Tuesday, June 28, 2011


The market rallied this week for a couple of reasons. I did not take any trade this week primarily because it is harder (not impossible) to find good deals in up days, especially when the momentum is pretty strong. Secondly, it is against the trend to go short when the market is going up. The risk/reward ratio is simply not worth it.

Above being said, I've spent two days reading the investment classic-Security Analysis. While the bull market is still intact, we can't forget about what the past had taught us. Even though I, myself, did not experience the crash of 1929-1932, the dot.com bubble and the most recent crisis, it is always a good idea to take precarious approach to protect my investment even in good times.

Today was a good day for me, my portfolio was up 3% in a single day. Looking under the hood, however, I do realize that some of my picks a while ago have proven to be pure mistakes because I did not adhere to the "margin of safety" principle and took some actions based on emotional turbulence instead of sound rationale and attractive risk/reward ratio.

I love Apple's product but  I've lost some money on AAPL simply because I didn't stick to my system. Looking back, I would've made money out of the last two major shakeouts accompanied by hammer candlesticks. Similarly, had I paid more attention to the risk/reward ratio, I wouldn't have bought POZN at the near-term resistance.

Reading Security Analysis really calms me down and makes me rethink some of the positions I've held before or am holding now. I'll keep reading it and come back with some more insights on the value investing side.

Friday, June 24, 2011

June 24th

The market started off today with another drop followed by debt concerns in Europe, especially in Italy. Although there is nothing new about this, we are in a very volatile market now, any good or bad news, albeit inconsequential, may impact the market. Again, I expect strong corporate earnings coming up and I still believe this is an intermediate correction as opposed to a bear reversal.

Trade today is CPIX, and trade signals are:
1. Very clear Falling Rectangle, one of the most bullish chart pattern. What's better, this pattern was formed during a more than 2 months period, boding well for a bigger move in the near term.
2. ADX kept falling during the formation of the falling rectangle to below 15 and it started trending upward a couple of days ago. +DI crossed over -DI and the distance between +DI and -DI is widening.
3. Positive Divergence of MACD line and Price. Price was forming lower highs and lower lows but the MACD line didn't form lower lows. This could've been a more powerful divergence had the MACD Histogram showed the divergence as well.

Trade taken: Long 1/2 position @5.65, another 1/2 position @5.50 for an average cost of 5.58.

Thursday, June 23, 2011

June 23rd

The market today kicked off with an expected dip followed by Fed Chairman Ben Bernanke's comments on the U.S economy yesterday. Although the Chairman's comments were nothing new, and I think the current U.S market has partially reflected most of the concerns over the health of the U.S economy, many traders were hoping for the Fed to take on QE3 when QE2 comes to an end in June. However, the Chairman did not provide any clue that the Fed will take any action soon.

With the above being said, I'll be closely watching the earnings season. Even though job data and other economic indicators have been very disappointing, once corporate earnings show some strength like they did in the April earnings season, I believe the market will head up despite the slower pace of recovery of the economy.

The trade I made today is National Penn Bancshares.Inc (NPBC, Nasdaq GS).
Shorted 500 shares at market open @7.61
Covered 500 shares @ 7.44.

Trade Rationale: 1. Price penetrated upper MA Envelope (10,5)
                 2. Yesterday's high was higher than the high of the day before.
                 3. Yesterday's close was lower than the close of the day before.
                 4. William's R% highly oversold

What I could've done differently:
1. Stocked actually gapped down at opening and it might be better to wait around     10:30 to take any actions.
2. The MA Envelope has just taken on an uptrend. It would be safer to take the trade had condition 1-4 occurred at a peak of the MA Envelope.