DummySpots.com

First the minor action in ASEI (American Science & Engineering) today:

This is just a daily chart for reference. The real action on this stock is intraday. This one was on red alert for a mammoth multidollar-range daytrade. Didn’t happen Friday, with options expiry and the market dead in the water. It did, however, print two pretty little Dummy Spots on the 5-min and 15-min charts. Check ‘em out:

And here’s the 15 minute intraday:

Will be praying for more of these to show up next day I’m off from the (gag) “day job” (puke).

Trade Updates for 20 August 2006:

Update on APPL (Apple Computer) setup:

Friday posted a Higher Low and a Lower High for Apple. No changes. This bar is not a Dummy Spot, so for now I’ll stick with Thursday’s range of 67.18-68.66 to look for a trade entry.

Update on CSCO (Cisco Systems) setup:

Cisco is still behaving better than Lassie. Friday’s bar continues a textbook pullback into an uptrend. Could take an entry above its high of 20.90. Another, shorter bar with a lower high would be ideal.

Update on GIGM (Gigamedia) setup:

Gigamedia put in a Lower High on Friday, but it was on decreasing volume and ended the day in the black, er, blue. This thing might reverse and prove me wrong after all. A short trade taken on Thursday’s (8/17) break of the prior bar would still be 0.14 under water by the way I set my stops, which is still the maximum loss I would take on this trade. We’ll see.

Update on the CVTX (CV Therapeutics) setup:

No trade on CVTX yet. Friday’s high was 10.35, just slightly lower than the 10.37 I’d count as a break. Note that the volume is fading. I’d suspect a breakout on low volume to be a fake-out, and move my stop right up to about 10.25. A good break should be on heavy volume, and should close well above the 10.37 level.

I’m aware that CVTX had the “over 10 million shares issued at $9.50” situation in the news. That does seem like it would be a drag on the stock. However, I just trade the chart. If people run from CVTX, it’ll show up in the candles.

G’nite.

Many of my posts are bascially taken from my trading journal (which I keep entirely on a Hipster PDA). They include trades where I have capital at risk as well as paper trades. I like to post the setups and trades as they evolve vs. looking backwards later and doing the “woulda, coulda, shoulda” boogie. It’s much more useful in identifying opportunities for improvement in my methodology (if I have anything that could be called such).

If we operate only through the rose-colored glasses of memory, the hindsight dance is as useful with stock trading as it is with past relationships, that is, largely worthless. We need to know what we were thinking when we made the bad decision, and what information we were basing that decision on, in order to avoid repeating our errors.

It’s easy enough to look back at a situation, or a trade, and say “it was a huge mistake” or “it was a great call.” But what does that tell us about what to do in the current situation, or how to avoid getting into the same spot in the future? Not a damned thing, unless you consider “Don’t make mistakes” to be useful advice to give a human. We need more specific information… exactly where we should have turned left last time when instead we turned right.

What I (and many others) have found most useful, in both my trading and my personal life, is to keep a record of situations as they unfold, i.e. a journal. It enables us to look back later at what I was thinking “in the moment” and discern at what point and in which specific decisions and judgements was my thinking… stinking.

Then, when we find ourselves in the same situation in the future (and we all do, don’t we?), we will have the chance to make a different decision at the appropriate crossroad. Whether we actually make a different decision, well, that’s more about personal growth, our true primary journey on the old Third Stone from the Sun.

I’m really short on time this week. “Bill-paying” job bogging me down. For tonight, I’m going to just toss up a few interesting charts and make some quick comments.

First: It’s options expiry, it’s August. Short of a “geopolitical event,” this is a gimme for a long weekend if you trade for a living (you lucky dog, you).

There are no two ways about it, AAPL just looks like a screaming short setup to me. Today’s bar is an “nr11” and is the lowest volume in 11 days also (I suppose that would be a “lv11″ if we’re just sitting around pissing jargon).

The nr11 and lv11 are no coincidence. Range and volume are usually tightly correlated. As a matter of fact, when they’re not, it can be a strong signal. But that’s another post. Back to Apple.

Today’s high is 68.66. If it’s not broken, it’ll be my initial stop. Entry would be below today’s low of 67.18. If tomorrow is a higher low and higher high, I’ll move the spotlight to it as my trading bar. If the 70.000000 high of the 8/3/06 bar is broken, all bets are off, I’m wrong, next patient please.

