Saturday, December 31, 2011

Portfolio performance 2011

First things first. I get emails everyday asking me if I day trade? If I am only a short seller? If I manage a hedge fund? I suggest you to read this introduction and all the links in that blog post first. I also have a chance to explain now. I am not a day trader, but should the position insist me to open and close a trade in less than 1 day, I have no problem doing it. I am both a long and short player, so I don't have any bias there. I see opportunities, I trade them. I trade stocks, ETFs, stock, ETF & index options. I do not trade commodities, currencies, futures and options related to them. However, I take advantage of the commodity and currency fluctuations directly by playing ETFs or indirectly by applying them to the general market. If you want to take advantage of my trading methods, I believe you need to ask more questions. The more you interact, the more you will understand my methodology better. We all benefit in the end.

My previous performance letter was posted here . Till Q3, my portfolio was up by 39%. For the year ending 2011, my portfolio's gain was 48%. The market in major indices were mostly unchanged for the year. SPX was down by 0.0003% for the year, $DJI was up by 1.5%. Given the flexibility in my trading and the methodology I use, it should not be surprising that my portfolio was up. Account performance in the last quarter is shown in this picture from my brokerage:

Some highlights for the year:

  • The year was not short of drama even though my portfolio was up. Trading was in no way easy. In terms of trading being hard, this year would rank in the Top 3. In terms of YoY gains, this is not my best year but one of the best for sure. Y  2007 was my best trading year. Conditions were similar to this year but I was able to catch some good swings during that year which made it my best year in terms of returns.
  • I didn't expect the year for the stock market to be flat. In the beginning of 2011, we had QE2 going on. With such a massive liquidity push, stock market was all happy. I expected that the market would end short of 1500, based on the liquidity push at that time. It was only my expectation but you know I seldom trade for that long time for a year. 
  • My longest trade time was 28 days, shortest was for 5 minutes, average trade time 2.4 sessions. The shortest trade made my whole account go up by 1% :) , I had no options but to take the profits and ring the register ka-ching.
  • Going back, I had several trades which netted my account less than 0.2%. I regard them as waste trades, which made money for my broker but not worth my time. 2011 being a volatile year, I had several such trades. I am sure the brokerages made a boat load of money from every other trader as well.
  • 2011 was not a year for the lazy, couch hugging hedge fund managers. Hence, many hedge funds including the famous John Paulson's fund was down big for the year as well. The top performing hedge funds for the year 2011: here . By sector : here . Flexible, and many hardworking hedge funds did close in positive. I wouldn't classify John Paulson in the lazy group though. There are times when you are unlucky, I would bet that Paulson will return with a vengeance next year.
  • I did not expect the top for the year in May 2011. I continued to be long, hence I faced slight draw down.
  • My worst performances came in early August and middle of the October. In August, the down move was extended, and stretched beyond a 3 sigma move. I had gone long on August 5th after the market was down more than 10% in 8 days, then came the US debt downgrade by S&P. The market was down by 9% the next day. I did not keep my trade open, I had to close at 5% loss that day. Market was up by 8% next day, it would have been beneficial if I was still in the trade but sometimes market can be down 25% on a single day like in 1987, or 15% like in flash crash 2010. I couldn't risk a draw down more than 5% for the whole account in a single day. 
  • In October, I was a dumber. Though my market signals indicated me to go long, I traded short with a bearish bias in my head. I was rewarded with a 3% loss. But, that's not what hurt me during that time. What hurt me was not being in the biggest long trade of the year from 1077 to 1290. It was my lesson not to trade against the signals. If you trade against the signals, not only will you lose that trade but you also miss the trend.
  • I could not take much advantage of the gold rush in the 1st half of the year or the plunge in the 2nd half. I had stayed away from the Gold trade. I traded Silver though early on in the year. Gains from Silver (via SLV, AGQ) account for the largest profits I made in the year. Silver always will remain my favorite play as I had several profitable trades over the years.
  • Any 2011 year review without Steve Jobs tribute would be empty. Steve Jobs succumbed to Pancreatic cancer after a 8 year fight. We miss you Steve Jobs! 
I wish you all a Happy New Year 2012, have a very good and prosperous trading year!

Friday, December 30, 2011

Sell Humana Inc.

I am looking at HUM today. The chart I am using is a weekly chart, so this is an IT call. If you hold HUM, sell HUM (before the next call) and take profits. Don't short sell yet. Short sell below 82$. The weekly price developed negative divergence with many indicators, one of which is MACD. The price developed higher highs while the indicators are showing lower highs.

