Laird Hamilton's Knowledge Of Big Wave Riding Transcends Over To Trading Market LEADERS

I posted these videos on the Twitter stream last September when I saw them. What Laird says just resonates with me as a trader. You have to always be ready for the big opportunity. That means you must always be in a strong position in order to take advantage of these opportunities when they present themselves. A moment's notice is all you will get, because you have to be in the moment in order to catch the notice. In our case that is the price action, volume, and pattern on our charts. When the wave of money starts pushing hard one way we want to take full advantage of that directional flow. Another thing we must do is prepare ourselves to be in the right spot in order to catch the really big move. That means sticking with the market LEADERS. The force that powers their spectacular moves is EPS (earnings per share.) If EPS is leaping & bounding Quarter over Quarter and Year over Year coupled with a well constructed chart pattern, and the market is right; well you've got yourself the perfect situation for a BIG MOVE. You want to ride that LEADER until the energy peaks out of it,then step back, and see if it will then set up another nice move in which to surf into some big profits yet again. It's known as William J. O'neil's CANSLIM system, and I know many of traders who will attest to it's effectiveness (yours truly included.) If you have never read How To Make Money In Stocks by William J. O'neil then you are a "neophyte out there playing with seasoned professionals and you ARE going to get hurt." You must always be ready for the market. However, in order to be ready you must be prepared with the BEST knowledge you can get. And the only way I know to do that is follow the teachings of BIG STOCK surfer William J. O'neil & his wonderful publication ( www.investors.com ) Investor's Business Daily. See how I tied that all together!?






Laird is talking about catching a 1st stage base in a market LEADER, right?!? When Charlie asks him "When you think of a great wave,what do you think; opportunity?" Sub in 'trade setup on a market LEADER' for wave, and you'll understand how my mind is working while listening to this. ALWAYS BE PREPARED & ALWAYS BE READY for the OPPORTUNITY!




I own the 4th Edition orange cover book, but the newest release the green cover is one that someone new to this should buy. It just has newer charts from March 2009 market.

Finding Buy Points and Pyramiding

I thought I would share an email response that I sent to a fellow trader yesterday that was asking me about buy points on CSH, JOSB, SGI, WYNN, CHKP, and CPHD. In going over those buy points I elaborated some as I tend to do. So I give you a little TCM,LLC commentary drawing heavily on the teachings of William J. O'neil & Jesse Livermore.


CSH 60.37 was the buy point. Close of 60.54 can be a level to watch as it was the close above the buy point. 61.69 will be the next level to watch. However, anytime you identify the PROPER buy point on a pattern you should calculate out 5% from it in this way. 60.37 x 1.02 = 61.57 this is an add on spot. 60.37 x 1.04 = 62.78 add on spot. And then 60.37 x 1.05 = 63.38 this is where it's 5% extended from the buy point and you should be finished with your buying operations. This is O'neil's pyramiding method ie: Winners average up! So any buy point you ever id, first things first, go calculate 2%, 4%, and 5% past the buy point. The way it works is you determine what you will invest in the name you've identified a proper pattern in. Go 50% of capital at the buy point. Then if it's acting right you will then add the other 30% of capital at the 2% extended spot. If it then continues to act right you will then add the remaining 20% of capital at the 4% extended spot. When it's 5% extended you are then done buying and you then sit on your hands watching it closely for signs of stalling, distribution, abnormal behavior, etc. All the time making sure it continues to act right. The bulk of proper bases will break out and run 20% before building a new base. This is why you lock in gains at 20%. In bear markets that should be adjusted lower to perhaps 10-15%. Anyway, this is all in O'neil's book (Chapter 11 of the 4th edition page 257-259.) And my buy points are a bit higher because you always add +.10 to the high where you identify the buy point, so as to make sure it can clear that high with conviction.

JOSB - double bottom with handle 52.96 handle buy point & 54.47 buy point.

