Commodity Negative Divergences, My Sched D, and You

Without getting too personal…
I just sent off my taxes — yes, I had to write a couple checks — but the good news is that my schedule D was much EASIER to fill out than previous years.

Before I’ve struggled to compile huge lists of trades across mulitple accounts. If you actively trade, you probably know what I mean — many hours work, and even when I’ve hired accountants for my taxes they’ve wanted ME to do the gritty work of listing all the trades!

But this year I breezed through sched D! I took fewer trades because I relied more on MACD divergence and the divergence count to target higher-potential times to buy. ( To tell you the truth, sched D is one of the reasons I went for this trading strategy.)

Now I want to share with you the means to simplify YOUR schedule D and, more importantly, FOCUS on times when trades are more likely to work out in your favor.

Check out an example from April 15, 2011 of the divergence alerts commentary. We’ve been seeing lots of different commodities — especially energy and metals but also some of the broader commodity indices — showing negative divergences on the daily charts. On Fridays, we get the weekly analysis and starting to see some of those negative divergences move up to the weekly charts.
http://divergence-alerts.com/commentary/weekly-commentary/commodity-neg-divs-bubble-up-to-weekly-macd-div-alerts/

If you would like to receive alerts like this, plus get all The Truth About MACD educational materials as bonuses, become a member before April 18, 2011 at
http://divergence-alerts.com/my-membership-options-page/

Traders Expo in New York City

The Traders Expo exhibit hall consumed two floors of the Marriot at Times Square and drew a large crowd. People were generally upbeat and eager to learn.

My main goals, besides presenting, were to connect with the key software vendors.  Here’s my notes:

Fidelity Wealth Lab — Fidelity always has a big presence and this show was no exception.  I want to assess the demand for a MACD Divergence detector in WealthLab.   Please leave a comment or email me directly if you want to use WealthLab to backtest MACD Divergences between the indicator and price.

Ninja Trader – also considering a port of my MACD Divergence Detectors to their platform because it is free.   Again, please contact me if this interests you.  At the Traders Expo, they gave a nice demo of their drag n drop interface for creating strategies, plus how to just write in C++.

TradeStation – their lounge is an awesome place to get questions answered, even sit down with a programmer.  In particular, I went there to learn more about concurrency in version 9.0 and how it affects my MACD divegence scans.

Worden – they are now demo’ing new tc2000 which is a combination of TeleChart, StockFinder, and freestockcharts.com.  Will need to brush up on PCF and be ready to port once they add the  language constructs necessary to detect MACD divergences there.  Meanwhile, StockFinder from Worden runs my divergence detectors.

What’s New:  CurrenSee – a fleet of 100 currency traders and software to let you allocate percentages of your account to trade with your favorite traders.

Best Give-Aways:  CitiFX giving hardback copies of New Market Wizards book for filling out a 5 question survey.  The iPad remains the big drawing prize of choice and many vendors give their own product as a prize.  The drawing prize in my session was a copy of  The Truth About MACD video series.

Technical Analysis of SPY

The premise of technical analysis is that the price carries information about a market’s future potential as well as its past. Since price is numerical, we can use mathematics to aid our analysis. For example, a moving average of price smooths its fluctuations and allows us to focus on the overall trend. Today the S&P500 opened with a gap above its 200-day Moving Average. The chart below shows that with the dotted blue line as the 200-day MA. Technical analysis regards this as a bullish sign.

With an ETF such as SPY we have an opportunity to look under the hood to see how well its component stocks support it. Continuing with our example, we can check how many of the S&P500 stocks are above their 200-day Moving Averages. See the screenshot from Telechart below.

We see that 283 of 500 stocks in SPY are above their 200-day MA. That’s slightly better than half and a terrific improvement from last month.
This is one example of the type of analysis that you can do on stocks in an ETF. To see more, check out the eMoneyShow webcast and chat room on Sept 15, 11am EDT. Click here to register.

ETF and Stock Index Analysis at SF MoneyShow – Webcast

 

Thursday, August 19

Gain insight into where CTIUS, the Cleantech Index™, is going via a live technical analysis of its component stocks. In this session, we identify the key movers out of the 78 stocks in the index, and examine each of the strong leaders and the worst of the laggards. This is your chance to learn a bottom-up method of analyzing an index. You will walk away with a potential buy/sell list plus ideas about where to set protective stop losses. Ultimately, we form an opinion of where the Cleantech Index™ is headed over the intermediate and long-term investing horizons.

3:20 pm – 4:05 pm PDT

Dear Fellow Investors,
With today’s unique market conditions, it is especially valuable to have expert guidance as you seek to grow your assets and position your portfolio strategically in this new era of investing.And it is with that in mind that I proudly invite you to tune in for this LIVE Webcast presentation, which promises to help you gain knowledge and critical insights that you’ll need to make smarter, more informed investment decisions throughout the coming months and beyond.

Viewing is free, so please click the link for more details and to register for this and other LIVE Webcast events, which will come to you from the upcoming MoneyShow San Francisco! I look forward to connecting with you!

Sincerely,

Jackie Ann Patterson

Editor, BackTesting Report

Please make your arrangements today to join me and individual investors from around the world forLIVE Webcast events from The MoneyShow • San Francisco 2010—coming soon to MoneyShow.com!

 

Managing Your Exits

Click Here to Watch the Video on Managing Your Exitsmoneyshow_managing_your_exits_07-12-10_jackie_ann_patterson

Karen Gibbs (K):    Is it different for investors versus traders?

