My thoughts and journal

Ok, so on second thought I am happy that the snake not bite me Tuesday because Wednesday turned out to be one of my best days of the year. Luck always plays some role which most people have a hard time admitting, but I also do believe that hard work puts you in a position where its easier to get lucky.

One stock we have been looking at here for the last several days is American Woodmark Corp (NASDAQ: AMWD). Yesterday the stock shot up nearly 10% on nearly 3 times average volume as it broke out of a base. This is the type of stock I love to find. I have a chart up and I want to explain this one just to go over the selection process I use to determine if I will be involved in a stock or not. http://www.tradingfrommainstreet.com/images/Brandon/AmericanWood.gif I always start to by flipping through a ton of charts, I look at about 3000 over the course of a week. What I look for are bases and flags, and you can see that AMWD here has a very nice base near its highs. This is a pattern that allows a stock to rest and build energy, potentially for a strong breakout. I like to see it. Once I have found a chart I am comfortable with, I then look to see if it is a company I can be comfortable with. I like to see high growth, high insider ownership, low fund ownership (which unfortunately AMWD lacks), a low PE, accelerating earnings growth, consistent sales growth, low debt and strong overall performance relative to the market. You can see in the circled areas on this chart that AMWD has all of these things except for being undiscovered by institutions. People make the mistake of treating all trades the same, but when you find one like this you have to go in with larger size than normal and really press the potential advantage. Trades like this come along a few times per quarter, and can really boost your numbers.

There was nothing to complain about on Wednesday for the bulls. The market acted great. After pulling back on light volume it got a head of steam and kept it all day long. For the past several days it had gone into a narrow, low volume range and put everyone to sleep. Well rested the market decided it was time to leave the station and like always many are caught off guard. NYSE volume expanded 14% to 1.77 billion shares, while NASDAQ volume surged 24% to 2.29 billion shares. The NASDAQ Composite ended the day up 41.42 points, closing at 2,138.23 and the S&P500 gained 17.55 points to close at 1,191.37. The price, volume and tone of the market are exactly what you want to see in a strong market. What do I mean by the tone? Recall that Tuesday both AMAT and NVLS came out with disappointing news. Also that GM came out and said auto sales had been much worse than Wall Street had expected. Well, each one of those stocks managed to be up on “bad” news. That is a strong tone to the market, and one of the things you want to see if you are long. Opinions are nice to hold, and anyone who reads this or talks to me knows that I hold a bias most of the time, but if the evidence points strongly to something else, you are foolish as an intermediate to short term trader to express that opinion too aggressively with trades. I will continue to probe lightly on the short side when I feel there are valid setups, but it will be small until I am confirmed to be right, and for the time being I expect that the money I make will be on the long side.

There are a number of good companies out there with strong charts. Some examples include: BEBE, LUV, HTLD, HAE, TOL, JBHT, DHI, LNCR, DELL, CME, INAD, GOOG, AMD, AAPL, KFY, FILE, MFLX, HUBG, VRTV, AVTR, and PDFS. In addition to these individual stocks the QQQQ, SPY, RSP, IWM, and IWD all look good as well.

Brandon

 

I’m usually one of these very opinionated people. If you ask me about the markets at any given time, I might think its going up or I might think it’s going down, but I tend to have an opinion. I’ve got to tell you, I don’t really have an opinion right now in the intermediate to short term. Since that tends to be the timeframe I operate in, I’m working towards cash in all but a few places. The last month and a half has made my year, so if I just crawl into a hole and don’t do anything in the stock market for a little bit of time, it wont hurt my feelings. There are times when things are very clear, and when those times occur you should press your edge. That is what we did right before the elections and up until just recently. We have been rewarded very nicely for it. As I have said, many people have made their year in the last month. But right now, things are not so clear. I don’t have a passionate bias about the market. To me, that means I should sit on my ass. I think sugar is going down, I might trade that, but as for stocks I could care less right now. That could end tomorrow, or it could go on for several months. Only time will tell. One thing I do know for sure though is that the stupidest traders out there are the ones that think they always have to be doing something. I know, because I used to be their chief.