SGI - 15.83 - 23.51 is a Fibonacci box as I call it because 15.83 is the 23.6% level from high to low from 2006 high to 2009 low. 23.51 is the 38.2% level. I have 16.99 as an early buy point and 17.81 as the buy point. I also note that it needs more accumulation on the weekly. I'm looking at all weekly charts to find the buy points. The patterns stand out clearer on weekly charts, and you want to be looking at volume with a 10 week moving average making sure there is accumulation and not distribution up the right side of the base.

WYNN - 157.79 handle buy point (153.50 close from 8/30 a level to watch) 172.68 is the buy point for new highs.

CHKP - 58.09 / 61.56 bp

CPHD - 37.93 8/29 close of 36.23 is of interest. 41.08 buy point with 40.77 close from 7/22 possibly being an early trigger on that buy point.

Set your alerts for these prices on the bid. I do that because they will only fire off if someone bids at the buy point. The majority of the time the volume will come with that immediately. However, many times it won't; so you have to be Johnny on the spot critiquing the price action and volume making sure it's going to act properly. Put your money on the ones that act right. And be quick to avoid the ones that don't act right. Acting right is Price action that is surging coupled with volume that is surging. Accept nothing less.

Reckless Fools & Careful Wise Men : A Crash Spares Nobody

“Reckless fools lost first because they deserved to lose, and careful, wise men lost later because a world-wide earthquake doesn't ask for personal references.” - 1932 Edwin LeFevre

1929 Stock Market Crash Movie :

Watch the full episode. See more American Experience.

QQQ / TQQQ / QLD 10/240mac : Last Man Standing

Sent the note below to the respected trend follower Easan Katir this evening. His work on the 10/240mac I speak about often. Definite recommended reading if you want to understand what I'm talking about when I mention 10/240mac.
http://www.easankatir.com/resources/articles/articlesbyeasan/Superior_Returns_from_Average_Indicators.shtml

10ma is dark blue and the 240ma is red on the following charts :

QQQ
http://screencast.com/t/OSSo76XMMz

TQQQ
http://screencast.com/t/Wuq5bn17Nq

QLD
http://screencast.com/t/5aFjLKI3ihH

Mr. Katir very interesting stuff here. QQQ, TQQQ, QLD never had the negative 10/240mac. They are below the 240ma which is not ideal, but according to the rules there is no SELL until you get the cross over. If markets are going to bounce with any significance I think these could LEAD much like they did in Sep 2010. QQQ, TQQQ, QLD 240ma lines up with the 50% retrace from the recent waterfall. Could be a nice grind higher, or a fast snap back to those levels if not higher. I like these best vs SPY, DIA, IWM and all their juiced up beta pairs because they all had negative 10/240mac. Thesis is : that which led us shall continue to lead. Ie: AAPL, BIDU, and all those other NASDAQ leaders.

Thoughts?

ARCO - LEADER Characteristics On This Ipo

I picked up ARCO originally at 21.35 (given out real time on the Twitter feed to the right) based on some Ipo techniques that I've been deploying rather successfully this year. More to come on those in a future post. ARCO however is a winner, and looking to become a leader as it's earnings report to me has the scent of the Eau de toilette: CANSLIM via this writer's guru Mr. William J. O'neil founder of Investor's Business Daily. I realize these earnings are EBITA and if you listen to Steve Wynn he would suggest to you you're crazy forecasting off of unaudited EBITA, but hey, we're chart guys here. ARCO ranks a 98 composite in the 7th best industry group of the 197 tracked. Now it's relative strength needs to pick up to become a real LEADER. 24.27 was a buy point hit today, and there is an additional new high buy point at 26.05 that would need 40% above average volume to be buyable. The chart below applies some of my Ipo techniques in order to come up with a Fibonacci extension target as well as support / resistance areas that we are navigating presently. I want to see 23.82 flip to support now. There's a confluence zone between my original buy point of 21.35 and the 50% retracement of 21.46. I see new highs coming in this one if the overall market conditions would improve. On the sponsorship quotient of the CANSLIM formula Fido aka Fidelity is a 9% owner of ARCO across 9 of it's funds.


