In today’s Free Intra-day Swing Trade Report originally sent to members, Paul Singh discusses the difference between the bounces in the commodity sector and FANG stocks (Facebook, Google, Amazon and Netflix). He also discusses his current positions and the gold sector.

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The post Swing Trading 101: Understanding the Commodities and FANG Bounces appeared first on Bulls on Wall Street.

SPY breaks down under key $200 level.  Entered SCTY today.  Still holding SPY short (via SPXU) and GWPH. New Focus List addition ECTY.

Video Analysis:

No video today.

Key SPY Pivot Levels: Round number $200, Old high 199,  50 dam 197.19, 197.50 and $196.50 gap fill and support levels

Under the Hood and Trading Game Plan:

We *finally* got a clean break of $200, and for a time it looked like SPY might even break $199.  In the end it closed above $199, but the damage is done. We are starting to see some clear signs follow through for shorts.  Knowing this market, I would not be surprised to see some more back and forth before we get more follow through with a $199 break.

Once we get a close below the old high at $199, the 50 dma and gap fill in the $196-197 range will come into play.  This is where we should see some attractive entries in momentum stocks.

The current game plan is to manage the SPY short position.  I continue to look for long setups on momo stocks, but will not chase. B

Current Trades

I am still holding SPY short via SPXU and GWPH.

Today I entered focus list stock SCTY on weakness. It recently remounted the 50 dma and is now basing above it.  As with the rest of my long entires of late, this was a half size position due to the overbought market.

The Trade Results Journal/Spreadsheet is up to date.

The Focus List

Finviz link to easily follow the entire focus list.  Most positions entry charts remain as annotated earlier in the week.

Take a look at the link to the focus list above and you’ll see a few momo stocks with ugly bars, like AMZN and BITA.  When the market pulls back or corrects this tends to happen in waves.  The prevailing wisdom is to look for the stocks that acted well, but my experience is these guys often are the next to drop.  For that reason I am going to stay away and just watch, unless intra-day action tells me different.  Instead, I will focus on the most recent breakouts that have a strong catalyst and volume.

New Addition:

ECTY broke out of a range going back to May on strong volume.

DGLY still looks good but I’ll wait for more of a pullback.  See yesterday’s chart.

Short Setups:

My focus now is shorting SPY via SPXU

Market Leaders

Every one of the market leaders pulled back today.  AMZN was hit hard enough that normally I would consider removal since it was already somewhat broken.  However, since it may be an over reaction to the AAPL phone payment news, I’ll continue to watch it over the coming week or two.  I did this with CAT, which I use as a gauge of industrial type stocks, and it bounced back before I had the chance to remove it.  PCLN is also on a short leash.

Please read the post 23 Laws of the Part Time Swing Trading the Market Speculator Way and How to Anayze Your Swing Trade Results  It is important to know these rules if you trade off the Report.

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Self-worth is often measured by the sum of accomplishments. This is why failure can burn badly. Not only is a goal or project left unsatisfied, but your sense of self-worth feels compromised as well.

Well beyond the whole glass-half-full/glass-half-empty scenario, failure can actually be the largest impetus to success. Success is fun and safe. Uninterrupted success can also lead to stagnation and risk adversity.In business companies that enjoy years of success and growth–without at least a few years of serious financial trouble–almost always fall victim to their own strengths.  You see companies like Microsoft that come out hot out of the gates with no setbacks they fall victim to their own success and stagnate vs Apple who had some serious trouble in their original business model had to innovate and reinvent themselves.   In the field of day-trading, limiting yourself to safety and avoiding all risk reduces your income potential. Since markets are constantly shifting, this is also not a field where adversity to change is helpful. Failure will often open one up to change better than success.

Understanding the value of failure and, more importantly, not fearing failure, supports personal growth and profit potential. Failure can morph into success if it’s taken in a nonpersonal and productive approach.

Failure ends resistance to change

In times of success, the old ways stay strong. There’s no reason to change because the current methods are working so far, and income is coming in.

In day-trading, proven methods are good but they don’t always remain successful. It’s important to avoid stagnation for that reason. Reviewing strategy and changing methods is part of this trade. At some point, you’ll have to change anyway. But those most resistant will actually not consider change until that point where methods fail. When I started this business in 2008 I strictly traded smallcap stocks. I traded every type of crappy 2-3 dollar stock possible. What I found was that trading that way wasnt scalable for my account or my business. Its hard to have a chatroom where your trading these small junky stocks and its hard for someone who now has a much bigger account to get size in these stocks. During these times I was making 400-500 dollars a day and had 30 subscribers as this style just wasnt a good one for me or my subs. Trading this way limited my results in many ways.  Today I trade mostly momentum Nasdaq type of stocks 20-100 dollar stocks with volume and range. Changing my method allowed me to get more size into my positions but also move faster and more aggressively. This changed my profits 10 fold.

