Chart Review

I receive questions each week regarding my selection of charts that I post and thought I would offer a few helpful hints about my process. I am a “hybrid” trader in that I rely on Technical and Fundamental information in my stock selection process. I believe this gives me an advantage over other traders/investors who rely solely on one or the other — you’re leaving out important data in the review process that does matter in my opinion.

I utilize proprietary stock/ETF scans/screens in my selection process — I do want to let technology do some of the work for me. I don’t look at 1000 charts a week as I don’t see how that improves a trade process at all. Typically I will look at a few 100 charts over the course of the week from my scan results and other ways I may become aware.

For those that wonder how I select pullback trades – like for the Submarine Basket – I do have 3 different scans I run to produce a list. If any tickers are on more than one list I will move it to the top.

For Breakout trades, momentum, RS, etc. I have several scans that will often produce over 100 results each. I have a criteria that I use for sorting to produce a more manageable list to review. The Fab 5 candidate scan is an example ($100 Roll) which is typically under 10 names each week (very strict criteria).

As a chart review example, L-3 Communications hit several scans. This Daily chart shows you why that would be the case:

LLL

-DM 12:00 noon CST

 

The TLT

Here is a Weekly chart on the iShares Barclays 20+ Year Treasury Bond Fund $TLT:

TLT_weekly

As you can see above, Price has taken a stab into the Breakout Box area again – but just narrowly missed closing inside the box for the week.

 

-DM 11:00 AM CST

 

Managing a Risk Reversal starring Skyworks Solutions

On November 18 I initiated the following trade for my Long-term account:

December 05 weekly 63/65/61 Risk Reversal Call Spread (RRCS)

On 11/26 I adjusted the short Calls to the December 26 weekly expiration. So, as of this adjustment this is how the trade currently looks:

  • Own the December 05 weekly 63/61 Risk Reversal
  • Short the December 26 weekly $66.5 Calls

As of today, price is probing the $69 level so I need to decide which path to take with the Long $63 Calls for tomorrow expiry:

SWKS_E

Here are a few paths to take:

1) Let the Long Calls get assigned, take stock at $63. The Short $61 Puts go poof nonetheless. I would then have long stock with short December 26 weekly $66.5 Calls (covered calls)

2) StC the Long $63 Calls and use the proceeds to BtO Calls in the December monthly or Dec 26 weekly expiration (maybe at $65 for example)

 

 

StC = Sell to Close

BtO = Buy to Open

 

-DM 10:38 AM CST

Looking Both Ways in Energy

I did a trade this morning for some clients that is categorized as a LBW (Look Both Ways) trade. Since there may be additional short-term weakness I wanted to participate in that as well as any anticipated bounce as traders begin to nibble on Energy names.

Here is the trade (notes on chart):

ERX_B

-DM 12:45 PM CST