Note: you can follow the progression of this setup here.

Update on CSCO (Cisco Systems):

A check on our friend Cisco. I said if I were in, I’d have pulled a Landry and covered half my position. My trailing stop would be just above breakeven, at about 20.20. Give ‘er a little room for consolidation.

Since I’m not in, this could be an entry opportunity. Let’s look at it as a potential setup. One or two more lower highs on short bars with low volume (as I said above, that’s typically a redundant statement), and I’ll be looking to get long. A Daily Dummy Spot would be nice, but I don’t insist.

Give me some action, she said. Show me some volatility. Something that’s just all pent-up and waiting to explode. An intraday move that could give me whiplash.

Well, here y’go. How’s down from 62 to 36 in just over a month, then back up from 36 to 48 in a few days? Add a little bar that’s something like an nr90, and you’ve got the potential for a major adrenaline-laced trade. As always, wait for the break, grasshoppa, wait for the break. Then throw the gate open and try to stay on for 8 seconds.

Is the GIGM setup a short or a long?

That thar candle on the far right edge qualifies as completing an Upside Gap Three Methods Bullish pattern. Should mean “go long, amigo!” (”This gap-closing move should be looked upon as supporting for the current uptrend. This third-day reaction can be considered as profit-taking. “)

I’d have to vote with the dissenting minority. Monster volume days like this stock had on 8/8/06 often mark tops or bottoms. Today looks more like a resumption of the prevailing (down) trend to me. We’ll know soon enough if the 18th-century rice traders are right.

And speaking of rice… I’d be on a break of 10.37 here like white on rice. See that bodacious volume bar yesterday (8/16, nearly 7 million shares)? Ditto what I said above about volume like that often marking tops or bottoms. “Support” and “resistance” really amount to “volume at price” after all, and a big day like that can create as much S/R as weeks of “normal” trading.

Note: you can follow the progress of this setup here.

Gotta get some sleep. Best of luck and thanks for visiting.

And when the market’s finally getting interesting!

I’m redesigning my site to have a 3-column layout. Right now it’s 1000 pixels wide, but that’s subject to change. This’ll give me more room for wider charts and even more hot air. Some extra room in the sidebars for future expansion, as well. My apologies to anyone still running 640X480 on a 15-inch monitor. Both of you.

Also, please forgive any pages or sections of pages that are formatted strangely, as if they’re missing a closing “div” tag or aren’t obeying their CSS. That’s my bad, since I’m having to do this manually (hint: if you want to just “switch themes” with Wordpress or whatever, don’t tinker too much with any one of ‘em). I used to do my sites full manual w/ Notepad anyway, so I’m kinda a tinkerer at heart.

How about that Cisco!

The volume looks like the run’s petering out, and I’d be inclined to pull a Dave Landry and cover half my position here, and let the good ole trailing stop take out the rest whenever and wherever. Alternatively, one could just let the stop do the work for the entire position. Either way is well in the money at this point. That’s the good type of dilemma to be in.

Now back to work on the guts of the site…

Today CSCO showed up as a nice Dummy Spot example, and also potentially triggered a swing trade (if you’re a swinger). Read on…

Oh, and P.S. Who could have known that we should have been watching CSCO?

I’m going to include some quotes from my “What Are Dummy Spots?” article written last January. The most recent example I had at the time was GM from the day before. I’m using this juxtaposition (ha! I knew back in high school I’d use that word at least once more in this lifetime!) to show that the players may be different, but the song remains the same…

First, the chart:

(Quotes are from January post on GM intraday Dummy Spots):

>>The overall market was rising.

This morning, the overall market was rising.

>>GM had gapped up on the open by 15 cents (gaps are good, they attract attention), and had wandered sideways/down on fizzling volume.

This morning, CSCO had gapped up on the open by 25 cents (gaps are good, they attract attention), and had wandered sideways/down on fizzling volume.

>>The range on the 10:20 EST “inside bar” was from a low of 20.27 to a high of 20.32, just 5 cents.

This morning, CSCO’s range on the 10:20 EST “inside bar” was from a low of 19.83 to a high of 19.89, just 6 cents.

>>The 10:40 bar broke the high of the 10:30 dummy spot, triggering a trade. Entry would have been just above the high of the 10:30 bar at 20.32, with a stop at the low of the same bar, or 20.24.

This morning, the 10:30 CSCO bar broke the high of the 10:20 dummy spot, triggering a trade. Entry would have been just above the high of the 10:20 bar at 19.89, with a stop at the low of the same bar, or 19.83.

>>This entry provides a total potential loss of 8 cents. On a 1000-share trade, that would be a total risk of only $80.

This morning’s entry provides a total potential loss of 6 cents (8 cents if you give a penny on each end). On a 1000-share trade, that would be a total risk of only $80.

***

The GM example in January would have netted at least $680 from that $80 risk, or “6R” if “R’s” are what blows your skirt up.

Today’s CSCO trade, with an exit at 20.13, would have netted $240 from that $80 risk, or “3R.” Not exactly enough to make the fair maidens swoon, but quite a sweet trade “on a whale.”

What about that swing entry?

This morning’s break of the “big day” (09 August) high of 19.95 provided a nice place to enter a long swing trade. Today’s volume being significantly above average is a positive, as well.

However, (and there always seems to be a damned however, eh?) the overall market is looking pretty anemic on a daily-bar (i.e. swing trade) time frame, and this is August, after all. Trading in August is usually about as entertaining as watching paint dry, because it seems the entire world is either on vacation (THEY) or at work (WE).

If I had entered a swing position (I did not), I’d have myself a nice tight stop right up under today’s bar, at 19.76. That’s a 19 cent maximum loss, or risk, or “R” (19.95 entry minus 19.76 initial stop). As my position size is always based on risk, I’d buy 100 shares for every $19 I was comfortable losing. Also, I’d take what I considered a “normal” position (say $150 risk or about 750 shares), and reduce it by 20 or 30 percent, just because of the however mentioned above. There’s no system to that. That’s pure O’Malley, baby.

Sorry, but this is hilarious. Not really market-related, but it’s just vague enough that I guess I could call it “Kim Jong-il, real estate analyst, on the bursting of the bubble” or “Kim Jong-il, economist, on the coming recession”.

Or maybe not. Maybe just watch it and have a good chuckle.

Caution: Don’t click “play” with the kids in the room… profanity in the last second or so of the clip.

Keeping a close eye on CSCO these first days after the Big Gap. Looks like a nice little pullback so far. Watch for the break, grasshoppa, watch for the break. The NDX won’t be soaring with Cisco sinking like a lead weight (vs. a lead balloon), and it won’t fall too far if Cisco breaks out and is raging upwards.

As for Apple, let us bow our heads and pray that our friends who were long had a nice trailing stop (and we all do, don’t we?), and they got stopped out here, here, here, here OR here:

On a brighter note- Dave Landry, brilliant trader, selfless educator, fine gentleman, fellow Loosiana boy, and self-proclaimed “Trend-Following Moron” (from an idiotic email he once received), has highlighted Tidewater (TDW) as one of the few potential bright spots in the current market:

A trade of the break of the 8/1 high (49.76) with the 8/4 low (47.08) as an initial stop would give a risk of 2.68. I determine my position size solely based on the risk of a particular trade, so if I traded this, I wouldn’t be taking a very large position. 100 shares would give a risk of $268, for instance.

One of my close friends asked today what I thought of JOYG. I recognized the ticker - I’ve daytraded that one once or twice. So, let’s give it a look.

First, a daily chart of JOYG. I’ve linked it to a larger version so you can click and view that one.

I’m guessing anyone who bought this thing in April will now tell you they’re a “long-term investor.” That’s usually code for “losing money.” I can’t see anything tradable on here, for me. For me. For me.

These bars are really noisy, often ranging from $2 to $5 in a single day. Nearly impossible to find an entry point, long or short, where you could set a sufficiently tight stop given the intraday volatility. But that gives me another idea. Let’s look at a different time frame.

Here’s a chart from the last two days, from the trusty Ameritrade Screamer, er, Streamer. Again, click for a larger version.

Ah, look at those pretty 10-minute bars! Nice smooth swings. Trends 50 cents to two dollars wide in a matter of hours. Intraday is the time frame for this stock. I would, and I will, follow JOYG on 5-15 minute bars, watching the price action and volume for signs of a low-risk entry. Preferably a dummy spot, of course.

I’d tell my friend that picking up $500 in 1 hour from a good entry with a nice tight stop is something I’d declare plausible if JOYG continues this volatile pattern.

As for swing-trading this one (daily bars), I got nuthin’ fer ya. Sorry.

Cheers.