Our trade in the symbol GLL is hanging on for grim life, but hang on it does. Because of the proximity to a short trigger for GLL, I am keeping an eye on its inverse, UGL. Which is why I keep hammering on the idea that if you have a symbol for up, and then one for down, and you have a series of symbols that represent a broad swathe of the market, you don’t need anything else while you are learning.
A couple of charts that presented some interest, even if no trades.
You remember the curious matter of the spike in UDN? To the chart, Robin…
A pattern that we look at in my book is kind of forming. The old cup and handle pattern. It is a bit ragged for me, so we shall keep an eye on it. Since patterns are not what we are trading in this exercise, we can see that our set up of an uptrend is in place (blue EMA above Green EMA), and our trigger price or the red EMA are above the blue EMA. The last impediment is resistance at the upper horizontal line. Once we get a close above that line, we will place a stop buy just above the candle that did closing.
The other chart we need to keep an eye on is the SSO. This the UP symbol for the S&P 500. Let’s take a look.
We were stopped out after the price closed below the diagonal trend line. The price appears to be preparing for another run for glory. We love glory, but we like our process to be followed even more. A close above the resistance line at position 1 will do it for us.
That’s all for this evening. If you have any questions or concerns, please drop me a line at: firstname.lastname@example.org.
A number of the symbols we follow were not updated this week for some reason, a glitch somewhere in the system.
I kept an eye on them on other charting systems. Let’s update them now.
There were four open positions. Three closed out, two at a profit, one at a loss.
The portfolio balance before we start ciphering was: $138,066.90
20 Year Treasuries: TBT=DOWN, UBT = UP
We bought into TBT per our process just above resistance at $17.09.
It hit a high of $18.30 before taking a dive and stopped us out. The trailing stop anchored the stop at $16.29 which is where we were closed out. The result:
$17.09 – $16.09 = .80 X 700 shares = ($560) Loss
S&P 500: SSO = UP, SDS = DOWN
As you are aware we use symbols that are readily available on the stock market so that the average person can use them in their retirement accounts that might have restrictions for shorting or other crazy rules.
The SSO is a ETF (exchange traded fund) that mimics the rise in the S&P 500. But like most of our symbols it does so at twice the rate i.e. if the S&P rises by 2%, the ETF rises by 4%. It also does so the other way, this is why protective stops are even more important.
The interesting aspect to this chart is the price reached a new high, but the ROC at the top did not. This a divergence, a warning, if you will, that all is not well. My usual process is to put a trend line on the chart and if the price crosses that trend line, I bring my protective stop to just under the candle that did the crossing. I don’t get out right away because the ROC can recover and return to its rightful place.
In this case we were stopped out at $131.20. The result:
$131.20 – $114.74 (original purchase price) = $16.46 X 120 shares = $1,975.2 gain
Dollar Index: UDN = U.S. dollar falling against a weighted basket of global currencies, UUP = U.S. dollar rising.
We bought UDN per our process. You can see at position one that for some reason the price zoomed up and then fell back. We could probably find the reason for the weird spike if we gave a poopie, but we don’t.
The trailing stop was set .37 below the purchase price and then followed the price skyward. It reached a high of $20.96. The price then fell back by more than the .37 and consequently stopped us out at $20.59. The result:
$20.59 – $20.09 (original purchase price) = .50 per share X 600 shares = $300 gain.
Gold: GLL = DOWN, UGL = UP
We bought GLL per our process after it had closed above the middle line which was resistance at the time. The stop was set just under support at $4.23 below the purchase price of $40.47.
Even though it has fallen in price we have not yet been stopped out.
Oil: UCO = UP, SCO = DOWN
UCO is the ETF which mimics the rise of oil. Oil as you are aware has taken an awful beating. Our process is starting to put together a case for taking the long side of oil. Our last barrier is a zone of resistance. It is a zone because there is a “falling window” as the rice traders termed it.
We need a close above that zone. We would then put a stop-buy just above the candle that does that closing. In the meantime, we shall wait for all our rules to be adhered to before we act.
