Professor’s Comments March 12, 2014

Posted by OMS  at March 12th, 2014

The Dow fell 67 points, closing at 16,351.  Volume was moderate, coming in at 98 percent of its 10 day average.  There were 109 new highs and 29 new lows.

Not much changed after yesterday’s choppy trading.session.  The Dean’s List and cockpit indicators remain positive. As long as the Dean stays positive, I will maintain my positive bias.

The Professor was still sleeping when I checked in with him last night.  This time he only had 2 longs and 3 shorts.

Without any new signals, I’m still on the sidelines …waiting.

One of the things I was doing yesterday was scalp trading Royal Gold to the short side.  Actually I have been doing this for the past three days.  Without going back and counting the trades, I think I shorted RGLD at least 5 times during the past three days, with each trade producing about $150 to $300.

Scalp trades are very quick trades, so I don’t have time to put them on the web site.  But with Red bars on the 60s, all I’m doing is looking for periods where there is no trend in place and the 2-period RSI Wilder is overbought.  When I see this condition, I put on the trade and then hold it until the RSI becomes oversold.  It’s not an exciting trade but it pays the bills.  I do not hold any of these trades overnight. I also use very small positions and pay strict attention to money management.

One of the things I do when I scalp trade is use casino style money management techniques.  For example, the first trade of the day is always the largest, usually about 500 shares.  The reason I do this is because I have more time early in the day for the trade to play out.  Then if this trade is successful, and I bank a small profit…let’s say its about $250, my next trade that day will be a maximum of 300 shares. By coming down on the number of shares traded,  I help protect myself against a loss. Once I’m ahead, I never want to give back all the money I made on the earlier trades.  Never!

What I’m hoping for is to see RGLD start to enter a down trend.  That hasn’t happened yet.   But as I mentioned in yesterday’s Comments, the next Fed meeting is scheduled for next week and traders should start reacting to the increasing probably  that another taper will be announced.  And even if the Fed doesn’t taper again, any sort of words about the economy improving, blah, blah…could sent gold shares reeling.

On the other hand, the market is still in an Uptrend, and all the pullback of the past few days has accomplished was to cause the 2-period RSI Wilder to become oversold on a lot of stocks.  Halliburton, HAL, is a good example of this.

The last time we saw HAL with an oversold 2-period RSI Wilder was back on 26 February when it was trading near the 55 level.  Two days later, when the 2-period RSI became overbought, the stock was trading over 57.  We’re still in a very favorable time period for energy, so HAL will be one of the stocks I’ll be looking at today. 

Because I already own a few shares of HAL, I will be looking to acquire a few more shares as a Pistol Trade on the 5s.   HAL has a nice Hockey Stick Pattern on the Daily Charts, so IF the overall market starts to bounce higher to relieve the oversold conditions, any ‘bounce’ could lead to a re-test the 16,588 level or start a new rally.  If this starts to happen, HAL should be among the leaders.

BTW, most of the other energy issues I have been talking about in recent weeks also have nice patterns and oversold RSIs.  Stocks like SLB, TOT, and SPN.  I’m just using HAL as an example.

That’s what I’m doing,

h

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.