Friday, December 21, 2007


Good morning everybody.

I'm going to give you a small update on the two trades that I've made so far. First, SCSS climbed for another small gain yesterday to 7.36/share. I am moving my stop-loss point up to a 7.00-breakthrough on strong volume, so between 6.90 and 7.00/share. This means that no matter what happens all 500 of my shares are 100% profitable now.

DUG has done a strong retraction and I am sitting just under even to my buy-in right now. This correlates with the recent demand-increase oil report as Light Crude prices on the Amex are 90.60 for the April '08 futures, and I shorted at just over 92.00/barrel. So I am in the money on my futures contract and on SCSS, but out of the money on DUG. If it hits my stop-loss of 37.00 the position will be closed out and I will take a loss.

Otherwise I'm feeling good. Christmas is coming up soon and it'll be nice to have some quiet time with Laura. I am thinking about taking another trade this afternoon so if I decide to go ahead I will post here before I do it.

Thanks for reading guys!

Oh yeah one more thing. I just got a new watch a couple of days ago and it's so nice! Check it out here if you want.

I will be making at least one more post before Christmas and then it's off to gain some weight! See you soon.

Tuesday, December 18, 2007

To answer a Question.

I had a question from a reader - Why these two stocks?

SCSS - I have been researching this company for some time and I always find that times like now (sideways markets) are good times to watch for over-reactive investor buying or selling. In this case the stock lost 40% of its value on gloomy news alone. Yikes!

Considering that SCSS is still in the black for earnings, possibly losing 20% of it's net, a 40% decline is far too much. On top of that if you look at the short % for November 27 and consider that since then there were 2 days which had the same volume of SELLING that existed in the previous 2 WEEKS. Obviously the short sellers would want to lock in profit after such huge gains, and the sellers are now experiencing remorse as they watch the price ascend again.

What I will discuss in the next few days (I was going to do this last night but it's been extremely busy for me this week) is that the stock market is about primal psychology, and that the charts tell the story of the mind.

That is why I picked this stock, because of the erratic takeover of group-panic-selling. I am already at my first profit goal ($7.00 on the button at the close and who knew lol) and have thus sold 200 shares of SCSS and now I am riding out the rest. I have moved my stop-loss position to $6.50/share so that I am still profitable but can handle a one-day retraction as may very well occur.

My second pick, DUG, is very simply a way to short Oil if you don't have the capital to actually deal in futures. I also have shorted the April 2008 futures contract at $92.08, because I strongly believe that oil will dip down into the $70's and below in the coming months and I plan to profit from that loss. DUG works on the same principal except that you buy it (it is an ETF) and it goes up if the oil market goes down, kind of a mirror effect.

Since I am betting on oil going down I thought I would show people how you can do that without the actual risk of short selling (where your loss potential is technically infinite, which I will explain in a later post).

This is more of a long-term trade, though, which I plan on holding until it either reaches a satisfactory price target in the next couple of months, or hits my stop-loss number. Either way I am only risking so much for a much greater potential gain.

I hope this answers your questions. I know you only asked for a paragraph on each but I wanted to give other readers a bit more of an in-depth view. Here is the chart for Crude Oil, and one of the main reasons I am shorting it (also refer to my first post for other reasons on each stock).

Please click to enlarge this as you will see what I am referring to much more accurately.

There is a strong head-and-shoulder which about 68% of the time points to a sharp immediate decline. Also the fact that the bottom of the "head" is lower than that of the left shoulder points to a raise in the strength of bearish tendencies.

This also shows that it has broken the trend line and the last shoulder represents a last-ditch attempt at a bull-run which has failed.

That being said a very small percentage of the time this may turn. If there is a very significant change in the American dollar or world oil economies or both this could potentially go on a strong bull-run. If this happens I will hold to my stop-limit and sell my futures contract and my shares of DUG and eat my small losses.

However, a point to be made: If you encounter a head and shoulders that turns against your short position and actually reverses enough that it equals the height of the top of the head, chances are that it will take another bull-run at least the height of the first upward movement. If this occurs I will take a long position and set my stop at a midpoint between the top of the head and the red line which represents the neck.

So in simpler terms, if this reverses on me I will lose about 1.80/barrel on my contract and about $1.50/share on DUG before I hit my loss-limit. If the run continues in my favor I stand to make about 14.00 - 20.00/barrel on the futures contract and a potential 50% gain on my shares of DUG before I sell. My profit potential is about 10x my loss potential which is unusually high (I usually try at least 4:1), but a good start for this blog!

Thanks for reading I will keep you posted. Still researching a few other position.

p.s. Another thing I will have some fun discussing is the goings-on of traditional stock brokerages, where I spent some time working. I will say this now - you really don't have to know anything about stock profitability, just terminology. And it's all about salesmanship, not the success of your clients. And that's why I don't broker stocks anymore - too many showers to clean my conscience. I looked like a damned raisin at the end of the night!

