Tom

Cheetah Trading System Big Pattern Strategy Update

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DBLE, the second trade of the Cheetah Trading System seems to be performing well after two days of draw down after entering the trade.  Yesterday 4/21/2011 DBLE had a pull back on 75% less volume and as a plus managed to avoid exceeding the 4/20/2011 high by one penny.  This is good because I like to see strong volume contraction on pull back days without touching the previous days high.  In this case DBLE managed to avoid doing so by one penny.

DBLE is not really a ‘big pattern’.  But I only recently decided to focus this first Cheetah trading system on big patterns.  So I am stuck with DBLE for now and if all works according to plan will hope to exit DBLE in the 12 to 13 range?

If I can get an exit on DBLE within the next month or two, I would then like to consider a long entry in TLR, a possible big pattern I have been watching.  Ideally TLR will wait for me until the DBLE trade is finished.

TLR is a highly speculative gold exploration company with transitional potential to a production company by early 2012.  I have spotted TLR as a potential big pattern and will now start to study it like a cheetah in the tall grasses.

cheetah

I probably do not have to inform you that the gold price has been hitting record life time highs and will maybe continue to do so for a while longer.

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Amarin Corporation plc AMRN a Lost Opportunity

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AMRN came up in one of my metastock scans a week or two ago and I failed to act on it.  It was actually a cup and handle scan and it also pulled up DBLE which I am currently long in.

It is unfortunate that I did not do a posting on AMRN as I look at the chart now it was maybe one of the best trading setups I have seen a long time.  I think part of the reason I did not do a posting on it was because it was a biotech stock with no revenue, 31 million in cash and had a 800 million market cap at the time.

Small and Mid cap Biotech stocks are probably famous for not having substantial earnings, but instead trading on potential and FDA approvals and milestones.  Perhaps they could be compared to exploration gold and other mining stocks.

Anyway a few days after AMRN came up in my scan I gave it a thumbs down despite the apparent massive positive cup and handle structure.

Sure enough a week or so later AMRN gapped up 100%. 

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The Cheetah Trading System Large Pattern Strategy

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After further contemplation it has occurred to me that there probably ought to be two trading strategies for optimized chances of longer term success.  The 5% and 10% Cheetah Trading System strategy being the first, and then a 30% Cheetah Trading System ‘Big Pattern’ Strategy as the second.

At this point I am thinking it better to continue with the second ‘Big Pattern’ Strategy going forward.  Depending on how it works out, I will then make the next attempt the 5% and 10% Cheetah Trading System Strategy.

The reason why is because I am slowly coming to the firm conclusion that fewer trades out of bigger patterns is the best approach to long term trading success.  If you are reading this then you are probably familiar with a man named Warren Buffett.  If you are not, then just know that he is probably one of the top 10 investors of all time.  I would not consider him a trader.  But he has sold positions and bought them over very long periods of time.  His tendency is to buy and hold for a VERY long time.  By doing so he has become extremely wealthy.  He has bought brand name companies with very strong long term sustainable economics.

So as crazy as it may sound, I like to think of the Cheetah Trading System 30%er strategy as a ‘Mini Warren Buffett Swing Trader’ type strategy.  It is a strategy where targeted trades are made out of big patterns and are then ‘held’ but not ‘forever’.  Only for targeted time durations.  So I am applying part of the principle of Warren Buffett’s success except that I am doing it from a trader’s mindset, not a fundamental one.  I am also applying the principle of compounding (which Warren Buffet always credited as key to longer term success), but on my own terms, not on annual buy and hold terms.

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Silver ETF SLV Deep Into RSI Powerzone

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The SLV ETF continues to trade in near vertical fashion well into the RSI ‘powerzone’.  RSI is near the 83 range and the SLV still pushes higher.  Anytime the RSI is so ‘high’ there is always the risk of a very sharp downward pullback.  So it is a bit of an art to figure out when something is close to topping out.

My take is that SLV is not currently topped out quite yet.  It think it still has another 1 to 3 weeks of juice left in it.

Having said that if I was in SLV from the lows, I would be looking to scale out when/if the SLV gets near the 47 range.  There is a possibility that the SLV will blast above the 50 range first for a brief period and only thereafter start a sharp correction down back under 50.  This would be similar to what occurred with the gold price at 850.

But the 47 range is where I see top channel resistance start to come in and max resistance is near the 50 range.

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Taking Some Heat on DBLE Double Eagle Petroleum

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I am taking some downside heat on DBLE, the second trade of the BestOnlineTrades Cheetah Trading System.  I don’t intend to sell out based on today’s action for now.  I have to be careful about accumulating too many trades in the early going without enough profit to work from.  10 round trip trades at my current commission rate of 7.95 would be about 16% of $1000.  That is quite problematic and does show how excessive trading can really damage an account just on commissions alone.

So for now I will stand ground on DBLE as I still believe it will work into a breakout.

I will say though that I realized that I have made another mistake with regard to my entry on DBLE.  I entered DBLE at the time it was appearing to break out north from the downward trending resistance line during the day.  But the mistake was that at the close it was NOT an official break.  In fact by the close of the day it closed right under the resistance line.  So this was the type of day where waiting until 3:59PM would have been very useful as I had written about before.

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The Stock Market Should have been Down 5% Today

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Today was one of those types of days in the market where you try to match up the ‘news’ with the market result and find yourself scratching your head.  Given the credit rating news today I really would have thought this market to close down 5% on the day on massive massive volume.

What happened instead?  Instead we got a down close, but only about 1% and the volume on the SPY ETF today was dramatically light given the news.  In addition to being dramatically light it was also lighter than the 2/24/2011 price swing which we tested today.  That 2/24 price swing was an important price swing and it seems to me like it was rejected today and at least somewhat affirms my decision to switch to long signal last Thursday, although right now I am on a Neutral signal pending a holding above 1300 on the sp500.

Not only did we reject the 2/24 price swing but we also once again rejected the mini bear channel I have been referring to for a few weeks now.

It appears what is in store for us is a violent trading range type price action in the sp500 between 1300 and 1330 for the next 5 to 10 trading days.

But I do reiterate that as long as the sp500 can hold 1300 I will remain in a neutral to positive stance on the market.

But I really must admit how shocked I am at how light the total volume was today on the SPY.  It could mean this market wants to flip right around to the other side again near 1330 which was my original theory.

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