Sunday, June 26, 2011

Six Stocks To Watch This Week

This list originally started out with ten stocks on it, but I decided to pare it down to six and include only the stocks that are actually trading at a distance less than their ATR (Average True Range) from their stops. 

For example, Apple will start the week trading at $326.35, which is just $13.55 above my new stop at $312.80. With an ATR last week of $15.73 it's entirely possible that it could trade below its stop. I'm not saying it will, and honestly I hope it doesn't, but it could happen.

Crocs, on the other hand, is trading at $24.81 with a stop for the coming week at $19.05. That's a difference of just $5.76, but with an ATR of only $1.92 it seems very unlikely that it will trigger that stop and reverse to short this week.

Just for the record, Shutterfly, Deckers Outdoor, and Citrix Systems are the other three stocks that I took off this list.

Apple (AAPL): 
- LONG the week of 3.30.09 at $115.99. My initial stop was $84.39, so the risk (R) on the trade was $31.60. Closed last week at $326.35 with a $316.26 stop. The new stop for the upcoming week is $312.80. The percentage gain on this trade is 181.4%, and the reward-to-risk ratio is $210.36/$31.60 = 6.66.

Boeing (BA): 
- LONG the week of 5.4.09 at $43.65. Using $32.10 for my stop the risk was $11.55. Closed last week at $71.26 with a $70.39 stop. The new stop for this week is $69.70. The percentage gain on this trade is 63.3%, and the reward-to-risk ratio is $27.61/$11.55 = 2.39.

Potash Corporation (POT): 
- LONG the week of 8.2.10 at $37.80. With my stop at $29.08 the R was $8.72. Closed last week at $52.54 with a $49.15 stop. My stop for this week will be $49.74. The percentage gain on this trade is 39.0%, and the reward-to-risk ratio is $14.74/$8.72 = 1.69.

Acme Packet (APKT): 
- LONG the week of 3.9.09 at $5.39. I used $2.89 for my stop, so the R was just $2.50. Closed last week at $65.16 with a $59.41 stop. The new stop for this week is $59.36. The percentage gain on this trade is 1,108.9%, and the reward-to-risk ratio is $59.77/$2.50 = 23.92.

Diamond Offshore (DO): 
- LONG the week of 1.3.11 at $70.57. With a stop at $57.65 my risk on the trade was $12.92. Closed last week at $67.71 with a $66.64 stop. The stop for the coming week is $66.76. The percentage loss on this trade is -4.1%, and the reward-to-risk ratio is -$2.86/$12.92 = -0.22.

Joy Global (JOYG): 
- LONG the week of 5.4.09 at $29.80. With my stop at $17.74 the R was $12.06. Closed last week at $86.65 with an $82.77 stop. The stop for this week will be $82.50. The percentage gain on this trade is 190.8%, and the reward-to-risk ratio is $56.85/$12.06 = 4.71.

Wednesday, June 22, 2011

Five More Short Signals... Part 2

Before we move on to other stocks I feel like I should follow up on my post from last Thursday so that we can see what actually happened. 

It turned out to be just five short signals after all. I anticipated that Baidu would reverse to short along with the others, but it managed to finish the week just barely above its stop. I'm not sure if that's a good thing or a bad thing?

Baidu (BIDU): 
- LONG the week of 3.23.09 at $18.32. My first stop was $11.34, so the risk was $6.98. Closed last week at $117.66 with a $116.58 stop (the new stop for this week is $116.35). The percentage gain on this trade is 542.4%, and the reward-to-risk ratio is $99.36/$6.98 = 14.24. 

The other four stocks on my list (plus Caterpillar) all reversed to short as expected. Once again, I don't know if that's a good thing or a bad thing. After yesterday's rally it would be easy to say it was a very bad thing, but I think we'll need a little more time to know for sure.

Riverbed Technology (RVBD):
- SHORT Friday at the close at $31.93. My first stop is $42.96, so the risk (R) on the trade is $11.03. I scaled my risk/position sizing model down slightly to 0.75% to give me a 2.17% portfolio weight on this trade.

