It continues to be a rough 2011, minus the July to August downtrend, but it is possible another trend is in the process of developing. Following the rally off the October lows, it started to look possible that a new uptrend might take shape as some new CANSLIM quality stocks started to build right side of bases with some breaking out. On top of that, some very pretty green chart patterns began setting up in more speculative quality names (SIMO PKT) with the stocks coming off the lows producing some solid gains fast (PEIX BIOF). During this uptrend from the October lows two partial buy signals were produced with both failing immediately due to the signals coming very late in the uptrend during overbought conditions. While this was occurring, ex-generals of the previous uptrend from the 2008/2009 lows were not participating in the rally. These two major red flags prevented a full buy signal from being produced the whole rally saving Big Wave Trading investors money by keeping new long positions very small in relation to total account capital.
Since November 17th, things have changed. Bank stocks that looked to have been trying to hammer out a bottom have completely rolled over with stocks like BAC and GS hitting new lows, the new CANSLIM quality long setups (VMW TIBX SPRD RHT) have failed immediately, the speculative longs have reversed hard/crashed (LGND OPNT GMCR), the inverse ETFs have come under heavy accumulation, the 3x bull ETFs have come under heavy distribution, the ex-generals (AMZN AAPL PCLN CRM) have all created very bearish chart patterns (most have H&S tops), and the SP500 and Nasdaq have resolved themselves below the triangle pattern they were creating in November. All of this threw our market model into a 66%-75% sell signal on November 17th.
This signal has proven quite profitable in the very short term but it remains under a 66-75% signal and not a 100% sell signal due to the fact that volume on the NYSE on the distribution days continues to be below the average daily volume of the past 50 market sessions and we still have some current long positions that are holding above key support. If the market can rally on the short term and fail at recent resistance levels on higher volume, a full 100% sell signal will be triggered (despite above average volume or not on the NYSE). The nine long positions that remain in the margin account (4 in the IRA) are all on the cusp of triggering their final cut losses. If this happens, along with the NYSE failing at resistance (even if volume is lower than the day before), then the model will go 100% sell.
Currently, the Big Wave Trading margin account is 55%-60% short 10 stocks, 10-15% long 9 stocks, and 25-35% cash. The Big Wave Trading IRA account is 70% long 4 inverse ETFs, 6% long 4 stocks, and 24% cash.
Top Current Holdings – % Return – Date Of Purchase:
EDZ – 23% gain – 11/18/2011
Saturday, November 26, 2011
Monday, February 14, 2011
My Interview With The Rouge Investor Website
I had the chance to re-interview Josh Hayes from Big Wave Trading in an effort to learn about his methods to consistently profit from trading stocks. Let me stress that Josh does what I consider to be an art and he is one of the highest performers around. I’d argue he is mainly a momentum investor, mixing technical and fundamental analysis to achieve superior returns.
There are two options for getting more information about Josh and his analysis. First, he has a premium subscription service at BigWaveTrading.com with different membership levels for different needs. Second, he has BigWaveTrading.net which is a site dedicated to free commentary. Check them out!
We started off getting revised answers to the questions I asked in my previous interview and then moved on to a new set of questions.
Interview 1.0 Revisited
How would you describe your trading system?
Simple without noise. I simply pay attention to my charts. I don’t watch CNBC or read other financial publications. I do not even subscribe to IBD anymore. I just use Daily Graphs, Telechart, Scottrade, and IB. I keep it very simple and the most important thing is I never “try (it’s impossible to do)” to let my stupid opinions influence me.
How has your trading system changed, if any, ever since the economic downturn?
No, It hasn’t. I started looking at charts in 1996 and in 1999 I had learned-in-my-head the CANSLIM methodology and have kept to that simple (yet very hard to initially learn) methodology since 1999. I know and knew, thanks to my laborious reading of about 100 stock market books, that nothing ever changes in the stock market but the players. The patterns always remain the same thanks to basic insecure human emotions like greed, fear, and hope. They are completely useless in this game.
I noticed that on your telechart, you keep your price very small compared to most charts. What is you reasoning for such a setup?
It allows me to, very, clearly see the basing patterns such as a cup w/ handle, cup, ascending, double bottom, or HTF pattern. By “squishing” the price the chart goes from big and what appears to be loose to tight. If a stock is not completely tight on my price settings I know I want to avoid it. Visually, it is just what I prefer. To someone else, it might not be their cup of tea. To each their own.
Is it an advantage or disadvantage to be located in Maui?
If we are talking about surfing, YES! If we are talking about life, YES! If we are talking about the stock market, YES! Maui no ka oi. Being so far away from NYC and CNBC has to have nothing but 100% advantage towards my investing. Getting rid of all that mainland noise is the reason I can completely be objective towards the stock market. I never know what is happening in the macro environment anymore. I could care less. It’s all about sun and fun for me and that equals profits thankfully. Once again, I say, for me.