http://screencast.com/t/J2Yc9eOsRGa

"5:04PM Arcos Dorados beats by $0.04, beats on revs, raises FY11 revenue growth guidance, reaffirms FY11 EPS growth guidance (ARCO) 23.54 +0.10 : Reports Q2 (Jun) earnings of $0.07 per share, $0.04 better than the Capital IQ Consensus Estimate of $0.03; revenues rose 28.7% year/year to $888.5 mln vs the $853.3 mln consensus. Based on stronger than forecasted year-to-date results and the current outlook for operations and currencies for the remainder of 2011, Arcos Dorados has modified its outlook for the full-year 2011. The company now expects year-over-year consolidated revenue growth of 22-24%, up from prior expectation of 15-17%, and Adjusted EBITDA growth of 18-20%. Additionally, the company estimates an increase in net income of 35-45% in 2011." from briefing.com


http://finance.yahoo.com/news/Arcos-Dorados-Reports-Second-bw-867473074.html?x=0&.v=1

Patriotic Business Optimism by William J. O'neil

"This country is so strong and has got so much freedom that there are entrepreneurs, and they are out there, and they don't go away no matter who's in Washington. So Washington can screw it up, and the market will go up anyway because you've got AAPLs all over the place. There's probably 20 to 30 of them that have got a unique product that's really selling and making money." - William J. O'neil 2/18/2011 interview with Steve Crowley on American Scene. Interview can be found at www.investors.com in the IBDtv section under the tab for William O'neil interviews.


And the picture below is of me in 5th grade hitting a home run in my patriotic Red, White, and Blue colors! There's an analogy to be made with the market and staying focused as it relates to the knuckle heads playing in the dirt on the losing team seen in the back ground (people focused on the noise,) and the player laser focused at the plate waiting on the fat pitch (staying focused on the charts.)



Just stay on your toes and ALWAYS BE READY!

CMG's 3rd Century Mark : Livermore Edition

'Ol J.L. would probably have something really clever & snappy to say about CMG and it's attack on the 300 level today. Unfortunately he's not around to speak on it, but I did get this interesting note with my burrito bowl tonight.


Profile of Market Leader : CMG - weekly chart
http://screencast.com/t/UYcEAhMNZL

Daily volume on this break of 300 was acceptable. Had it been closer to 300 prior to the start of the day the move through 300 would've been stronger I think. Time will tell if CMG wants to exist above 300. Be quick to act if this level doesn't hold. And also note a very sharp rise up and out of the ascending upper trend line may trigger a sell signal. So best you be on your toes!

Dr. Bull's : For What Ails Your Portfolio

Pride : Never Argue With The Market

"I never try to predict or anticipate. I only try to react to what the market is telling me by its
behavior."

"Losing money is the least of my troubles. A loss never troubles me after I take it. I forget it
overnight. But being wrong – not taking the loss – that is what does the damage to the pocket book
and to the soul."

"There is only one side of the market and it is not the bull side or the bear side, but the right side."

"…the market will often go contrary to what speculators have predicted. At these times, successful
speculators must abandon their predictions and follow the action of the market. Prudent
speculators never argue with the tape. Markets are never wrong, but opinions often are."

"Markets are never wrong, opinions are."

"A prudent speculator never argues with the tape."


- Jesse Livermore




Pride : Never argue with the market.

Enemy Of The Speculator : Uncontrolled Basic Emotions

"I believe that uncontrolled basic emotions are the true and deadly enemy of the speculator;
that hope, fear, and greed are always present, sitting on the edge of the psyche, waiting on
the sidelines, waiting to jump into the action, plow into the game."

"Greed, fear, impatience, and hope will all fight for mental dominance over the speculator."

"The speculator’s deadly enemies are: Ignorance, greed, fear and hope. All the statue books in the
world and all the rule books on all the Exchanges of the earth cannot eliminate these from the
human animal."

"Fear keeps you from making as much money as you ought to."

- Jesse Livermore


More on Fear & Greed from MarketSmith's W. Scott O'neil.