Priceline.com (PCLN): 
- SHORT Friday at the close at $462.35. Using $550.34 for my stop the risk is $87.99. The only good thing I can say about this trade so far is that I took my risk all the way down to 0.25%. That gives the trade a weight of just 1.39%, but that's the norm more than the exception when I'm trading particularly volatile stocks like Priceline, CME Group, and Google.

Cognizant Technology Solutions (CTSH): 
- SHORT Friday at the close at $67.65. With my stop at $81.51 the R works out to $13.86. Once again I dropped down from 1% to 0.5% to reach a portfolio weight of 2.44% for this trade.

Aruba Networks (ARUN): 
- SHORT Friday at the close at $24.01. I used $35.02 for my stop, so the risk is $11.01. I used my normal (for the most part) 1% risk model for Aruba Networks, giving the trade a 2.18% overall weight.

Caterpillar (CAT): 
- SHORT Friday at the close at $95.95. I calculated $113.69 for my opening stop, and that means the risk (R) will be $17.74. For the first time on Caterpillar I had to scale down from 1% to 0.5% just to reach a portfolio weight of 2.69%.

Thursday, June 16, 2011

Five More Short Signals...

Barring a nice fat rally tomorrow, I'll have five more short trades to make tomorrow afternoon at the close. Actually, it will be six, but we looked at Caterpillar in my previous post, so I'm not going to include it in this list.

Riverbed Technology (RVBD):
- LONG the week of 3.30.09 at $7.98. My stop was $4.73, so the risk (R) on the trade was $3.25. Closed last week at $34.03 with a $33.45 stop. The percentage gain on this trade is 326.4%, and the reward-to-risk ratio is $26.05/$3.25 = 8.03.

Priceline.com (PCLN):
- LONG the week of 8.2.10 at $295.25. Using $212.23 for my stop the risk was $83.02. Closed last week at $493.18 with a $463.60 stop. The percentage gain on this trade is 67.0%, and the reward-to-risk ratio is $197.93/$38.02 = 2.38.

Cognizant Technology Solutions (CTSH):
- LONG the week of 4.6.09 at $23.62. With my stop at $16.25 the R was $7.37. Closed last week at $73.00 with a $70.51 stop. The percentage gain on this trade is 209.1%, and the reward-to-risk ratio is $49.38/$7.37 = 6.70.

Baidu (BIDU):
- LONG the week of 3.23.09 at $18.32. My first stop was $11.34, so the risk was $6.98. Closed last week at $121.69 with a $119.15 stop. The percentage gain on this trade is 564.2%, and the reward-to-risk ratio is $103.37/$6.98 = 14.81.

Aruba Networks (ARUN):
- LONG the week of 4.13.09 at $4.33. I used $2.45 for my stop, so the R was $1.88. Closed last week at $25.48 with a $24.90 stop. The percentage gain on this trade is 488.5%, and the reward-to-risk ratio is $21.15/$1.88 = 11.26.

Tuesday, June 14, 2011

Caterpillar (CAT)

Caterpillar began the week at the very top of my watch list, just $0.45 from its stop at $96.34.

A day like today will give it a little breathing room, but will it be enough to survive the week?



1. LONG the week of 3.17.03 at $21.99. Using $17.67 for a stop, the initial risk (R) on the trade was $4.32. Stopped out and reversed to short at $31.62 the week of 7.19.04. The percentage gain on the trade was 43.8%, and the reward-to-risk ratio was $9.63/$4.32 = 2.23.

2. SHORT the week of 7.19.04 at $31.62. With the stop at $36.71 the R was $5.09. Stopped out and reversed to long at $34.81 the week of 9.27.04. The percentage loss on the trade was -10.1%, and the reward-to-risk ratio was -$3.19/$5.09 = -0.63. 

3. LONG the week of 9.27.04 at $34.81. The stop was $30.29, so R = $4.52. Stopped out and reversed to short the week of 4.11.05 at $36.39. The percentage gain on the trade was 4.5%, and the reward-to-risk ratio was $1.58/$4.52 = 0.35.

4. SHORT the week of 4.11.05 at $36.39. With my stop at $42.44 the R was $6.05. Stopped out and reversed to long at $42.50 the week of 6.6.05. The percentage loss on the trade was -16.8%, and the reward-to-risk ratio was -$6.11/$6.05 = -1.01.

