Saturday, March 10, 2018

Technical Indicators: The Good, the Bad and the Ugly

It is a bit overwhelming when being first introduced to technical analysis. It can be quite confusing, as a lot of jargon is thrown around. As the months go by, I find my self focusing less and less on technical indicators (chart patterns are much more useful, and I don't mean patterns like Head and Shoulders patterns). I find the indicators out there to not be that effective, since they are so overused as trading robots to the numerous retail investors use them, and that takes the edge away.

My Thoughts on Indicators:
Early in my trading career, I followed Tom McClellan and he has always emphasized not to use the same tools everyone else does, as it takes away the edge. I have always taken that as motivation to find new/unique ways of interpreting indicators. For example, with the RSI, I don't look at it to tell me whether a stock is overbought or oversold, there is so much to the indicator, that many don't discuss (or maybe notice). In fact, I find trying to use it to tell if a stock is overbought or oversold is inaccurate and hard to profit from it signal. Ever notice that when a stock is more overbought, it just keeps getting more and more overbought? That's not a very useful way way to exit/short a stock However, I rather keep the ways I read them to my self to, and maintain my edge. The point is, try to think outside the box, even when looking at other indicators, don't just go with the way everyone else reads them.

Saturday, February 3, 2018

When Will The Bleeding in the Stock Market Stop?

The Market has had a parabolic bullish move in 2018. Parabolic movements in the Stock Market, is something traders need to be very wary of (see Bitcoin's latest parabolic movement ended in over a 60% correction from its all-time highs so far). As a result, I am very cautious about the Stock Market's ability to keep continuing higher in 2018.

However, in the short term, I think the Market is near a bottom. Referencing the McClellan Oscillator above, on Friday the indicator closed near the rare reading of -300 (as of Friday -273). Which means a higher than usual amount of stocks participated in this sell-off, when it hits reading this low (which is rare), the market often hits significant bottoms. Take a look at the chart for previous examples marked in August 2017. Despite my bearish outlook in the Market, expect a nice bounce due to selling exhaustion as indicated by the McClellan Oscillator rating of -273.

Sunday, January 21, 2018

Trade Opportunity in the Utilities Sector?

XLU Utilities ETF Stock Chart Technical Analysis

Reviewing my recent $IBM call that I posted in October, the stock recently hit my target of $168 before pulling back due to earnings. The good news is I have found another good risk to reward ratio trade, that I will be sharing in the next paragraph!

The utility sector has pulled back 10% from its recent highs, based on my proprietary analysis, it is worth purchasing stock (not options!) in $XLU ETF, at this price. If the trade goes wrong or takes longer than expected a quarterly dividend will help a bit.