The Nasty Price Action of a Whipsaw Posted 4-6-17

The Nasty Price Action of a Whipsaw.  Who’s to Blame?

Whipsaw Price ActionOne of the cruelest price action occurrences is the intraday whipsaw and yesterday we witnessed a doozy!  If you apply a little trader psychology to the whipsaw the emotions, Fear, Greed, and Panic will always come to the surface.  One of the places that whipsaws commonly occur is at or near price action bottoms when Fear suddenly reverses to Greed.  Of course, the opposite of that is what we witnessed yesterday.  With the market displaying topping patterns and uncertainty concerning the future of the rally Fear can quickly shift to Panic at or near price action tops.  Most commonly, an event or news story will trigger these nasty intraday reversals in price action.

Traders will often point to these events and assign blame to whatever triggered the reversal for their misfortune.  While it’s true, there was trigger point it’s incorrect to blame the person or the event that set the whipsaw in motion.  The ultimate responsibility for any losses incurred rests squarely on the shoulders of the trader.  Sorry I know that hurts to admit, but it is the truth.  When the market is trending higher, and everything is coming up roses we as traders often fail to see topping action or choose to ignore it.  Price action provided the clues but our emotions clouded our view.  Playing the blame is a bad habit.  Accept that the ultimate responsibility for success or failure rests with you and you alone.

On the Calendar

On the Economic Calander today, we have the weekly jobless claims and a single Fed speaker.  It would be unlikely that either will have the power to move the market today.  On the Earnings front, there are 25 companies reporting, but none are noteworthy unless you have been holding one or thinking of entering.

Plan of Action

My plan for the day do little more than managing the positions that I’m in and continue to prepare.  After the big reversal yesterday we can expect an extra dose of volatility and whippy price action this morning.  However, there is a very good chance the market will get very quiet today as we wait for the Friday morning employment report.  If I do decide to enter any new positions, they will be smaller than normal with a plan to take quick profits if I feel the trade is at risk.

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Trade Wisely,

Doug

“Patience, Grasshopper” Posted at 8:18 AM EDT 4-5-17

“Patience, Grasshopper” Sometimes Less is More For Traders.

When I was a kid one of my favorite shows was a TV series called “Kung Fu.”  When the student played by actor, David Carradine wanted to rush his education; the Kung Fu master would say “patience, grasshopper.”  The phrase is so popular it has become part of the US lexicon.  However, I’m not sure many fully understand it’s context.  What the master wished to confer was that the desire to accomplish was not enough.  The real message was that with patient dedication, hard work, thoughtful study and repeated practice that success or mastery would be the result.

I think that kind of thinking applies well to trading and the current condition of the market.  Sitting in front of our computers we often tend to rush in, but the desire to hurry the process most often produces an undesirable result.  The trader with the patience to prepare, watch and wait for the best time to act will most likely succeed.

On the Calendar

Today on the Economic Calendar we have the ADP Employment Report, ISM Non-MFG, Petroleum Statis Report and the release of the FOMC minutes.  A big day for news to be sure.  Of those reports, it’s the report on the oil supply and the FOMC that have the most chance of moving the market.  On the Earnings Calendar, there are 23 companies reporting today.

Action Plan

I have mentioned in my morning notes and several times during the Right Way Options sessions that we should expect choppy price action.  Not that I want to be repetitive, but I believe we can expect more of the same the rest of this week.  After the morning rush, you should not be surprised to see the volume to become very light as we wait for the FOMC minutes.  After their release, there will be a flurry of activity that new or inexperienced traders would be wise to avoid.  Keep in mind the big Employment Situation report will be out on Friday morning.  The market will likely once again become choppy until it’s release.

Having said all of that my plan for the day is to be very patient watching, waiting and preparing for my next trade.  I have only made two entries this week, and that number may not grow at all today.  I don’t trade just to trade I will follow my rules and remain in control of my emotions.

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Trade wisely,

Doug

Morning Market Prep Posted at 8:05 AM EDT 4-4-17

Focus on the bigger picture and don’t get distracted by the hard right edge.

Focused tradingWith the afternoon rally yesterday it’s very easy to become overly focused on the hammer candlestick and ignore the downtrend staring us right in the face.  Most people are naturally positive.   When money is on the line the desire to be right will influence how we visualize a chart.  We may latch on the bullish hammer pattern and be blinded to the fact that it has occurred at resistance in the middle of a downtrend.  Not the most helpful place for a hammer to form.  Failing to see the overall chart pattern is a bad habit that can be tough to break.

We may latch on the bullish hammer pattern putting on blinders to the fact that it has occurred at resistance in the middle of a downtrend.  Not the most suitable placement for a hammer pattern to form.  Failing to see the overall chart pattern is a bad habit that can be tough to break.  I call it hard right edge trading.  It’s times like this when the trader tends to focus only on the candle and become blinded to the bigger picture.  I can tell you from experience this habit can cost you a lot of money if not dealt with by taking just a few more seconds to focus on the bigger picture objectively.