About how long did it take you to get to a level where you could make consistent profits?
Four years (1999 was too easy and we will never see that again in our lifetimes). 2000 was the first year, when the market tanked, and I beat the market by 1000%+ that I realized that I could do it. I have always beaten the market returns but trust me the market still beats me at being very difficult. I can not stress enough how difficult this really is. If you do not get any luck and have only skill in the stock market, you will not make money. You seriously need skill and luck. Since I have no luck, I am very fortunate to be beating the market every year since 1999.
What single piece of advice would you give to personal investors as we all fight to find and keep profits?
Never give up. Either you have it or you don’t. If you struggle for 10 years and are still interested TRUST ME in 20 years you will be very wealthy. However, wealth will never equal happiness. Live and love life. Have fun. Make sure you do what you love. If you do not love this game do not do it. Honestly, I hate this game so much that I love it. But if someone asked me “surfing or stocks?” The answer is simple and I do not even have to think about it. Surfing.
Interview 2.0
To start off, would you highlight your average return on a position, your success rate (% of stocks from which you profit), and the size of your average position in dollars?
All of that information can be found here. I was tracked by a subscriber in an excel spreadsheet going over my purchases and sells over the past year.
We’ve seen a bull market with significant gains since the bottom in early ’09 (Dow). What do you expect from the market in the coming years? Also, do you subscribe to IBD’s method for determine market trends?
I can not predict the future and never will try to. Nobody knows what will happen in the future and when they say they think this-or-that will happen it is completely ego driven and they want to be seen as “important and smart.” The truth is, nobody, and I mean nobody, can completely look at all the data and be correct about the future. It is a total crap-shoot. I play the now. I live in the now. There is no room for the future. It is what it is and that is that. Also, 130 years of data of facts proves that IBD’s way of determining market trends is correct. However, in all fairness, I think some of the writers of IBD might not be investing money in the stock market. They don’t have what I would say is “the touch.”
I’ve been studying the articles you’ve written about your trading strategy (which I will include links to) and was curious if you are still using the same chart setup? (The setup consisted of price with a moving average up top, volume and TSV in the middle, and BOP, MS, and RS to the S&P 500 in the bottom.)
To keep it simple, yes. The same setup I’ve had since 1999.
Click to Enlarge.
Using your chart setup, what exactly to do you look for that triggers a buy or short signal?
Volume, price, and BOP. Just like always. Big volume, a clear breakout/bounce, and heavy BOP either to the upside or downside.
Do you have a written/typed checklist of some sort that you follow when trading?
No, it is all in my head. The routine is like breathing. You just do it at this point.
How do you determine the point when you take profits/limit losses? Do you have an exact system for exiting positions?
The chart tells me what to do. Sometimes you get it right and look like a genius. Other times you get it wrong and look stupid until you get it right again and look like a genius. I take every buy/sell signal from my charts. It’s definitely more of an art than a science. I laugh at most “mechanical/black box” systems.
Do you add to existing holdings? If so, what is your strategy for this.
The chart. It is all about the signal. Breakouts/bounces on volume. I have added to positions on pullbacks in my IRA in high-priced CANSLIM quality stocks but it must be coming right off the 50 DMA on volume with a very low risk to possible reward.
How about ETF’s? Do you stick to stocks or have you started to trade other securities?
Only stocks. No ETFs. Not the same ballgame. Lazy man’s game.
Lately, I’ve started to add the IBD composite score as a screen component (only going long companies with a score of 80 or higher). Do you have a level of fundamental analysis in your system? Does share price influence your picks?
Share price and quality of fundamentals matters everything. I don’t care how nice the chart is, if fundamentals are not there, it will be small. An ugly chart but making a clear move with fantastic fundamentals will always beat a perfect chart with ugly fundies.
What would you say was the tipping point when you transitioned from an amateur to a professional?
That will never happen. I am and always and forever will be an amateur in this game. You just got to cut losses and learn your history and have amazing patience for learning. This is the hardest “game” to ever play and win at. Harder than blackjack, harder than poker, and harder than almost anything you can think of.
I want to thank Josh for his time and help in putting this together. Much appreciation! Again, if you would like to get in touch with Josh or get more information check out his site, BigWaveTrading.com.
There are two options for getting more information about Josh and his analysis. First, he has a premium subscription service at BigWaveTrading.com with different membership levels for different needs. Second, he has BigWaveTrading.net which is a site dedicated to free commentary. Check them out!
We started off getting revised answers to the questions I asked in my previous interview and then moved on to a new set of questions.
