but I would say that ETFC is not a penny stock, just undervalued, again let me know if I'm totally wrong on that as well..

Thanks again,

Brian