Tuesday Q&A
Tuesday, January 15, 2008 at 08:31AM Like I had mentioned yesterday, I was unable to keep up my responsibilities as the resident "blog" administrator, and unable to monitor traffic and answer questions. Because of this I am going to spend time answering a few questions that came through yesterday.
Question 1
I have been watching the IBKR trade that you mentioned in the watchlist. Are you in the trade already? Waiting until the end of the day for it to close over a certain level? I think it is an interesting trade, but a little unclear on it.
Yes, I own quite a few March 35's...which will lead to the question, "when do you decide to anticipate a breakout versus wait for it?"
Answer: Whenever I want.
In all seriousness, I do this quite often when I feel that the risk involved in taking the trade would be insignificant when compared to the potential reward. IBKR is not a real volatile stock, and there have been some easy entry points to manage risk along the way. I have mentioned that I am very bullish on this group, dating back to my E-Trade short position ahead of their fallout. This space is ripe for some consolidation.
Question 2
I gotta ask, how do you do it?? Week in week out your watchlist is awesome. On an up day your bullish picks, in the main, skyrocket, and your bearish picks in the main take minimum losses, and oft times still make money.
Ditto for your bearish picks on a down day.
I know you use "Anticipating the bounce" and a couple of other strategy searches from the Momentum archives, so do I, but your picks trump mine most every time. Is stocking picking an innate skill? Is there gut instinct kicking in for you? You seem to have it down to an art form and I was wondering, all ease being equal, why is it that when you and I see two recognisable patterns on two different price charts, why your one will beat my one in the majority of cases.
The answer to this question is fairly complicated. At the very least it will leave you unsatisfied, but I will answer it.
I do not use any searches or scanners to find the stocks I trade each week. I have never been able to communicate through a software program what I want the computer to find for me. On the times that I have, the outcomes have never been the same. The stocks that a computer will locate are immeasurable in comparison to the stocks that I locate on my own.
To locate the stocks that I trade each week, I search manually. This is a skill that has taken years to develop, but I have it down to a quick and easy process that takes about an hour and a half, and I complete this process Sunday nights as I prepare for the market open on Monday morning.
I have roughly 3500 stocks organized into watchlists that I manually scan. I don't do this chart by chart, since that would take forever to do. I use thumbnail charts which enables me to view 150 stocks at the same time. I scroll down this list pretty quickly looking at recent price action. I try to pick up stocks that are forming or trading near good support or resistance levels, or breaking out of these levels. To scan through a list of 150 stocks takes no longer than 60 seconds. My eyes are trained to look for entry points and desirable price action, and as you've seen the stocks in my watchlist...this is exactly the case.
Once I have picked out the stocks I am going to trade for the week, I watch them until I get the entry signal I am looking for. If the signal never materializes, and I am light on trading activity for the week, then occasionally I will run a search. The most reliable searches I use are the "biggest dollar gainers" and "biggest dollar losers" on the NYSE and NASDAQ. This is available on the charting platform I use. Less occasionally I use some of the searches that were mentioned in the question above. I authored many searches that are available on the toolbox, but they don't give me as many candidates as I like. Plus, ever since I focused specifically on the methods I use to locate trades (watchlists)...I have been on an incredible streak.
Having read this, I can imagine you are thinking that my procedures and skill in this department is unable to be duplicated. Well, you are right...sort of. I can't teach your mind and eyes to like the same things I like, or be able to pick the next stock that makes a huge move. As you can imagine I can pick out about 300 stocks that offer price patterns, or good looking set-ups, but narrow down that list to a much smaller number. This procedure is based solely on my own trading experiences, biases and preferences doing all the work. However, in order to teach you some of these preferences, I encourage you to actually pay attention to the stocks in my list. Study the chart and the technical condition of the stock. Use my entry/exit strategy to understand why it is on my radar, and when I would get out. My watchlists are very "timing" sensitive...in fact, that is the biggest prerequisite to publishing it on my list.
In short, I seek alpha stocks. I find them and make money trading them. It is a skill set that not many have, but can attain through similar experiences and trading styles such as mine.
So now that I have caught up on a few questions, I am off to trade for awhile. Some of the stocks on this weeks list are doing well, but rather than point them out and "brag" about it...I hope you are monitoring them well enough on your own.
Reader Comments (179)
Let me be the first to say...Excellent comments. Its good to be number one somewhere.
Larz,
All good advice on spreads so far. My $.02....Try to establish a rule about how big a spread you are comfortable with. A wide spread usually means that the underlying has poor liquidity and low open interest usually goes with that. I was interested in VMI on 1/4/08 as an aggressive C&H play. The spreads were between about $1 to $1.30 so I declined the opportunity. I always look at worst case scenario. IF I were lucky enough to get filled on VMI at the thoeretical value I still had to consider that when I wanted to get out that the best I could do might be the bid. The stock had to move too much for me to even break even. I generally do not take spreads wider than $.60. Anyone else have a spread limit or rule?
