Wednesday, April 21, 2010

Morning Briefing for April 21st: Watching the Range Trade

8:58 AM CT - Note the relative strength among bank and homebuilder shares, but only a little more than 500 advancing stocks than decliners so far. Health care and materials shares relatively weak; watching closely to see if this is simply sector reallocation or if the rally in banks can lift the broad market.

We're trading toward the top of a broad multiday range; handicapping whether we can attract fresh buying at the highs vs. fall back into the range will set up the best trades for today. I'll be watching the intraday advance-decline line and new 20-day highs/lows carefully during the day for clues as to the likelihood of sustaining a breakout: with a little over 1300 new 20-day highs on Tuesday, we're seeing some thinning of participation on this most recent leg up in stocks. Note also that we're falling short of recent highs overseas, in EEM and EFA.


M said...

I am wondering what is the obsession, mild or more than so, of predicting tops and corrections? Ever since I've been reading technical analysis blogs since last May, the overwhelming theme has been make the bearish case. I wonder if a key reason 99 percent of daytraders don't make money is because they are constantly going short, with the aid of so-called expert advice, during raging bull markets. Dr Brett,as a psychologist, I wonder if you can shed some light into this mass bear trader psychology.

Joel said...

As a novice trader, I find this type of day one of the most challenging/frustrating and am inclined to sit on the sidelines to see how it unfolds. I can think of as many reasons that the market could continue to climb as it could to fall back. No conviction.

Tariq said...

I am a new day trader and before I enrolled into a training program with a good trading and educational firm ( SMB Capital) I lost money and made money without knowing WHY?

I am still in the training ( unlike 99% of training programs which last 2 days to 7 days)my formal training will continue for 3 months and then on.

I see every day good day traders making INSANE amount of money ( even after SMB training majority of traders fail for various reasons just like a high percenatge of professionall ball players never make it even after being drafted- I wonder how many of my REDSOX drafted players just sit on bech or get cut loose year after year- my guess it's a quite a high number).

In my view- you can either be an Investor ( Jim Rogers- majority of the people do not have stomach and wisdom of his long term view and patience) or a trader.

To a trader ( day trader or swing trader) it does not matter if market is up or down. They trade the market as price action is in front of them. There are several tools to gauage price and volume action- and I find Dr. Steenbarger analysis along with several other blogs helpful in clarifyig market price action.

A professional day trader starts his/her trading day without a FIRM BELIEF ( they might have a long or short) and they are EXTREMELY FLUID and trade based on PRICE and PRICE ONLY.

So to Joel and M- do not worry about if market is going up or down if you want to be a trader or just invest in Index funds and be happy with market returns ( 99% of the money manager have a poor track record on a 10 year basis).

Word of Caution to new traders: I will keep my full time job and spend 2- 4hours every day for at least 1 year before thiking about day trading full time. I made the mistake and I am still payig for it.

Tariq Malik
Hopkinton, MA

Raymond said...

Hey Tariq,

Let's keep it up. I am also a developing trader with dedicated passion. However, I am still far away from being a consistent winning trader.

I believe I have a winning tool for day trading, since some of my friends with the same tools can make lots of money, but not me.

So my goal is to: (1) trade with discipline that do not chase the market, only action according to my indicators (2) become a consistent full time trader high winning probability.

let's share views if you like, my email address is