5. LONG the week of 6.6.05 at $42.50. The stop was $36.82, so R = $5.68. Stopped out and reversed to short the week of 9.11.06 at $58.52. The percentage gain on the trade was 37.7%, and the reward-to-risk ratio was $16.02/$5.68 = 2.82.

6. SHORT the week of 9.11.06 at $58.52. Setting my stop at $69.73, the R on the trade was $11.21. Stopped out and reversed to long at $61.09 the week of 2.12.07. The percentage loss on the trade was -4.4%, and the reward-to-risk ratio was -$2.57/$11.21 = -0.23.

7. LONG the week of 2.12.07 at $61.09.  Using $53.27 for a stop, the R = $7.82. Stopped out and reversed to short at $64.41 the week of 11.5.07. The percentage gain on the trade was 5.4%, and the reward-to-risk ratio was $3.32/$7.82 = 0.42.

8. SHORT the week of 11.5.07 at $64.41. With the stop at $77.41 the R was $13.00. Stopped out and reversed to long the week of 3.31.08 at $71.60. The percentage loss on the trade was -11.2%, and the reward-to-risk ratio was -$7.19/$13.00 = -0.55.

9. LONG the week of 3.31.08 at $71.60. The stop was $58.56, so that means R was $13.04. Stopped out and reversed to short the week of 6.30.08 at $64.98. The percentage loss on the trade was -9.2%, and the reward-to-risk ratio was -$6.62/$13.04 = -0.51.

10. SHORT the week of 6.30.08 at $64.98. With the stop set at $77.85 the R was $12.87. Stopped out and reversed to long at $35.82 the week of 4.27.09. The percentage gain on the trade was 44.9%, and the reward-to-risk ratio was $29.16/$12.87 = 2.27.

11. LONG the week of 4.27.09 at $35.82. The stop was $22.29, so R = $13.53. Closed last week at $96.79 with a $96.34 stop. The percentage gain on this trade is 170.2%, and the reward-to-risk ratio is $60.97/$13.53 = 4.51.

Bottom Line:
Winning Trades: 6 | 54.5% | $20.11/share avg.
Losing Trades: 5 | 45.5% | -$5.14/share avg.
Average Trade: Gain of 23.2% | $8.64/share | Reward-to-Risk Ratio (R): 0.88

Sunday, June 12, 2011

OpenTable (OPEN) Update

When I first blogged about OpenTable back on May 25th I was kicking myself for passing on what turned out to be a pretty nice little trade. 

So what have I learned since then? 

Apparently nothing. 

OpenTable reversed to a short signal Friday and I passed on that trade too. I actually like the trade, and I had my finger on the trigger just a few minutes before the close. But as I mentioned in my Cummins post on Friday, I'm already short a bunch of stocks, and a lot of big names are trading just pennies from their stops (even Apple), so I think I'm going to wait and see what happens in the coming week.

But just for the record, here's the setup on OpenTable:   

1. LONG the week of 2.8.10 at $31.10. The initial stop was $23.68, so the risk (R) on the trade was $7.42. Stopped out and reversed to short the week of 6.6.11 (Friday) at $79.40. The percentage gain on the trade was 155.3%, and the reward-to-risk ratio works out to $48.30/$7.42 = 6.51.

2. SHORT the week of 6.6.11 at $79.40. I would use $108.91 for a first stop, and that would give me an R of $29.51.

A month from now will I be kicking myself for passing on this trade too?

Saturday, June 11, 2011

CME Group (CME)

Even though I've never used the Directional Movement System to make a trading decision, I still like to see it align with what the Volatility System is telling me. For the CME Group, the -Directional Index (-DI), which measures downward price movement, crossed above the +Directional Index (+DI) back in second week of March. On top of that, the ADX bottomed out at 12 in the last week of April and has since climbed to 19 as the -DI/+DI spread has widened.

That gives me (maybe) one extra ounce of confidence in my short position.   



1. LONG the week of 4.21.03 at $48.14. Using a stop set at $39.95, my initial risk (R) on the trade was $8.19. Stopped out and reversed to short at $108.86 the week of 7.12.04. The percentage gain on the trade was 126.1%, and the reward-to-risk ratio was $60.72/$8.19 = 7.42.

