How To Invest - How To Buy Stocks - Big Wave Trading

Bears take it on the chin again; DMND reminds us why we don’t catch falling knives

Big_Wave_Trader — Thu, 09 Feb 2012 03:03:08 +0000

This week has been very light on the economic news front, but it hasn’t been light in terms of gains. Volume was higher on the day as institutions stepped up in a big way supporting the market once again. The morning session gave way to sellers, but once again the market would not be held down. This market continues to go higher and the reasoning is not a concern to us. We care that it is going up and until we see sustained institution selling there is no reason to think this won’t continue.

Many traders are out there arguing against this market and fighting it tooth and nail. Others are simply “taking profits.” Trend followers simply react to price movements rather than emotions. We allow ourselves to let profits run and grow big while others dink and dunk. More importantly, trend followers do not allow losses to grow. Know your risk, know your exits, and certainly do not let emotions get involved in your trading.

CSCO reported earnings after-hours, but the stock failed to react positively to the news. The real story in after-hours was DMND and its restatement of financial statements. This is not a falling knife, more like a machete electrified. The stock fell more than 40% in after-hours trading. There have been quite few traders trying to pick a “bottom” in this stock. It appears they will continue to be looking for a bottom. DMND reminds us why we cut losses and why we DO NOT bottom fish. While we have stocks like NFLX, GMCR, CROX, AKAM, etc come off the lows, they have to prove themselves first. Falling machetes are deadly to your account.

Tomorrow we’ll get to see the market pundits yap about jobless claims, with the job picture seemingly looking better (who really knows, the government always fudges the numbers) claims should continue to fall. Does it matter to us as traders, not at all! We follow a set of rules governing our trading and trading off an economic indicator is not in our game plan. Follow price and check your emotions at the door.

Cut your losses!

One New Long Position, One Stock I Am Adding To My Existing Long Position, And No New Short Positions For Thursday’s Stock Market Session

Josh Hayes — Thu, 09 Feb 2012 02:44:06 +0000

Sorry everyone. I got tricked into playing tour guide ALL day and I am now just getting back. We will have new longs and sells listed later but no in depth analysis. This was not planned and I could not say no. Thank you for understanding. I am selling 25% of SNTS FFN, 50% of ELN OSUR PPHM FPP, 100% of ACLS.

new longs: CVGW (2%) AMSC (1%)

CVGW

AMSC

adding: YNDX (2.5%)

YNDX

new short positions: none

none

Stocks Close in the Green Again; Uptrend continues

Big_Wave_Trader — Wed, 08 Feb 2012 03:53:35 +0000

Just another day in this uptrend as stocks close higher on the day recovering from early morning lows. Volume rose on the day showing institutions had an appetite supporting the market on the morning dip. It is truly amazing this market is on, a straight line to multi-year highs from what appeared to a market heading for fresh bear market lows. For now, it appears the market is more focused on the Fed’s printing presses than any country from the European Union defaulting. Stop fighting the trend as it has been very painful for those who have been.

Yes, the market is “overbought,” but it has been for quite some time. Sentiment has come down off its highs as of late, so the crowd is anticipating some sort of pullback. Anticipation is a problem if you act upon a hunch. It will lose you money either by missing out on a move or compounding your losses. While it is true we are overbought, the market can continue higher. We have defined rules for exits and until those are met, we’ll stay long.

It will be nice when Greece finally defaults. The past few weeks every morning and night headline has Greece “close” to a deal with its creditors. Just get it over and done with, they are going to default one way or another. Greece has not shown it can stick to any terms it has promised, why even bother with a new set of terms? In the end, Greece cannot pay for its obligations and liquidation needs to occur. This is a painful process for those who are dependent on the government and it will take time for it to resolve itself. Trading off this situation is too difficult; we’ll stick with the trend.

A dangerous tactic here is chasing. It is never wise paying up more than 5% beyond a proper buy point. Often time stocks will reverse shaking out weak holders and late buyers. At this juncture and with the amount of stocks extended it would not surprise me a few of them shakeout weak hands here. If you do chase, make sure you are lightning fast cutting the position if it turns against you.

Stay disciplined and cut those losses.

