Stock Market 101 Lesson 2

RageWizard · 03-10-08, 07:59 AM

O.K. so I have determined that I thnk the market will have a little upswing to it but then fall apart. I thought the same thing last week and got crushed with my lunch money play on the diamonds.
In order to find a good stock to play, you need to find a sector that is in favor, or if you like to short, you need to find a sector that is going out of favor. In order to do this, I look up ETF's from all the sectors and make a determination about the chart. Below I have loaded up a couple of charts. When I look at the sector charts I set it up so that the chart spans 6 months in time with a weekly break down of prices. Of course the volume and stochastics are included.

The first one is XLY (Consumer Discretionary), a look at the circle shows that it has just completed a run and is now on its way down. A look at the stochastics shows that trend has started about two weeks ago. If anything I would be looking for stocks in this sector to short, but either way the chart isn't robust enough for me to catch wood over this sector for going long or shorting.

RageWizard · 03-10-08, 08:08 AM

The next one is consumer staples (XLP), the chart shows some consolidation for the last 6 weeks with a tight trading range. The price is hovering aroud the 50 day moving average and in a bull market this might be a sector to watch if your a long player because the longer stocks or sectors consolidate, the more volitale the break out in either long or short directions. The stochastics are showing a slight overbought condition so again if I was looking in this sector, it would be a short play that I would be looking for.

RageWizard · 03-10-08, 08:17 AM

Lets look at some sectors that I like for the short term. Below is a weekly chart of the XLF (Financial sector). It is the same chart as when I start the trading day only broken down into weekly increments. A look at this chart shows the finacials have been getting hammered for the last 6 months. They deserve it too with all of the mortgages that have been blowing up in their faces. So why do I like them for a short term long play? A closer look at the stochastics shows that each time this sector gets into the oversold territory, they make a rally for a couple of weeks to the upside before falling apart again. For the long term this is a shorters paradise, but for the short term, going long is the play. If the entre market is going to hold the January lows, the finacials will need to make a rally. I will be a buyer of this very eft (XLF) this morning and I will try to identify a single stock to make a run for the next couple of weeks.

RageWizard · 03-10-08, 08:30 AM

Finally the best sector play. Below is the XLE ( Energy) sector. A look at the chart shows that it has made quite the run as of late, and is now sitting on the 50 and 200 day moving averages. Remember the 50 and 200 day moving averages tend to offer support when stocks approach from above and resistance when stocks approach from below. A look at the red lines shows that this sector falls apart rapidly and a look at the stochastics indicate that is about to happen again. The Orange line in the stochastics is about to cross the blue line. This indicates a change in sentiment about this sector. I will definitely be on this sector this morning trying to find a big loser. Since the price hasn't moved across the moving averages yet, there may be some initial support for the stocks, but with all the other information about the market, I think this sector will have a hard time continuing to the up side even if there is a rally in the overall market.

That's it for this week, stay tooned for next week. I will be going over how to identify a single stock that is ready for a trade and some indicator chart patterns that can be helpful.

RageWizard · 03-10-08, 10:55 AM

Looks like the financials will have to wait another day before they can rally. Country wide is under a FBI investigation. I hope they get that asshole who ran that company. Between him and the group at Goldman will Sack you, they are the two worst criminals in the market today.

RageWizard · 03-10-08, 01:21 PM

Looks like the S&P is dangerously close to making a new low for the year. This could spark a big down day. Then a chance to buy tommorrow on a short covering rally. The financials are set for a nice day in the near future, just need to find a place to get in.

RageWizard · 03-10-08, 02:39 PM

Right on cue, right after XLE fell through the 50 and 200 day moving average, the etf is starting to fall apart. Yeah. I'm gonna step ever so lighly into the Financials (XLF) right here because I really think they will move in the next couple of days, and I think the FED will be printing money sometime this week, and when the FED prints money they can artificially hold the market up for a while.

BrentCrude · 03-10-08, 02:53 PM

Rage,I have a younger nephew that has a garage band and they were thinking of a good name to call themselves and I told them to call themselves the Bollinger band.hehe!I should do a Google search because there has to be someone that took that name from the stock graphs.

