Goodbye For Now

Well, what a year this has been. I finally achieved my holy grail of getting consistent returns month on month. I have not had a month below 10% this year. That is a huge breakthrough for me. I have realised it is not about chasing the dragon, because you will never catch it.

I will be having a break from posting for December. I will still be trading at least up to the Fed meeting on Dec 15th. I will be having a go a the CME bitcoin options over the break and I will do a post about it next year if it is worth looking at. Nasdaq has just announced they are likely to list a futures contract for bitcoin mid 2018 as well. It all depends how much liquidity there is. It might start slow for a while, hard to say.

I will do some video’s about my full trading method over the break. I have got the whole thing covered from the monthly chart, right through the weekly, daily, 4hr, 2hr, 1hr and 5min.

I have done my best to show what I do in the hope that it might help someone avoid the pitfalls that I encountered. Only a hand full of people were interested but that is ok. Most people just want to be told what to buy and sell and not think for them self. You will never make money that way. It’s just human nature I guess. Just remember this quote. “Bulls and bears make money but pigs get slaughtered.”

This blog has been a huge help to me and I will always write about my trading. This has been part of my trade journal process. It is very useful to look back over and see what I was thinking at the time. My biggest breakthrough in my trading was to take it one week at a time.

If I see anything important I might drop a post about it but only if it is critical.

Take care. Peace out!

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Three Push Pattern

There are some very reliable patterns in charts. The three push is one of my favourite high probability shorting patterns. There is no guarantee with any trading method. All I can say is that I have a range of tools in my trading tool kit, that I have come to rely on. As I journal extensively, I can get a very good idea of what will make me money.

ASX:CBA daily. This is a great example of a three push pattern. If it has occurred before in the chart like in this case, even better. This is a great opportunity to short or use put options. The financial sector is also bearish, so this fits with my analysis.

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Bitcoin Topping Out

Bitcoin cleared 11,000 and that seems to have been the trigger for the profit taking to start. This is the first sign of a correction. I do believe the price will go much higher in the longer term but this will be a much needed shakeout.

I will be murdering these bitcoin options when they start. It is going to be great fun.

Bitcoin 4hr and daily. Target for a correction down to 6,000 area. This is not a confirmed reversal yet. Have to see it on the daily to be confirmed.

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Volatility Watch

Volatility is at a point where we need to start watching again. Remember I have been saying about the short volatility crowd? I am watching their movements extremely closely. If someone yells fire and they all make a run for the exit, it is going to be too late. You need to be watching those people who quietly slip out of the door, at the first smell of smoke.

VXX 4hr is showing signs of interest. I could take some call options on UVXY here and just wait for this to develop. The idea with options is you need to get in before everyone else catches on and get out again quick. You like to make a profit on the long volatility trade but at the end of the day, it is insurance for my long stock positions, so if it does not make money I am not bothered.

VXX on short term template. The problem here is the double bollinger bands are too wide. That is not giving me any conviction yet. I can take call options here and then add again if there is a higher probability entry.

SVXY 4hr some of the short volatility crowd are taking profit. This is inverse so when you are long SVXY you are short volatility.

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Tech Watch

Tech watch update. The FANG stocks have been running rich to the Nasdaq and I have been watching for a reversal. We have seen some signs today. One day does not make a reversal, but it is a warning signal. This does not mean it is a potential major reversal but all major reversals start with a minor reversal.

My FANG composite index v Nasdaq index (left). FANMAG stocks (right)

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Little Boxes

Little Boxes. I can remember my school teacher singing this song to the class in the early 1970’s (I am gen X). It seems that the millennial’s, of which the oldest are 36, are now finding their feet and starting to produce a tailwind in the housing market. I have been reading some very interesting articles about it. It seems that there wont be such a hard landing for the housing sector after all if you can believe some of the current trend forecasts. Lets see. It will be very interesting.

“Little boxes on the hillside
Little boxes made of ticky tacky
Little boxes
Little boxes
Little boxes all the same
There’s a green one and a pink one
And a blue one and a yellow one
And they’re all made out of ticky tacky
And they all look just the same.”

XHB weekly. I never would have expected this kind of growth in homebuilders into the end of this year but there it is. This will be very interesting to see in 2018.

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China Liquidity

With all of the massive liquidity injections in China the markets are still showing sings of an inherent liquidity crisis. Kyle Bass has been warning of this danger for quite some time now. When this reaches the tipping point is anyone’s guess but you must be aware of it.

Shibor – Shanghai interbank lending rate

Shanghai Composite daily has pulled back below the kumo. Have to see if this turns into something more serious.

SPX v JNK daily. Junk is still above the 15 day MA for now but this is one chart I will be watching very carefully.

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Crypto’s Update

Bitcoin had a cracking weekend breaking the $9,000.00 mark. It could even push a little higher before it sees profit taking. Some have been saying that the demand is related to the mid December start of the Bitcoin futures contract. I don’t see why that would be because the futures contract is cash settled.

I like to look at the Google Trends. When you do a search for ‘how to buy bitcoin’, the search results have a stunning accuracy for picking tops and bottoms. It looks like interest in how to buy bitcoin is starting to top out. See if this corresponds with a short term top in the price. The bottoms when people have lost interest have been incredibly accurate at showing a buying opportunity. I would not rely on this to trade from, but interesting to see the madness of crowds in action.

Google Trends search: How to buy bitcoin

Bitcoin daily. Should see a retracement at some point back to the weekly kijun sen which is also the 100 day MA. Has been a very reliable level for support.

Litecoin daily breakout

Ehtereum daily breakout.

Monero daily breakout

Dash daily strong

 

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Trade Your Personality

One of the biggest breakthroughs in my trading was understanding what type of trading suits my personality. For some people, the types of trades that suit me, would drive them crazy. I am often tempted to try day trading but it just does not suit my personality. I am suited to short term swing trading. The only way you will find out what suits your personality is to try it. Some people will look at some small cap stocks or cyrpto currencies and find they are not comfortable with that level of volatility. In that case stay away. I find crypto’s are easy to trade and see the volatility as quite manageable. It is very rewarding if I use my swing trading methods. The key is to manage position size and manage risk/reward. Those two are the main points for being successful at trading. The same rules apply to small cap and large cap stocks, commodities, forex, market indices, crypto currencies. It is all the same.

When looking for stocks to add to my portfolio, I look for stocks that match my personality. Sometimes they might not have suitable fundamentals, so they don’t make it to my watch list. This is how I can manually scan a very large number of stocks in a very short time. I can also use various automated scan’s to find stocks that match my criteria. To get good scanning software you need to subscribe to a proprietary system. You can start with the basic free ones first.

ASX:BUB is a good example of a stock that matches my personality. When I do my manual scans, I use the weekly chart only and make a list for further evaluation. I can look at hundreds of stocks this way in a very short amount of time.

ASX:BUB weekly

ASX:BUB daily

ASX:BUB 4hr

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Nothing To See Here

China concerns have subsided for now and the bears have gone back to sleep. The problems are becoming inherently worse with each injection of stimulus, because it is a game of diminishing results. There is no point making forecasts about what will happen or when, because everything is being measured with a rubber band. All you can do is watch the risk indicators and act accordingly. You have to hedge your book at this point in the cycle. Not for the purpose of making money, but for the purpose of portfolio insurance.

Never have a bullish or bearish bias. You must be multi directional.

VTI weekly holding the breakout. Still 18% above the mth kijun sen.

VXX daily has broken lower.

SPHB daily high beta has recovered after the junk bond rout.

JNK daily rebounding off support for now.

EEM weekly breakout on $USD weakness.

Oil weekly holding the breakout.

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