Three New Long Positions And No New Short Positions For Wednesday’s Stock Market Session

Josh Hayes — Tue, 07 Feb 2012 22:31:35 +0000

Did you see SVVC and BVSN today? If you did not you need to check them out. I can not borrow BVSN anywhere and IB only had 200 shares of SVVC to short. Even though that side of the market did not work, it will work every day every month every year for the rest of our life. It is not always easy to borrow shares. That is life. What can you do? Today was an overall very positive day for the market. I really expected a big down day so the fact we even closed higher is really surprising. There are only three longs tonight and two are really horrible. The only one that is of quality is a stock I really really really like: PZZI. I love their Pie 5 franchise and believe we have a BWLD PNRA etc. here. That being said I am still sticking to my extremely disciplined rules and buying the max amount I am allowed via this methodology. They do announce earnings after hours tomorrow but I have a feeling it will work out. If not, who gives a crap. We will cut our losses and move on. On that note, look at GHDX and CBM failure today. Last night I saw that the unrealized p/l statement had two stocks down dollar amounts that I deem unacceptable. Therefore, I sold 50% of GHDX and CBM in the AM. This is why cutting losses is the most important tool in a traders arsenal. I saved myself a lot of hurt by doing that last night. Whew. Now those funds can be placed in PZZI. NAII was also a long possibility but the longer term daily chart just made me laugh and therefore I passed. Those insane move downs are just ridiculous. DEXO was also a possible long but I think BOP should be stronger on that one. I said that about SMSI at the start of January and that cost me 80%+ so that will probably happen with DEXO. I will be back later, post surf session, with charts and individual analysis of each long.

new long positions: PZZI (2.5%) PPHM FFN (1-2% it depends on how I feel when I place my trades)

PZZI is producing a pocket-pivot point buy signal and is breaking out from one of the tightest flat bases I have ever seen, on very strong volume with BOP rising to the green level. Cut your final loss with a close below the 50 day moving average, if the stock does not move higher immediately.

PPHM is producing a pocket pivot point buy signal and is bouncing off the 50 day moving average, closing near the HOD, on very strong volume with BOP rising to the max-green level. Cut your final loss with a close below the 1.02 level, if the stock does not move higher immediately.

FFN was close to producing a pocket pivot point buy signal (30,000 or so volume) and is breaking out of a short tight consolidation, closing near the HOD, on very strong volume with BOP holding the max-green level. Cut your final loss with a close below the 1.24 level, if the stock does not move higher immediately.

new short positions: none

none

Stocks Finish off the Lows as Volume Drops

Big_Wave_Trader — Tue, 07 Feb 2012 01:35:11 +0000

Settling near the highs of the session stocks put in a solid day of consolidation. Volume fell more than 20% across the board, a very good sign institutions weren’t selling. After such a big run up, a day or two of consolidation is a very healthy signal. Crude oil settled lower, but natural gas is in the midst of forming what it appears to be a bottom. While a positive sign for those drilling for the natural resource, but not a particularly good sign for consumers. At the end of the day, we saw a very positive signal out of the market and we continue to ride this uptrend starting at the beginning of this year.

Another few days of the market pulling back would do us some good. 88% of stocks are above their 50 day moving average. Normally, at these extreme levels we do get consolidation. Does this mean you act upon thinking a pull back is about to happen? No, pullbacks are apart of the market and we welcome them as we live within this uptrend. If big volume selling takes place we’ll start taking a different tone, but for now, we stay the course and execute our game plan.

BAC continued its tear leading the Dow Jones Industrial average higher. Financials continue to perform well despite the negative press. It is nice to see banks perform well; they tend to lead the market higher in new uptrends. WFC and PNC are two other stronger BIG banks doing well. A bit of consolidation for the bank stocks around their respective 200 day moving averages would do them a bit of good.

NFLX and GMCR two former top quality stock All-Stars continue to mount comebacks. We are seeing quite a few of these old names like AKAM and CSTR come back to life. DNDN is another former high flyer coming back to life. As always, sound money management is a must and cutting losses should not be avoided at any time. Even these former high flyers coming off their lows are not exempt from the plan.

Solid start to the week and would not be surprised if the market continued pulling back. The uptrend remains strong and there is no reason to think otherwise.