For the next little bit of time, until I become more interested in equities again I will try to write a small lesson in the rants, its important that you learn something new every day as a trader. Today’s lesson is simply that there are pockets of time when there is nothing to do. It’s one of the hardest to learn. If I had to trade a stock right now, and I’m lucky that I never have to trade if nothing strikes my fancy, I would be short WMT.

 

Just to let you all know I'm still here. This being the end of the year I am wrapped up in family stuff and have mostly shut down the trading until the New Year except for some index and futures positions. If anyone is interested I think the Euro is topping out here and I have gone short the March 05 Euro, 1.3326.
Brandon

 

Happy holidays. Looking forward to your thoughts next year.

 

Someone much wiser than me once said you can have anything you want in this life provided that you are truly willing to pay for it, but the price is rarely paid in dollars and cents. Whoever it was that first said this may have been a successful speculator, because it is certainly one of the true statements that a trader should take to heart. With this being the New Year many people are taking stock of themselves and their lives. This is one of the things that I think everyone who wants to be successful should do. Write down specifically what you would like to accomplish, but you have to take it a few steps further. Identify how you are going to get their. What tools do you currently have at your disposal and how can you employ them to further yourself. What obsticals are standing in your way, and what must you do to overcome them? Very clearly in your minds eye see for yourself the success that you want to have, create it and live it in your mind so that you know what it looks like, what it feels like. Know the hardship and triumph¡¦s that will come with that goal. With all this you can then decide if it is worth it. For me it has been! When I was a young man dreaming of a better life for myself I could have never imagined it would be this good. But, along the way there have been losses. I have lost friends because their lifestyles and goals did not mesh well with the ones I had for myself. I have lost social time with other friends and with Toni and my family. So, it is important for each person to look at what they truly want to become, and then honestly look at the price and decide if you can pay it. If you find that you can the journey will be long and hard, but in the end I think it is also wonderful. If you look at the cost of success in this business though and find that it is one you do not want to pay then I would urge you to stop. I know far too many people that look back on the time they spent trading and do not have happy memories, they look back on lost money, lost relationships and lost time, time which you can never get back.

Today I am not going to include the index and exchange figures, simply because none of the data from the last few weeks is very meaningful due to the very light holiday trading.

I always start each year from nothing. I pretend that the first trade I put on for the year is the first I have done and I do everything I can to make sure it is something that would be very hard to make a mistake and lose money on. For this reason I would not expect to be really active over the next week or two. I will be building my lists up and watching for relationships in the market. Once I see them and have a clear idea based upon them we will then be making commitments to those ideas. Right now the major theme I am seeing is a serious divergence between tech and the rest of the world. The S&P500 very recently made a new high, while the NASDAQ on the other hand made a significantly lower high. In addition to this Semiconductors continue to lag in a major way. All of this is worth paying attention to going forward and it is likely that our opportunities are going to come out of this divergence. Tonight I do not have a stock list, but I do expect that we will start to have one in the very near future. For now I want to stand back and observe the market and some specific stocks before placing any money on the line. I am very glad to be back and Random Rants and Market Idea¡¦s will again continue on a nightly basis now that I am back from my vacation. (The drive from Cincinnati to Indianapolis took over 12 hours, maybe it wasn¡¦t such a ¡§vacation¡¨ after all ƒº but, I can talk more about that at another time.) At any rate I look forward to another great year in 2005 and thank all of you who are reading this and coming along with me for some of that drive.

 

Welcome back and happy new year. I will continue to follow your journal and be a student whenever you feel like throwing a nugget out about your process.

Wishing you prosperity, health and happiness this year and every year.