This is where failure becomes helpful. You can no longer resist change, and the recent failure opens the door to further exploration. Any new ideas that you were afraid to try before can be tried now out of necessity. It breaks up your routine and forces you to grow beyond proven methods.

Change not only involves trying the new methods but also involves corrections to stay on target. Long-accepted strategies are now questioned, and after a hard look at what led to failure, you can see where you can improve your approach.

Change is inevitable and, in failure, it becomes necessary. You become less resistant to change, which in the future leads to less risk adversity and a more open-minded approach to your methods.

Failure reveals both strengths and weaknesses

Many successful people failed first before succeeding. From those failures, they learned more about themselves, what they really wanted, and better paths for success.

It may simply be that there are some types of day-trading investments you have a better handle on than others. Or you made an “educated” guess on bad information or require more skills training to reduce the likelihood of bad decision-making. Through failure, you learn your shortcomings, and your strengths also come to the surface through this self-examination.  This is why I have my students trade for sometimes months on a simulator while we grade their trades. So that they can rise and fall! So they can have terrible days and amazing days and feel the ups and downs of trading.  Then after each failure and each disaster we reformulate and learn lessons getting them ready to trade live

The foremost lesson that can come from failure is your ability to survive it. Sometimes knowing that fear is survivable and leads to better accomplishments is the best way to stop fearing it and encourage future risks. When I get up and get ready to attack it in the morning I have such a confidence as I have been on the otherside. Desperate and wondering if I was going to make it in business and in trading. In my younger days I blew up 5 different trading accounts.  I once had 400 people in my chatroom  when my partner left and took them and lost them all down to 20 people! Going all the way to edge and coming back gives me my strength.

Failure means never asking “What if?”

“What if?” is that great unanswerable question that haunts people until death. In it, there are regrets and wonders that will never be answered or satisfied. By its nature it is always unsatisfied.

Failure may result from taking risks. You make a trade with a 50-50 chance of being good, and instead it goes bad and you lose money. At the time this occurs, you may feel devastation and wish you never took the risk.

But imagine if you never took the risk. That question will likely haunt you too. You’ll never know what may have come from that risk. It could have been a very profitable trade, or it could’ve tanked. Either way, you don’t have a strong answer, and you’ll always wonder.

Sometimes, instead of the constant nag of “What if,” the answer of “I tried, but it didn’t work,” is often better for the simple reason that it is an answer. You tried, you did your best, and it wasn’t successful. But at least you know, and you can let it go and move on. It doesn’t haunt you like unanswered questions. You can even feel a certain “badge of honor” that you acted bravely and didn’t hold back due to fear. In trading whether you win or lose money is meaningless. Our jobs is to do the right thing to trade a stock well. That often means that you do the right thing and you lose on a trade. And sometimes you will do the wrong thing and make money. But longterm if you want to make serious money and do it each day your job is to trade each stock well with probabilities and risk irregardless of the dollars or your p&l.

Builds character

This sounds very cliché, but it’s true.

As stated earlier, success often preserves the status quo. It feels good but demands little from you. Failure, on the other hand, makes you examine those uncomfortable questions that lead to growth.

Coming out of failure, you’ll find you’re more resilient and mature. Failure is no longer frightening because you survived. Also, you’ll be more forgiving toward yourself and others in the same position. Perhaps you can even encourage those facing similar failures or shortcomings. Patience will grow, and you’ll no longer take shortcomings as personally.

You’re the sum of a whole picture in which accomplishments are one part. Success or failure doesn’t define you, as they’re merely results of events in your life. Failure can be devastating, or it can be a learning opportunity.

In the light of failure, regroup and remove the personal connection to it. From that place, you can make a new beginning with new risks, new challenges, and new methods of continuing your trade.  Your struggles can define you. Handle it right and it will give you an amazing power to make things happen.
if you guys are having any trouble with your trading or anything else always feel free to email me kunal@bullsonws.

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Also notice the thickness of the cloud… usually represents more resistance.  I like the flat top however.. The flat top of the cloud lines up nicely with the recent highs printed at the turn of the  month.  THAT is the real breakout zone.  That level (around 123.30) would also get us back above SMA50 (not shown below).  Right now we’re riding under SMA50 with little proof we’ll shoot above.

Now to the 30 minute chart…..