No New Long Positions And No New Short Positions For Tuesday’s Stock Market Session

Josh Hayes — Mon, 06 Feb 2012 23:10:54 +0000

We must be ready for a pullback as I could not find one chart pattern I wanted to buy tonight. On top of this, I saw many intraday reversals that took stocks from being up nicely on the day (see MOTR) to finishing barely higher or lower on the session. Stocks have been on a non-stop rally since December and it is getting a bit long in the tooth. The logical thing would be to pullback here but if we move up 2% tomorrow that would be fitting. Volume was much lower today on the NYSE and Nasdaq. That is nice to see on a day where we finished down. There really is not a whole lot I can add tonight that was not discussed this weekend. SVVC is still on watch and now so is BVSN again. BVSN is insane and the criminal job that Lebed is doing with NIA is going to result in this stocks death. I only pray I have funds available and IB has shares to borrow. Possible longs tonight included COBR, CMLS, DISCK, and SDIX. I found flaws in all the charts to keep me away. There is not much else to talk about today. Overall, it was pretty dull session. Normal, following a Super Bowl Sunday.

Update: GENE could be a new long. It did not make any of my scans but Jodyy brought it up to me in the chat room. Too thin off the bottom, for me.

new long positions: none

none

new short positions: none

none

Big Wave Trading Portfolio Update

Josh Hayes — Sun, 05 Feb 2012 00:30:02 +0000

Big Wave Trading remains fully invested in all margin and IRA accounts. Big Wave Trading has been fully invested since the full BUY signal was generated on 1/5/2012. While many traders/investors tried to deny the uptrend as just another suck out, our model told us to expect more via the price and volume action across a myriad of stocks across multiple sectors. The past week the market finally took off and our long positions were rewarded greatly. We at Big Wave Trading could care less how much the market moves up from here. We know that we can not control the gains. We can only control how much we lose in the stock market. Therefore, if the trend persist, we will continue to sell stocks underperforming and move the bad cash to good stocks outperforming the market on a Relative Strength basis. We do not get emotionally involved with gains at Big Wave Trading. We could care less. It is simply doing the process right that gives us the pleasure. Being right is meaningless. Getting rich is meaningless. It is the process that allows us to be right and get rich that matters. The most important ingredient in this process is cutting losses fast. Big Wave Trading never holds losers. If the stock is losing money, we sell it and move on. No questions asked. Big Wave Trading’s win/loss ratio is at a point that we could be right 10% of the time and still not lose money as we refuse to lose 1% of our total account value in any one trade. Losing is not an option. Winning is the only goal. We will continue to stay fully invested until poor action among leading stocks (Relative Strength basis) and distribution days start to litter this market. If many distribution days occur, the Market Direction Model will switch back to NEUTRAL and possibly switch to SELL. Switching to a sell signal depends on the amount of distribution days and time frame in which they occur. We do not expect that to happen any time soon but expectations are resentments waiting to happen. Therefore, we remain completely agnostic towards the future. We are prepared for a continuation of this uptrend, a top, or possible consolidation. All game plans for each outcome have been analyzed and are ready to be used accordingly.

Top Current Holdings – Percent Gain (non-margin) – Date of Signal

IRE – 64% – 1/12/12
YINN – 37% – 1/5/12
RENN – 35% – 1/11/12
FAS – 28% – 1/5/12
UMDD – 28% – 1/5/12
RF – 24% – 1/5/12
DVR – 23% – 1/13/12
MOTR – 23% – 2/2/12
RAM – 21% – 1/9/12
RGR – 20% – 1/5/12
VNET – 20% – 1/10/12
RATE – 20% – 12/28/11

Four New Long Positions And No New Short Positions For Monday’s Stock Market Session