After all the ciphering the portfolio now sits at: $139,782.10
If you have any questions or comments. please drop me a line at: email@example.com
As of the close today our four open trades continue to trundle along. The only instrument out of the five we keep an eye on that has so far resisted our charms and remained on the sidelines is oil.
Let’s take a look at this slippery character…
Oil: UP= UCO, DOWN = SCO
UCO is the ETF (exchange traded fund) representing the up movement of oil. That sounds a little alien doesn’t it?
Our chart tells us that based on the definition of trend we have been working on, it is down. The 21 EMA (exponential moving average), the blue line is below the 55 EMA (green). This represents our set up. Our process sees us trading with the trend which means we should be trading with the down trend. Our triggers, price/and or the 8 EMA (red) have crossed above the blue line signalling a buy. The downtrend precludes that, except, for our exception rule.
That is if our ROC (purple line in the upper panel) is above the 0-line in that panel at the time of the trigger – or within three days – we can go.
That just leaves one consideration: resistance is too close to our trade. The trade cannot become risk free before risking bouncing back down from the resistance area. The resistance area is formed by the falling window ( as the Japanese Candle chartists call it) to the left. Our final consideration is a CLOSE above the $32 level. Once that CLOSE occurs, we will place a stop buy just above the high of the candle that does the closing.
Who knows maybe Oil will be back in the game by the end of the week. We shall sit on our hands until all the conditions of our process are met.
Let’s also take a look this evening at the S&P 500…
S&P 500: UP = SSO, DOWN = SDS
I wanted to show this chart for a couple reasons. We are in this trade. The trailing stop has followed the price up like the faithful Sherpa it is and we are at the point that even if the price were to fall off a cliff, we would be stopped out with a small profit. It is a beautiful thing to be risk free.
So why the long face, Seabiscuit?
The vertical line shows us that the recent high in price is not matched by the high in the ROC in the upper panel. The ROC is a measure of the energy driving the price and when the two are at odds, I consider it a warning. That doesn’t mean that the ROC can’t go back to its usual relationship with the price , but we would be foolish not to take action. Even though the trade is risk free, if we can save some of our profit – we will.
My first step when faced with this particular warning is to put a trend line on the chart. If the price closes below that trend, I then place a stop-sell just below the low of the candle that closed below the trend line.
I like trend line fans. Sometimes the price pulls away from the first trend line enough that it is necessary to draw another one from a point such as the one I have used in the chart above.
We are prepared. We will be patient and wait for the actual signal to place our stop-loss a little closer (i.e. just below the trend line).
If and when this happens I will display this chart again because it is an important point you need to get.
If you have any questions or comments, please write to me at: firstname.lastname@example.org.
And we are back to Monday. As reported we have four open positions out of the five instruments we keep an eye on. The reason that is odd, is that they are different parts of the market and as such they rise and fall with different stimuli acting on them.
Maybe that means we will get stopped out of one or more quite quickly – we shall see.
All trades are still open, so nothing much to report.
We will take a look at my favourite type of chart: the Point and Figure.
I know – it is indeed beautiful.
We can see on the right hand side the rise that matches our trade in SSO, the ETF that mimics the S&P 500. The down trend line has bee broken, we seem to have headed back to an uptrend – interesting. I would have bet money that another shoe needed to drop. I think I mentioned at the time we placed the SSO trade that there was danger that there was another leg down to come, that is was quite a common pattern. All I could do was enter the trade based on our rules and we shall see where it takes us. At this moment at least it is risk-free, which is always our initial goal when we enter a trade.
The P&F Charts provide fairly reliable target projections – except the last one, of course.
For now the chart is telling us that there is quite a bit of upside available in Apple. It looks as if $387 is a possibility, especially if $333 is in the rearview mirror.
The down trend line was broken.
Keep an eye out this week for a couple of videos that will deal with some interesting aspects of trading.
Anyway, that’s it for today.
If you have any questions or comments, direct them to: email@example.com.
