A Trade A Day

Here’s a trading idea that is set to pop. While I was scanning through charts this evening, I came across NILE. NILE is forming a nice bullflag. Volume is in decline as the flag forms which is positive for this formation. Let’s take a look:

You could take NILE over 105 to 107. The stock is a mover with an ATR of over 5 so you’ll want to give this stock some cushion when it does setup. Let the stock break into new territory by a point or two. Keep your stops a little looser also. Manage your risk on this one by trading smaller lots.

Thanks for stopping by!

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This weekend I was flying back home and had a connection in Denver. As we were boarding the 777, I noticed something curious. I felt the anxiety of boarding the plane. Not fear of flying, but making sure I got on it. Airlines seem to be fairly strict in the order in which you board. So I was feeling the anxiety of having my number called and insuring that I didn’t some how miss my opportunity to get on the plane.

I would assume other travelers were feeling the same emotions as I because they started to queue up after first class got called. There was some confusion as I got asked on more than one occasion what row had been called. As I’m watching this queue, there was a palpable sense of urgency to board the plane. I had the presence of mind to conduct a little experiment.

The first thing I noticed was that there was a long line at the gate, going past the arrival departure monitors. I decided to stand directly in front of the gate and at least 20 feet away. My first experiment was to confidently take three steps toward the gate and stop. I did so and a curious thing happened. The mass of people standing around the gate followed for a few steps. Interesting because no seating area had been called, yet it would appear that my three steps toward the gate made others nervous and prompted others to start to board.

The next thing I did was to ignore the line to being with. Now I have to say that I think I was not budging in line, but you might have a different opinion. Here is this line of people waiting to board the airplane with a smaller, mass of people directly in front of the gate. Because of this mass it was very easy to merge at the head of the line and get on. As soon as they called me seating area, I joined at the head of the line and was on.

So what does this teach us.

1. I am a jerk, can’t wait in line like everyone else and don’t respect order. Wait…that’s not really a fair characterization.

2. People waiting to board an airplane are like investors trying to buy a stock. Most would be investors are eager to pull the trigger on a trade. They can be manipulated to buy or sell a stock based on the actions of others(rumor and volume)

3. The most successful traders wait for their setup and pull the trigger as soon as they see it. Wait for your setup. When you do see it, don’t hesitate.

See you tomorrow!

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Hi all,

Blain over at www.stocktradingtogo.com created a list of 10 Great ways to learn stock trading as a new investor. I would like to be so bold as to suggest one more. When you do start trading, trade small. What do I mean by trading small? How about starting with one share.

I remember when I made my first stock trade. It was for 10,000 shares of International Taurus. This stock was a microcap trading on the Vancouver Stock Exchange. I threw down over $20K to buy this stock and well, let’s just say I bought at the top.

My disastrous start to stock trading was the result of two problems. The first was a lack of a concrete trading plan. The second, and the subject of this article, was I did not trade small.

My logic at the time was that it was a microcap. It wasn’t trading at $2 bucks when I sent my order to my broker, I assure you. But instead of trading 100 or 500 shares, I got greedy and used almost all of my account equity. I didn’t take into account that I had never traded before. I thought it was a good stock based on what I had heard and read. Their investor relations had very positive things to say. I kick myself whenever I think about it.

But I’ve made thousands of more trades since then. I’ve had many winners and losers. But it took trading small. I started trading with one share, then worked to 10, then 50. Once I got to the point where I could make good trading decisions consistently, I started using more sophisticated risk management techniques.

However, I digress. You will never get the chance to experience the winning and losing trades. Your trading career will be over before it started if you don’t give yourself the time to learn by trading small. Resist greed. Enjoy the learning experience. As one of my mentors told me: “If you can’t make money with one share, how are you going to make money with a thousand?”.

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Tonight’s trade is brought to you by GT. This stock is forming a very nice double bottom. I don’t trade double bottoms as often as flags, triangles, or bases simply because they don’t form as often. But if you can find a nice one like GT is forming, they are typically very good patterns to trade.

I like the fact that volume has tapered off as the stock has formed it’s bottoms. This signals a lack of conviction on the part of sellers. Also, the second bottom was not as deep as the first. This is also positive as it is another signal of a lack of selling. What is key for the stock now is to break through resistance at $30 on good volume.

GT is a slow mover, but I like the stock anyway over $30.

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I wanted to give you a status of the trades that were featured on this blog and where they currently sit.

The AMTD trade was featured on September 10th. I still like AMTD. The stock currently sits at 18.27 so my entry has been hit. I am waiting to see where this one wants to go.

The FCX trade was featured on September 11th. FCX has been a great stock for me. My entry was hit at 92.15 and the stock has taken off. The best trades are profitable from the beginning and FCX is a great example as it has blown through my target of 107 and kept going.

The ALXN trade never setup. It’s broken down in its base and is no longer valid.

On September 19th I featured a CSCO and TNH trade. CSCO hasn’t broken out. It’s in the zone where I may pull the trigger, but I’d like to see it over 32.50 by at least a dime. TNH has tried to break, but as I stated in the post, I’m giving it at least a 2 or 3 dollar cushion above 122.50 before I pull the trigger.

Finally, on September 20th, I featured the AGU trade. AGU broke out on 9/21 and did well. Volume was exceptional and I’m eager to see what this week holds.

Ok, we’re up to date. Good luck this week!

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