Where You Want To Be : PTJ Theory to Trading

Using proper buy points confirmed with price and surging volume is the only way to be when buying stocks long. However, when buy points fail and are then confirmed with selling volume; stops are deployed instantly. The absolute greatest traders understand that, and that is why they consistently win overtime. Paul Tudor Jones II is one of those great traders, and a native Memphian as well. His elusive Trader video has been watched by myself more than is required. It's a very inspiring video for a guy like me that has to take the same decisive actions and do them quickly on a daily basis. Inter personally it resonates with me even more because his age in the video is my current age. There should be no analog to that I don't think! (Inside joke if you've seen Trader.) Anyway, I've plucked the pearls of wisdom and put them into my notes as the PTJ Theory. And here it is :

Where You Want To Be:

1. Always in Control
2. Never Wishing
3. Always Trading
4. And always, first and foremost, protecting your ass!

Focus on the money/capital. It's always at risk in any single investment. 90% of your time spent on that is key. As was said in his Market Wizards interview, "Don't focus on making money; focus on protecting what you have."

Also, it's gotta hurt when you lose. If it doesn't there's a disconnect between you and the capital. And likewise one must have a quiet confidence about themselves when winning. The only reassurance that is ever needed lies within our P&L line. Thinking about that and all your positions relative to the previous session's close forces you to stay in the now. In turn this keeps you in control. Staying humble and very focused on current price action/ chart patterns with the appropriate buy (buy stop)/sell (sell stop) rules in place can only lead one closer to market success.

Quotes from the movie : "Quote me, quote me, quote me!!! What's the market!??! Second to that is, "And tell him do not $&%* around I want to buy 'em! 85-90? Offer 90 for 3000 FILL or KILL!!!" There's also a turkey that thinks he's a dog. That in and of itself is classic. However, one can't forget about the mystical powers of the charity auction purchased Bruce Willis white high top Reebok's; that are good for generating a market bounce of 30 dow points! When worn properly of course!

$IMAX: 3 Weeks Tight Pattern

I applied a Fibonacci retracement to the $IMAX monthly chart. Start point was 29.43 the high in 8/2000, and the low point occurred at .55 in 9/2001. It has essentially trended higher ever sense. Sans a few corrective waves.

Currently it just ripped through the 38.2% fib level of 11.53. Closed above it, and then it did a 3 weeks tight pattern that it has currently moved out of with volume as of today. 13.18 was the buy point in the pattern. 50% level is up at 14.95. I think that's a fair target for now. Piper's target is 16.

A 20% move from my 13.18 buy point would equate to 15.81. The 61.8% level sits up at 18.37 just in case things get real heated. 15 seems fair for now though. Today's close puts it 4.5% above the 13.18 buy point. It can be bought up to 13.83 from the buy point, or 5%.

***UPDATE : I sold this at 13.70 Thursday due to light volume, and general market weakness. 3.6% profit. I'll take it. If it holds 13.18 and can't break it on volume I will re enter. I don't want my views of the "valuation" to get in the way of a potential 3 weeks tight break out. We'll let the market be the final arbiter of what happens. Watch that 13.18 level.

TCM, LLC Tweeting Levels and Patterns Intraday

Getting more active on Twitter these days, and finding micro blogging to be a much simpler way to convey the trade. In that spirit I'm only trying to use it for actionable levels in the equities I'm following, or trading in during the day. The TCM,LLC blog will continue to play it's role as the repose of my more long winded market prose.

There is a handy Twitter tool embedded to the right that the tweets are sent to as they are made. You can follow me by clicking the follow link on this page, or you can go there and find me under TCMLLC.

Thanks, and a very warm welcome to all the new readers.

SmartHeat (HEAT)

My buy in on HEAT @ 12.25 on 11/24/09 has started to move in the right direction. With an all time high of 15.10 today along with a closing high of 14.95, HEAT looks poised to go higher yet still. Big volume came pouring into the name this afternoon with over 1.5m shares being transacted in the 1pm to 2pm cst time frame. This speaks to institutions piling in. They want to take this one higher, but they will most certainly shake the trees of weak hands along the way. So buying right is the key, as to not get shook out.