Watch the pretty breakout after the 2010 consolidation.

Thursday, December 29, 2011

What is holding this market down?

For the last several weeks, SPX has been hitting a thick wall of resistance and dropping down. Some think it is the 200 DMA, some think it is 61.8 number. SPX traded above, below, at the 200 DMA several times this week. There is significant resistance that is holding the market down though. I don't think this low volume push will cause the market to go higher. "Market higher" is the keyword and I expect the market to trade higher 3 months, 6 months from now. The 50 week MA is at 1267 and that is what is pushing the market down. For /ES, the resistance stands at 1264. 

I expect we will go lower, gain some momentum and then push higher in the new year. 

Thursday, December 22, 2011

Emini intraday update

My VST signal is still on a buy. I am still partly long, after closing 60% of the SPY position. When and if the trailing stop 2% hits, I will still be profitable on that position taking my entry into consideration.

At this hour, I wanted to post an intraday Emini futures update. There is a negative divergence of the price with the RSI (14) on the /ES hourly. I noticed this divergence early on, but the divergence is not complete until the hourly bar is complete. I am posting this now as we are very close to finishing the hour. What this means is we may have reached a VVST short term top. After consolidation, we may go up or down. My signal will determine my next entry. If VST signal continues to be on buy, my current position should be good. If VST signal is sell, I will open a short sell VST SPY position. I will post it on my trading blog. The divergence on the chart below is valid as long as the trendlines hold.

Tuesday, December 13, 2011

Euro update - Swing sell

Euro is out of the trendline that held it for the last few months. The implications of this trendline breakout are very negative. It means that the downward spiral from here will accelerate. Sell all rallies, same with AMZN (check my weekend post for the chart).

I also got a swing sell for the market. You can use any price appreciation today to sell SPY short with a 5% stop from here. I suggest you do that after the FOMC meeting update. I know we are not expecting any QE but who take risk even on a 1% chance? If FOMC statement is neutral, there will be a dip followed by a rally. I expect today to close in positive. Either way you can use any strength to sell. I don't think 0.5% on a ST signal matters, safety first!

Sunday, December 11, 2011

Not so FAST!

 It has been a while since I posted individual chart names. I found some good ones to post today. This should kick off the week for you. I have no idea of the fundamentals of these companies, that is your homework before trading/ investing in them. I will take a look at the sector, analyst estimates, 1 year EPS performance, trading volume before trading. I cannot guarantee I will trade all these charts, these are eye candies. If things line up well, I may trade them. I will definitely post it on Stock fund blog. 

I start with Fastenal Inc. today. Use the trendline on FAST to buy the dip with a 5% stop.

Next is symantec. SYMC has possibly double bottomed, buy it right here with a stop below the lateral trendline. Go short below it.
Below is the HOLX daily chart. Enter the position on a breakout, up or down.

Adobe recently satisfied Steve Jobs' ghost by killing mobile flash. Check ADBE chart. ADBE has been trending up after a good consolidation. Buy on a dip with a 5% stop.

We return to our good old friend, AMZN. AMZN is at the lower trendline of the megaphone pattern. I have a bad view of the fundamentals this company has. Yeah, traffic is growing and the site provides good stuff to buy. So, what? It earns 10 cents. With cash in balance and everything, if Wall Street used good criteria for buying stocks, then this should be below 50$. 

 Sell short on a trendline break but notice long term trendline support. If it breaks below that support, it should go down faster than NFLX.
Mattel Co. has been on the uptrend. With this being the holiday season, I am bullish on the name. The chart supports the theory as well. Buy 1/2 now, and buy on a trendline touch. Sell 3% below the trendline.

Sell BMC with a stop above the channel breakout. Buy if it breaks out of the channel.

BroadCom is bearish for some reason. To be honest, the tech sector is not leading this market. That is definitely not a good sign for the market. 
Sell BRCM below the lateral trendline with a 5% stop. I see a H & S on the chart, do you? If the H & S is real, then we should see BRCM test the 2009 lows.

I am bullish on CSCO. CSCO has double bottomed over the long term. Buy with a 5% stop but if it breaks below the double bottom, sell short.

I am bullish on ESRX but buy the breakout. Wait, have patience!

Here comes KLAC with a beautiful chart. Buy with a 7% stop.