You ever see that stock panelist Peter Najerian ''spelling''on CNBC at night?He used to play for the Minnesota Vikings for a year or two and maybe another team?After that he became a broker.His old man is a premier heart surgeon and one of the most famous heart authorities in the country but robbed the University of Minnesota of a lot of $$$$ through different methods.They used to come up where I live for vacations in the summer and the kids were real jock jerks I guess.

It sounds like you are a full fledged broker,have you ever worked for a boiler room when you first got started?I love the movie Boiler Room.So how close to the truth is that movie?My penny stock buying days are over and when I would get unsolicited cold calls touting stocks I would just hang up the phone thinking of that damn movie.

capitalist pig · 03-10-08, 02:57 PM

Im adding to my SPX fund today.Then again Ive been adding to it for 25 years.

later

RageWizard · 03-10-08, 03:35 PM

Originally posted by BrentCrude

It sounds like you are a full fledged broker,have you ever worked for a boiler room when you first got started?I love the movie Boiler Room.So how close to the truth is that movie?My penny stock buying days are over and when I would get unsolicited cold calls touting stocks I would just hang up the phone thinking of that damn movie.

When I first started this stuff about 20 years ago, I was going over financial reports, PE ratios, and crap like that. I would always wonder how a stock could look good in the fundamentals but still fall out of the sky, then I realized that it doesn't matter about the comapny itself. It is the people who are buying the stock that make the stock go up or down. Thats when I started to look at the charts. So I pretty much developed all of this stuff on my own, and I would love more input from some others so that I can do even better than I have been for the last decade.

jjgold · 03-10-08, 04:44 PM

Great info Rager

But lets not kid ourselves, squares get chewed up in the stock market, best strategy is buy and hold for at least 10 years.

RageWizard · 03-11-08, 09:09 AM

The buy and hold guys are the squares.

There was a big gap opening this morning on an Bernake's telling the fianancials that he is going to pony up another 200 billion. Not surprisingly XLF gapped up 1.00 as well. Great play by me late yesterday picking up the XLF. Sadly tough the XLE gains from yesterday also gapped up and I got stopped out because of the very tight stops that I always employ, especially in this trading environment. That's O.K. believe it or not out of every 5 trades I lose on 3 of them. That is because I always have a tight stop and never get to emotional over the way the tap moves.

RageWizard · 03-11-08, 10:51 AM

I'm unloading the rest of my gold play. I must give props to the Drunkenlullaby who recommended this. Not bad over 10% in a month, thanks.

mmarino · 03-11-08, 10:53 AM

Great read today. Thanks.

capitalist pig · 03-11-08, 01:18 PM

Originally posted by RageWizard

The buy and hold guys are the squares.

I dont mind being a square, I will just give one example of how buying and holding has worked for me. In 1982 or so I bought 1000 shares of Harley Davidson @ about $8 a share, I dont think it moved for a decade, but when it did it paid off well. Take that original 1000 share purchase and add the shares gained from about 10 splits since 1982, and the re-investment of all dividends and you do the math, and tell me thats not the way to go.

This is just one example I can give you, I did the same thing with Exxon and General Electric, and a Evergreen SPX Fund at about the same time. I have never sold a single share and wont till I retire.

Trading is fun, but 99% of people arent going to get rich at it, JMO.

later

RageWizard · 03-11-08, 01:30 PM

Originally posted by capitalist pig

I dont mind being a square, I will just give one example of how buying and holding has worked for me. In 1982 or so I bought 1000 shares of Harley Davidson @ about $8 a share, I dont think it moved for a decade, but when it did it paid off well. Take that original 1000 share purchase and add the shares gained from about 10 splits since 1982, and the re-investment of all dividends and you do the math, and tell me thats not the way to go.

This is just one example I can give you, I did the same thing with Exxon and General Electric, and a Evergreen SPX Fund at about the same time. I have never sold a single share and wont till I retire.

Trading is fun, but 99% of people arent going to get rich at it, JMO.

later

You play it like you want to. I not saying that I don't like the buy and hold idea. I actually have several stocks like TM, CHK, and KO that I have had for years and will probably have for several more, but I don't think market timers get wiped out like you and JJ suggest. It is just too easy to make a profit at the end of the year with this in the range of 20%. For me looking at other investment avenues that are out there, 20% is pretty good for a legitimate investment.