Our first buy was nothing more than a retracement level from the Oct lows to the most recent highs (post impressive eps w/ strong forward guidance.) At the time that high was 14.50. The 38.2% level from that was 12.25. That's where I got in. As of today we're up 23% on that purchase. So what now?

Well, we HOLD, and we buy more on the dips! According to IBD (to which I subscribe) when you buy properly, and your stock then goes up 20-25% in the first two weeks of you owning it. You sit tight, and give it another 8 weeks to see what it will do. HEAT's volume was up 462% today in this strong move. However, because it was sub $15most of the day it didn't show up in IBD's stocks on the move screen. It will soon though. The trend is heading for higher prices. Of course you always have your 7% stop in under your purchase price just in case it reverses. Managing risk always comes first! However, you never want to cut a winner like this loose too early, so you have to let it "breath."

And keeping with the theme of letting your winners run; I want to pyramid up in this trade. To do that I will most certainly be using major moving averages to determine support levels. However, the best method for buying right again here would be to use the Fibonacci levels again. With today's 15.10 high our fib levels move up again. I'm measuring from October's low as to capture the post earnings renewed interest in the stock.

So my adds could come at any of these new levels:
23.6% line = $13.53
38.2% line = $12.59
50.0% line = 11.83
Other levels to pay attention to would be the 9ema, 20ema, and 50sma. All of those are conveniently spread out by a dollar each here. 13.15 , 12.15, and 11.14 are where those averages were at after today's close.

All this said, if the stock reverses lower on increased volume, and starts to close in on my stop. I'm out. While I love HEAT now. I'm not in love with it if you catch my drift! Let the winners ride, and kiss the losers bye bye!

Testing The Oil Break Out

Crude oil has fallen back down through the 75 level now. Potentially erasing the break out seen from the the ascending triangle pattern in crude at $75. Sometimes these patterns see throw backs so violent they actually get halfway down in the ascending triangle base and then snap back up. Keeping the pattern valid. At the current moment with the Dubai news shaking the world markets crude finds itself trading in the high 73s. SCO should be the big beneficiary from this action during Friday's shortened trade. We'll have to see if 75 becomes resistance now in crude going forward.

UCO / USO / UHN / ERX / DIG should get hammered Friday.

SCO / ERY / DUG should move up nicely, and potentially trend for a few sessions.

DE : A Buck In It's Rut

MS put a "rare opportunity" target of 64 on DE. I missed that earlier today. However, that's the measured move out of this ascending triangle break out we saw at 48. First line of resistance is at 55. New box between 50 and 55 now. Major moving average resistance above on the weekly could keep this one contained for a bit longer giving ample time to grind toward's the measured move target. This one is a buy and hold candidate to be bought on the dips going forward for another 10$. Earnings on Wednesday before the open.

Morgan Stanley (MS) says :
" Deere & Co. was upped to overweight from equal-weight by Morgan Stanley, which lifted its price target to $64 from $48. "Demand for U.S. farm equipment is growing as customers add acreage, a secular phenomenon that is widely underestimated. Cyclical factors are also more favorable than most believe, with corn likely higher into 2010 and the potential for recovery in Brazil. We see this as a rare opportunity where consensus is too conservative on both cyclical and secular factors, making DE risk reward highly favorable vs other machinery stocks," the broker said."

GRRF 3Q 09 EPS

I decided to hold this one through their earnings ( a highly risky proposition) and it has paid off. Closed normal hours trading at 4.92 after it was pinned flat all day. Trading 5.60 here in the after hours. Showing a 24.26% gain on this trade now. Shorts are trapped here, and they could gap this one yet even higher in the morning. A very key level is the 23.6% retracement which sits at $5.27. I would like to see that level hold in as support. Holding that level would be very positive going forward. Failure to hold that level will cause me to get flat in this name. Tomorrow's action will bring in a lot of day traders, so there is most likely going to be a shake out several sessions down the road. TSTC also reports on Friday, so we have another catalyst as they are in the same sector.

