AAPL YHOO TSLA C : It's always your call...

Don't let someone else tell you how to invest your money!

It's always your call...

• It is natural to look for an easy way to start investing.  Or an easy way to continue investing because you are tired of losing money.  What you really need is more knowledge.  More experience.  More time to learn.  And a good teacher.

• I am not saying you shouldn't subscribe to some investing service or some trading room.  All I am saying is that every time you spend your money it should be your decision.  You should know why you are hitting the "submit" button on that order.  You should also know when, and how, you are going to cut your losses if the trade goes bad.  This is not easy people.  All of us struggle with the reality that we made a bad decision.  And what if the trade goes good?  When do you get out??  Sometimes this is an even harder decision.

• If you are invested in AAPL or YHOO you may be wondering what to do now.  If you are not invested in anything but you want to get involved because "everyone else is making tons of money", realize that some people are making money.  But there are definitely some people losing money.  Even in this market which is at all time highs.

• Let me circle back to my opening paragraph for a moment.  More knowledge will come as you read more.  You have to learn to distinguish between facts and opinion.  More experience will come as you make more trades.  But it will likely come with a financial cost.  Unless you are "paper trading".  Let's be honest, paper trading is great when you can walk away from a "paper loss" and start over.  But paper trading SUCKS when you make a huge "paper gain" because you got a trade just right. 

• And about that good teacher.  Good Luck to ya.  There are some traders / investors out there that would make great teachers.  But they aren't accessible to you and me or they want more money every month than is affordable to most.  By the way, there is never a guarantee that you will make money.  And you can't expect one.  This market isn't a place where guarantees work. 

• So why am I rambling instead of showing charts?  The charts are next.  But investing is rarely like going to school and having someone show you exactly what to do.  You have to learn by taking little bits from many sources and putting the bits together to form a cohesive plan.  I hope this blog is one of your bits.

C  -  Citigroup
      It's your call...

This is a daily chart of C

Click the chart for a larger chart of Citigroup

• Citigroup has been in a range (between the two gray horizontal lines) since about March of 2013.  The price did dip below the range once in 2013 and rose above the range once in 2014.  You will need to look at a 2 yr chart to see it clearly.

• What I am trying to show you is two things.  1) The lows have been getting higher & higher since April of 2014.  Notice the green uptrend line that touches the lows.  2) The price just approached the top gray horizontal line and now looks like it is heading lower.  Notice the short red downtrend line that touches the highs. 

• If you want to invest in or trade Citigroup you have a decision to make.  If you think it will go up from here then it needs to stay above the 21 ema (yellow).  If you think it will go down from here then is has to stay below the red downtrend line.  It's your call...

TSLA  -  Tesla Motors Inc

      It's your call...

This is a daily chart of TSLA

Click the chart for a larger chart of Tesla

• Tesla has been following the same uptrend line (UT 1) since mid 2013.  Going long when TSLA is close to UT 1 has been a great investment.  Take a look at a daily chart that includes all of 2013 and you will see what I am talking about.  

• I know there are several lines on this chart so it may seem confusing at first.  But let me explain...  If a trend line doesn't have a UT or DT label then ignore it.  Those are old trend lines that I am not talking about in this post.  I guess I could have removed them but I didn't.  Focus on DT 1, UT 1, and UT 2.  We have already talked about UT 1 and how it has been intact for about 1.5 years.  UT 2 has only been intact for about 3 weeks.  But it is crucial that you realize the price of TSLA is following UT 2 at the moment.  DT 1 was intact for all of September & October.  What is important about DT 1?  The fact that TSLA's price is now above it.

• How do we invest or trade TSLA from here?  If you think it will continue higher then it has to stay above UT 2.  If you think it will go down from here then I guess it has to stay below the gray horizontal line.  

• If you were short while TSLA was following DT 1 then you should have exited that position at the beginning of the week.  If you were waiting on the sidelines for a hint that TSLA was done going down, that hint came at the beginning of the week when the price closed above DT 1.  

If you initiate a trade right here, 

how do you know if you made a bad decision?

• One way is to only allow 3-5% of your money to be lost.  But that is arbitrary and only you can make that decision.  I like the range but if you don't enter a trade at the right time you could loose every time.

• Another way is to use a trend line.  If you feel TSLA or C are following a particular trend line and that trend line is breached, then you should get out of the trade.  What about the percent range?  You would've known how many percentage points you were risking before you entered the trade because you know where you were buying and you knew the price level of the trend line at that point in time.  If you weren't willing to risk that many percentage points then you shouldn't have entered the trade.