RageWizard · 03-12-08, 10:08 AM

O.K. after getting stopped out yesterday in XLE, I'm going to try again here at the 75.60 level to start shorting this exchange traded fund.

The XLF is doing fine, bought that 2 days ago when nobody wanted anything to do with financial stocks which is when you want to buy. I got in at 23.60 and two days later it stands at 25.60 as of now. Time to reset the stop loss to a trailing stop to protect profits.

RageWizard · 03-13-08, 06:29 AM

Looks like the dow is going to have a little pressure again today to start with. This may push my XLF play below my target stop target of 24.50. This would still represent a profit of 3.5% for three days work if this happens. I hope it doesn't because I think there is still a good run up coming for this ETF. The XLE play is finally starting to work for me, it was working the first day and lost a dollar only to gap up and wipe out all of the losses that it had the previous day and pass my stop loss target of 1%. Then yesterday it started to fall again. This ones volume was starting to trail off until the last couple of minutes of the trading day when the volumes really shot up but the ETF was able to hold the lows for the day. I'm going to set my stop at the same level that I bought it at now which was 75.60. That way I won't lose any money except for the vig of trading if there is a upswing and my previously mentioned 1% of capital.

RageWizard · 03-13-08, 08:57 AM

Well the market gapped down this morning on the open and my stop loss of 24.50 in XLF turn into a stop loss of 24.10. Still made a profit but now it is only 2%. Still not that bad for 3 days. Bad news for XLF is good news for XLE which had a gap down today of over $1.00. If I cash in now it would also be a 2% gain. I will now adjust the stop to $74.50 to lock in profit to offset the losses earlier in the week on this ETF. At this point all the work this week hasn't really paid yet but in the market it is all about not losing money. If I can limit my losses, the stocks that make a run make up for the losses even though 3 times out of 5 I lose on a trade. Now as I'm typing this I see that the XLF is turning around for the day, and a look at the IWM, VIX, S&P all look positive for today so I'm buying back in here at $23.90 for XLF. I going to put a real tight stop of $0.25 just in case the market continues down. I don't think that the sell off will continue for the day however. This looks like a chance to get in for a quick rn for today.

capitalist pig · 03-13-08, 09:22 AM

Im doing the CEGE trade again, it worked out well the 1st time so lets give it a shot again. Just bought 5,000 shares @ $1.95, looking for .25-.35 cents on this one.

later

capitalist pig · 03-14-08, 08:51 AM

Originally posted by capitalist pig

Im doing the CEGE trade again, it worked out well the 1st time so lets give it a shot again. Just bought 5,000 shares @ $1.95, looking for .25-.35 cents on this one.

later

Dont like market this morning, closed CEGE position at $2.12.

6-0 on 08 trades so far this year.

later

aszzzbrokerman · 03-14-08, 10:59 AM

option trader myself

Looking to buy some march puts on bhp @ a strike price of 70 If it makes the move I think it will (down to 68 in the next 2 or 3 days) then I should make out pretty well. Maybe a little over 100%.

good luck with everything

Nice thread

aszzzbrokerman · 03-17-08, 09:43 AM

bhp opened at 66 something this morning for about a 220% gain for the ole brokerman.

Rage,
Keep making these threads I enjoyed reading your posts

RageWizard · 03-17-08, 09:55 AM

I was going to post how to find a stock today, but I'm real lazy today and just can't seem to get going on anything. Maybe tommorrow will be better.

DrunkenLullaby · 03-17-08, 10:04 AM

Hey guys, I just rolled out of bed. All I can get news on is Bear this & Lehman that. Anybody know why oil is tanking this morning? Didn't expect to see that with the Fed's inflationary actions.

Thanks for any info I'm missing,
DL

capitalist pig · 03-17-08, 10:13 AM

If one has some time, I think SGP is a pretty good play at the $18-19 range, and I also think MOT is a strong play at $9. I bought MOT at $8 something about 5 years ago and sold it at $20 last year.JMO

later

Cyclone · 03-17-08, 12:02 PM

They are saying that oil is down today because the speculative party in commodities may be over.