The IBD investor in me thinks that this one could be a 15$ stock at some point in the future as it hits more radar screens. I don't want to make a mistake similar to STAR and get out before the full potential is met. However, these Chinese stocks are slippery as to "when the music stops" regarding accounting standards. Price and volume will guide us as to our ultimate decision. Tangible book value is reported as being 8.95, so to a value player this one is still cheap.


http://finance.yahoo.com/news/China-GrenTech-Corporation-prnews-4077980183.html?x=0&.v=1


Third Quarter 2009 Financial Highlights
-- Total revenue increased by 85.8% year-over-year to RMB394.9 million
(US$57.8 million).(1)
-- Revenue from wireless coverage products and services increased by
97.9% year-over-year to RMB309.3 million (US$45.3 million).
-- Revenue from base station RF products increased by 52.4%
year-over-year to RMB85.6 million (US$12.5 million).
-- Gross profit increased by 67.4% year-over-year to RMB105.2 million
(US$15.4 million).
-- Operating income increased ten-fold year-over-year to RMB29.8 million
(US$4.4 million).
-- Net income attributable to the equity shareholders of GrenTech was
RMB20.1 million (US$2.9 million), compared to a net loss attributable
to the equity shareholders of GrenTech of RMB8.4 million in the third
quarter 2008.
-- Basic and diluted net income per ADS(2) were RMB0.85 (US$0.12) and
RMB0.84 (US$0.12) respectively.


(1) The Company's reporting currency is Renminbi ("RMB"). The translation
of amounts from RMB to United States dollars is solely for the
convenience of the reader. RMB numbers included in this press release
have been translated into U.S. dollars at the noon buying rate for U.S.
Dollars in effect on September 30, 2009 in the City of New York for
cable transfers in RMB per U.S. dollar as certified for customs
purposes by the Federal Reserve Bank of New York, which was
US$1.00=RMB6.8262. No representation is made that RMB amounts could
have been, or could be, converted into U.S. Dollars at that rate or at
any other rate on September 30, 2009.
(2) Each ADS represents 25 of the Company's ordinary shares.

FOMC Statement for 11/4/09

Release Date: November 4, 2009

For immediate release
Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt. In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

TCM Notes : 11/4/09

Well first off let me say to the few of you that actually read my scribblings that I'm sorry for not having anything posted for the past few weeks. I've taken on a new consulting job, and it has been eating into my "analysis" time in the evenings. That said the bulk of all my market calls are being made in a chat room and thoroughly explored instantly with 400+ active traders during the day time. If interested it's a paid for site run by Daniel J. Zanger. It's $78 per month, but for an active trader it can be considered a value. www.chartpattern.com is where it's at. My handle in the room is "spm." By the time I've finished the day I'm typed out. Enough with the excuses though. Let me update.

By luck or perhaps by skill I was able to spot a gap island reversal on the XLF, UYG, and FAS charts during the session of 10/13 - 10/16. This sent a huge red flag up for me that the financials had stalled, and may very well roll over. I wanted to make sure it wasn't a fake out, so I sold only half of my position in UYG on 10/20 for 6.05. Well, the next day the other half got sold out as UYG violated it's 20ema. I was out. Now the next two sessions that followed I wasn't looking too smart, but I knew I would get back in if the resistance gap was filled. Which it did not. What's gone on since for the past 9 sessions is very bearish and could continue on for some time. Financials are offering up tremendous intra day bounces, but the swing long set up I'm looking for has not shown itself yet. This is the fourth instance that I've identified the gap island reversal in real time trading (CHK, DBA, DAG being the others) and it generally stays in place and determines the trend for some time to come.

SPY remains below it's 50ma as the DIA has been propped up by it's 50ma for the past few sessions. The moving averages I use have begun to cross down over one another as prices compress. They are now offering temporary support levels as the market comes down into them for a test. Only to then offer resistance once support gives way. It's going to take some very powerful action to get these averages moving up sharply again. The scenario I see playing out is a choppy grind lower where the averages all "tie up" and converge at some point. Then we will see which way this market really wants to break. For the moment long trades look capped to the upside.

