The days of “well, I have a broker and he’s going to take good care of my investments” are over. We see this played out everyday as more brokerage firms struggle to survive and unfortunately, we see folks like Madoff facing serious charges.

Here’s how you can take control of your investments:

1.    Understand what the market is doing.

That’s first and foremost. You can invest in a good stock that’s breaking out of a set-up, but if the market direction isn’t behind you, it’s like riding a bike into a fierce wind. You must understand where the market is and where it’s likely to go in the short-term. Then, invest in the best set-ups that will be helped by the market direction. It’s much easier to ride a bike with the wind at your back.

2.    Trade only the best set-ups.

Let’s take a look at NVEC, which triggered a long-side trade last week…

When a stock is moving higher, it doesn’t go straight up. Instead it rises, then has mini-downtrends where it consolidates its gains before moving higher. These mini-downtrends are where it pulls back off of its highs in an orderly manner — often to an area of key support such as its upward trend line and/or 50-day moving average.

We connect the lines of the mini-downtrend. A break above the pink line triggers a trade on the long side. For that reason, NVEC was an ideal long side set-up last week:

On Tuesday morning, NVEC triggered a trade by breaking above the pink line.

By Tuesday’s close, we were already enjoying a gain of 5%. And Wednesday morning, we locked in gains of 8.9% — a nice gain in today’s market in just over 24 hours.

This leads to step #3.

3.    Take your profits when you have them.

While on the surface, a 9% gain may not seem like much, I have to tell you that if you just did one trade like that a week, you’d significantly outperform most brokers, money managers and mutual funds. After all, most of these money handlers are nothing but “Managing To A Benchmark” cookie-cutter indexers that know how to sell but not how to manage. Have you seen what the indexes and mutual funds are down year to date? If your traditional account mimics the indexes, you know you’re working with one.

Just think about it. Let’s say you have a portfolio of $50,000. And you invest in 200 shares of NVEC at 28.22. After selling it at $30.74, you’ve made a profit of $504. Multiply that by 52 and you have a one-year profit of $26,208 or 52%! And that’s just from doing one trade like NVEC a week.

What would a one-year gain of $26,208 do for you? Well, it would easily put you well ahead of what most brokers could do for you.

Stocks may continue to go in the direction we want after we take profits. But for the time being, you are never going to go wrong ringing the register on short-term gains. For example, what if we didn’t lock in our NVEC gains at $30.74? Our gains would have been gone as the stock went right back to where it was when it originally triggered.

Now don’t get us wrong. We aren’t out to get brokers. We know a lot of them and many are very good. But the point we are trying to make is the days of handing your money over and expecting a traditional Wall Streeter to perform are over. To be successful, you have to be in control of your investments. After all, only you have your best interests at heart. As good as your conventional Wall Streeter may be, he’s not able to watch your investments as good as you can.

Sincerely,
David Grandey
AllAboutTrends.net

March 10, 2009

Quicker, Safer Trades Every Week was originally featured in the Penny Sleuth.

All uptrends break to the downside and all downtrends eventually break to the upside. They are Change In Trend patterns that you really need to be on the lookout for. After all, if you are long, a trendline break to the downside is your cue to get out of dodge. Conversely, if you are short and an issue breaks its downtrend to the upside, it’s time to run for cover and lock in your gains.

Today we’ll be talking about trendline breaks to the downside. They say a picture is worth a thousand words… so rather than explain it away, just take a look at the charts below. They are great examples of what we are talking about…

So what happens after they break the uptrend to the downside? We call that a1st Thrust. That first thrust is an excellent trading opportunity — it’s often one of the most explosive moves a stock will make. Think about it. If a stock has been going up for a long time, it’s going to fall hard and fast when institutions decide they want out. The same goes after a stock’s been falling for some time. We’ve seen stocks absolutely go into orbit as investors pile on to get in at bargain prices.

After a 1st thrust down, we want to watch for a snapback rally as shown.

The battle cry with these patterns are : 1ST THRUST DOWN (blue box on all), SNAP BACK RALLY (Pink Lines) , BOMBS AWAY.

Now it’s your turn, look at the issue below.  What do you see?

Sincerely,
David Grandey
All About Trends

March 2, 2009

How to Trade Trendline Breaks was originally featured in the Penny Sleuth.