2. SHORT the week of 7.12.04 at $108.86. With a $138.19 stop the R was $29.33. Stopped out and reversed to long at $134.13 the week of 9.7.04. The percentage loss on the trade was -23.2%, and the reward-to-risk ratio was -$25.27/$29.33 = -0.86. 

3. LONG the week of 9.7.04 at $134.13. The stop was $109.39, so R = $24.74. Stopped out and reversed to short the week of 3.28.05 at $171.35. The percentage gain on the trade was 27.7%, and the reward-to-risk ratio was $37.22/$24.74 = 1.50.

4. SHORT the week of 3.28.05 at $171.35. With a stop at $212.70 the risk was $41.35. Stopped out and reversed to long at $229.89 the week of 5.31.05. The percentage loss on the trade was -34.2%, and the reward-to-risk ratio was -$58.54/$41.35 = -1.42.

5. LONG the week of 5.31.05 at $229.89. The stop was $181.35, so R = $48.54. Stopped out and reversed to short the week of 1.14.08 at $529.89. The percentage gain on the trade was 130.5%, and the reward-to-risk ratio was $300.00/$48.54 = 6.18.

6. SHORT the week of 1.14.08 at $529.89. Setting a stop at $674.51, the R on the trade was $144.62. Stopped out and reversed to long at $268.68 the week of 5.11.09. The percentage gain on the trade was 49.3%, and the reward-to-risk ratio was $261.21/$144.62 = 1.81.

7. LONG the week of 5.11.09 at $268.68.  Using $170.09 for my stop, the R = $98.59. Stopped out and reversed to short at $281.05 the week of 1.25.10. The percentage gain on the trade was 4.6%, and the reward-to-risk ratio was $12.37/$98.59 = 0.13.

8. SHORT the week of 1.25.10 at $281.05. With my stop at $343.45 the R was $62.40. Stopped out and reversed to long the week of 4.19.10 at $329.35. The percentage loss on the trade was -17.2%, and the reward-to-risk ratio was -$48.30/$62.40 = -0.77.

9. LONG the week of 4.19.10 at $329.35. The stop was $275.87, so that means R was $53.48. Stopped out and reversed to short the week of 7.12.10 at $262.86. The percentage loss on the trade was -20.2%, and the reward-to-risk ratio was -$66.49/$53.48 = -1.24.

10. SHORT the week of 7.12.10 at $262.86. With the stop set at $321.90 my risk was $59.04. Stopped out and reversed to long at $281.35 the week of 10.18.10. The percentage loss on the trade was -7.0%, and the reward-to-risk ratio was -$18.49/$59.04 = -0.31.

11. LONG the week of 10.18.10 at $281.35. My stop was $233.66, so R = $47.69. Stopped out and reversed to short at $283.15 the week of 5.23.11. The percentage gain on the trade was 0.6%, and the reward-to-risk ratio was $1.80/$47.69 = 0.04.

12. SHORT the week of 5.23.11 at $283.15. Using a stop set at $322.60, the risk on the trade was $39.45. Closed yesterday at $268.27 with a $312.61 stop. The percentage gain on this trade is 5.3%, and the reward-to-risk ratio is $14.88/$39.45 = 0.38.

Bottom Line:
Winning Trades: 7 | 58.3% | $98.31/share avg.
Losing Trades: 5 | 41.7% | -$43.42/share avg.
Average Trade: Gain of 20.2% | $39.26/share | Reward-to-Risk Ratio (R): 1.07

Friday, June 10, 2011

Cummins (CMI) Update

I'm already short CME Group, Google, Mosaic, Cimarex Energy, F5 Networks, Transocean, Research In Motion, and Akamai Technologies, and by the end of the day I'll be adding Cummins to that list. 

Riverbed Technology, Baidu, Aruba Networks, and Caterpillar might not be far behind. 



1. LONG the week of 5.19.03 at $7.05. My stop was $5.60, so the initial risk (R) on the trade was $1.45. Stopped out and reversed to short at $16.39 the week of 3.28.05. The percentage gain on the trade was 132.5%, and the reward-to-risk ratio was $9.34/$1.45 = 6.45.