With BRKa making a 44 billion move for BNI one would think the market would've been sharply higher Tuesday. It was not. A market tell perhaps. What it did do though was to goose the transports which have been steadily moving lower after their recent double top. IYT gaped higher reclaiming it's 86ma and closing above it's 9ema. With only the 20ema and 50ma sitting above it, the transports could re trigger another Dow Theory Buy Signal. Keep in mind a Dow Theory Sell Signal was issued shortly after the double top. This is the type of sharp, choppy action we are navigating these days as "owners" of real assets continue to restructure (bankruptcy), reassemble (sell off divisions/cut work forces), and reassert (new jobs/ipo issuance) themselves back into the economic landscape.

Still holding a small stub of GRRF as they head into earnings Nov 11. Louis Navellier issued a buy on them on 10/20 as well sending the volume and price dramatically higher. Since then I think we've seen a sufficient shake out of the hot money that was chasing it higher that day. This is an exploratory stake, and the reaction to earnings is what will determine what comes of this one.

2x As Slippery On The Upside In Crude Oil w/ UCO

My focus this week is on the front month crude contract /QM_Z and the 2x beta etf UCO. On some days the service companies could outperform front month crude, but i think the big guys are loading up for a December spike in oil futures based upon USD$ seasonalities. And that is where the action will be. The measured move out of that ascending triangle is roughly 16.68+/-. So a move to 91.68 is definitely under way now from the break out at 75. $100 is attainable, but I think the easy money will be made by buying now any serious correction down from 79 (a throwback testing the 75 break out) in front month crude. Stops at 72.50 can be placed under buys at 75 on the retest of the break out. A break below 70 would cancel my bullish view of a sharp increase coming.

For the hyperactive trader SCO can be day traded against an accumulation strategy in UCO. Longs in SCO can be deployed on down days in crude, but should exercise a "close at end of day" mantra. This should be most effective in balancing out the beta shock incurred when playing this type of accumulation strategy on a juiced up derivative etf that re balances daily. Unless of course I'm wrong about the whole trade! If so you better be able to flip flop over to SCO fast.

The front month crude break out will be uncorrelated from the broader market, and actually should cause a 5-15% correction in the equity indexes. Because generally when oil begins to become more than 4% of GDP it causes a strain on business activities. This will cause analysts to adjust earnings models again with a downward bias on the most input cost sensitive firms.

Also, I think crude may get a run at much higher levels from here based upon several other reasons. As in Saudi bail outs via the American gas pumps. And it also serves as a job creation engine as "Drill, Drill, Drill" becomes a louder chant in the Halls of Congress. In order to keep the national debt buoyed up by "friends in the Middle East" they'll drag their heels on CFTC regulations. Doing so will allow for another speculative push in oil, so that the Saudis may capture higher prices in order to give them their bail out. Also, Texas regions hit with unemployment due to uncertainty in oil prices (less drilling activity) could see speculative drills put back to work as crude moves higher. BHI has already seen the rig count stabilize and begin to expand ever so gradually again. YoY eps comparisons should begin to see double and perhaps even triple digit percentage gains going forward; as earnings begin to re accelerate against crash level comparisons. All of this will be made possible by a steadily increasing oil price.

And what about those alternative energy jobs? Believe it or not higher oil is needed now more than ever in order to push capital back into those industries too. If you want green jobs they have to be economically viable. Oh, and don't forget about Iran. Sprinkle in some saber rattling from them and add it to the above outlook, and voila`! You get a push into much higher levels. It has begun. The Speculators are on the loose again!

**UCO trading notes:
Holding 13.89 or the 38.2% retracement line is important, but could see a dip below as I expect crude oil to revisit it's 75$ break out level once more. That could make UCO dip to as low as 11.91 - 12 area if that were the case.

On the weekly chart UCO is moving out of a descending channel, and this data also translates into a bull flag on the monthly chart. All signs seem to be pointing higher in this name. A move to 10 would cancel out the bullish bias.