Quick Summary:
SPY at 200dma resistance and double top trendline. $SPY short trade. Biotech sector added to focus list. New section added: Small Account Strategy
Video:
No video today. Here is a link to the webinar if you have not watched it:
https://blog.bullsonwallstreet.com/swing-trade-members-only-webinar-recordingSmall Account Strategy: SelectivityI started seriously trading 7 years ago with a small account. While it has grown substantially since then and I now trade full-time, my methods have not changed much. Thus my current analysis and trading style applies to any size trader. However, there are some nuances that a small account traders must keep in mind that I will regularly touch on in the Reports. Bigger, accounts, much of this applies to you too, so do not skip this section.Selectivity:When trading a small account you must be selective with your trades. A bigger account can get away with more mistakes. Think of the New York Yankees (non-sports fans, think of a big movie studio that makes bad movies yet can profit). The Yankees have the highest payroll in baseball. They make mistake after mistake, deplete their minor league talent making stupid trades and overpay for aging stars. Yet they are always in the hunt because they have a big bankroll that covers up these mistakes. Small market teams like the Royals, this year's World Series participants, have to be almost perfect to compete. They can't just throw money all over the place and hope they hit a few home runs. They have to use use strong fundamentals, develop their minor league talent, look for value and once in a while when the time is right, make that big splash free agent signing.Small accounts, you are that small market team like the Royals. It's tougher for you, but you can get to the World Series. You have to be smart with your money. The best way to do this is to be selective and only take the *best* setups.If there are no setups, hold on to your cash and wait for those high quality setups. Don't be deterred by what you see around you. Be patient and pounce when the time is right.Current Trades:I shorted SPY today by shorting leveraged ETF $SPXL, 400 shares at average price $69.43.In the follow up alert I discussed why I shorted SPXL instead of using the inverse ETF SPXU. If you need more clarification, feel free to email me or comment below. If you could not short SPXL (it is a "hard to borrow" stock and many brokers will charge a small fee) it is perfectly fine to use $SPXU. Discussion of setup in market analysis.Trade Report StatsThe format is a bit different for the time being, as we have ditched the regular focus list and are only focusing on 6 index/sector charts. We are watching key levels on each of the charts. Near term I am now keying in on 4 charts, $SPY, $QQQ, IWM, $IBB and $DIG. Market Analysis:Note: I am using the SPX index chart rather than SPY because there is a discrepancy between the moving averages on SPY other charting platforms. Until stockcharts.com fixes this, I will use SPX, which matches up with Telechart.As we have been watching and waiting for, the bounce today made it's way to the 200dma which also converges with the bottom of the bearish double top formation. This is a classic short setup. However, there are some concerns. First, often when everybody is watching the same thing, games are played and we'll get more of a bounce that shakes shorts out before the real move comes (we saw this with the topping formation in Aug-Sept). So we may have to take a few shots at this before getting it right. If a bounce over the 200dma is strong in character, then we will reassess and possibly ride it. Otherwise, I'll look for other short opportunities.The other concern is that their are strong underlying price patterns with what looks like volume coming in on the intra-day charts. These are short term and do not negate a double top and bearish biases, but they could cause a stop out and stronger bounce.For now we'll mange the current position and study the key levels closely. Pay attention to volume and strength of the price action.
For today I have taken Q and IWM off the table as I don't see a good scenario for trades. Both can be seen as bullish and bearish here, so I'll wait for a clue. Same goes for focus list sectors Energy and Semiconductors.New Sector Addition: Biotechnology$IBB is the first of the major double top formations to break the bottom of the double top trend line. It also slightly remounted the 50 dma and volume is trending up. If there is any sector or index to play on the bullish side, this is it. I will keep an eye on this chart. Early morning weakness could signal an entry. $BIB is a leveraged ETF that you can use.Along with earnings breakouts, I will start looking for good setups from this sector.
Right now I have a slightly negative bias, but would not be surprised to see a bounce first. If we do get the bounce, we will analyze the strength of the bounce. If it is weak, we can deploy short positions. If it is on increasing volume, we will ride it with longs. I am taking a wait and see approach.Note that earnings announcements pick up this weak. I will start looking for good earnings breakout plays throughout the week.I still do not feel it's a good time to trade individual equities, though if good setups do form I will point them out. Make sure when making any trades to keep risk smaller than normal and adhere to stops. Do not get in the mode of thinking the market could bounce at any time and fear missing out. If your stop is hit, get out and make you do not suffer a big loss.Keep in mind that while I am trading for a bounces, it does not mean I am bullish on the market. There is still room to the downside and the bounce I am playing is a "pullback before another drop" type bounce. These are not long swing trades, they are much shorter trades than I normally make. We adjust our styles to the market. Please read the post 23 Laws of the Part Time Swing Trading the Market Speculator Way and How to Anayze Your Swing Trade Results It is important to know these rules if you trade off the Report.
New subscribers and trial members please leave me any feedback/comments in the comments, via email (singhjd1@aol.com) or twitter (twitter.com/PaulJSingh).