2. SHORT the week of 3.28.05 at $16.39. Using $19.08 for a stop, R = $2.69. Stopped out and reversed to long the week of 7.11.05 at $18.20. The percentage loss on the trade was -11.0%, and the reward-to-risk ratio was -$1.81/$2.69 = -0.67.

3. LONG the week of 7.11.05 at $18.20. With the stop set at $15.57 the R was $2.63. Stopped out and reversed to short at $18.25 the week of 10.17.05. The percentage gain on the trade was 0.3%, and the reward-to-risk ratio was $0.05/$2.63 = 0.02.

4. SHORT the week of 10.17.05 at $18.25. The stop was $21.25, so my risk was $3.00. Stopped out and reversed to long at $21.09 the week of 11.28.05. The percentage loss on the trade was -15.6%, and the reward-to-risk ratio was -$2.84/$3.00 = -0.95.

5. LONG the week of 11.28.05 at $21.09. With $18.44 for my stop the R on the trade was $2.65. Stopped out and reversed to short the week of 1.3.07 at $27.50. The percentage gain on the trade was 30.4%, and the reward-to-risk ratio was $6.41/$2.65 = 2.42.

6. SHORT the week of 1.3.07 at $27.50.  The stop was $31.35, so that means R was $3.85. Stopped out and reversed to long the week of 1.29.07 at $33.01. The percentage loss on the trade was -20.0%, and the reward-to-risk ratio was -$5.51/$3.85 = -1.43.

7. LONG the week of 1.29.07 at $33.01. My stop was $28.06, so my R was $4.95. Stopped out and reversed to short at $44.32 the week of 9.22.08. The percentage gain on the trade was 34.3%, and the reward-to-risk ratio was $11.31/$4.95 = 2.28.

8. SHORT the week of 9.22.08 at $44.32. The initial stop was $71.90, so R = $27.58. Stopped out and reversed to long the week of 4.20.09 at $32.66. The percentage gain on the trade was 26.3%, and the reward-to-risk ratio was $11.66/$27.58 = 0.42. 

9. LONG the week of 4.20.09 at $32.66. With the stop set at $18.82 the R was $13.84. Closed last week at $101.40 with a $97.42 stop. The percentage gain on this trade is (was) 210.5%, and the reward-to-risk ratio is (was) $68.74/$13.84 = 4.97.

Bottom Line:
Winning Trades: 6 | 66.7% | $17.92/share avg.
Losing Trades: 3 | 33.3% | -$3.39/share avg.
Average Trade: Gain of 43.1% | $10.82/share | Reward-to-Risk Ratio (R): 1.50

Tuesday, June 7, 2011

Hewlett-Packard (HPQ)

I do not trade Hewlett-Packard. I've wanted to trade the stock for years, especially the short signals, but it has consistently ranked in the high 40s to low 50s in my ranking algorithm (currently its 47th), and I only trade stocks that rank in the top 30.

It's not a huge loss, but our total return on investment since June 2003 would be 172.8% vs. the stock's rise of 63.9%, so we have left a little bit of money on the table.    



1. LONG the week of 6.2.03 at $22.03. The stop was $16.83, so the initial risk (R) on the trade was $5.20. Stopped out and reversed to short at $21.67 the week of 4.19.04. The percentage loss on the trade was -1.6%, and the reward-to-risk ratio was -$0.36/$5.20 = -0.07. 

2. SHORT the week of 4.19.04 at $21.67. Using $25.49 for a stop, R = $3.82. Stopped out and reversed to long at $19.69 the week of 11.1.04. The percentage gain on the trade was 9.1%, and the reward-to-risk ratio was $1.98/$3.82 = 0.52.

3. LONG the week of 11.1.04 at $19.69. With the stop set at $16.49 the risk was $3.20. Stopped out and reversed to short the week of 2.4.08 at $41.88. The percentage gain on the trade was 112.7%, and the reward-to-risk ratio was $22.19/$3.20 = 6.94.

4. SHORT the week of 2.4.08 at $41.88. The stop was $52.63, so R = $10.75. Stopped out and reversed to long at $37.35 the week of 6.1.09. The percentage gain on the trade was 10.8%, and the reward-to-risk ratio was $4.53/$10.75 = 0.42.