I like NVDA here. Buy with a 7% stop. 

I will visit these names after 4 weeks and we will assess our performance of this basket.

Thursday, December 8, 2011

Market update

Folks, 1st things 1st. It is easy to get distracted during trading/ investing. Trading and investing need 100% of you in a perfect state of mind. If you are not in tune with  the market, then your trade is a lost cause. Today morning I read a signal on my charts, I placed a short sell TNA but that didn' execute well. My VST trades are more often terminal trades, sometimes they get extended for many days though. I get in to the trade with a small expectation because of the terminal nature of the trade. When I did not get enough TNA and market was going down within 10 minutes, I felt very bad. When you want to short sell, remember you are fighting everyone else. The odds are stacked against the short sellers. Buyers don't have many rules. Short sellers can't get enough trades, then your short trades may be called..the list goes on. TDAmeritrade is turning short selling into nuisance. During peak hours, exactly when I want to place a trade and hit short sell order button, the order says "WAIT REV.." What review guys? If the short sale is not available, let them make the system to outright reject the trade. I will move on to the next thing to find within few seconds. If the order is waiting for 3 minutes to be approved, what does it mean? It means the guy on the other side can reject my order for 1001 reasons, not just because there are no available shares. It is more frustrating if you have a partial fill. I had to short sell today at a lower price again today but see not everytime you get an opportunity to fill at lower price and still win. It kind of set me off today morning but overall it was a good day. The brokerages, investment managers, nobody encourages short selling. They set weird rules to offset you from short selling. So, be ready to take such risks when you want to sell short.

I analyzed my charts and it looks like there is unfinished business on the downside. I suggest my swing traders to stay in cash. The next signal you are going to get from me is a buy, I don't know at what level. But, you stay in cash. period. Because the market gapped up multiple times and stopped you out. Fine with my system, you will get your chance. Please wait in Q.

The market is sick and 1 chart straightaway shows it. The NYA50R declined today by 22.5%. Translates to 22.5% of the NYSE stocks fell below their 50 day moving average. May be the ticker changes on individual names may be small but I told you during the weekend that market managers tend to buy stocks which are above 50 DMA, 100 DMA, 200 DMA etc. The fact that even after multiple days of rally, the market could not take all these stocks so much higher above 50 DMA to be able to be above 50 DMA on a day like this (2% sell off) speaks volumes about the vulnerability of internal structure of this market.

Look at the NYA200R. It is at 29.32. So, with a rally of several days, all the market is able to do is to keep only 29% of the stocks above 200 DMA. Yeah? That is pathetic and sick.

If today finished close to even, I was going to write we were close to a buy signal. But, not anymore. All I can say for swingers is to stay in cash. That is only because I am following my system. I have to adhere to the rules of my swing system. Buy signal comes after sell signal and so on. If I followed several untested (by me) systems, I would ask you to sell short with good stop. That is where the market is.

Saturday, December 3, 2011

Is Santa Claus coming to the stock market?

The chart is self explanatory. There are several ways to define a bear market. Classic text book definition uses the term bear market as market below 20% of the peak. In my opinion, we can use meter checks like how many stocks are above 50 DMA, 150 DMA, 200 DMA etc. I am using the NYSE stocks above 150 DMA as a barometer here. What happened to this index is not good for the market in the long term. Long term model following this index chart above stays in cash even though the  big picture still tells us that we are in a bull market. So, is Santa coming to the stock markets? I doubt it but with a gun to my head, I have no idea. There are mixed signals. I am taking a day, but if compelled a week at a time.

Friday, December 2, 2011

Sweet candy!

"What would compel me to short it here is if we see a lower high on the RSI (14) against a higher high on the price."

The above is from my previous post.  I got the lower high today morning on ES hourly with RSI14, that is sweet candy to me. I am entering a VST trade based on this.

Thursday, December 1, 2011

Negative divergence

The chart above is /ES hourly chart. You can see the price developed negative divergence with the RSI(14) indicator as opposed to the coordinated move on the previous line. I expect /ES to be lower in few hours than now. Hence, I close all my VST positions and move to cash. What would compel me to short it here is if we see a lower high on the RSI (14) against a higher high on the price. Am I expecting a down day tomorrow? Possibly! But, this divergence could be resolved overnight. The chances are slim for overnight resolution because of the divergence. Don't worry about the accuracy of the trendlines. The concept is important here but not the lines. 

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