Interview 1.0 Revisited
How would you describe your trading system?
Simple without noise. I simply pay attention to my charts. I don’t watch CNBC or read other financial publications. I do not even subscribe to IBD anymore. I just use Daily Graphs, Telechart, Scottrade, and IB. I keep it very simple and the most important thing is I never “try (it’s impossible to do)” to let my stupid opinions influence me.
How has your trading system changed, if any, ever since the economic downturn?
No, It hasn’t. I started looking at charts in 1996 and in 1999 I had learned-in-my-head the CANSLIM methodology and have kept to that simple (yet very hard to initially learn) methodology since 1999. I know and knew, thanks to my laborious reading of about 100 stock market books, that nothing ever changes in the stock market but the players. The patterns always remain the same thanks to basic insecure human emotions like greed, fear, and hope. They are completely useless in this game.
I noticed that on your telechart, you keep your price very small compared to most charts. What is you reasoning for such a setup?
It allows me to, very, clearly see the basing patterns such as a cup w/ handle, cup, ascending, double bottom, or HTF pattern. By “squishing” the price the chart goes from big and what appears to be loose to tight. If a stock is not completely tight on my price settings I know I want to avoid it. Visually, it is just what I prefer. To someone else, it might not be their cup of tea. To each their own.
Is it an advantage or disadvantage to be located in Maui?
If we are talking about surfing, YES! If we are talking about life, YES! If we are talking about the stock market, YES! Maui no ka oi. Being so far away from NYC and CNBC has to have nothing but 100% advantage towards my investing. Getting rid of all that mainland noise is the reason I can completely be objective towards the stock market. I never know what is happening in the macro environment anymore. I could care less. It’s all about sun and fun for me and that equals profits thankfully. Once again, I say, for me.
About how long did it take you to get to a level where you could make consistent profits?
Four years (1999 was too easy and we will never see that again in our lifetimes). 2000 was the first year, when the market tanked, and I beat the market by 1000%+ that I realized that I could do it. I have always beaten the market returns but trust me the market still beats me at being very difficult. I can not stress enough how difficult this really is. If you do not get any luck and have only skill in the stock market, you will not make money. You seriously need skill and luck. Since I have no luck, I am very fortunate to be beating the market every year since 1999.
What single piece of advice would you give to personal investors as we all fight to find and keep profits?
Never give up. Either you have it or you don’t. If you struggle for 10 years and are still interested TRUST ME in 20 years you will be very wealthy. However, wealth will never equal happiness. Live and love life. Have fun. Make sure you do what you love. If you do not love this game do not do it. Honestly, I hate this game so much that I love it. But if someone asked me “surfing or stocks?” The answer is simple and I do not even have to think about it. Surfing.
Interview 2.0
To start off, would you highlight your average return on a position, your success rate (% of stocks from which you profit), and the size of your average position in dollars?
All of that information can be found here. I was tracked by a subscriber in an excel spreadsheet going over my purchases and sells over the past year.
We’ve seen a bull market with significant gains since the bottom in early ’09 (Dow). What do you expect from the market in the coming years? Also, do you subscribe to IBD’s method for determine market trends?
I can not predict the future and never will try to. Nobody knows what will happen in the future and when they say they think this-or-that will happen it is completely ego driven and they want to be seen as “important and smart.” The truth is, nobody, and I mean nobody, can completely look at all the data and be correct about the future. It is a total crap-shoot. I play the now. I live in the now. There is no room for the future. It is what it is and that is that. Also, 130 years of data of facts proves that IBD’s way of determining market trends is correct. However, in all fairness, I think some of the writers of IBD might not be investing money in the stock market. They don’t have what I would say is “the touch.”
I’ve been studying the articles you’ve written about your trading strategy (which I will include links to) and was curious if you are still using the same chart setup? (The setup consisted of price with a moving average up top, volume and TSV in the middle, and BOP, MS, and RS to the S&P 500 in the bottom.)
To keep it simple, yes. The same setup I’ve had since 1999.
Click to Enlarge.
Using your chart setup, what exactly to do you look for that triggers a buy or short signal?
Volume, price, and BOP. Just like always. Big volume, a clear breakout/bounce, and heavy BOP either to the upside or downside.
Do you have a written/typed checklist of some sort that you follow when trading?
No, it is all in my head. The routine is like breathing. You just do it at this point.
How do you determine the point when you take profits/limit losses? Do you have an exact system for exiting positions?
The chart tells me what to do. Sometimes you get it right and look like a genius. Other times you get it wrong and look stupid until you get it right again and look like a genius. I take every buy/sell signal from my charts. It’s definitely more of an art than a science. I laugh at most “mechanical/black box” systems.