Jeff
Thanks for that answer, I appreciate you taking the time to answer it in such a detailed manner.
I count myself lucky that I can continue to follow your watchlists and study them for as long as it takes to build up the successful stock picking neural pathways that are obviously so firmly entrenched in that brain of yours.
Thanks again
Ken
Hi Jeff,
what software do you use to view multiple mini charts at once (im running tc2007 im pretty sure it doesnt let me have the fun you are! :)
Pete
JOYG and CNX showing strength in a bad tape.
Not suggesting trading against the market at this point, but worth watching into the close?
Aussie Pete,
Investools allows you to keep multiple portfolios of stocks, then view these portfolios as thumbnail charts.
VIP looking wounded...anyone else bailing by end of day today?
Sledge
Jeff,
Thanks, great post. For those of us who don't have access to IT's toolbox, how do you begin to describe a pattern that's bouncing off of S/R? As a former (and perhaps future) programmer I thought I knew how to talk to computers. Not with this stuff though. If you could list a couple of non proprietary indicator that we could plug into any decent search program (prophet.net for example) that would return at least some stocks in the ballpark that would be really appreciated.
ps. I haven't responded to some of your posts lately, (it's the joy of seeing large percentages of my account being wiped out and not knowing why (well actually yes knowing but denial springs eternal). It tends to have a muting effect on me. (Wow, I wonder how many parenthesis I can nest in here)) but I wanted to thank you for all you do here on the blog, with the directing and advising and watchlisting and bragging about your profits and commenting and everything else.
Thanks.
Wanna Bee,
Are you considering trading them here? Do you not consider them too late?
Thanks VA Beach Girl, Stan Lake and Sean M. for your advice on buying puts.
Mike, I'm definitely not an expert by any stretch, but I was looking to buy puts on AIG, AIV, DVA, LCC, LM, MER, MS, NBR, NCS, VRTX and WM.
XL holding up on a sharp down day - time to sell puts and move on?
Re. VIP, my s/l just trigger to sell.
Tom in SC
Aussie Pete,
You can also use ThinkorSwim. In "TOS charts" you can view up to 24 stocks of your choice in mini charts at once, all in real time.
And you can save the page if you like (for example have one page of 24 charts for each sector).
Good for yearly charting and day trade scalps.
jym,
You don't need access to investools to answer your questions. They don't own the rights to "ascending triangles" or any price patterns for that mater.
Larrz
I viewed AIG as breaking out of a symmetrical triangle yesterday and looks like a retest today.
I bought calls on a $60 strike a couple of months out projecting its gonna hit c $65 by the end of this month. I guess theres always someone on the other side of the trade, same chart, two perspectives !
Jeff,
Thanks for sharing how you do your amazing job at finding just the right stocks at the right time. I am studying trying to "see" how you think.
BTW... do you really know who pops in and out just for your picks? AMAZING... Good, you know then many of us here are here daily, just can't offer advice until have a consistantly growing intake of $$
Jeff,
I know, I just don't know how to describe what I'm looking for (various price patterns) in computer search terms . For example, rising MACD, overbought stochastics, hitting new highs, etc. Which of these or combination of indicators describe a stock forming a specific pattern or S/R bounce?
Thank you Jeff for a great post. I do watch your watch list and monitor closely but would still love to hear about your successes, it's not bragging to me it's being our cheerleader and saying "this is what you can do". Please dont let a few change your style.
Jeff
So much is about timing, getting in correctly and the option you chose, so your successes are important to hear about in my humble opinion. If you had a great day on a stock and some others not so good we can reaccess our entry/exit and become better at what we do.
Larzz
For someone not being an expert, You sure are looking at a lot of puts to buy. They all lookok but they may have already started on the downside today.
VIP my biggest looser this year so far. But I have faith.
Opttracker,
I can assure you, I won't.
Jym,
What program are you using? Prophet?
Jeff,
I entered trades on JOYG and CNX Friday and Monday. My thought was, if the market pulls them back for a retest, there might be another entry for folks later today? JOYG could have another $5 of upside...small by your standards. ;)
Thanks for your watchlist yesterday, always great getting it early in the day. Appreciate your insight and guidance. I'm learning every day from your posts and archives, I have lots of room for improvement.
yes
Jeff,
Thanks for the insight into your approach, as always. What is the charting platform that you use to search the biggest dollar gainers and losers on the NASDAQ and NYSE?
Larzz,
I'm a newbie too, but took a peek through your put picks, and saw some pretty low volume on some stocks (low volume = low liquidity = bad), and some pretty low pricing on others (=not far enough to fall to be worth the risk).
See what Jeff has to say about volume (liquidity) and pricing--and all topics--in "greatest hits" section of the site. Best of luck to you.
Did anyone get in EDU at the open? Wow!
jym,
Use their prophet pattern service.
Mike in SL,
Vip is your biggest loser? Why are you leting the loss perpetuate? That doesn't seem right, does it?
