After Market Close June 8, 2010
Making a Bottom
It is certainly possible that the market is trying to form a low. Today's multi-swing action is typical of such. That said, we're really not building panic levels of pessimism. Certainly, sentiment is constructive, but typically (TYPICALLY) lows are more punctuated points, not a slow building processes and the sentiment typically gets to over-the-top levels. I'm not seeing that. As such, I think that the market will have to prove itself before I turn Bullish.
DJIA: The DOW held some support and looks like it's trying to bottom.
Summary:
So, the options are supportive, but not terribly so. The other sentiment is acting similarly. It's hard to pick a low, so I suppose we should default to the prevailing trend. That's down. I will be quick to reverse should breadth come in. I'll also be quick to reverse if we see some unambiguous over-the-top Bearishness. For now, we can look at longs but lets bias short.
Be Well, and Trade Smarter Than the Average Bear!
-The ChartSmarts Team
Current Positions:
Long 25% DFT at 23.23, stop at 23.23
Short 25% BLUD at 20.79, stop at 20.17
Short 25% CHD at 65.94, stop at 67.67
Short 25% CPKI at 19.02, stop at 19.02
Long 25% GRM at 12.69, stop at 11.85
Long 25% HUM at 46.37, stop at 42.83
Watch List:
Short 25% COST on a print of 55.28, stop at 59.57
Buy 25% MOT on a print of 6.84, stop at 6.31
Buy 25% STR on a print of 45.77, stop at 43.17
Changes in Current Positions:
No changes to current positions
*30 Minute Trading Rule:
In order to prevent whipsaws, we use a 30 minute trading rule. This means that, as a general rule, we are going to "sit on our hands" during the first 30 minutes of trading, this includes the lifting of stops during this 30 minute period as well. Additionally, if after the first 30 minutes of trading the range of the stock pick is within the stop and buy/short boundaries presented, the trade recommendation is valid. If the stock's range is outside of the buy/short and stop boundary, the trade recommendation is VOID. E.g. if the recommendation is "Buy a print of 10.25, with a stop of 9.95," and the stock trades up to 10.50 during the first 30 minutes, we would pass on the trade. Similarly, if that stock were to trade down to 9.90 before 10:26, the trade would also be void.
In addition, due to Market Makers, programmers, and market miscreants targeting our stops, a long pick must trade at a stop or below for a full 5 minute bar before actually triggering the stop. For a short pick, the stop must trade at or above the stop for a full five minutes before triggering a stop. This should have the effect of reducing the risk of 'gunning for our stops', though it will subject us to more technical risk. At this point, we believe it is a worthwhile trade off.
There is no 30mn rule on limit orders, but if price gaps out of the buy/stop range the trade is void.
Rule on stops: As a general rule for the model portfolio, we will lift all stops on existing positions for the first 30 minutes of trading. As a practical matter, subscribers may wish to leave their stops in place if they expect to be incommunicado or unavailable during that time to monitor positions.
Past Performance is not a guarantee of future returns.
Trading is risky. Trading entails unique risks, so get with your broker and do your homework before you take any trades based upon this or any model, newsletter, or trading service. Never trade with money that is necessary to your near- or long-term financial well-being.
None of the ChartSmarts™ Newsletters should be construed as a solicitation to buy or sell any security or commodity. We aren't your advisor and we aren't your broker. Any decisions you make are yours alone.
Though we do keep a hypothetical valued account track record, none of the performance referred to should be construed to be that of an actual account. Performance is not based upon back testing, and it does not represent an actual trading account unless explicitly stated. From time to time, we'll be trading the same ideas that we're discussing here. We make every effort to insure that we and our associates not "front-run" subscribers, or to otherwise affect the price of securities that we hold or discuss. Be aware that sometimes we, or our clients, family, or associates, will hold the same securities that we discuss in ChartSmarts. Occasionally, our trading actions may not be the same as those discussed in ChartSmarts, for a variety of reasons. We will never attempt to manipulate the price of any stock for any reason. ChartSmarts (the "Newsletter') is protected by federal and international copyright laws. Equity Guardian Group, LLC., publisher of the Newsletter and owner of all rights therein, retains all proprietary rights to the Newsletter. Equity Guardian Group, LLC. hereby grants you, as a subscriber, the limited right and license to this issue. All recipients must receive the Newsletter directly from ChartSmarts.com. The Newsletter may not be forwarded or copied without the prior written permission of Equity Guardian Group, LLC.