The Unsuccessful Investor Is Best Friends With Hope

"The unsuccessful investor is best friends with hope, and hope skips along life’s path hand in hand
with greed when it comes to the stock market. Once a stock trade is entered, hope springs to life. It
is human nature to be positive, to hope for the best. Hope is an important survival technique. But
hope, like its stock market cousin’s ignorance, greed, and fear, distorts reason. See the stock
market only deals in facts, in reality, in reason, and the stock market is never wrong. Traders are
wrong. Like the spinning of a roulette wheel, the little black ball tells the final outcome, not greed,
fear or hope. The result is objective and final, with no appeal."

"When the market goes against you, you hope that every day will be the last day - and you
lose more than you should had you not listened to hope. And when the market goes your
way, you become fearful that the next day will take away your profit and you get out - too
soon. The successful trader has to fight these two deep-seated instincts."

- Jesse Livermore

W. Scott O'neil (son of William J. O'neil) goes over the investing pyschology of Hope and it's perils.

Royal says AZO is no fire plug!

Let's just say I disagreed with Royal as he was wildly bullish on AZO earlier in the month. AZO is a market leader he said, but again I let general market sentiment cloud my judgement on whether or not the run in AZO was over. Royal again kindly pointed out to me that Eddie Lampert is one tough dude on the trading desk, and his ability to jam the shorts in AZO could prove to be deadly for those trying to pick the top. I took this wisdom to heart.

AZO settled out at ALL TIME highs today.
http://screencast.com/t/kEyPebhw

AZO beat expectations today :
http://video.cnbc.com/gallery/?video=3000023365

"A Very Worthy Hero" ~ Ode to Tom Lee

I had to jump over a little bit of water to get the shot. That 'ol River she's a flowin'!

http://en.wikipedia.org/wiki/Tom_Lee_Park

http://en.wikipedia.org/wiki/M.E._Norman

http://tomleeamemphishero.webs.com/history.htm

http://www.hmdb.org/marker.asp?marker=4947

http://www.mallofmemphis.org/Main/TomLee

I didn't realize this at the time, but when this photo of me in front of the Tom Lee monument was being made it was also the 86th anniversary of that fateful day! May 8, 1925 is when Tom Lee pulled 32 people out of the Mississippi River and took them to shore in his motorized boat 'Zev.' Saving their lives. Even crazier was this photo was taken at sunset just about the time that Tom Lee noticed the M. E. Norman sinking downriver at the Cow Island Bend. What started out being a joke photo has really turned into something special for me, and for my understanding of this very heroic event, and selfless man.

~"Lee acted quickly, calmly and with no regard for his own safety, continuing to search after night fell."

