Friday, May 10, 2013

Top 3 Trading Indicators for Profitable & Simple Trading

Many investors and traders make the same mistakes assuming that one needs a complex trading system to consistently profit from the stock market. On the contrary, some of the top performing strategies are the ones with the least amount of moving parts and are simple. Because their simplicity they can be easily and consistently followed.
The methodologies we use for timing the market, picking stocks and option trades are very simple because we focus mainly on price, volume and momentum. These three indicators are the key to success. When these are used together you are able time your entries and exits during key turning points, clearly define risk and reward levels while maintaining a clear unbiased state of mind which allows one to trade almost emotionless.
As my Trading System Mastery coach (Brian McAboy) taught me, if you do not have a detailed trading plan which a five year old could trade, then you do not have a solid strategy and will have unnecessary losses and emotional stress.
So here are a couple tips to keep things simple and emotionless:


Our recent trade in Infoblox Inc. (BLOX) :
This stock was flashing several signals (price, volume and momentum) that a bounce or rally was likely going to happen within a few weeks. This is a good example of a swing trade based purely on our main indicators.

Our Broad Market Outlook:
Current stock market prices are starting to warn us that a market correction is near.
We all know the market works with the saying:
“If the market doesn’t shake you out, it will wait you out”.
How does this work? Simple really, during down trends and just before a market bottom we tend to see capitulation spikes in selling. These scare the last of the long positions out of the market and suck in the greedy shorts after the move has already been made.
During an uptrend which is what we are in now the market makes spike highs designed to scare out the shorts and get greedy long traders to buy more. Once again after the move has already been made and likely near the market top.
If you are the type of trader who always tries to pick tops and bottoms against the current trend then you may like to know this little tip… The largest percent moves typically happen during the last 75% of the trend. What does this mean? It means when you take your position against the trend trying to pick the dead top or bottom you are most likely going to get be caught on the wrong side of the market in a big way.
Most traders I know based on recent emails have been short the market for 1-3 weeks and many keep emailing me that they are adding more shorts each day because they feel the market is going to top. So me being a contrarian by nature in terms of what the masses are doing, if everyone is still holding on to their shorts we likely have not seen the top just yet. Another 1-2% jump from here should be enough to shake them out though…
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Fusion-IO, Inc. (NYSE: FIO)

Fusion-io, Inc. engages in the development, marketing, and sale of storage memory platforms for enterprise data decentralization primarily in the United States. Its integrated hardware and software platform enables the decentralization of data from legacy architectures and specialized hardware. The company's storage memory platform includes ioDrive, ioFX, and ioCache products; directCache data-tiering software; ioTurbine virtualization software; ioSphere platform management software; and ION data accelerator software. Its products are used in various markets, such as financial services, Internet, technology, education, retail, manufacturing, energy, life sciences, and government. Fusion-io, Inc. sells its solutions through its direct sales force, original equipment manufacturers, and other channel partners. The company was formerly known as Fusion Multisystems, Inc. and changed its name to Fusion-io, Inc. in June 2010.
To analyze the company's stock for potential trading opportunities, please take a look at the 1-year chart of FIO (Fusion-io, Inc.) below with my added notations:
1-year chart of FIO (Fusion-io, Inc.) From October until April FIO had a rough slide. However, thanks to a well-received earnings report last month, the stock is now back above it's key price level at $18. Looking back, you can see that $18 was not only resistance (red), but it had also been a key support area last summer (blue).
The Tale of the Tape: FIO has a key level at $18. A long position could be entered at the $18 support with a stop placed under that level. A short play could be made on a break back below $18.
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Will King Dollar break the S&P?

We keep asking ourselves who is buying into a market at an all time high; the answer is always the same.  It is scared money; the bears are likely playing a bigger part in this rally than the bulls are.
Remember, prices changes are largely based on motivation not necessarily the quantity of buyers and sellers. Traders jump on the bearish bandwagon on every little pullback in the S&P, but they've been burned so badly this year that they aren't willing to risk much. As the market starts to creep higher, they panic and buy back positions without regard to price (in other words, the bears become highly motivated buyers bidding prices up).
On the other hand, because this is one of the most "hated" rallies of all time; money managers are scrambling to get sidelined cash into the market.  These traders are panicking to get in the market and are willing to buy shares at lofty prices because they feel like they can't afford to wait for the dip that never seems to come.
We don't know how long this frenzy will last, but we do know that scared money rallies and performance chasing rarely ends well.
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Value expert's prudent energy bets: HAL, ESV

by John Buckingham, editor The Prudent Speculator

We find the record-low interest rate environment to be very supportive of further gains in equity prices. That does not mean that we won’t soon see a correction. But with low inflation and not-too-hot, not-too-cold U.S. economic data and profits and balance sheets remaining strong, equity valuations still seem reasonable.

We retain our long-term enthusiasm for our broadly diversified portfolios of undervalued stocks -- such as two energy issues: Ensco (ESV) and Halliburton (HAL).

Ensco is the world’s 2nd largest offshore driller. The firm operates across six continents with one of the newest jackup and deepwater fleets in the contract drilling in dustry, including 9 drillships, 13 dynamically-positioned semisubmersibles, 6 moored semisubmersibles and 46 premium jackups.  (more)
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Wholesales Sales Drop By Most Since March 2009; Relentless Inventory Accumulation Continues / By Tyler Durden / May 9, 2013, 10:23 -0400
The relentless warehousing of wholesale inventories continues, even if the “any minute now” gusher of wholesale sales continues to be pushed back into the indefinite future. Sure enough, the March data showed that wholesale sales disappointed, and instead of growing 1.5%, declined by -1.6%, below expectations of a 0.1% rise. This was the biggest drop in sales since March of 2009: another nail in the coffin of any recovery dreams. That this happened even as inventories increased by more than the expected 0.3%, or 0.4% up from the previos decline of -0.4%, shows that indeed the end-demand weakness has been quite widespread. Logically, the Inventory-to-Sales ratio rose to 1.21, up from the 1.17 a year ago, and the highest also since 2009. Sooner or later all this pent up inventory will have to be cleared, resulting in even more dumpin, price reductions and margin deterioration in a retail world in which the bottom line is more elusive now than it has ever been: just ask Amazon.
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Chart of the Day - Under Armour (UA)

The Chart of the Day is Under Armour (AU).  The stock was near the top of the New High list when sorted for Technical buy signals.  The stock has 100% Technical buy signals and a Trend Spotter buy. In the last month the stock advanced 5 time for a 8.19% gain.

The Company is a developer, marketer and distributor of branded performance products for men, women and youth. The brand's moisture-wicking synthetic fabrications are engineered in many different designs and styles for wear in nearly every climate to provide a performance alternative to traditional natural fiber products.

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