Narrow Edge Trader/ Stewie's Trading Blog

2009-08-28T19:14:00.000-07:00

Bearish Newsletters/blogs

2007-08-12T22:02:00.000-07:00

I am reading a ton of bearish projections for the markets from various popular blogs and newsletters (including Dan Zanger). I cannot help but say that they could be on the wrong side of the trade.

Signs of a Bottom. Analysis by leavitt brothers

2007-08-12T11:38:00.001-07:00

They called the top. Why not the bottom?!

http://www.screencast.com/users/LeavittBrothers/folders/Default/media/9f90634b-cab7-4077-878b-e3fbe67a9f84

Expect a Very SLOPPY MOVE HIGHER NEXT WEEK.

2007-08-12T09:50:00.001-07:00

This is perfect scenario for this new method(scalp shorting) of trading introduced to me by fellow wallstreaker StreetSmack. We will see short squeezes followed by failed breakouts/breakdowns. A sloppy move higher next week.

Russell 2000 weekly

2007-08-12T09:47:00.001-07:00

DEJA VU!

2007-08-12T09:42:00.001-07:00

NDX weekly on Support

2007-08-12T09:35:00.000-07:00

Sloppy Double Bottom

2007-08-12T09:31:00.000-07:00

A Double bottom with price div. will lead to a sloppy corrective move higher next week.

Double Bottom Taking Shape?

2007-08-10T09:34:00.000-07:00

Leavitt Brothers' View on Liquidity and Today's Market.

2007-08-09T22:54:00.001-07:00

What is liquidity?
It relates to the ease and speed required to turn an asset into cash. Most stocks are highly liquid – with a quick call to your broker or the click of a mouse, you can convert a stock into cash. A car is less liquid. It may take a few weeks or longer to convert to cash. A house – for the most part – is even less liquid. Under normal market conditions, it could take a couple months to convert a house to cash. In today’s very illiquid housing market, it’s taking many months and often longer than a year.

How does liquidity work?
Here’s an example. Let’s say a bank has $1 million. It divides the money by 4 and lends it to 4 home buyers. The bank then takes those 4 mortgages, bundles them together and sells them to convert them to cash. It then takes this new cash and repeats the process. The bank lends to individuals, small business, large business etc. The lending of money is the engine that drives the economy.

Here’s where things go bad. If those home owners default on their mortgage payments, the banks will have a problem selling the mortgages, and if they can’t convert the mortgages to cash, they'll have nothing to lend out. With no cash to lend out, the economy drastically slows down because everything is built on debt.

If people can’t borrow money to buy homes or aspiring entrepreneurs borrow money to start business or large businesses borrow money to fuel growth or hedge funds borrow money (margin) to invest, the entire economic system grinds to a halt.

What I’m saying is extreme. Money can always be borrowed…at a price. Interest rates are the “cost of borrowing,” and as the cost goes up, less borrowing takes place.

Why are these hedge funds going under or at least halting redemptions? Because they’re the ones that bought those bundles of mortgages from the banks. Those bundles are like junk bonds. The paying higher rates but the owner has to assume more risk. Those funds simply went too far. Instead of allocating a small percentage of their fund to risky subprime mortgages, they went overboard and took on too much exposure. Defaults mean they’re not being paid, and it’s not like they can turn around and sell them to another sucker.

Funds going under means nothing to me. It’s their own damn fault. But if banks can’t loan money or can only loan money at high rates (i.e. liquidity is drying up), our economic engine will drastically slow down, and its ripple effect will be felt everywhere.

That’s why the Fed needs to lower rates. That’s why Cramer went ballistic in the youtube video. The Fed needs to lower rates to grease the economic engine.

Analysis on NMX

2007-08-09T22:47:00.001-07:00

Short setups

2007-08-09T19:49:00.001-07:00

Beautiful Day for the Bears.

2007-08-09T19:22:00.001-07:00

Ugly candles all over. You just gotta love the bearish action here. A solid trend day down and looks poised for an avalanche type decline from here. Market seems to be trying to price in a recession in the coming months.