• Let's look at C first.  If you go long right here, you have to realize that C could go all the way down to the Uptrend line...  Ouch!!  That is a drop of about $4 from here or 8%.  Not my idea of a good entry.  If you go short right here, you want the price to stay below the red downtrend line.  Which is about $0.60 above Friday's close or 1%.  I can accept that kind of risk.  Either way you have to constantly evaluate your trade.

• Let's look at TSLA.  It you go long right here, the price has to stay above UT 2.  If it crosses below UT 2 you should sell because chances are good it will go to UT 1.  You could buy it back when it gets there.  If you go short right here, I would call you crazy  :)  But seriously, I would wait until the price closes below UT 2.  If it gets that low, watch for a turn back up at UT 1.  If it gets below that, I will short it with you...

Anything can change at anytime!  You have to constantly evaluate your trade.  If it is working, hang in there, adjust your trend line, and be patient.  If the trade is not working, get out of the way!  Don't be patient, don't hang in there, don't adjust your trend line.  You can always try another trade later on down the road if you still have money left because you were disciplined enough to get out of a bad trade...

Trade what you see...  Not what you think, or feel, or hope, ...

The trend is your friend... Until it's not.

Limit Risk & Protect Profits!

So You Want To GoPro...

GoPro Inc  (GPRO)

 

If you want to read my previous post on GPRO click here

 

 

This is a DAILY chart of GPRO - Moving Averages Only

Click the chart for a larger chart of GPRO

• Let me start this post by reminding everyone that GPRO is still a "new issue".  We don't have much history to rely on.  But we are going to run with what we have.  Remember you can always look at an hourly chart too if that makes you feel better.

 
GPRO has been on a tear for the last 4 days.  Although I missed the initial trigger for this latest move, lets look at a couple things that are pointing at a potentially positive longer term story.
 
The first things I want to focus on are pullback levels.  The first time GPRO corrected, it came all the way back to about $36.  The second time it corrected, it came back to about $38.  Pullbacks are constructive in a stock.  Pullbacks to higher levels is an indication that big time traders & investors see value at a higher price than they used to.  So does this mean GPRO will pull back to an even higher level the next time it pulls back?  Maybe  :)
 
The second thing I want to focus on is the moving averages.  I like to pay close attention to the 8, 21, & 50 day ema's.  The 8 should be above the 21 and the 21 should be above the 50.  You can see the 8 was above the 21 until there were a couple days of decline in the stock price.  Now the 8 is trying to get above the 21 again with the recent positive price action.  If the 8 does go above the 21, you could say GPRO is beginning to act like other uptrending stocks.  You might feel like GPRO has run too far too fast.  And you may be right.  But if the 8 day ema gets above & stays above the 21 day ema then GPRO is a good long going forward.
 
 
 

I want to be a TECHNICIAN when I grow up...

 

 

This is a DAILY chart of GPRO - Trend Lines Included

Click the chart for a larger chart of GPRO

** I just noticed a "UT 2" note on the bottom left corner of the chart.  Please ignore it **

• If you are not a "Linear Trader" or "Linear Investor" as I am you may feel overwhelmed by what you see on the above chart.  But give me a few minutes and I will explain it to you.

 
Let's start with the gray horizontal lines.  You may have to look at the hourly chart to see where some of these came from but they are all levels I deemed important early on.  For instance, if you look at the candle representing the first day of trading you will notice I have a horizontal line at the top and bottom of the candle.  I believe the first day's trading range is important so I marked the top & bottom with horizontal lines.  All the horizontal lines have significance to me.  They are not arbitrary and most were created in the first week of GPRO's life. 
 
The horizontal lines are potential support & resistance levels.  If you read my previous post (the link is at the top of this post) you will see that I talked about these levels and how they might help us in the future.  It turns out that $38ish was a very important level recently.  Before that was the $36 level.  I didn't see the $36 level and therefor don't have a horizontal line for it.  $38ish is the best horizontal support we have at this point.  Why?  Because GPRO came back to $38ish twice and has turned higher both times.  I would say $45ish is the best resistance we have so far.  Why?  Look at how many times GPRO has touched the $45ish line and then immediately turned lower.  Big time traders & investors are not convinced that GPRO is worth $45.  So when it gets there they sell it.  At some point this will change.
 