Josh Hayes — Sat, 04 Feb 2012 22:09:15 +0000

Did you know the Nasdaq hit new 11 year highs? Of course you did. I think I only heard about 25 people on Maui tell me this and ask me questions like “is now the time to buy mutual funds?” What? Really? Uh, no. Anyways, it was an impressive session and the Russell 2000 hit it out of the park with its second 2%+ gain in three days. I do love that. However, this is coming late in the rally and if you were not fully invested into this move and are thinking about finally doing it I have something to tell you. You are probably late. A pullback here seems very logical but as we know the stock market is an illogical beast. Whatever you think the stock market is going to do, I can guarantee you it will not. While my accounts are starting to finally produce gains on par with past rallies I am still not happy and never am until I take profits. The trend remains in a strong uptrend but we will have to see what happens following this next pullback. If we resume the uptrend, we are going to make a ton of money. If we don’t, trust me, we are about to make a ton of money (at least I am). I have been watching this pump and dump method and my god is it working well. PROT fell 40% intraday Thursday. ECIT fell 30% Friday. BVSN fell 50% from our “top call (chart signals)” intraday on 1/24. What am I watching now? BVSN still, NSRS, STVI, GSVC, SVVC, and to a lesser extent STEV (looks ready to go for Monday), QPSA, and RENN (I know we are still long). If you want to know what the exact start of a pump and dump looks like get ready to watch WTII (you could go long that one on Monday; I only focus on the short side). This methodology made those that know how to trade correctly (ie..trend followers, those that cut their losses fast) a lot of money in 2011 and has always done relatively well. It never ever could keep up with the gains I scored using my CANSLIM/BOP methodology back in the day. But recently it definitely has and in fact it is easier for me to trade. I am still under investigation with this methodology but as soon as funds become available to give it a go (I am fully maxed out on margin long), I am diving in. This methodology is not a good methodology for those with seven to eight to nine figure accounts. Those with three to four to five to six, it is a perfect compliment when the CANSLIM/BOP stocks are not working. Right now, our BOP/CANSLIM stocks are starting to really work (did you see MOTR today?). However, one day, this uptrend will end. Our Market Direction Model will go into a SELL mode and instead of focusing on the CANSLIM stocks like I always have before I now will focus on shorting ANY previous pump and dump scam stock that gives legit breakdown and sell signals. Watch SVVC. Watch what happens after it tops. Watch NSRS. Tell me this is not the right thing to do on the short side. Waiting for AAPL or GOOG to top seems insane to me now. Shorting the 3x ETFs makes sense. Buying the 3x inverse ETFs for the IRA makes sense. Shorting the scam pump and dumps that droop 20-60% in a week makes sense. Trying to find the one moment where shorting the previous generals of an uptrend during a bear market where tons of POS companies are dying just doesn’t make sense. I am experienced enough I can follow everything. The best bet with these POS pump and dumps is to daytrade the breakdowns. That way you can get the 4-to-1 margin in IB, the 6-to-1 margin for elite traders in IB and Suretrader (suretrader gives you 6-to-1 with only a $2000 account). It’s nice to watch this methodology in real time and see why so many morons lose money using it. The #1 #2 #3 #4 and #5 reason almost everyone loses in “playing” pennies is they do not cut their losses. What is our top 70 rules here? Always cut your losses. The winners take care of themselves. We can have a track record of 10% and still win if our nine losses are 1%. It is that simple. This is something the public will never understand. They are sheep. This is why we make a lot of money trading. The public could to if they wanted. But they have decided to be sheep. There is nothing wrong with that. However, I will exploit it. On another note, LAD and NTGR gave buy signals today but after extensive studies going over their charts I simply can not buy either move. LAD is not a smooth operator and NTGR’s move is just too much with not enough previous accumulation to warrant the one day jump. I passed on going long SBH on Thursday. It had a similar move to NTGR. You can see how the CANSLIM quality SBH acted compared to our two new longs MOTR and PBTH. This is an art and a science. Using science in this business works. But if you have an artistic ability to see some things that science is unable to see, you are golden. Have a great weekend. I will see you on Monday.

Market Model Weekend Update

new long positions: TNGO (5%) CYMI (2%) BWEN ACPW (1%)

TNGO is bouncing off the 50 day moving average, closing near the HOD, on very strong volume with BOP rising to the green level. Cut your final loss with a close below the 14.75 level, if the stock does not move higher immediately.

CYMI is breaking out of a tight consolidation pattern and is producing a pocket pivot buy point, closing near the HOD, on strong volume with BOP rising to a higher green level. Cut your final loss with a close below the 50.32 level, if the stock does not move higher immediately.

BWEN is breaking out of a very tight consolidation pattern and is bouncing off the 50 day moving average, closing near the HOD, on strong volume with BOP rising to a higher green level. Cut your final loss with a close below the 0.72 level, if the stock does not move higher immediately.