I can tell you from experience this habit can cost you a lot of money if not dealt with by taking just a few more seconds to focus on the bigger picture objectively.

On the Calendar

This data-laden week kicks off the morning with a potential market moving report on Internation Trade at 8:30 AM Eastern.  It’s followed shortly after by Factory Orders at 10 AM Eastern which can affect the market particularly if the number is a surprise.  Also noteworthy is the Fed speaker at the end of the day. On the Earnings Calendar, we only have 15 companies reporting today but, it’s wise to continue with the process of checking rather than being surprised.

Action Plan

With the futures continuing to push lower in the premarket I’m inclined to become very protective of the capital.  First thing first is not to panic.  Emotional decisions are rarely the correct business decision.  Remember to follow your trade plans because they are there to protect you from that emotional beast which costs you so much money.  As always manage the positions that you’re in first.  Set your stop orders and allow them to work for you!  If your new, inexperienced or struggling as a trader the best course of action may to simply set this one out!

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Trade Wisely,

Doug

Morning Market Prep Posted AM 8:05 EDT 4-3-17

At resistance or not at resistance, that is the question?

Bulls and Bears at resistanceThe four top indexes closed right at resistance or just below.  Now comes the decision point.  Will it be the Bulls or the Bears answering in the majority?  If you have been or watching or reading any of the market new headlines, the predictions have started the fly.  There are the rose colored glasses crowd with the deep conviction that the changes made by the Trump administration will carry us much higher.  Then we have the gloom and doomer’s, convinced we have been teetering on the edge of the world and our next stop is a bottomless pit.  As I continue to say predicting is fools that will rob your hard earned money if you allow it to influence your decision making.  Personally, I have always felt it is much easier to simply follow the market if or when it picks a direction.  You and I are the CEO’s of our trading businesses. Therefore the ultimate decision always rests upon our shoulders.  There will never be anyone that cares about our money more than us.  So let’s make our own decisions!  Let’s turn off all the outside noise and focus on price rather than waste our time being influenced by the predictors.

Items to watch

This is a big week on the Economic Calendar.  We kick it off with PMI Manufacturing at 9:45 Eastern followed by the ISM and Construction Spending reports at 10.  The ISM index number is the most likely to move the market.  Other than that we have two Fed speakers out there stumping on interest rates today.  It seems to me they have said plenty and have nothing noteworthy left to say.  Some quiet would be nice!  On the Earnings Calendar, there are 38 companies reporting today to be aware of.  Keep in mind that the FOMC minutes will be out on Wednesday and the Big Employment Situation report happen Friday.  Both of these important reports tend to give the market pause because of the uncertainty that comes with them.

Action Plan

As you know, I trimmed a lot of risk from my portfolio last week.  If the Bears use resistance to begin moving the market lower, I should be affected very little as a result.  On the other hand, if the Bulls step up to the plate I’m prepared with the cash in hand to start buying are low-risk entry points as they develop!  First things first, I will manage existing open positions.  After that, I will do the job of the trader and begin going through my watch list preparing for the next trade.  I won’t predict, I will follow when direction as has been determined.

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Trade Wisely,

Doug

Morning Market Prep Posted 03-31-17

The Final Battle Between Resistance and End of Quarter Window Dressing

Market ResistanceOnce again the end of quarter window dressing won the day and pushed the resistance battle line forward.  The Nasdaq front line gave way altogether and as a result reached record highs.  The futures are hinting that the Bears have gathered some reinforcements overnight for the final 1st quarter showdown.  The first quarter of 2017 will go down in the books as tremendously profitable for most traders.  Big firms will finally have a chance to post hefty returns, therefore, they will do all they can to prevent a selloff.

Events to Consider

On the Economic Calendar, we have Personal Income and Outlays, the Chicago PMI and Consumer Sentiment reporting numbers.  The Personal Income is the big number of the day and the most likely to move the market.  Although important the PMI and Sentiment number are unlikely to have much effect unless they post a big surprise.  Also closing out this quarter we have Fed speakers that feel they still have something noteworthy to say about interest rates.  Personally, I’m hoping this is the end of Fed’s new tour because every time they speak they risk having a market effect.   Last but not least we have over 100 companies reporting earnings today.  It’s odd to have so many reports at the end of the quarter so consequently, we must be vigilant in managing our accounts.

Plan of Action

Today is Friday and as a result, I want to collect my paycheck.  Therefore I will be looking to trim risk positions ahead of the weekend and bank some tasty profits.  Because the market is pressed against resistance I will also be looking for good short trade setups.  Today could prove to be a very busy day.

I wish you all a profitable day and a fantastic weekend.  Keep in mind this Saturday at 10 AM Eastern time I will be doing the RWO E-Learning session.  The topic will be shorting setup and strategies.

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Trade Wisely,

Doug

Morning Market Prep Posted 03-30-17

The Bulls Are Pounding On The Door Of Resistance, Will It Open?