What about the shaded box?  What is that?  I said in my previous post that GPRO has lived in the $41 to $45 range for most of it's life.  I am still willing to say that.  So if you want a pretty high probability trade you can buy shares at $41 (or $38 if it gets that low) and sell them at $45.  that's a 10% move that took about 10 days last time it happened.  We are on that same road again only it started at $38.  If you are long now you have to look for a change in direction around $45.  More precisely, hold your long position as long as the closing price stays above UT 2.  Once the price breaks the UT 2 trend line you have to prepare for lower prices.  If I was going to take a guess I would guess that this might happen around the top of the shaded box.
 

• Let's talk about UT 1, DT 1 & UT 2...  For me, these lines are guides.  They help me decide what may be coming.  But they are only guides.  They are not "tomorrow's newspaper today". 

 
UT 1 is an uptrend line that starts at the low of day one and touches the most recent lows from last week.  I use this line as my ultimate stop or line in the sand.  If I am long GPRO I will sell all remaining shares if the price closes below this line.  I say all remaining because I always look for ways to limit my losses & keep most of my gains.  In other words, I should have sold some or most of my shares before the price dropped to UT 1. 
 
DT 1 is a downtrend line that starts at the highest high and then touches the next lowest high.  I use this line in two ways.  I see it as potential resistance, a place where the stock may turn lower.  But I also see it as an area of momentum once the price closes above that line.  If everyone thinks GPRO will turn lower at DT 1 and it actually goes right on through to even higher prices, some big investors & traders are going to jump in for the next leg higher.  That jumping in will increase the price even more.  And that's a good thing if you are long.
 
UT 2 is an uptrend line that gives me clues about the shorter term.  If I was lucky enough, or good enough, to get in between $38 and $41 I don't want to let the market take away my profits.  So I use UT 2 as a sign that the stock may rest.  When GPRO closes below UT 2 I would sell some of my stock.  Then I will wait to see if GPRO bounces off UT 1 or maybe closes below it.  Then I would buy or sell accordingly. 
 
 
 

Trade What You See...Not What You Think, Or Feel, Or Hope, Or ...

The Trend Is Your Friend...Until It's Not

Limit Risk & Protect Your Profits

 
 
 

Correction or No Correction ???

The S&P 500 and a 20% Correction


Why are so many calling for a large correction?  I am sure there are lots of good reasons but let me try to explain what the chart might be saying. 

The S&P, as an indicator of the general market, got up to about 1550 in the year 2000.  Then it gradually declined to about 800 by 2003.  After that decline, the S&P gradually rose back to 1550 again.  But again it turned down and this time declined to about 700 by the year 2009.  Notice the horizontal line on the chart below.  Also notice that the first two times the S&P gets to about 1550 it turns around and heads lower.  This is classic "resistance".

In 2009, after hitting 700, the market began going back up and really hasn't stopped.  In the recent past we have seen a high of almost 2000.  Wait!  What happened to 1550??  Looks like we skated right on through that level this time. 

Now that the S&P has gone through that 1550 level should we just forget about it?  I don't think so.  It may come back into play sometime in the future.  Remember that resistance can become support.  If it does, that means the S&P will revisit that 1550 level and then turn and go higher. 

In case you missed it.  I will ask the question again and answer it again...

Why are so many calling for a large correction?  Because if resistance becomes support, then the S&P has to go back down to 1550.  IF (the caps are not a typo) the S&P goes back down to 1550 then the market will have to drop about 450 points from the intraday high we saw in July.  That equates to a better than 20% drop in the market.

Does all this make sense?  When you hear someone say, "the market may decline 20ish% in the next 6 months" just realize all they are really saying is that they believe the S&P may revisit that 1550 level. 

This is a Monthly chart of the S&P 500

Click the chart for a larger chart of SPX

 

 

 

Let's talk about UT 1, UT 2, and the ellipse at the top

UT 1 is an uptrend line that started back in 2009 and has held strong ever since.  UT 2 is an uptrend line that started in 2012 and has held strong since.  Notice that UT 2 is steeper than UT 1.  That indicates faster price growth.  The ellipse at the top is just meant to call your attention to this area of the graph.  I would say that many investors are looking at the August candle to see if it will close below UT 2.  They will keep looking at new monthly candles until they see a shift in sentiment.  All of this is inside the ellipse.  If a candle closes below UT 2, then the next trend line it may ultimately fall to is UT 1.

What's next for GoPro (GPRO) ?

GoPro (GPRO)

• The cool thing about an IPO is that it's new & exciting.  Then again, new & exciting can be deceiving...

Any technical investor will tell you that it's nice to know where a stock has been in order to ponder where the stock might go.  An IPO doesn't give the investor that luxury.

