Link: Trade Like a Scientist Series

Jun 16, 2007: 8:38 PM CST

Dr. Steenbarger at TraderFeed has written a three-part (so far) series entitled “Trade Like a Scientist,” which includes insights on how to approach the markets from a structured, formal standpoint. The scientific method is standard operating procedure for any quality experiments, and experiments contribute to the known body of collective knowledge which comprises science.

Trading should be no different, then. Read over his posts and see what areas (including backtesting and pattern recognition) you could test using a more structured model and test your own hypotheses about the market.

Trade Like a Scientist Part I – The Scientific Mindset

Trade Like a Scientist Part II – Framing Individual Trades Scientifically

Trade Like a Scientist Part III – Three Common Mistakes of Traders

Should there be any updates, I will make note in this post and add the new links.

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Link: Active Trader Studies Schlumberger

Jun 15, 2007: 5:09 PM CST

Schlumberger: Funny name, powerful stock.

Even though I don’t watch “Cramer”, others inform me he has mentioned this stock various times and from my studies, the fundamentals, as well as the technical charts (regardless of what method you use) look promising.

Active Trader Blog posts a strong daily chart of SLB as well as a quick commentary on how to limit risk by using a proven, conservative (simple) options strategy.

Posting this link serves a few purposes:

  • Position traders can see an example of a covered call sale
  • Swing traders can see a nice uptrend and confirmed technical breakout
  • All traders can learn a bit from studying options and how they can enhance returns

There is a negative momentum/price swing divergence, but that’s no reason to exit – only a caution.  Notice the rhythmic price swings and the thought that we are making a new price swing high.

Study the chart and see if you can learn a few insights.

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Just a Blip in the Radar

Jun 14, 2007: 9:17 PM CST

Technically, I should be waiting until this weekend to post weekly index charts, but these look so beautiful (so far) that I couldn’t resist.

With the exception of the Nasdaq and Russel (technology & small cap respectively) the weekly charts of the Dow and S&P are making new all time highs as well as new momentum highs – positive signs. The charts are beautiful for the bulls who have been holding.

dow-w-june-14.png

nas-june-14.png

sp-w-june-14.png

rus-w-june-14.png

Remember the major economic reports tomorrow which – one TV analyst said today – could swing the Dow Up OR Down 200 points.

Here is tomorrow’s expected economic action (calendar) from Briefing.com:

briefing-june-14.jpg

It’s – of course – options expiration Friday. What a great time to be a trader!

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Let’s See Some Green! And bonus charts

Jun 13, 2007: 6:39 PM CST

Today’s action was nothing less than stellar.  The gap up in the morning led to a bear-flag like correction to the moving average (consolidation) and then it was quite literally off to the races when the Fed Beige Book hit the newswires.

First, two index charts showing price trapped (for now) below the rising 20 period moving average after a bounce off support:

dow-june13.png

sp-june13.png

It will be interesting to play the resolution of the ‘box’ in which these two indexes are trapped .

As a bonus, here are two potential impulse buy trades:  Google and Apple.  Remember an impulse buy occurs after a new momentum high is made (along with a new price high) and the price retraces back to the rising 20 period moving average.  You play for a small target, being the most recent price high and place your stop a bit below (depending on your risk tolerance) the rising moving average.  Study these charts:

goog-june13.png

aapl-june13.png

Here is a bonus chart of PotAsh, a company with a stock in a strong uptrend that has doubled in price since last October and tripled in price since December 2005!

Look at this runaway monster on the weekly chart:

pot-june13.png

For all of you who love strong updays, here is the polar opposite picture of the industry groups from StockCharts.  Remember, every industry was down – most by 1% – yesterday.  Today, we see the exact opposite picture.

industries-june13.jpg

By the way, if you want to see red, look no further than the Bond Yields.  My, this is an inverse of the last few trading sessions:

yields-june13.jpg

Remember, options expiration is upon us, so consider your strategies and decide how much (or if all) you wish to trade this wild market.

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Mid-Week Index Overview

Jun 12, 2007: 6:47 PM CST

Here are a quick charts of the Indexes:

dow-june12.png

  • Holding the Bottom Bollinger Band
  • Lurking above the 50 period EMA
  • Market making new momentum lows
  • Stochastic registering a buy signal
  • Volume increased today on the sell-day… distribution
  • Clear momentum divergence now unwinding
  • Support should be 13,200 until it fails

nas-june12.png

  • Has not reached bottom of Bollinger Band in months
  • Market recently bounced at rising 50 period EMA
  • We almost registered a stochastic buy signal
  • Momentum not making new lows and not clearly diverging
  • Price is clearly in a trading range now with support at 2,540 until broken

russell-june12.png

  • Market making new momentum lows
  • Price broke the 50 period MA – are small caps in trouble?
  • Nearing stochastic buy also
  • Price almost made a new momentum high recently – no price divergence
  • Price is also in a trading range – recently experienced a failed breakout (up)
  • Support should be near 810

Please see the Market Summary at StockCharts.com.  I could do a repost of an earlier blog entry where I pulled each segment of the daily action and everything was ‘in the red’ except bond yeilds.  This was the (almost) exact same scenario as occurred Thursday, June 7th.  Many such ominous down days (where bears take a swipe at everything) cannot be good for the overall market unless buyers find value at lower prices where everything is ‘wounded’.

Here is a teaser of the StockCharts page (each Industry was down):

indexes.jpg

Last time, the buyers found value and drove the indexes up after the “bloody” day.  The question on everyone’s mind has become:  Will it happen again?

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