Friday, September 27, 2013

Friday: No trade (with comment from Dune and Caesar)

Nine symbols survived my initial screening last night: GNW, DISCA, EGOV, BWP, PSB, IRC, NJ and ROVI with bull signals, and RVBD with a bear signal. (See "Friday's Prospects".)

Having looked at them further this morning, I can't find a one that merits further analysis.

My bias at this point is toward bear trades. My holdings are over-balanced to the bull side, and in looking at charts I'm finding many bull signals that are coming as upside corrections within larger-scale downside movements.

The markets movements are fractal, with smaller trends tracing their courses within larger trends. Or as the great Frank Herbert put it in his Dune series:
"Wait a bit, Tyek," Farad'n said. "There are wheels within wheels here." --Children of Dune
The wheels within wheels of the markets these days to my eye are pointing to the downside, even when they signal to the upside.

All the symbols confirmed their signals by continuing to trade beyond their 20-day price channels.

I rejected DISCA, BWP, PSB and ROVI because their bull signals were at odds with bearish ratings from Zacks. My best-case scenario is for Zacks and my trade direction to be aligned.

The bear signal, from RVBD, came in a chart that is clearly in an upward correction. Bull signals from GNW, EGOV and NJ are within downward corrections.

The IRC chart -- well, I couldn't make sense of it, so I tossed it off the island, sans pitiĆ© . I really do loathe a chart I can't understand.

I also took a look at HTZ, a very liquid stock that gave a bear signal but failed initial screening because its odds of success were below my threshold. But I read the chart as being a bear signal within an uptrend, and one that broke a rule of Elliott wave analysis. So I'm uncertain how to interpret it and so shall give it wide berth.

In truth, with the possibility, however remote, that the House Republicans will force the United States into defaulting on its debt, it's not really a great time to be opening new positions. My greater concern is to get the timing right as I flee my existing option spreads that expire Oct. 19 early enough to avoid damage from a political train wreck. The government runs out of borrowing capacity on Oct. 17 unless Congress acts.

Shakespeare, in praise of courage, has Julius Caesar say, 
Cowards die many times before their deaths; The valiant never taste of death but once.
What's good for Caesar, however, is not necessarily good for traders. The trader, like the cat and the coward, wants to have many lives so that he or she can come back to trade again. The valiant trade but once, then irrevocably die, never to trade again. Where's the profit in that?


My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Elliott wave analysis tracks patterns in price movements. StockCharts has a good explainer. The principal practioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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