ACPW is breaking out of a consolidation pattern and is producing a pocket pivot point buy signal, closing near the HOD, on strong volume with BOP rising to a higher green level. Cut your final loss with a close below the 0.87 level, if the stock does not move higher immediately.

new short positions: none

none

NASDAQ Closes off its Highs as Volume Slides, but Above Average

Big_Wave_Trader — Fri, 03 Feb 2012 03:02:45 +0000

The market ended off the highs of the session, but with volume coming in lower we avoid a day of stalling. Russell 2000 small cap index raced higher tying the NASDAQ composite for the top index of the day. Interestingly, enough both indexes have yet to have the golden cross yet continue to lead the entire market higher. Bernanke’s testimony on the hill helped spark some buying, but as the testimony wore on sellers began to take over. We continue to play in overbought conditions, but this rally is healthy and remains that way. Tomorrow’s job report will certainly set off fireworks. At this very moment, we have a healthy rally that is a bit over-extended.

The unemployment rate will be the key statistic the market pundits will be paying attention to. Last month’s surprise move to the downside for the rate helped spark some confidence for the market in general. However, the denominator, the total employment pool continues to shrink driving down the percentage of people out of work. It is very difficult to measure unemployment, but judging by the U-6 figures as well as the number of people on food stamps our situation remains weak. Why else would the Federal Reserve hold rates steady near zero percent all the way out to 2015? If employment was actually improving there would be no need to continue to hold rates down. Enough of the economic talk, it’s about the trend.

Trend following is not an art form and trading based upon gut feel is not our style. Disciplined trading, rule –based trading is our game; it’s our edge to outperform the market. I know we harp this one lesson: CUTTING YOUR LOSS SHORT. It is vital, letting losses run ruins capital and ruins traders. Breaking your rules is another major flaw. Jesse Livermore would often break his rules only to see his net worth crumble. If you find yourself in this situation, what separates the best from the rest, the best rise again!

Have a great weekend!

Two New Long Positions, Three Stocks I Am Adding To My Existing Long Positions, And No New Short Positions For Friday’s Stock Market Session

Josh Hayes — Thu, 02 Feb 2012 22:55:12 +0000

The market just keeps moving higher. Every dip is bought and supported and as long as that is the case I am on the hunt for good stocks to help replace my bad stocks not moving higher. I expect that we are due for a pullback sooner or later. However, I am not going to position my portfolio and lose my position just because I think we are getting a bit long in the tooth here. I will let the charts tell me what to do. There wasn’t much excitement out there today outside of the gains in PROT. Last night, I gave you a list of stocks that are either under real paid promotion to raise their stock prices or part of a Facebook pump. The companies moving higher off the FB news will probably not hold due to their EPS and sales numbers being so pathetic. The other group is just being moved by criminals that do what criminals do best. Sucker in the weak. The strong take the other end. Last night I told my chat room that PROT is giving a legit short signal here and went over it with my “turtle” that is working with me here on Maui for the next 5-6 months. Today, intraday, was down 40%. I would say we pretty much nailed that. If you are still short PROT, due to the intraday bounce and volume, I would cover all and take the 20% gain and wait for the next signal. The only possible signal tonight is ECIT and it is not legit. It is not closing close enough to the LOD and the volume is not big enough to say “go.” PROT’s volume was not huge yesterday but the price pattern took precedent following that astronomical run from 0.25 to 7.25 in one month. That is a real pump job. ECIT is still way too early. I wouldn’t mess with it on the long side. On the quality end of today’s trading, SBH gave a very strong buy signal. This is indeed a CANSLIM quality stock but the problem is that it’s making a huge one day move for it compared to the way it has traded the past two years. It looks more risky to me than trading MOTR. That is why MOTR is a small long and SBH is on the table. Also, NQ gave a buy signal today. But with BOP going the wrong way and the chart not being tight, I will pass on this Chinese company. It needs to be tighter and more green, in this tape. You don’t have to settle for OK. You can wait for the best. Everything is moving right now. Everything. My biggest regret of the day is SAVE. Hindsight is 20/20 and it now appears after it offered that secondary that the gap up HOD close on huge volume was a buy signal. I wanted it to make a base/handle. Guess that will not happen. 16% move left on the table. On another note. I am watching BVSN and ready to pounce on it the next time it reverses lower. IB now has shares (for now). Time to open a Suretrader account. They have every stock available to borrow.

new long positions: PBTH MOTR (2%)

PBTH

MOTR

adding to existing long positions: YNDX (2.5%) ACLS JKS (1%)

YNDX

ACLS

JKS

new short positions: none

none