Do you add to existing holdings? If so, what is your strategy for this.
The chart. It is all about the signal. Breakouts/bounces on volume. I have added to positions on pullbacks in my IRA in high-priced CANSLIM quality stocks but it must be coming right off the 50 DMA on volume with a very low risk to possible reward.
How about ETF’s? Do you stick to stocks or have you started to trade other securities?
Only stocks. No ETFs. Not the same ballgame. Lazy man’s game.
Lately, I’ve started to add the IBD composite score as a screen component (only going long companies with a score of 80 or higher). Do you have a level of fundamental analysis in your system? Does share price influence your picks?
Share price and quality of fundamentals matters everything. I don’t care how nice the chart is, if fundamentals are not there, it will be small. An ugly chart but making a clear move with fantastic fundamentals will always beat a perfect chart with ugly fundies.
What would you say was the tipping point when you transitioned from an amateur to a professional?
That will never happen. I am and always and forever will be an amateur in this game. You just got to cut losses and learn your history and have amazing patience for learning. This is the hardest “game” to ever play and win at. Harder than blackjack, harder than poker, and harder than almost anything you can think of.
I want to thank Josh for his time and help in putting this together. Much appreciation! Again, if you would like to get in touch with Josh or get more information check out his site, BigWaveTrading.com.
Monday, January 03, 2011
Stocks Rally On Higher Volume Following The Light Volume Holiday Trading
While MarketSpeculator/BigWaveTrader is on vacation on my stomping grounds of Maui, I will fill in with some brief comments, until he returns. — Josh Hayes
The market had a very strong session today and despite finishing off the highs overall it was a great day. The biggest positive of today is two fold. For one, my current holdings had a fantastic day with the biggest CANSLIM positions having some of the bigger gains. Second, my main long scan is full of stocks. These two events tell me that today was a great day, despite us finishing off the highs.
For those of you familiar with me, you know that I do not read or watch anything anywhere on the stock market. I simply use charts on the indexes and individual stocks. When I see a chart pattern that is extremely bullish based on the past 130 years of historical data about the markets biggest winners then I dive a bit deeper into the fundamentals. However, when it comes to macro events, I could care less. When you live on Maui and have made your living via charts the past 12+ years, you realize more and more everyday what a pile of junk most traders infect their brains with.
The bottom line to that is that if you are looking for a “reason” as to why the market did what it did today well I can’t help you with that. If you are looking to make money on the actual actions of the market based on what people “believe” caused the market to move well that I can help you with.
This market continues to be in a strong uptrend establishing itself well above the 50 day moving average. Until the market turns lower on heavier volume making lower highs and lower lows, along with my current holdings showing distribution, then and only then will I entertain a possible topping scenario. Until this occurs, I am just riding the trend higher. That is how you make the real money, and not just scraps, in the stock market.
As Big Wave Trader knows by now Maui is a beautiful place and I doubt you will be hearing from him until he returns to the mainland. Can you blame him? I hope everyone had a wonderful holiday season and while it may not be an easy transition back into work mode, I will be here doing as much as I can to make sure you continue to profit from this rally. Aloha everyone.
The market had a very strong session today and despite finishing off the highs overall it was a great day. The biggest positive of today is two fold. For one, my current holdings had a fantastic day with the biggest CANSLIM positions having some of the bigger gains. Second, my main long scan is full of stocks. These two events tell me that today was a great day, despite us finishing off the highs.
For those of you familiar with me, you know that I do not read or watch anything anywhere on the stock market. I simply use charts on the indexes and individual stocks. When I see a chart pattern that is extremely bullish based on the past 130 years of historical data about the markets biggest winners then I dive a bit deeper into the fundamentals. However, when it comes to macro events, I could care less. When you live on Maui and have made your living via charts the past 12+ years, you realize more and more everyday what a pile of junk most traders infect their brains with.
The bottom line to that is that if you are looking for a “reason” as to why the market did what it did today well I can’t help you with that. If you are looking to make money on the actual actions of the market based on what people “believe” caused the market to move well that I can help you with.
This market continues to be in a strong uptrend establishing itself well above the 50 day moving average. Until the market turns lower on heavier volume making lower highs and lower lows, along with my current holdings showing distribution, then and only then will I entertain a possible topping scenario. Until this occurs, I am just riding the trend higher. That is how you make the real money, and not just scraps, in the stock market.
As Big Wave Trader knows by now Maui is a beautiful place and I doubt you will be hearing from him until he returns to the mainland. Can you blame him? I hope everyone had a wonderful holiday season and while it may not be an easy transition back into work mode, I will be here doing as much as I can to make sure you continue to profit from this rally. Aloha everyone.
Subscribe to:
Posts (Atom)