Hmm.. Another island of candles with overall trend very hard to spot.  There is clear level of moderate support just above the 5 day moving average (yellow line).  Based on today’s close, there is a real chance we’ll test horizontal support and SMA support.  That’s what I want to watch.. will SPY stay above the 5 day moving average?  If it attempts to hold above and then falters by lunch, I’ll likely short the market… not a heavy position, but I’ll toss some coin at it.

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It’s Monday night and as you all know, the market took another hard kick in the backside.  We’re truly experiencing a kick-em-while-he’s-down market right now.  I’ve been completely on the sidelines over the last few weeks – mainly because of other obligations restricting my trading time, but it has been fun to watch as a spectator. All of the crazy political games during the debt cieling nonsense pretty much pissed off all of the rating agencies.  They were not impressed with our ability to work together to find meaningful solutions. Top that off with weak market data, the ongoing mess in Europe, and a generally slowing global economy.  It all makes for a perfect storm of concern.  Concern breeds great short side opportunities and opportunities to profit from gold.

So, where is the bottom?  I don’t know and trying to trade off that prediction is a really good way to get hurt.  The market is a falling knife right now and has no real catalyst to move back up.  Day trades aside, when you look around, there isn’t much to be happy about – maybe the earnings reports were ok and companies have a lot of cash. But, the negative news far outweighs anything we’ve heard on the positive site.  However, this collapse will end.  Fear trades tend to over extend themselves to the downside and opportunities will start to show up…someday.

If I swing trade at all this week, it will be very small and less than 10% of my portfolio. When would I maybe take a tiny position in a swing this week? Hmmm. Maybe nothing.  But, I am interested in hearing what the Fed says tomorrow and if they hint at QE3 – the twitter buzz phrase of the night. I don’t think announcing QE3 would indicate anything other than the government is REALLY concerned about the economy.  They don’t want to do it.  A good Non-Farm Productivity might dull the falling knife a little.  Hmm. The more I think about it, there may not be a reason to swing long yet – all about the day trades.

A quick look at the charts:

HA – Everything is so crazy oversold… or, is it?

The McClellan Oscillator is at -479.84.  Either that’s a misprint of the lowest it’s been as far back as my chart show (1995).. That obviously implies VERY oversold territory.. we’ve fallen below the July lows seen last year.

The VIX is at the highs seen in mid May of last year… showing high levels of fear. BUT, last year when we saw this kind of spike, it quickly reversed back up – yeah, things are definitely different now, but just pointing out what the charts show.

Even though these two ‘stress’ measurements are showing oversold levels (as they obviously would), it’s important to look at the big picture.  If you step back and look at the SPY weekly, the first thing that jumps out at me as that TODAY was the first day below SMA200 support. So, in other words, a major psychological level has been broken.   Next support looks around the 100-106 range (amazing).  That’s where I’ll watch for new entries long unless it bounces back above sma200 soon.  You’ll also nice that MACD on the weekly didn’t fall below zero until today.  Take a look at what happened to SPY in 2008 once SMA200 was taken out and MACD started to move under 0 – crash goes the market.  So, from this big picture view, we could go much, much lower.  Something to consider if you’re swinging – this is not the time to go in heavy to the long side.

Stay nimble, team and don’t rush to find the bottom.

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For tomorrow, here is my swing approach..

I will not look to chase the gap. Last week’s GDP numbers and overall cautious outlooks from companies during earnings season gives me enough reason to stay cautious. We have to keep in mind that the debt ceiling mess was nothing more than political positioning. This event is normally a non-event and I’m not sure that a 1% gap-up is sustainable without more. I’m still very concerned that our credit rating will drop to AA status… that would wipe out any debt ceiling pop and then some. However, the U.S. credit rating is probably safe in the very near term, so tomorrow I’m focusing my attention on the votes on the debt deal.

After the gap.. I’ll watch for afternoon strength or weakness. If the market is holding up, I’ll possible look to short GLD and look for stocks that are holding up relative to their peers. I really don’t have a swing watch list, but will tomorrow AFTER the vote.. so, expect one tomorrow night.

The simple message is to not get overly excited early tomorrow as a swinger. The vote MUST happen first. Don’t forget, ISM Manufacturing numbers come out tomorrow, too. Weakness there, and the trade focus will start to move away from the political news and towards the real economic influencers. Unimpressive ISM could push us red tomorrow even with the debt ceiling mess behind us. Did anyone think it wasn’t going to be raised? Start spreading your attention to the sectors with strength and measures of confidence and global growth. That’s where the swings will be.

More tomorrow night. Have a great Monday.

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