Time to take a look at all the bad decisions I made over the last week or so of stock marketry.
Here's a link to my last trade review. The main thing I learned that week was to bet with the overall trend. Looking back on the steps I formulated for better trading, I realize I basically outlined the Dow Theory without ever having read about it. It's pretty simple stuff, but that shows these trade reviews help me learn how to be smarter in investing. *I know it's the Dow Theory now because I started reading Technical Analysis of Stock Market Trends, which outlines Dow Theory in the first couple chapters.
So here we go. I'll look at both trades and market predictions. I'll decide whether, in hindsight, I should have bought earlier or later, sold earlier or later, and try to catch some things I missed. I'll review if my assumptions were reasonable and if I set prudent points to consider my trade a bad one.
3/25/09
- Market Prediction - I called this pretty well. The market bounced upon hitting the bottom of the upward channel. It topped within a few points of where I predicted. +1 point for channel bounce trading. Unfortunately I slept in the next morning instead of executing this idea. Need to work on: acting on my future predictions of this sort.
- Trade Plan - Neutral. This was probably not reasonably high enough above resistance. The stock needs to break resistance by a little more than 5 cents above in order to show break-out. Also, on breakouts like this, I shall also use volume as confirmation of a breakout before buying.
- SPY Buy - Success. This was a support/resistance trade, and it worked. I bought at 809.3, though the low of the day wasnearly 791. I can see the trend line I traded off of and in hind-sight it wasn't the real line of support. Had I created the correct trend line, It may not have seemed safe. If a stock breaks out of one "channel" you've drawn, try to see if you can find others that it's entering.
3/26/09
- Trade Plan - This was another "stop order on breakage through resistance". I was still looking at a short time-frame, instead of the big picture. Here was my pretty chart. I was drawing channels, but not using them yet:
I did make some good assumptions, and "break through resistance" buys are OK as long as it's a confirmed breakout. I just need to confirm a breakout with decent rise above resistance, and good volume. I'll miss some of the first fruits, but it'll be a safer, surer trade. It might not hurt to mix some Dow Theory in there, and look for either the new support to be tested and stand, or to see a decline w/ a low above support to confirm even more. CONFIRM THE BREAKOUT beyond mere price action.
- SPY Buy - This was just before I learned to look at the bigger picture, and notice a larger, overall downtrend with the uptrend. I was all excited we'd make another bounce up, and this time through resistance. Little did I know that we were about to hit the ceiling of a several month long downward channel. I am, however, getting good at spotting support and resistance. And channel/trend action. Combine the two, and I'll be a much better trader. Check out this chart to see my resistance spotting skillz:
3/27/09
- Game Plan - Interesting situation, with the upward funnel running into resistance:
I decided to trade with the trend, once resistance was breached. Again, I was not looking at the overall, long-term trend. My reasoning was OK, but I need to adjust a few things. This has become trend in myself over the last few days: first, confirm breakouts with decent price breakout, and volume to confirm. Don't just buy once it enters a resistance/support zone. I was trading with the mindset that went like this: "We're still in this upward channel. Chances are, the trend will continue and this resistance will turn into springboard support." This would be a combined channel/price support buy. The perspective of a longer trend was the one caution I was missing.
- SSO Buy - This was not so bad from a short-term standpoint, but i needed the perspective of a longer term. There was price resistance as well as big channel resistance to stop the rally dead in it's tracks:
this is when i finally learned my lesson.
this is when i finally learned my lesson.3/30/09
- Game Plan - I had made some good observations, but still wasn't looking at the long-term trend. This changed later that weekend.
- ASIA check up - Success!I said I thought the chinese burritos would bounce down from the top of their current channel. Here's what I predicted:
- And here's how things ended up:
- Game Plan Second Look - This was where I started seeing things as I do now. Here's where I predictd we'd bounce down from a major, 6 month downward channel:
- And the result from there? We're about even, though we've seen an end to that huge rally that lasted nearly all of march. Meeting of price resistance and channel resistance broke the trend, at least for the time being. Since we were still in a strong short-term uptrend, I changed my stance to neutral. Unfortunately, I was already long, and it as too late.
- Tech Analysis of YGE - I noted that YGE has an ascending wedge. I said it was a buy, if the S&P broke out on Monday 3/31, but to ignore it otherwise:
- Here's how it ended up:
- Trade Prediction: RNT - Didn't lose money, at least. This stock broke out regardless of S&P action:
- S&P outlook - Getting rid of this asap was a prudent move. It moved out of the channel, and into the lower one. I didn't have any idea there was another channel support below. I should have gotten out in after hours on friday, though.
3/30/2009
- SH Buy - This is a long term (3 weeks) buy based on a 6 month channel movement. I'm trying not to worry about price fluctuation in the mean time.
- VFH Prediction - Said to get short when VFH was at 20. Now it's at around 19.14:
That's about it for now. I'm still short SH, due to convictions discussed in this post.
I'm definitely learning a lot. Here's a summary of the lessons learned over the last two weeks (at a decent price, too):
- Trade with the trend.
- Gain perspective of trends to trade in, in different perspectives of time. Trade in the short term only while knowing what the long term is also doing.