Short Term View

2007-08-08T17:06:00.001-07:00

Back Testing the Broken Support Lines

2007-08-08T17:03:00.000-07:00

Don't Blink

2007-08-07T20:15:00.000-07:00

Don't Blink, the market is up, and now it's down, up, down. This has been one of the fastest and most psychoatic markets i have seen in a very long time. The DOW can be literally up or down 100 pts in in a matter of seconds it seems. Very hard to trade with size in a mrkt like this. I think i need some therapy after today's wild ride.So going forward i am expecting more of the same, just a very sloppy move higher. I was hoping for a traditional rally up to relieve oversold levels. THis is a dangoerius mrkt and i do not recommend taking home stocks or trading with size. My goal for tmrw, is to keep it small and simple and loosen the stops until things chill out a bit. As of now, the current upmove we are seeing in stocks has all the makings of a corrective move and hence gives me no confidence at all that we are seeing real actual buying. I am starting to really feel like we are working out this oversold conditions but setting up for more downside. I am OK with that b/c i really enjoy shorting. There's some serious money to be made shorting and i am starting to get excited not for a rally but another bout of selling. I am also gonna avoid shorting into selloffs and avoid buying into rallies, odds are very high, that volatility will cause reversals on get you stopped out with losses. Short rallies and buy selling might be a smarter strategy.

Falling Wedge Breakout!

2007-08-06T14:29:00.001-07:00

Long is where you wanna be now! I made good money shorting but now the tables are turning.

The Mother of ALL Rallies is Approaching

2007-08-06T11:37:00.000-07:00

Those Severe positive Divergences are playing out like a charm. Watch Out Above!

Intra Day Short Setups

2007-08-06T07:18:00.000-07:00

Zanger talks about Years Ending in '7'

2007-08-06T05:16:00.000-07:00

Super trader Dan Zanger talks about years ending '7'.

One of the most impressive stock market cycles in 20th century is known as "Year 7 Pattern" which is that years ending in "7" have historically reached the top of a bull market and then quickly started selling off, which marked the beginning of deep correction or a bear cycle. Here are the historical stats.

1917 ==> -40.1%

1927 ==> -10.2%

1937 ==> -49.1%

1947 ==> -24.0%

1957 ==> -19.4%

1967 ==> -25.2%

1977 ==> -26.9%

1987 ==> -35.1%

1997 ==> -13.2%

The average of these sell offs is 27% and so far this market is down about 8%.

For those of you have never heard of Zanger. Check him out at chartpattern.com. He's one of the best traders around.

Market Analysis and Setups for the New Week

2007-08-05T18:05:00.000-07:00

I am seeing some positive divergences taking shape on the 60 min charts. So that tells me that either downside will be very limited on Monday or we might open lower but close higher by the day's end. If we close poorly on monday then this mrkts isn't even responding to what has been extremely reliable indicators i have been using successfully for 4 years now. It will be a volatile session, there' no doubt about that right now.

Holy Grail.

2007-08-05T11:52:00.001-07:00

I got questions all the time about the Holy Grail, invented by linda Raschke. The basic idea is that during strong trends, when price price pulls back to the 20 period Moving average, that is usually a very strong buying point and usually finds very eager buyers in uptrends and very strong sellers in downtrends.

Here's an attachment that explains in full detail.

http://www.lbrgroup.com/images///raschke_pt2_0304.pdf

This is by far one of the most consistent patterns i trade but it works best during strongly trending markets/stocks. Up or Down. Choppy and sideways mrkts/stocks will give many false signals.

Think About This

2007-08-04T14:49:00.000-07:00

Jason From Leavitt Brothers Once said:

'I like to say that to be successful, you really only need 1 or 2 good trades each week, and this is more true now than ever. Do not trade for the sake of trading. Trade the good patterns only, and be demanding. Constantly ask yourself: "is this one of those good ones?"

If you made 2 points each week with 1000 shares, you'd make a 6 figure income trading. Think about that. Just 2 points each week.

Find "your trade" and get good at it. Focus on executing your trade over and over and ignore everything else. Do not complicate this game.'