5. LONG the week of 6.1.09 at $37.35. With $28.63 for a stop the R on the trade was $8.72. Stopped out and reversed to short at $47.07 the week of 1.25.10. The percentage gain on the trade was 26.0%, and the reward-to-risk ratio was $9.72/$8.72 = 1.12.

6. SHORT the week of 1.25.10 at $47.07.  The stop was $53.49, so that means R was $6.42. Stopped out and reversed to long the week of 3.22.10 at $53.42. The percentage loss on the trade was -13.5%, and the reward-to-risk ratio was -$6.35/$6.42 = -0.99.

7. LONG the week of 3.22.10 at $53.42. Using a $48.29 stop, the risk on the trade was $5.13. Stopped out and reversed to short at $46.73 the week of 5.3.10. The percentage loss on the trade was -12.5%, and the reward-to-risk ratio was -$6.69/$5.13 = -1.30.

8. SHORT the week of 5.3.10 at $46.73. The initial stop was $55.74, so the R = $9.01. Stopped out and reversed to long the week of 1.3.11 at $45.09. The percentage gain on the trade was 3.5%, and the reward-to-risk ratio was $1.64/$9.01 = 0.18.

9. LONG the week of 1.3.11 at $45.09. With a stop set at $39.27 the risk was $5.82. Stopped out and reversed to short at $42.68 the week of 2.22.11. The percentage loss on the trade was -5.3%, and the reward-to-risk ratio was -$2.41/$5.82 = -0.41.

10. SHORT the week of 2.22.11 at $42.68. The beginning stop was $50.58, so R = $7.90. Closed last week at $36.11 with a $42.82 stop. The percentage gain on this trade is 15.4%, and the reward-to-risk ratio is $6.57/$7.90 = 0.83.

Bottom Line:
Winning Trades: 6 | 60.0% | $7.77/share avg.
Losing Trades: 4 | 40.0% | -$3.95/share avg.
Average Trade: Gain of 14.5% | $3.08/share | Reward-to-Risk Ratio (R): 0.72

Friday, June 3, 2011

Wynn Resorts (WYNN)

As far as I can tell, Wynn Resorts is the closest thing there is to a sure thing in Las Vegas.

The stock is up 192.7% since my first buy signal in April 2005, but our total return on investment currently stands at 643.1%. I think it beats trying to count cards.



1. SHORT the week of 4.18.05 at $44.17. Using $59.50 for a stop, the risk R on the trade was $15.33. Stopped out and reversed to long at $50.02 the week of 11.21.05. The percentage loss on the trade was -13.2%, and the reward-to-risk ratio was -$5.85/$15.33 = -0.38.

2. LONG the week of 11.21.05 at $50.02. With the stop set at $38.27 the risk was $11.75. Stopped out and reversed to short the week of 6.18.07 at $79.70. The percentage gain on the trade was 59.3%, and the reward-to-risk ratio was $29.68/$11.75 = 2.53.

3. SHORT the week of 6.18.07 at $79.70. The stop was $96.17, so R = $16.47. Stopped out and reversed to long at $99.26 the week of 8.6.07. The percentage loss on the trade was -24.5%, and the reward-to-risk ratio was -$19.56/$16.47 = -1.19.

4. LONG the week of 8.6.07 at $99.26. With $73.85 for a stop, the risk on the trade was $25.41. Stopped out and reversed to short the week of 12.17.07 at $107.51. The percentage gain on the trade was 8.3%, and the reward-to-risk ratio was $8.25/$25.41 = 0.32.

5. SHORT the week of 12.17.07 at $107.51.  The stop was $144.59, so that means R was $37.08. Stopped out and reversed to long the week of 4.20.09 at $36.88. The percentage gain on the trade was 65.7%, and the reward-to-risk ratio was $70.63/$37.08 = 1.90.

6. LONG the week of 4.20.09 at $36.88. Placing the first stop at $15.28, the risk was $21.60. Closed last week at $146.40 with a $119.28 stop. The percentage gain on this trade is 297.0%, and the reward-to-risk ratio is $109.52/$21.60 = 5.07. 

Bottom Line:
Winning Trades: 4 | 66.7% | $54.52/share avg.
Losing Trades: 2 | 33.3% | -$12.71/share avg.
Average Trade: Gain of 65.4% | $32.11/share | Reward-to-Risk Ratio (R): 1.38