Leigh Drogen » X

Sunday Night Setups

Leigh Drogen — Mon, 16 Nov 2009 05:32:50 +0000

A big week ahead as the next few days should provide clarity on several patterns in the broader market. We are now back in sell the rip territory, if we break to the upside here off the bull flag I’m watching we could see a quick move north. If the market rolls over here as traders step in to sell the rip once again, the momentum divergences I’ve been looking at will become more pronounced and signal a likely end to this rally. I’ve posted a bunch of charts with good setups both long and short for the first few days of the week. Remember that trades should only be taken once certain levels have been cleared, don’t try to anticipate and be a hero for another few pennies, take the breakout and be vigilant with your stops. Have a good one ( trading setups on chart.ly ).

Execute Your Play Book

Leigh Drogen — Tue, 27 Oct 2009 19:11:10 +0000

The past few days have been nothing other than a calamity of errors on my part, not because I’ve lost money, but because I’ve bumbled the opportunity to make a lot of it. You will hear this next line recited by many traders, and frankly, it’s true. There are periods of time where I lose money and pat myself on the back for doing an awesome job executing my trades and managing risk. Then there are the times when you are making money, but are angry as hell at yourself for poorly managing risk and not executing your play book.

In football, the job of the offensive coordinator is to pick the right play from the coach’s play book at the right time. The job of the quarterback is to execute that play. There will be times when the right play is called and the quarterback does everything in his power to execute effectively, and still the play will not work for reasons out of their control. This is life. The point here is that the only thing you have control over is the play you call and how you execute it.

Looking back at your trading history his something we all need to do. It is only helpful though if you learn from your mistakes, crying over them gets you nowhere. So let’s go through a few.

I closed the $STEC short way to early and for no good reason but trying to protect profits. At the end of the trade I came away with 1ATR profit, half of the 2ATR loss I use as a stop. There was no great reason for my covering the stock last week. $STEC is down 11% today.

I was long $AMZN and stopped out at 92.90 for no good reason on 10/21. I tightened my stop into earnings and took 1/5 my normal loss. A complete failure of executing the trade correctly, no need to say anything more, if you haven’t seen that chart you must have just crawled out from under a rock.

I stopped out prematurely on $PCX yesterday after tightening my stop around break even. $PCX had broken the 50 day moving average, but still sat above important support levels. Up 21% at one point today after I just about bottom ticked it yesterday. There was once again no good reason to move my stop up either than what @ppearlman would call performance anxiety.

Update (3:45PM): Forgot to mention that I completely missed the fact that $PCX was reporting this morning, add that too the list.

Now on to the trades that I had all lined up and never made.

I’ve been all over the short trade in the solar stocks. I still hold a short position in $LDK, but have been paralyzed to act on perfectly good setups in other names that I have both posted charts and talked about here.

$WFR is in complete free fall after giving a perfect entry which I noted on 10/23. From 15 to 12.75, enough said.

I came in this morning ready to sell $X on any dollar strength. What a perfect entry, oh man, $X is now trading down almost 8% and I have no position.

In a well executed trade this morning I am long TreeHouse Foods $THS.

There are times when every trader fails to execute properly, it can happen for many different reasons, the key is to step back and reset yourself.

Hockey tonight, I will crush someone, and score another hat trick, then come in tomorrow and crush the market.

It’s a Play Book, Not a Game Plan

Leigh Drogen — Mon, 26 Oct 2009 21:38:11 +0000

I highly believe in having a large play book while having no game plan. The market doesn’t give a shit what your game plan is, so don’t come to play with a bias. In war, the game plan goes out the door the second you step onto the field of battle. Conditions change, capabilities are lost, assets swing around in ways you didn’t expect, etc. I often comment that I’ll take a certain trade above or below a price. This is me looking through my play book and highlighting my favorite plays given the current environment. But conditions change in the market from day to day, hell from minute to minute, and we must flip to a different part of the book when that happens in order to compete.

Ok, enough with that metaphorical crap. Look, I had a bunch of gold and agriculture stocks on my radar going into today, the market isn’t allowing me to get long there right now. I’m not a knife catcher, I’m anything but, I play momentum and trend. Materials gave it up hard today as the $USDX bounced. The gold miners $GDX ended down 4.2% with the larger materials sector ETF $XME giving up greater than 3%. The US Dollar now stands at a very important level, on the precipice of breaking its downtrend and hopping above some major moving averages.

As you can clearly see, the $USDX made a run today pushing up against the upper trend line and strong horizontal resistance. It failed to take those important levels in the afternoon, which held the market from getting completely demolished. Each time we have seen this pattern since June the dollar has caved. Is this the time it breaks through? I’m not in the business of placing bets, I’m a trader. I’m going to sit tight here as the dollar gasps for air. If I wanted to be very aggressive I would put on a whole bunch of material longs tomorrow on the open with tight stops, but frankly that isn’t my cup of tea. If the dollar fails tomorrow, sit back and relax, then look for a rebound. If the second run at these levels doesn’t break through, look for a lower high to be put in place, and when it begins to fail for the second time, smash it by getting long the material and energy names.

I’ve got a few names in the play book if that patterns plays out. $DE, $EGO, $RIG. I still also like $BX from the long side if the financials can get their stuff together.

So what does the play book look like if the $USDX really starts to run? I am stalking a short entry in $X, it just keeps banging away at that head and shoulders neckline. If it breaks 40 we could see some major damage done in that name.

The regional banks look ready to roll over here regardless of what the dollar does. I am stalking short positions in $ZION, $BBT, and the regional bank ETF $KRE which has put in a large symmetrical triangle as show on the chart. The resolution of this pattern will say a lot about where the market is going over the next 4 months or so. We would normally say that these types of patterns are resolved in the direction of the primary trend. Problem is, the primary trend is not quite evident here. The $XLF most likely saw a bottom back in March turning the primary trend positive. We could still see a large giveback of the gains since then, but overall, those lows aren’t likely to be violated. I am not so convinced in the regional banks as the moving averages aren’t quite as bullish here off the March bottom. If the market rolls over this is where you really want to be positioned short for some mass destruction.

I took a long position in Aruba Networks $ARUN as it broke resistance at 9.50. I like the longer term trend here and the long consolidation pattern it has put in here since July. It is currently battling with a flat 100 week moving average which is about to be crossed from the bottom by the 20 week, a bullish signal. $ARUN also has not given up the same ground as many of the other mobile internet stocks over the past few weeks.

Stopped out on two long positions today, $APWR and $PCX.

Headed out to the Ranger game, failed at bribing the immigration officer to revoke Redden’s work visa and strand him in Canada, so he will be in the lineup tonight sucking per his usual game plan which consists of playing like a pussy.