Market ResistanceThe Bulls were able to win the battle yesterday in 3 of 4 indexes and as a result, are pounding on the door of resistance.  The question that still needs to be answered is, will it open?  As I mentioned yesterday, this is a battleground, and it seems like the first round was won by the Bulls.  Most noteworthy is the NASDAQ which is very close to making new all time highs.  For new or inexperienced traders this is a great chance to study possible topping patterns.  Price action resistance is always of critical importance and therefore must be given respect as you plan the day ahead.

Events to Consider

I think the GDP number at 8:30 AM Eastern will be critical today.  A good number may be all that’s needed to inspire the bulls to stampede through resistance.  On the other hand, a bad number could have the opposite effect allowing the bears to feed.  Also on the Economic Calendar, today is the Weekly Jobless Claims and a slew of Fed speakers.  The Earnings Calendar has 92 companies reporting, and therefore we must continue to stay on our toes to protect our capital.

Plan of Action

My plan is to wait for the reaction to the GDP number because it will likely influence today’s open.  Although resistance will challenge any upside move, another consideration will be the possible window dressing effect.  I remain cautiously bullish but will be ruthless in the protection of my profits due to the power of price resistance.  Failure patterns here are not to be trifled with so in conclusion I recommend we remain very cautious.  New and inexperienced traders are highly encouraged to stand aside while this battle continues.

I wish you all a productive and profitable day.

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Trade Wisely,

Doug

Morning Video – Danger Zone Posted at 8:10 AM EDT 03-29-17

The Danger Zone Battle Begins, It’s Time To Raise Your Caution Level

Market Danger Zone

The price of the major indexes finished the day pressed directly against the Danger Zone of price resistance.  The feeding grounds of the Bears!  If a reversal of the market is to occur it would be right in this area.   We should be watchful of the Bears reestablishing dominance.  With the end of quarter window dressing possible, this could be an interesting battle to watch from a distance.  However, joining the battle in the danger zone could prove to be very damaging to your account.  Futures were slightly positive overnight but once again have moved to the downside this morning.  For new stock and options traders, this is a battle you should consider sitting out until there is evidence of victory has been established.  Keep in mind this fight could take a couple of days with consolidation as a result.

Events To Consider

On the Economic Calendar, we have pending Home Sales and the all important Petroleum Status Report at 10 AM Eastern and 10:30 AM Eastern respectively.  The Earning Calendar shows 63 companies reporting today.  Stay on your toes around these events and reports.  The last thing we want to do is get caught, unaware.  As the CEO of our trading business’s, the responsibility lies directly on our shoulders.

My Plan Of Action

As for me, I will be very slow to move on new positions this morning until I see some direction.   However, I will quickly as possible protect capital if the Bears gain the upper hand and failure (reversal) price action begins to win the day.  Let’s hope the end of quarter window dressing wins the day and as a result, the bulls charge upward!

Have a fantastic day and keep your caution flags waving.

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Trade Wisely,

Doug

Morning Video 03-28-17 Posted at AM EDT


Danger Zone


Good Morning Traders.

After the significant drop in the morning, I was pleasantly surprised to see the Bulls pull off a very nice rally recovering nearly all of the move lower.  The big question is can it follow through?  Last night the futures were up about 30 points, but they are now suggesting a lower open of 20 to 30 points.  We are truly in the danger zone so be very careful.

On the Economic Calendar this morning we have the International Trade goods number that has the potential to move the market at 8:30 eastern.  At 9 AM we have Case-Shiller report, and then 10 AM the consumer confidence number, both of which would have to be a pretty big surprise to move the market.  Keep in mind; we have more Fed speakers today.  On the earnings calendar, we have 78 companies reporting today.

My plan of action for today is to be very cautious.  That was great to have the rally yesterday, but that rally stopped right at resistance levels.  If the Bulls don’t step up and defend today, the Bears could regain direction and move use lower.  I will likely sit on my hands until we have some price action clues established.  I suggest extreme caution because we are in a very dangerous place where big moves are possible.

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Trade Wisely,

Doug

Morning Video 03-27-17 Posted at 7:59 AM EDT

Good Morning!

The bears are hungry, and it looks like they plan to fed well today.  The failure of Congress to pass a new healthcare bill is gaping the market sharply lower this morning.  The selloff began in Asian markets last night and went all around the world.  Quietly I was hoping why would pull off a last minute deal before today’s open but apparently they have given up at least for now.

The economic calendar events will not provide us any help today because all have are a few bond announcements and a couple of Fed speakers that still have something say after talking all last week.  On the earnings front, we have 50 companies reporting today so stay on your toes.

The first order of business for me this morning is to manage the positions that I’m in.  We have some very nice profits in RWO trades so let’s make sure we are taking care of that business first.  Don’t act out of panic but clearly think through each position and respond as with a business frame of mind.  We will now start looking for some bearish positions, but we must remember that the 1st quarter is coming to an end and the possibility of an end a window dressing rally is possible.

Have an awesome day!

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Trade Wisely,

Doug