Meanwhile, the NASDAQ has been holding much stronger. While it too has pulled back, it hasn’t done so near as much as the other indexes. But then again, the NASDAQ doesn’t have the toxic waste the other two indexes have either. Also, the NASDAQ has formed another bullish pullback off highs pattern (POH) as shown below:

But What About Gold?

About the time you hear everyone on TV pounding the table on gold and you start to hear the words: Safe Haven Buying for days on end you know you’re near the end of the run. Why? Its emotional money saying “UH OH– the sky really is falling, I gotta get some of this” (AFTER The fact of course).

This tells us we are near a stall point. There is an old adage that has served us technicians well over the years and that is:

“More often than not when everyone is talking about it, that’s about the time it rolls over…”

Don’t follow the herd! We all know what happened to those who followed the conventional Wall Street herd right? They added 7 years to their time horizon window just to get back to where they were in 2007.

While Gold MAY be working its way higher over time, technically it’s overbought and at resistance. While we’re not saying sell it, we are saying expect a pullback. Take a look at the chart below:

Notice how it is bumping up against resistance. Also, notice that the full stohcastics are overbought? Not time to jump on the bandwagon for now.

Just remember the market has a funny way of letting those who have to have it actually have it — in more ways than one, we might add.

Sincerely,
David Grandey
AllAboutTrends.net

February 23, 2009

Is It Time for a Breakout? was originally featured in the Penny Sleuth.

In technical analysis, stock chart patterns are used as tools to determine where a stock’s price is going. Even if you’re a fundamental investor – someone who invests based on a company’s business and financials instead of stock charts alone – taking a look at technicals can be incredibly useful… and profitable.

After all, even when you find a stellar fundamental play, the technicals can help you get in at the best price.
So, what patterns should you be watching for?

Double Top and Double Bottom

The double top (and its bullish cousin, the double bottom) is one of the easiest technical patterns to pick out. It happens when a stock’s price bounces off the same resistance line twice in a short period of time (or in the case of a double bottom, it bounces off support), and gives strong evidence that the stock is having serious trouble breaking through that barrier.

The double top is usually not a good sign, because it represents a limit on a stock’s upside potential – at least in the short term. A double bottom, on the other hand, is a good thing because it means that there’s a strong support level that the stock’s price will have trouble falling below.

Trading Channel

Another simple pattern to pick out is a trading channel. While a trading channel is any range in which a stock’s price is fluctuating, a horizontal trading channel (like the one above) is a lot more interesting. It could mean that the stock is consolidating – trying to regain its footing after a big drop-off, for instance – and gearing up for a breakout either up or down.

When you see horizontal consolidation, especially on lower-than-normal volume, keep your eyes peeled.

Head and Shoulders Pattern

The head and shoulders pattern is a bearish trend that usually means that a stock is headed downward. When you see two “shoulders” with a taller “head” in between, watch out, a head and shoulders pattern may be forming. Take note, though, that within the head and shoulders pattern itself you’ll find a strong support level (called the neckline).

Like most patterns, the head and shoulders has an opposite – in this case, the inverse head and shoulders. This bullish pattern looks the same as the regular head and shoulders, except it’s flipped upside down. When an inverse head and shoulders is on your chart, it could mean a rally is coming up.

Descending Triangle

The descending triangle isn’t a pattern you’ll want to find on a stock chart in your portfolio. It’s a bearish signal that usually results in price movement downward.

A descending triangle occurs when a stock’s downward trend intersects with a strong level of support. Again, its opposite, the ascending triangle is a bullish signal.

Hammer and Hanging Man

A hammer is a single candlestick that might mean a bottom is in sight. It’s formed when a stock trades in a wide range downward during the day, but closes near the open. It’s opposite, the hanging man, happens at the end of an uptrend, and signals that the trend is likely to resolve downward in the near future.

Start to Chart

While this is by no means an exhaustive list of the types of charting patterns you’ll see when you enter the wild world of technical analysis and technical trading, it is a starting point that can help you set off in the right direction. We’ll keep filling you in on technical analysis tips to make sure that you can make the most of your investment dollar.

Cheers,
Jonas Elmerraji

February 19, 2009

Five Charting Patterns You Need to Know was originally featured in the Penny Sleuth.