Yes, it is once again that time of the week you have been anxiously awaiting: The Weekly Round Up !
Let’s get started. We have four open positions – unheard of!
The underlying instrument is accompanied by the ETF (exchange traded fund) that represents that instrument in the stock market.
S&P 500: UP = SSO, DOWN = SDS
We opened the position at $114.74 with a trailing stop set $16.04 below the trade price. Just below support at the time at position 2.
The latest high of $135.40 means that the trailing stop which followed the price up is now anchored at $119.36. This means that if the price collapsed totally, we would be stopped out at $119.36, and yes that is above our purchase price, meaning we are now in that glorious position of being risk -free.
We are now in a position that if there is a little push back without stopping us out, but the trend continues up, we could add another position if our process allows.
One little cloud, though, the horizontal line at 1 shows that the latest high in price is not matched by a high in the ROC. If the price CLOSES below the diagonal trend line, we would bring our stop to just below the low of the candle that did the closing.
We have been warned by the leading indicator, the ROC, that this rise may have some weakness inherent. A divergence does not always appear, but when it does, we have to pay attention.
Gold: UP = UGL, DOWN = GLL
The chart of GLL above has a horizontal resistance line. We needed a close above that to enact a stop-buy. We did get that close and placed a stop-buy at $40.47. The next day, however the price dropped. Then on the 5th, we got s rise at position 1 that triggered us into our position. It looks like this:
$13,000(10% of the portfolio)/ $40.47 = 321.225, rounded to 300 shares.
The stop is put just under support at position 2, $36.93
$40.47 – $36.93 = $4.23 X 300 shares = $1,269 risk (<$2,500 = approx. 2% of the portfolio)
Key elements of this trade were waiting for a CLOSE above resistance and then waiting for the next price just above that.
Oil: UCO = UP, SCO = DOWN
This chart is a little difficult to deal with because of the scaling after the big drop. I double check the price on other sites. We are essentially waiting for UCO to close above the resistance zone. The upper horizontal line is at $ 32.96. The high on June 5th was $30.29. We have a little work to do.
Dollar Index: UP = UUP, DOWN = UDN
This is the US dollar versus a weighted basket of global currencies. Up means the US dollar is stronger than the basket, down means the opposite.
We have an open position in UDN. You can see where we placed our buy – just above the resistance line at $20.00. We bought just above the close just above that line at $20.09.
The trailing stop was set just below support at .37 below the trade price. The most recent high was $20.42. This means we are within 4 cents of being risk free on this one as well.
20 year treasuries: UP = UBT, DOWN = TBT
TBT is currently an open position. Once again you can see the close above resistance and then the rise above that triggering us in. The high on June 5th was $18.29. Our stop was originally set at $2.01 under the trade price – just under support.
Our purchase price was $17.09. This means $18.29 – $2.01 = $16.28 (this is the new stop as anchored by the trailing stop). We still need a rise of another 81 cents to make this trade risk free.
This exercise is a continuation of the theoretical trading started in my book: Basic Trading: ‘A Beginner’s Guide to Trading and Investing…PROFITABLY!’.
As of last night we had two positions open and two pending a confirming candle.
What is a confirming candle?
Let’s take a look at the chart in question…
TBT: the ETF that represents 20 year treasuries to the DOWN side.
Yesterday I indicated that a brave little candle had raised its head above the resistance line and, more importantly, CLOSED there. So we put in a stop-buy to enter the market just above the high of yesterday’s candle at $ 17.09. Today’s high was $17.40, so we were triggered in. The close was $17.36.
Our trade was as follows:
$13k (10% of the portfolio)/$17.09 = 760,678, rounded to 700 shares
Therefore all aspects of our process has been respected. All we can do now is wish the trade, god speed!
Our other pending trade, GLL = ETF for gold DOWN, did not give us a confirming candle. We continue to wait for that one.
Our two open positions are still in play.
SSO the ETF for S&P 500 UP is at about the same level as yesterday. The high yesterday was $128.80. The trailing stop which has followed the price up is now anchored only a couple of dollars below the trade price. This means the trade is very close to being risk free; a situation we love.
