Jim Cramer: How he timed and manipulated the market as a hedge fund manager.
http://www.youtube.com/watch?feature=player_embedded&v=GOS8QgAQO-k
Why you shouldn't pay attention to upgrades and downgrades.
http://www.youtube.com/watch?v=F1a3RkpLscs
Volume Spread Analysis Primer - why volume really matters.
http://www.youtube.com/watch?v=FtWXdqQ1P4k
Tuesday, February 26, 2013
Why I Avoid Earnings
Many people like to play around corporate earnings. I think that's fine as a speculative strategy, but not as a reliable one. Here are some examples of why I avoid earnings:
- Jan 16 2013 JPMorgan's net profit surges 54%. JPMorgan Chase's (JPM) Q4 net income jumped 54% to $5.7B as EPS of $1.39 beat consensus but a revenue increase of 10% to $24.4B missed forecasts. JPMorgan has also released internal reports about its $6.2B Whaling Loss. Shares were -0.2% premarket.
- 28 Jan 2013 4:05 PM VMware (VMW): Q4 EPS of $0.81 beats by $0.03. Revenue of $1.29B (+22% Y/Y) in-line. Shares -5.8% AH.
- 6 Feb 2013 4:12 PM Visa (V): FQ1 EPS of $1.82 beats by $0.03. Revenue of $2.85B (+12% Y/Y) beats by $3M. Shares -0.1% AH.
- 31 Mar 2013 6:52 PM Micron Tech (MU), a chipmaker, said it lost 28 cents in Q2, worse than the expected 19-cent loss. Revenue was flat at $2 bil, slightly above. Shares rose 3.9%.
- 22 Apr 2013 7:34 AM Caterpillar Inc. (CAT): Q1 EPS of $1.31 misses by $0.07. Revenue of $13.2B (-17% Y/Y) beats by $600M. Shares +0.7% premarket.
Monday, February 18, 2013
Taking out a low...
Learned something this past weekend about breakouts down through resistance. Watch for a turn back up. If that turn up happens just below a prior low, it's generally a strong bullish move. The idea is that the stock has taken out a prior low, shaking out the bears, and is now on a good bull run. It might even break out of resistance in the process - especially if it's on the 3rd, 5th, or 8th roll (Fibonacci sequence there...). Good example of this is NFX (below) in December 2009.
Wednesday, February 13, 2013
Fibonacci Retracements
http://traders-lifeline.com/fibonacci-walk-through/ provides a great overview of what Fibonacci retracements are, how to use them, etc.
While I've encountered many people who use Fib retracements, I personally don't use them all that much. It's not that I don't find them useful. Rather, I've found other ways to get at the same information - namely something I call "HHPPLs," or Historic Horizontal Price Point Lines. Essentially an HHPPL is a horizontal line that has strong support (or resistance) across a significant amount of time.
Why I prefer HHPPLs
The thing I like about the HHPPL approach is that it forces me to take a broad view of the stock over time. In other words, I can pop in a Fib retracement in the here and now, and get some indicator. While that's not bad, the HHPPL approach looks back in time and asks, "Where has this stock gotten stuck in the past?" My experience has been that the points where it has gotten stuck in the past are good indicators of where it's going to get stuck in the future.
What I like Fib for
The one thing that I do like to use Fib retracements (actually, I believe they're called Fib extensions, or something like that) is in predicting how long an up or down trend will last. Fib extensions don't use the retracement lines. Rather, they extend the Fib sequence into the future, and "guess" where a stock will run out of steam (either heading up or down).
A great example of this is using the Fib extension on the S&P-500 (see image below, as of February 2013). Notice that the Fib retracement/extension at 161.8% showed the overhead resistance around 1475, and the 261.8% extensions is curiously close to the all-time high around 1550. The 423.6% extension is around 1675. So I wonder where this bull market will run out of steam? My bet is somewhere between 1550 and 1675.
Here's another great example of using Fib extensions to help your eye see HHPPLs. Below is a chart of CF as of February 2013. The Fib is drawn from the low December 31st, 2012 to the high on January 30th, 2013. Note that the 161.8 extension nails an HHPPL around $177, and the 261.8 nails another HHPPL around $142.
While I've encountered many people who use Fib retracements, I personally don't use them all that much. It's not that I don't find them useful. Rather, I've found other ways to get at the same information - namely something I call "HHPPLs," or Historic Horizontal Price Point Lines. Essentially an HHPPL is a horizontal line that has strong support (or resistance) across a significant amount of time.
Why I prefer HHPPLs
The thing I like about the HHPPL approach is that it forces me to take a broad view of the stock over time. In other words, I can pop in a Fib retracement in the here and now, and get some indicator. While that's not bad, the HHPPL approach looks back in time and asks, "Where has this stock gotten stuck in the past?" My experience has been that the points where it has gotten stuck in the past are good indicators of where it's going to get stuck in the future.
What I like Fib for
The one thing that I do like to use Fib retracements (actually, I believe they're called Fib extensions, or something like that) is in predicting how long an up or down trend will last. Fib extensions don't use the retracement lines. Rather, they extend the Fib sequence into the future, and "guess" where a stock will run out of steam (either heading up or down).
A great example of this is using the Fib extension on the S&P-500 (see image below, as of February 2013). Notice that the Fib retracement/extension at 161.8% showed the overhead resistance around 1475, and the 261.8% extensions is curiously close to the all-time high around 1550. The 423.6% extension is around 1675. So I wonder where this bull market will run out of steam? My bet is somewhere between 1550 and 1675.
Here's another great example of using Fib extensions to help your eye see HHPPLs. Below is a chart of CF as of February 2013. The Fib is drawn from the low December 31st, 2012 to the high on January 30th, 2013. Note that the 161.8 extension nails an HHPPL around $177, and the 261.8 nails another HHPPL around $142.
Market Wizards, by Jack Schwager
Link to Market Wizards (revised) on Amazon.com
The book is a series of interviews with top traders. My takeaway is that they were each phenomenally successful, and no two of them did exactly the same thing. Many had mentors from whom they learned a great deal, but several just jumped in head-first. Several lost nearly all of their initial investment in the early years, but quickly learned from their experiences. Bottom line: Learning from someone who's been successful will enable you to become more successful quicker. Then, once you've found your stride, don't be afraid to tweak and adjust things to develop your own style, system, rules, etc.
The book is a series of interviews with top traders. My takeaway is that they were each phenomenally successful, and no two of them did exactly the same thing. Many had mentors from whom they learned a great deal, but several just jumped in head-first. Several lost nearly all of their initial investment in the early years, but quickly learned from their experiences. Bottom line: Learning from someone who's been successful will enable you to become more successful quicker. Then, once you've found your stride, don't be afraid to tweak and adjust things to develop your own style, system, rules, etc.
Lower Highs & Higher Lows
Take AAPL for example. Below is a daily chart of APPL as of February 2013. AAPL had been down-trending since about September 2012. After five months of down-trending, notice the "higher low" on the bounce down around February 4th.
Prior to that, the lows of the bounces down made lower lows each time. Well, to be honest, it did hit a strong support line around 510 from the middle of November through the middle of Janurary - effectively forming a wedge. Then it broke down out of that wedge around January 14th and returned to making lower lows. So, even though it wasn't making lower lows during that time, it wasn't making higher lows - and that's the point.
So the lesson learned for me is that higher lows on a down-trending stock is a signal to stand back and watch that stock to see what it's going to do. Same thing is true (for me) on an up-trending stock - lower highs is a signal to stand back and watch (V in January 2013 [below] is a good example of the up-trend).
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