But that's another story for another day. Today's story is one of the start of success. Hope you're following along.

The wrap up: SHORT OIL! (with the right stop-loss of course lol)

Here is a visual guide I made on head and shoulders - sorry I can't draw with a mouse very well - I can trade stocks fine, just can't draw!

One last thing that's very important. I may be using some terms here that you aren't familiar with. If that is the case I strongly recommend using THIS SITE to help. Just type in a search for what you need to know and it is kind of like an encyclopedia of investing terms for the layman. Fantastic Resource!

Monday, December 17, 2007

Overview - My First 2 Published Positions

A recap of the positions I took today:

SCSS Long at 6.25/share for 500 shares. + .36/share end of day 1 for $180.00 profit. Will continue to hold until SCSS reaches price target I for first sell and price target II for second sell (see "A Risky Endeavor?")

DUG - UltraShares Pro Short Oil & Gas - Long at $39.34/share for 300 shares. + 1.15/share for $345 profit. Will continue to hold to reach sell off goal by tracking oil price movements and using technical analysis on the charts for DUG

So far off to a jump start because I picked some good entry points for $525 profit the first day of trading. These two trades have grossed me a 3.52% gain on the first day. My general goal is a 3% gain minimum per month on my overall portfolio, so I'm off to a good start.

I will be doing more extensive research on two other positions I'm attracted to as well as writing down some notes on something I call the tug-of-war which deals with general market perspectives.

Thanks to my readers so far. I've already received 2 emails and I 'm very excited to hear from more of you! Have a good evening.

A Risky Endeavour?

Well it is the morning of Day 2. My second post, and so soon. I guess I'm just excited about today. Last night after I finished posting I still couldn't find it in myself to sleep, so I decided to do a little more poking around for stocks.

I am taking up a few positions on the short-term, meaning typically around a week to one month. I basically do these to catch one or two trend swings then cash out my profits. When I trade short-term trends I set very tight stops on my trades using a volume-related price target. (i.e. I won't sell my position if there is an odd print in trading that is $.75 out of the money from an ECN. I set a minimum requirement of transactions and avg volume per transaction that triggers my stop-loss sell or buy point)

The first position I am taking is in Select Comfort, which just lost about 40% of its share value, declining from about $10.50/share all of the way down to $6.21/share on yesterday's close. The reason: SCSS posted a management update about slowing profit levels in a time when they thought they would be experiencing moderate sales growth. The result, by looking at the MASSIVE volume of the last few days, is that a good chunk of the shareholders are dumping off their shares because of a 2.00 gap down and a subsequent 1.00 + decline over the following day.

What I like about this is that the company is still in the black, and they have always had excellent cash-flow. The second is that as of November 27 they have a 30% short ratio. After this huge decline a large majority of the short position holders will be eager to cash in their profits.

I will demonstrate on the following chart why I want to buy into this stock now and where I am putting in my stop-loss points.

Now you can see on the chart that my hopes are obviously that this gap will close in sometime in the near future. I am anticipating a gap-fill for this morning (.12) and I am going to take up a position around 6.25/share for 500 shares. My stop-loss point will be a solid break through of yesterday's support and a loss of $.50/share, so I am setting my stop-loss point at $5.60 /share on appropriate volume and transactions.

My first sell point is at $7.00. I will sell 200 shares of my 500.00 share position, and reset my stop-loss points accordingly when it reaches that point. My full sell point is a retraction to the point where the gap initial starting trading, around $8.00

So I am basically risking a maximum $.70/share loss for a potential gain of $.80 on 200 shares and $1.80 on 300 shares. As always with investing there is risk. The most important thing about risk is your ability to control it, and to dictate how much of it you are willing to put up with.

I have taken up a 300 share position of UltraShort Oil and Gas Proshares as I said I was going to do last night, and I have made short gains of almost $2.00/barrel of oil. Of course this is just the first day and I am talking about several months of investing, but it always feels good to pick a good entry point. - you can view the chart on Crude Oil prices HERE.

If any of my readers have stock picks of their own they would like me to check out please feel free to post here or email me at any time. Otherwise I will be back with more portfolio positions.

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Sunday, December 16, 2007

First Post: My First Investment Position.

This is my first post as a blogger. I'm very new to this side of the blog concept but I have been an avid blog reader for some years (my RSS feed has about 145 of them). I love the idea of the blog, the unedited rawness that you find on the internet.

There's no need for the politically-correct softening down of certain topics. No need for the approval of a publishing manager then his manager and finally the general manager to get an article put through. There is just me, the writer, you the reader, and the medium; the blog.

I also love that the responsibility of editing lies solely on the writer. There is no team of proof-readers spilling drops of coffee and cigarette ashes across the pages of my work. In fact, there are no pages period. Just the clean desk.

