Sunday Night Coffee – October 25, 2009

I’ve been doing some analysis of my trading and I’ve determined that I’ve been overtrading my account. I’ve been going in and out of positions too much trying to catch some wiggles instead of being patient with the bigger moves. The net result is that over the past few weeks I’ve been churning my account and going nowhere. My goal is to eliminate the overtrading and the churn.

I already mentioned in my review of Beyond Technical Analysis that I would be going with looser stops. Another simple technique that I am deploying is following the 50, 200 and 300 day simple moving averages to objectively determine the primary trend of various indexes, commodities and currencies. For example, the primary trend on SPX is clearly up even though Friday’s trading session looked very weak. With the primary trend being up over three different timeframes, it seems pretty silly to short the market at this level. In fact, SPX has not even broken the 20-day SMA.

On a weekly basis, I’ll be updating the following spreadsheet.

As I pointed out in the book review, there is so much emphasis on getting a correct handle on SPX. However, as the book points out, certain commodities and currency pairs trend much better historically than stocks and can be much easier to trade than SPX.  Just something to think about.

A few moving averages that are worth watching are USO, UNG.

USO is bumping up against its 300 day SMA. A breakout over that level to confirm the recent move over $40 and this could be off to the races again.

UNG has horizontal support at $11 and closed right at the 50 day SMA on Friday. If it doesn’t bounce and breaks $11, it is likely headed back to $9.

Before I look at particular trading ideas, I’m mapping out the economic and earnings reports for the week. This is a filtered list of stocks that I consider to be important. For a complete list, click on the links to briefing.com on the sidebar.

We’re still playing around at the 10,000 level on the Dow. Many are trying to read into every wiggle. The truth is that there is a battle going on right here as expected. It remains unresolved. I would not add to long positions until this is resolved but I certainly would not be shorting the market until the dollar breaks its decent and DIA breaks the 50-day. If a big move lower is coming, there will be time to catch it. I don’t need to have the fame of calling a top. Meanwhile, while others play around with this I’ll be continuing to play trending opportunities such as gold, shorting the dollar, and oil.

SPECIFIC STOCKS

AZO is finally breaking down in a meaningful way. The stock broke support at $140 as well as its 300 day SMA. I’m hoping to get short it at  $140 with a stop at $149.

Another stock that has frustrated shorts for a while is CMG. The double top is in. I don’t expect it to return to $90 but I think it might get back to $86. This would be a reasonable entry and would also allow for some downside movement before it breaks support at $80 and then likely to its 200 day SMA.

BDK could be a cup and handle breakout. Note the breakout to the top of the cup and the pullback towards the 20 and 50 day SMA. I’m waiting for the breakout.

DST recently had a pipe bottom off the 300 day SMA. This one could be an interesting long idea if it can crossover the 50-day SMA.

Watching to see if FITB can take out resistance at $11.

PAR is a saucer pattern. Earnings are on the 29th. Waiting to see if earnings is a breakout catalyst.

VMW looks good here. It broke resistance at $42 which should now be support. I’d set my stop at about $40.

WWW is another cup and handle pattern. This stock seems to trade back down to its 50 day pretty often. It can be bought there but in this environment I’m more likely to buy on the breakout.