Jackie Ann Patterson (J):  Yes, I really think it is.  I think that the time frame, the mindset that you start out with has a big effect on the type of exit strategy that you’d like to use.  Certainly if you’re entering the market with an idea of holding a position for over a year, getting favorable long-term tax treatment, you’re going to want to do something different than a swing trader. If you’re a swing trader entering the market, and you want to get gains not after a year, but after one day, or four days, that’s going to prompt you to think about exits a little bit differently.

K:    What are the key elements of a trading strategy?

 J:   Well, I think there’s two really big key pieces to a trading strategy or to an exit strategy, in particular, and one is how do you handle losses??  When do you cut losses short?  What sort of method will you use to limit your loss and be able to preserve your capital and your peace of mind in order to be able to trade again?  So that’s one side.

The second side, I think, is how to capture gains, when to take profits. It’s important to think about that also as part of the exit strategy.

K:  How do you suggest limiting the losses?

J:    Well, I think there’s a couple different ways to limit the losses.  As far as exit strategies go, looking at a particular point, a particular price, whether you set that in the market as a stop loss or keep that in mind, that’s one way to do it.

The other way is to have a particular signal if the conditions change.  That could be another way to limit losses if somebody has, for example, gotten in when price has been going up, has been passing moving averages, if price starts going down, passing those same moving averages, that might be a signal to get out, even if the position has not yet become profitable.

K:    And ringing the cash register, taking those gains.

J:    Yes, yes.  I think that’s the happy part of trading, and it’s also a part that may not get as much attention as it fully deserves, to think through what sort of situations will be the time to ring the cash register, to get a paycheck.  Does a person want to set a target and exit when the price reaches a certain point, whether that point is a dollar amount or whether that’s a certain configuration of indicators, or is a person more inclined to let winners run and do something?  Say, for example, trailing a stop along with the price as the price goes up, to match that with a trailing stop price, and in that way protect profits using a stop, as well as limiting losses.

K:  So you have to kind of match it to your personality or style?

J:   Yes.  I think that’s really a key thing, is to match the exit strategy to your trading style and to your personality and to your temperament and that will give you a boundary of the different sorts of exits you might consider. 

For example, the long-term trader might be more interested in strategies that let the winners run and go on longer versus a short-term trader might be more interested in setting some very near-term targets than taking profits, but within that context, I think it’s also important to understand the trading strategy and understand the potential performance of the trading strategy, and use that hard data to make decisions about which strategy might work out best for you.

K:    Jackie, thanks for your insight.

J:   Okay.  Thank you.

K: My guest has been Jackie Ann Patterson.  You’re watching TheMoneyShow.com Video Network.

Bulls and Bears Fight Over S&P500

The stock market is often said to be a fight between the bulls and the bears.   Technical analysis aims to help traders understand market behavior by studying the price action which is akin to the tracks left by the various market animals.

In last week’s market action, we can see the bull and the bear squaring off as two powerful and infrequent “tracks” showed up on the S&P 500.

Representing the bulls, we see a MACD positive divergence on the daily chart of the S&P 500, as shown in the StockFinder screenshot on the left.

Representing the bears, we have a Death Cross on the daily chart of the S&P 500, as shown in the StockFinder screenshot on the right.

Of course, as traders the battle is of more than abstract interest — our success depends on siding with the winners as much as possible and protecting ourselves from losses when we find ourselves on the wrong side of the trade.
 
To find out more, here are three complimentary resources:
 
Focus on MACD with my Las Vegas MoneyShow video
 
Learn about Golden Cross and Death Cross in my other video archive from Las Vegas
 
As general resource, check out TraderPlanet.com   It provides market commentary, charts and quotes, news, educational videos, live webcasts and many more services absolutely free of charge.  I will be a contributing writer to TraderPlanet very soon. If you register with TraderPlanet.com, as a thank you gift, you’ll immediately receive access to their trading ebook library, where you can select among several trading topics and authors. Register here: http://www.traderplanet.com/freebooks/636

Telechart for Forward-Testing Trading Strategies

Last week I wrote an article about a situation that often stymies traders who are serious about learning a discretionary strategy.   During forward-testing, many tools inadvertantly give clues as to what the next bar will do, rendering the effort useless.

One tool, however, presents a clean view of the chart at all times.   That tool is Telechart by Worden Brothers.   

See more about Telechart – click here

Here’s an example.  Can you tell from the charting (not the price action) what the next bar will do?

telechart_stock_chart_forward_walk_1

I don’t think so.   Click here to see the chart with one more bar.

Forward-testing – done correctly – gives a trader the chance to see a trading strategy in action does bar by bar.  Even though it lacks the emotional component of live trading, its a necessary step to learning discretionary trading.  It does take real effort though.

If you’re serious enough to do forward-testing, then you owe it to yourself to set up an environment without “cheats” that cheat yourself out of the real experience.  Telechart  is the one tool in my kit that helps me do that.

Death Cross on the S&P500

The S&P500 recently gave a Death Cross signal.  As you might guess from the name, the Death Cross is generally considered bearish.  

Read the Golden Crosses and Stop Losses BackTesting Report to learn about a trading strategy which relies on the Death Cross as a sell signal.

Watch my MoneyShow presentation which includes the Death Cross:

 

Exit Strategies for Active Investors

Here’s a good  video with live charts about the death cross, what it is and how to trade it: 

Adam Hewison on Death Cross

(the next article about forward-testing tools will be posted on this blog on Friday)