I read this paragraph every day before i start my trading day. It's not the quantity of the trading that you do. My best trading days have by far been the days where i traded the least but these are the days where i made 1-3 trades and made a very good profit and just walked away. I know what kind of trade i like to look for and when i find it I jump on it without hesitation b/c it has worked for me many times before and feel confident in the outcome?

So, ask yourself, do you feel confident in the outcome? If not, don't take the trade!

CAll Me the Crippled Trader.

2007-08-04T08:48:00.000-07:00

Well, just because i had a broken thumb and high on pain killers doesn't mean I was gonna miss out on a friday's trading. I actually came out looking really good. I was trading with my left hand however, maybe i should do that more often.

Broke My Thumb Playing Soccer :-(

2007-08-03T06:28:00.000-07:00

Hello Everyone! I unfortuneately will not be blogging, trading very actively, or posting on wallstreak for at least 4 weeks. I got tackled playing soccer and landed hard on my thumb and broke it. I broke my ankle playing soccer 7 years ago and let me tell you, i'll take a broken thumb over a broken ankle any day. It is a contact sport and there are some very rough players in the game. Good luck trading to everyone and I will be looking forward to coming back nice and healthy hopefully in about a month.

Late Day Rally Spots the Bottom

2007-08-01T16:41:00.000-07:00

Once again the Positive Divergences Spotted an end to the downtrend and very likely spotted an important bottom/low.

Market Bottoming NOW

2007-08-01T07:14:00.001-07:00

Market Obversations From My Experience

2007-07-31T18:27:00.000-07:00

Dinosaur Trader made a very smart observation and asked why does the market always move around 2:45Pm. Here's my opinion and thoughts on that:

The biggest market moves are made in the first 1/2 hour of trading and the last hour of trading. That's b/c that's when the big money is squaring off their positions. That's why they tend to be the most exciting times of the day. I would avoid a ton of small shitty useless losses if i only traded during those two key times. That's when the pros are trading very actively, trends get stronger, breakouts/breakdowns are more meaningful, volume spikes etc etc. All other times during the trading session is just account churning, commissions to my brokers, boredom, frustration and usually small losses that add up over time.

Shorts Setps All Over the Place

2007-07-31T15:35:00.000-07:00

Shorts Setups is all i see right now. Amazing how quickly things change.

Why I was Bearish on AAPL and BIDU

2007-07-31T15:32:00.001-07:00

Two Shorts Taken Today

2007-07-31T15:26:00.000-07:00

The market was very frustrating in the morning as it gapped up and really offered no compelling long setups. The fact that bullish setups were hard to come by and the market was up big made me weary that we could be in for a Gap and Trap scenario and boy o boy was that the case.

Weak Market Bounce

2007-07-30T15:09:00.001-07:00

Weak bounce to relieve oversold conditions.

Bullish Divergences on the SPX

2007-07-30T15:02:00.000-07:00

Today's early to mid day decline looked weak, created some bullish divergences after that very extended decline and signaled a nice tradeable rally.

I learned a Lot Today

2007-07-30T14:52:00.000-07:00

Lessons to remember: If you decide to trade in a choppy market, trade with smaller size and use looser stops. It will avoid over trading, frustration, and silly losses.

Setups For Next Week

2007-07-30T00:31:00.001-07:00

Here are some setups to look at next week.

Market Analysis For the New Week

2007-07-29T23:55:00.000-07:00

The markets took a serious beating but a bounce could be very near. This bounce will give us lots of clues about the health of this market. A weak bounce tells me that we are going much lower into this corrective move. Regardless any move from here would very likely setup lots of shorting opportunites in the coming days. This correction could easily take us down another 5% and could last another 2-3 more months before we setup the classic year end rally or what i call the 'Wall Street Bonus Rally.' The market is way too oversold anyway you look at it right now to short here. I am gonna wait and see how a corrective move up plays out before i get aggressively short. The fact that we are seeing capitulation type high volume on the selloffs near the top(instead of the capitulation type volume after a long extended decline) tells me that we are going much lower in the coming weeks.

Sample Trades That Were Successful in July

2007-07-15T20:26:00.000-07:00