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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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The BestOnlineTrades Cheetah Trading System

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I decided to change the name of this ‘project’ I am working from BestOnlineTrades Mastermind Project, to the ‘Cheetah Trading System’.  I think the later is a more appropriate title.  A mastermind project implies a coordinated effort of the mastermind, in this case a group either small or large of many traders. I suppose such … Read more

BestOnlineTrades Cheetah Trading System Trade 1 Review

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This posting is a review of trade number one of the BestOnlineTrades Cheetah Trading System.  The first trade of the BOT Cheetah Trading System was not the way I wanted to kickstart this project.  It started with a loss of 1.71% and it was an absolutely silly loss and I can already see that I broke two important trading rules on the first trade of the project!!

I don’t know if this is a bad omen or not, but I will shrug it off in the hopes that this first posting offers something to be learned for FUTURE trades of the project.

By the way, I am also making it a requirement that before I initiate the next trade of the project, that I MUST read the postings of the previous trades to see if there were any important lessons that can be used to improve the next trade.

The first trade going long VG I made two very important mistakes which I hope will never be repeated again.

Mistake 1

First, I went long VG after it was already moving upwards for 6 straight days !!!!  This is a statistical probability that goes against anyone wanting to go long.  Going long any stock after a strong of advances like that is always a mistake, ALWAYS.

Instead I should have WAITED for the stock to retrace.

Mistake 2

This brings me to the second mistake I made with VG (Vonage Holdings Inc.).

The stock was fast approaching two very high volume swing highs.  In that situation there is almost always a pull back and is another reason to WAIT before going long the stock.

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Sp500 Pushing on a Weak String to the Downside

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The bears seem to have little or no power based on today’s price action in the sp500.  The downside volume in the SPY was horrible (meaning very light) and tells me this market is weak to the downside.  And that means of course that the right side must be the upside.  And so it shall be.

The current decline is probably now the ‘handle’ of a cup and handle formation, which means we are likely to bust north either by end of April or early May 2011.  The saying “Sell in May in Go Away” does not look like it will work this year.  Instead it will be more like “Sell in April (a very little amount) and then Come Back in May for more Drunken Hyper inflated Upside courtesy of the Fed”

The sp500 today rejected the bearish channel I was talking about in the last few postings.  We have a hammer reversal and it is likely to be confirmed to the upside tomorrow or early next week.

sp50020110414

You can also see in the chart above the apparent development of an inverse head and shoulders pattern that has the right portion looking like a cup and handle formation.

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Sp500 on the Brink of Holding Channel Support or Busting Back Inside

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If the sp500 trades a full price bar below 1309 tomorrow with 1309 as the high then it will be trading back inside the bearish trend channel and make the recent last 2 to 3 weeks a ‘false breakout’ above the channel.  This would be quite a bearish situation and further confirm the bearish trend.  Today the price formed a doji or pausing candlestick that seems to have tested the underside of the broadening wedge line.

A gap down opening tomorrow starting at 1309 would certainly do the trick to clue in that we are about to break back inside this channel.

Still, there is still an opportunity for the market to trade bullish in the current range.  If the sp500 trades sideways or up, with today’s low of 1309 as the final low then a bullish picture could emerge from here.  An added reason for a potential bullish move out of here is the lack of heavy downside volume.

We do not have to break back down into the bearish channel tomorrow, but it would certainly help the current bearish possibilities of the market.

sp50020110413

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Here is a Possible Crash Scenario for the sp500

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Here at BestOnlineTrades we like to consider a realm of possibilities for the market at any one time.  Sometimes they are bullish, sometimes they are bearish, and sometimes there exists a very remote possibility of a stock market crash.

So, after reviewing a few charts of the sp500 in the current time frame and the 1987 time frame and then also the XLF financials ETF, we see that there is a possible window for a crash to develop. 

These types of setups can occur a few times every few years and 99% of the time they fail and do not lead to the massive volatility of a stock market crash.  Still, I like to display and consider possibilities, but am well aware that bearish expectation must be kept under control and ‘tempered’ significantly depending on price action developments.

In some cases a posting like this can be a strong contrary signal!  (in other words meaning that we may have hit bottom).

However at this time I do not see much expectation for a big drop in the market.  In fact when we get a reactionary rally back up to the old 52 week highs, it tends to really discourage the bears and short sellers and squeezes them out, sometimes leading to a new decline that becomes very persistent because of their lack of participation and short covering.

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