 

i sincerely appreciate your reflections here, as well as look forward to reading more of your thoughts and insights as we close this passing year, and the new year opens and unfolds. your efforts are very gracious.

the first paragraph of your new year's post describes my own discoveries during 2004, my first year of trading; and i rediscover those these same prinicples everyday...every trade, every after-market review. i expect this to continue throughout my trading career.

supportive mentors, family and friends, and threads like yours are all so very critical to success--not to mention sanity.

again, thanks so very much for your contribution here.
kindest regards and best wishes to you for this new year.
angela

 

Very well written. I wish you will have a prosperous and profitable 2005.

 

Going back to the end of December I must say I have been about as interested in the stock market as I am in having Toni tell me what’s going on with “The O.C”. So, it hasn’t done much for me. So far it has been a good year, I’m already up over 10% from being long Cotton and the Dollar, but coming in I thought that the equities market might be tricky, and it looks like I was correct. This weekend though I was more interested in equities and spent a good amount of time scanning for strong stocks. I didn’t find much, but a few names look worthy of consideration for short term swings.

Friday’s NYSE volume fell 6% to 1.47 billion shares, while the NASDAQ saw volume increase by 1% to 2.18 billion shares. The Composite lost 1.39, closing at 2,088.61, the S&P500 was equally dull losing 1.7 points to close at 1,186.19. Recently there has been a lot of concern about the Federal Reserve taking an aggressive stance and raising rates several more time’s this year. I don’t need to spend too much time talking about the house of cards that has been built on credit, but needless to say if rates go up too high it will be bad for many individuals and some corporations too.

I spent my scanning time looking for high ranked companies with strong charts. My thoughts being that the market will probably continue lower, however we are at an area of support and have had several days of strong selling which I missed. At this point we are probably due for a bounce, and the stocks that held up the best while the market pulled back are likely to be the leaders if it holds this area of supports and tries to rally. In general terms also this rally in the market is going to be much more important than the decline. You want to pay attention to how strong it is and what kind of volume the market draws when it comes up. It will tell you a lot about the next several months. Stocks I will be watching this week include PNCL, VTIV, JWN, WLP, KSWS, VTRU and MOH.

 

Stocks continued to be under pressure Tuesday, not once trading in positive territory. The S&P500 closed down 7.26 points for the day to 1,182.99 while the NASDAQ Composite lost 17.42 points to close at 2,079.62. Volume increased slightly across the board, which is not what we would like to see. On the NYSE 1.48 Billion shares changed hand, the same as yesterday, while on the NASDAQ Volume increased by 6% 2.21 billion shares. Jeff Semmels Tradingscans.com website is showing 295 stocks at new one month lows, while only 39 are at a new one month high. This is not an extreme reading, but it tells you a lot about the current health of the market.

The Federal Reserve Continues to weigh heavily on the markets mind with the threat of increased interest rates. It should because America has become the biggest credit bubble in the history of the world. Real Estate prices in certain speculative markets have already come under pressure with areas of San Diego seeing declines of 30% and Las Vegas over 20%. The problem with this will not be so much for people who have bought houses to live in, but those who are speculating on home prices could feel NASDAQ 2000-2002 type pain. If that wealth comes out of the economy as well as the stock market wealth it will not be a good thing.

Since the start of the year I have been reluctant to be short. Even though I thought the market was vulnerable on the downside the amount we have had has come as a surprise to me so I have only traded three equities thus far, WLP long for one day, VTRU long and CAT short, all occurred this week. I continue to be long the dollar versus the major currencies and as long as we are in an environment where interest rates are going up, that is going to be the place to be. As dull as my stock trading has been the futures have made up for it, with current gains over 10% already this year.

Last night as I scanned I wanted to have a little bit of a mix of longs and shorts. The reason being that I feel the market may have had its upside correction over the last few days when it just simply did not go down. On the long side I have looked for stocks that have been able to hold up very well in the face of the correction, have a lot of strong patterns in their charts and that have superior fundamentals. A few names that currently stand out are PENN, ASCA, LNCR, CHRW, RCKY, LPMA and GTRC. For whatever reason the most of the housing stocks also look good at this time, PHM and MDC being too good examples. On the short side I really like the SMH, SPY, QQQ, TGT and MOT.

Brandon