So what can you do?  You can pay attention to shorter time frames while using the same investing & trading rules that you normally do.  Just realize that you will get more buy & sell signals so you will either buy & sell more often or you will take on more risk.  Caution: if you don't watch your stocks every day you probably shouldn't be investing in an IPO.

• GPRO started trading and was off to the races.  After a couple days we all wondered where it would stop. 

 

I don't have time to finish this now as it is very" early in the morning" and I need a little sleep.  I will try to come back and edit this post soon but check out the pictures below.  They tell a pretty good story on their own.

Remember to always look at multiple time frames.  In this case I am using the weekly, daily, and hourly.  You could look at the 30 minute, the 15 minute, the 5 minute, etc and see a lot more UT & DT lines.  The important part is seeing when the price crosses the lines. 

That is where the change in direction occurs.  Have fun...

 

OK. I'm back...

Turns out GPRO stopped right around $50.  Ever heard anyone say "round numbers are like hurdles"?  Now you know why.  Is there any way you could have known that it was going to stop there?  I don't think so.  But I do think you had some clues right up there at the top.  Take a look at the hourly chart below.  After a steady run up, the price crossed below UT 1 (look inside the circle near the top).  When that happened it was a clue.  Yip, just a clue.  But you can act on clues.  This was a clue to lighten up or just take notice.

 

On July 2nd, GPRO opened down.  That's not good.  Then it closed the first hour below the low of the previous day (July 1).  That was your second clue.  Yip, just a clue.

• Fast forward a couple days and you will notice the price creates a trading range.

GPRO trades between $40.50 and $44 for five days.  I call that indecision.  It is only a matter of time before the investing community decides what they think.  If they think GPRO is worth more than $44 then it will go above the range.  If they think it is worth less than $40.50 then it will drop below the range.  It is your job to wait for decision to be made and show up on the chart.  Then follow!

This is a weekly chart of GPRO - please ignore the lines on the right

Click here to enlarge this chart of GPRO

This is a daily chart of GPRO

Click here to enlarge this chart of GPRO

This is an hourly chart of GPRO

Click here to enlarge this chart of GPRO

• If you are looking at this hourly chart and you believe that GPRO may continue to fall, what is the next level to anticipate?  And the next?  And the next?  One more please.  What if it goes below there???  Let's just say I hope you used one of the circle areas to get out of this stock with a profit.  That way you can try shorting it if you like or just sit back and watch.  It will stop going down at some point.  When it crosses a downtrend line you can use some of your winnings to try to make more money :)

Answers to the above questions...

Price level below $40.50 ish is $38.00 ish / Price level below $38.00 ish is $35.00 ish / Price level below $35.00 ish is $32.00 ish  / Price level below $32.00 ish is $28.65 ish - why $28.65 you ask.  That was the opening print

__________________________

• Going Down???  I feel like this post is getting a little long in the tooth but here is some cool stuff that happened today

 

Take a look at the hourly chart that includes today's activity.  It clearly shows a downward continuation at the open and then some sideways movement for the rest of today.  First, it is nice to see things like that long red candle at the end of Friday that broke the trading range and have a clue that it might lead to more downside.  Second, it is nice to notice the indecision for most of the day today and realize that there will be a clue about future direction when it breaks.  "Breaks" doesn't necessarily mean keep falling either.

 

If you are short GPRO, you can stay with your short until the price closes above DT 2.  Remember that it is normal to make slight adjustments to UT & DT lines as you get more candles. 

 

If you want to get long GPRO, you should wait until the price closes above DT 2.  Be cautious, limit your risk, and get out of the way if you are wrong.  Don't take it personal.  You are trying to predict the future.  That isn't easy for anyone I know.  Making mistakes is part of the biz.  Keeping enough money in your pocket to be in business tomorrow is imperative.

This is an hourly chart of GPRO from 7/14

Click here to enlarge this chart of GPRO

• If you made it this far I thank you.  I think you deserve something a little above and beyond the basics. 

 

This chart includes Fibonacci Retracement lines.  It is amazing how well the UT & DT lines work but when you add in the Fibs you get even more information...

 

Take a look at the 5 day area of indecision.  It had a low right at the 38.2% retracement line.  Coincidence??  Now take a look at the low end of the candles for today (7/14).  Notice the lows are very close to the 61.8% retracement? 

 

Remember that all of these retracement lines are common places to look for price to change direction.  The faster it happens the stronger the stock some people say.  All I am going to say is that it pays to pay attention to UT & DT lines, previous levels of support & resistance, and Fibonacci Retracements. 

 

 

 

 

This is an hourly chart of GPRO from 7/14

with Fibonacci Retracement

Click here to enlarge this chart of GPRO