Wednesday, July 19, 2006


I don’t predict – I just follow my technical analysis. It says the secular trend of the market is down and that's what it is until it isn’t. As of now I will treat every rally with caution regardless of how high it goes. Tomorrow can take everything away again just as easily.

I added some XING (on the open) based on a filter that I call “scalp set-up”. This looks for stocks that meet the basic criteria

and close 2 days ago > close 1 day ago

The kicker of this particular filter is the skip a day nature of the sequence going down and the fact that it has to have broken the sequence on its most recent day. This filter has a 64% win rate over the period 3-09 through 7-09. Remember that a filter’s purpose is to find candidates - not to make trades.

This is a modification of a set-up I found in John F. Carter’s book – Mastering the Trade – an excellent read and highly recommended.

I also added HLTH using a filter I call "red-white and buy". Three down days followed by an up day on the day of purchase (today). Buy at or near close on a white candle in the final hour. This is a good overnight filter for a short-term swing.

I’m looking for both these trades to jump tomorrow morning and I will sell them at 10:15 if two out of the first three 15-minute bars on the DIA print red. If the DIA actually continues to rise tomorrow (which I doubt) I will hold them to end of day - or until the market turns against the trade.

Sold off my BGO and TGB in the mid day (for a profit) and bought BGO back again this evening at the close. Three reasons - 1. gold (physical) kept going up through the day, 2. BGO was down from where I sold it, and, 3. BGO ended the day printing a white candle in the last hour.

SWY made a dime today and the SDS (I only have a couple of hundred shares of this) went down hard. I should have sold it yesterday afternoon on the white candles from the three sisters but I didn’t.

Yesterday the final hour saw the three sisters, DIA, SPY, and Q’s, print white candles. Today’s action bore out that optimism. This afternoon they are all printing red candles in the final hour. That doesn't necessarily mean a down day tomorrow - only an 80% probability of one.

A good day. I made some money. I am happy.

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