Jeff,
I am somewhat new to your blog (October 07). It is a pleasure and a privilege to follow and learn from a trader at your level! Thank you for the time you take everyday to work with new traders like myself.... "I am not worthy"
Quick question. In an effort to follow your watch list system...
Do you organize your watch lists by sector? Biotech, Oil Services, etc. If so do you filter out stocks based on your criteria or do you include them all just in case there's one or two that would make a move?
Jeff,
Thanks for the responses. I don't see prophet pattern. I am a basic member maybe it's a premium service? I was looking for criteria to plug into ProphetScan.
OA... you are the best. As everyone else sharing your blog, I am so appreciative. You are exceptional and great things will for sure continue to come your way.
You have probably answered this a million times, but especially in this environment, are you quicker to take profits? Your picks are awesome but so tough to watch those profits whipsaw. Thank you again for all you do.
i'm out of vip. It's broken uptrend in my book. I've been in CX for awhile, it's paying off today. I saw that EDU was hovering near breakdown at open, but didn't get in. I check now and wow, how did I miss that?
Jym,
It is a premium service. I haven't used prophet scan before, so I won't be much help in that dept.
Casey,
Yes, about 4/5 months ago, I reorganized lists into sector/industry.
I told Jeff VIP looked like a descending triangle :( But there's a lesson to be learned. I tried to fight Jeff and was punished with GILD! Worst part is, I didn't follow through on my VIP put trade. I'm really starting to dislike this game hah.
Thanks
Hi OA.
A straddle or strangle has been working for me. Jeff's favorite strangle stock will anounce earnings on the Jan 24. Paper trade some strangles/straddles on very volatile stocks, sit back and wait for the stock to breakup or down. It worked for me with EDU
Great explanantion Jeff, your watchlists provide a nice map to the markets from there you read price volume action.
Optiondragon,
You also traded the EDU strangle, right? How did it work out for you :)
Thanks Jeff!
VMI showing signs of life...
Very good but I sold too early booked the profits but left alot of meat on the table!
Doubled up on the puts right after the open and cost avg out but all in all a good trade but that second leg down really caught me by surprise.
Hmmm...VIP was one of my biggest winners this year. In at 32ish in November and out at 43 at the end of Dec. I'm looking to get back in soon. Today (now) I have it sitting right on a 6 month trendline but I think given this market it could come down a bit more.
Jeff- Not sure you saw the thread in chit-chat about an OA get-together but if you get a chance, could you please look at it and post your thoughts, give your blessing or tell me to LYTFA. Thanks!
Westy (sorry this is late)...re PCU, I show both 2yr and 5yr support at $95.5. It's touched and held 4x
SledgeH: re VIP - I'm out too, but I'm waiting til the end of the day as #1. that is my rule and #2 there have been too many reversals of fortune at the end of day.
Ken: re AIG, Funny how eyes see things differently. I see AIG in a descending triangle with no breakout til it crosses $55. Right now its bouncing off upper resistance.
:) $$
Jeff
Would like to solicit your opinion on AIG, a couple of different perspectives being offered above, I bought calls on the basis of a sym triangle breakout yesterday but can see Sues and Larrz perspectives too. Was wondering if you were to trade this how you would play it and why? My support line hits the price action on November 21st and January 9th.
Thanks
Ken
Jeff,
I saw EDU at the open and thought to myself - it's already down 10%, I won't chase it now. Did you take the trade? I wonder if I can factor in the projected price target, buy a few strikes out of money put so I won't violate max loss per trade rule in case the stock doesn't continue to fall. Do you think that would be a sensible strategy when playing price pattern / earnings combo? Or is that too risky? Would the change in IMPL VOL on the day on earnings screw up this strategy?
Thank you so much for MOS - took profits earlier today. Still in SHLD, PCU, LFC, CNX. So far so good. I feel like I am finally learning. You are amazing.
Anyone in MBT? It looks like it broke the trandline today.............I would appreciate any input.
Thanks
Dian
Jeff,
Reading through Murphy over the weekend and studied asc. and desc. triangles as being applicable regardless of the prevailing trend but signaling trend reversals in the instances where they go against it. Asc. triangles showing up in a downtrend, etc.
Similarly, inv. head & shoulders acting as consolidation point in an uptrend and the opposite.
What are your thoughts on this? What has been your experience? Do you follow this methodology?
Thanks, Kim
MBT I will be out be day's end unless it straightens up quickly.
I have a question, I really hope its not viewd as a stupid question but I would really appreciate some advice on setting up my own watchlists, I too would like to be able to watch over and scan large numbers of stocks using thunmbnails. Can anyone suggest a good platform?
Dian,
MBT definitly broke the trend line today. I would wait to see if it closes below trend, but its not looking good.
Hi westy
Shouldnt we ask Jeff What he is sseing on MBT?
Thanks
Dian
anyone have an opinion on oil? I'm in PBR, watching it fall, getting ready to pull the plug
I'm in MBT too, and hopin' it will climb back to support levels (or thereabouts) before close.