Livermore on Century Marks

"The first thing I saw on the quotation board was that Anaconda was on the point of crossing 300. It had been going up by leaps and bounds and there was apparently an aggressive bull party in it. It was an old trading theory of mine that when a stock goes through 100 or 200 or 300 for the first time the price does not stop at the even figure but goes a good deal higher, so that if you buy it as soon as it crosses the line it is almost certain to show you a profit. Timid people don't like to buy a stock at a new high record. But I had the history of such movements to guide me. "Anaconda was only quarter stock; that is the par of the shares was only twenty-five dollars. It took four hundred shares of it to equal the usual one hundred shares of other stocks, the par value of which was one hundred dollars. I figured that when it crossed 300 it ought to keep on going and probably touch 340 in a jiffy. "I was bearish, remember, but I was also a tape-reading trader. I knew Anaconda, if it went the way I figured, would move very quickly. Whatever moves fast always appeals to me. I have learned patience and how to sit tight, but my personal preference is for fleet movements, and Anaconda certainly was no sluggard. My buying it because it crossed 300 was prompted by the desire, always strong in me, of confirming my observations. "Just then the tape was saying that the buying was stronger than the selling, and therefore the general rally might easily go a bit further. It would be prudent to wait before going short. Still I might as well pay myself wages for waiting. This would be accomplished by taking a quick thirty points out of Anaconda. Bearish on the entire market and bullish on that one stock! So I bought thirty-two thousand shares of Anaconda that is, eight thousand full shares. It was a nice little flyer but I was sure of my premises and I figured that the profit would help to swell the margin available for bear operations later on. On the next day the telegraph wires were down on account of a storm up North or something of the sort. I was in Harding's office waiting for news. The crowd was chewing the rag and wondering all sorts of things, as stock traders will when they can't trade. Then we got a quotation the only one that day: Anaconda, 292. There was a chap with me a broker I had met in New York. He knew I was long eight thousand full shares and I suspect that he had some of his own, for when we got that one quotation he certainly had a fit. He couldn't tell whether the stock at that very moment had gone off another ten points or not. The way Anaconda had gone up it wouldn't have been anything unusual for it to break twenty points. But I said to him, "Don't you worry, John. It will be all right to-morrow." That was really the way I felt. But he looked at me and shook his head. He knew better. He was that kind. So I laughed, and I waited in the office in case some quotation trickled through. But no, sir. That one was all we got: Anaconda, 292. It meant a paper loss to me of nearly one hundred thousand dollars. I had wanted quick action. Well, I was getting it. "The next day the wires were working and we got the quotations as usual. Anaconda opened at 298 and went up to 302¾, but pretty soon it began to fade away. Also, the rest of the market was not acting just right for a further rally. I made up my mind that if Anaconda went back to 301 I must consider the whole thing a fake movement. On a legitimate advance the price should have gone to 310 without stopping. If instead it reacted it meant that precedents had failed me and I was wrong: and the only thing to do when a man is wrong is to be right by ceasing to be wrong. I had bought eight thousand full shares in expectation of a thirty or forty point rise. It would not be my first mistake; nor my last."

Why post this today? Well, because SOHU is attacking 100 today.
http://screencast.com/t/NoyjhMijX12J

Notes 3/9 - 3/10/11: Cautious Eye on the QQQQ 50 day mvg avg

Notes from 2/21/2011

Notes for 2/15 - 2/17

Notes 2/14/2011

Notes 1/30/2011 Front and Back

Market view @ 1/30/2011

This is very real what's going on in Egypt as we watch from our perches here in the good 'ol USofA.

http://www.youtube.com/watch?v=ThvBJMzmSZI

I think the buzzword this week from the talking heads will be contagion. However, since the Euro is not heavily involved like it was with Greece we may not see outright plunging type action as we did on May 6,2010 in the US indices.

Here is the note I sent today :
At minimum I would think a 5% pullback to test the last break out buy pt on SPY 123.05 (cup w handle bp) and the 61.8% fibonacci retracement of 122.88 would be in order. This unrest in the middle east serves to further stoke inflationary fears and geopolitical angst.

The action in the futures pit was very decisive to the downside about 19min after the open. 3.235m contracts traded which is very heavy volume. We closed 1270.50 down 25.25 points on the day or 1.95%. Most notable this past week was the actions of GS in the pit. Goldman started selling earlier in the week. They were a scale up seller pretty much from 1293 all the way to the breaking point of 1299.50. They sold 100 contracts (the big ones) every .50 (half pt.) Most notably is that they didn't cover any of significance. They covered a 100 at 1281, but nothing else. And what really got me was in the last minute of trading (3:14pm ... futures close 15min after stocks) they came in and sold 500 big ones into the bell. When they did this so did JPM and a few others and they closed it on it's lows of the day 1270.50. Bearish action.

However, after a big down day one would be expecting to see a small range consolidation day, but this may not be the case either as Egypt hasn't resolved anything this weekend. A few of my friends that trade the /ES are expecting consolidation monday, small up day tuesday, and then selling to resume on wednesday. Only the market knows for sure which path it's gonna take, but enough retail money came into the market in January that a pullback / shakeout is in order.

For now it seems like a correction is underway. Which in this day and age could last for just a few days, or a few weeks. Just be on your toes and watch closely the action in the market leading stocks ie: LEADERS.

A few notes

Weekend Notes : 1/8 - 1/9/11

Notes 1/7/11

Notes 1/5/11