Not my desk, though. My desk as always is cluttered even as I type this. A box of matches, an ash tray, a fresh pack of cigarettes with only one missing. One empty paper cup and another full of coffee. Speakers, monitor, telephone, and a few scribbled notes. But these are just the things that keep me going, the fuel. The stuff that really matters is slid into 8 Firefox tabs, a word document, a spreadsheet, and a picture viewer.

Which brings me to why I am here. I have thought about blogging for a few years now, but there were first of all several mental obstacles I needed to overcome.

The first was the easiest: Dare I put my thoughts out into the universe of billions of clicking surfers and reviewers? Dare I test my wit and intelligence against the masses? What if I am ripped apart by the old veterans of the roller-coaster landscape of online publishing?

Thankfully I have just come out the other side of a rather distasteful employment experience. To work for some people there just isn't enough money in the world. But that isn't my point. What I learned, the most relevant to this anyway, is that I no longer care. Either way it doesn't affect who I am as a person if someone is interested or disinterested in what I have to say. If they see my insight as valuable or invaluable.

The ball is in your court after today. I am only the referee, calling the plays as I see them.

The second and far more challenging thing was the topic for me to blog about. I don't want to be one of these universal bloggers who grab at everything around them or narrate their own lives to the general public. A reality television book.

This problem arises from the fact that I have many interests, and some of those interests I consider myself fairly knowledgeable. I am a jazz drummer of 13 years, I have played poker profitably both online and in B&M casinos for some years, I am working on a novel that I have several publishers interested in, I have run three successful businesses and sold them since I turned 17 years old.

And I have a profound love for the world of stocks, commodities, and all things investing-related.

That is the topic I chose and it is for one reason. The very same reason that I would never take a job at a bank or large financial institution.

The many resources out there for making profitable investments are almost all there for one thing: to make themselves money. Whether it be a large brokerage house that profits whether or not you make a cent or lose half of your holdings, a subscription-based advisory service, a black-box system that will only work until the market makes a single significant change - if at all, and the many other ways average investors try to make sense of the endless ocean that is the financial world.

The first thing I would like to demonstrate to my readers is that the markets all and one are driven by a singular thing. I will deal primarily with that in my next post. The second thing I will be doing is simply posting the exact positions I will be taking in my portfolio and the reason for taking my position. That is all.

You as a reader can choose to take this advice, ignore it, laugh at it, ponder it, write it down, anything you like. I am simply opening my own portfolio to the eyes of the public.

Right now I am researching several positions that I will be taking in the next 5 trading days. The first position I have solidified is in Crude Oil. Here is the link for the charts on light crude traded on Nymex

Crude Oil Charts

I will be taking up a short position on futures contracts for April 2008. I will also be using the Proshares Ultrashort Oil and Gas ETF found HERE, which is an excellent resource for people who don't trade in commodities options or futures. Proshares offers the only Short ETFs in North America and holds $9 Billion in equity. They are a very reputable firm and only charge a .95% annual handling fee (the average fee is around 2% so they are very inexpensively priced).

There are several reasons that I am taking a short position :

  1. Timing: Oil prices generally take a 5-10% decline from January through May due to decreases in volume because the weather is warming across North America.
  2. BIGGEST REASON: Oil prices have reached a top, which I will show in the following chart, and have formed a head-and-shoulders pattern coming down the other side. This generally means that a large crash-down in price will be occurring in or over the next 5-15 trading days. I am very excited to take this position.
  3. Higher uses of coal in the last 3 years due to high-sulfur emissions has taken a chunk out of the oil market and OPEC is currently keeping demand levels at an inflated amount to cash in for a while. Once this "oil bubble" bursts the price will slide down.
My estimate is that the price of crude oil will be somewhere in the mid-high 70's by April giving me a tidy 20%+ gain. I will show you what I am talking about on this chart, and introduce you to a few of my cardinal rules.

RULE 1 - ALWAYS take a position you are at least 75% sure will run your way.

RULE 2 - ALWAYS set a stop-loss on your position that only risks a portion of your potential investment. In this case I am risking a loss of roughly $2.50/barrel versus a potential and projected gain of $14.00 - $20.00/barrel.

RULE 3 - Pick you entry Point - I will enter this position immediately as it has already hit its third top of the new downtrend. I did decide, when I started considering this position, that I would wait for a strong indicator in my favor. If you go to the charts for this stock and notice over the last month you will see that a clear head-and-shoulders pattern is formed and oil prices are poised on the brink of a decline. I chose my entry point at my estimated half-decline on the right shoulder to catch immediate gains and ride out profits.

This chart without revisions is provided by TradingCharts

This about sums up my first post. I would like to thank in advance anybody who takes the time to read what I have to say, and especially thank any of those who would like to add input to my posts. I greatly appreciate it.

Enjoy the holidays everyone. I will post another position very soon!