UDN the ETF for the U.S. dollar struggling against a basket of global currencies went onto a new high today at $20.41. The trailing stop is just five cents from making this trade risk free – excellent!
That’s it for today. Any questions or comments, please write to me at: firstname.lastname@example.org.
Well, when hump day came to its conclusion, I found a couple of pleasant closes in the charts.
First, our open positions: SSO (the UP ETF S&P 500) and UDN (the ETF representing the U.S. dollar struggling against a weighted collection of global currencies), have gone on to new highs today.
May they continue on their journey…
First chart, TBT, the ETF representing DOWN 20 year treasuries.
Our definition of uptrend or downtrend is contingent upon the position of the 21 EMA (exponential moving average) represented by the blue line relative to the 55 EMA represented by the green line. We only trade in the direction of the trend. As we look at the chart above, we can see that the blue line is below the green and therefore tells us we are still in a downtrend. Even though the triggers, price and/or the 8 EMA represented by the red line have crossed above the blue, we cannot place our trade because it breaks our rules: going long against a downtrend.
Except we have a tie breaker up our sleeve. If we have the triggers triggering happily, but the trend is against them, we look to the ROC in the upper pane. It is above the 0 – line. You may not be able to see the 0 – line, but to the right the numbers are positive.
One other thing that would hold us back is the resistance just above our trade spot. We definitely needed a close above that level. I went into that last night, you can scroll down if you wish to read all about it. You can see that today’s close has been above the resistance line as represented by the upper, horizontal, black line.
Our trade will go just above the high of the candle that did the closing at $17.09. If that triggers tomorrow, share positions, risk, etc will appear here as like magic, as if Merlin himself came down from the Tor above.
Our second chart this evening is of GLL. This is the ETF that rises like the Dark Knight when gold declines.
As I have mentioned many times before, we can only go by our process. If we listened to all the scuttlebutt, we would be going around in circles.
We can see the same situation as in the previous chart, so I won’t repeat it all.
– the trigger is above the blue line
– there is a downtrend still bearing down on us, but the ROC is above the 0 – line on this evening.
– the resistance line has been closed above by a brave little green candle giving us the go ahead to place a stop-buy just above the hair on its head
That price would be: $ 40.47.
If this price is crossed tomorrow, details will appear here.
If you have any questions or comments, please direct them to: email@example.com
Even if I borrowed Merlin from the Tor above I couldn’t conjure up much to say this evening.
We have two open positions: SSO (S&P 500 UP) and UDN (Dollar Index Bearish). Both are trundling along nicely.
Our pending, TBT, which is the DOWN treasuries, has not triggered. If you remember, we are waiting for a close above the nearby resistance.
I should take a moment to explain my position on resistance. When placing a trade, if it is to the upside (which most are for this exercise), I place my protective stop just below support. Now if there is a resistance level close to the trigger point, I put the buy just above the resistance level. A resistance level represents the possibility of supply coming in at that point driving the price back down. It is a more certain trade if we place it just above resistance. It is also likely that there are a bunch of buys just above that level because others have the same concerns as we do. It also means that if our buy is triggered, others will be as well giving the price a nice jolt.
When the trade is in place and it starts to climb (hopefully), it starts pulling the trailing stop up with it. This is where my calculation for how close is too close for resistance. If my price can rise so that the stop is above the initial purchase price before it gets to the resistance level, I am good to place the trade based on our trigger.
Example: resistance is at $20.00. Trade is at $15.00, stop is at $12.50. This means the stop is $2.50 under the market price. When the market price gets to $20.00, our resistance level, the stop is anchored at $ 17.50 which is above our initial trade price. All is good in that case.
If the trade price were $19.00, the stop would be anchored at $17.50 when the price got to $20.00 which is below the initial trade price of $19.00. In this case I would place the trade just above the $20.00 instead of the trigger price of $19.00.
I hope that clarified the stop vs. resistance level a little.
If you have any questions or comments, please drop me a line at: