Walking the tightrope. Fri Feb 26

I'm practising technique using intraday 5 minute charts and the moves often have little to do with any overnight leads. While I'm sitting waiting for something to evolve, it's quite easy to jump into a trade and then get "imprinted" into being bullish or bearish. Along the lines of "I know nothing", I'm trying to take an academic rather than a personal interest in the trades.
I've already broken a couple of my rules today, to my cost, and had to pull myself together again. The chief mistake was to get excited about the possibility of a larger breakout and put a position on without good confirmation.

Actually, I'm really tired today which is why this post is thin. I've also been impatient with my intraday trading, cutting a Cba long without a trigger just before a big surge. I would have been wise to sleep in today and try to find a couple of trades later in the day.
Here's Cba on the 5 minute.

Click to enlarge

Got long this at 5341, around 12.30 pm and cut for square - for some silly reason like I was temporarily bearish the Spi - only to watch it race up 75 cents before a recent pullback. I obviously failed the "I know nothing" test today! It's a good lesson though, don't trade tired.

I know nothing. Thu Feb 25

Like Manuel from Fawlty Towers, I've been insisting "I know nothing". I haven't actually been saying it out loud, instead I've been using it as my silent mantra.
My issues in the last year or so have been more to do with attachment to being right and self sabotage than to foolish methods. I've really had to grind it out for week after week but in the last couple of days I've been practising day trading using 5 minute charts and managed to leave things alone - by and large - which has been lucky because we've had a market that's gone in one direction intraday. Choppy markets will still be tricky but at least I allowed my positions to come to fruition.
By repeating, "I know nothing", I'm reminding myself to wait for the market to show that's it turning around rather than using guesswork. I am doing a bit of guesstimation along the lines of the targetting I wrote about yesterday but I'm letting the market action have the loudest voice so that if I'm unsure I'd rather give away some upside by waiting until a level is broken.
Here's the Woodside Petroleum chart on a 5 minute intraday basis. I thought it might rally today but it rolled over around 2pm and I shorted it at 4380. For once I stayed in until squaring up near and at the close because there was no reason to get off before then. Previously I might have picked a support level and cut too early.

Click to enlarge

Exit stage left. Wed Feb 24

Once more on trading methods.
I like to work my way out of positions when I'm taking profits because it seems psychologically more satisfying but intellectually it can be difficult to justify. A lot of your money is made on the trades which you're able to hold for a long time and if you only hold a third of your original position for the best part of the move then you're cutting back your upside substantially.
I don't think that the stepped exit is always unjustified. I've done a fair bit of work on targetting versus letting the market take you out and I think that most of the time you get a similar or better profit result with a shorter holding period through targetting. You also ensure you've made something when a stock has a sudden reversal but nevertheless you do miss some of the mega moves.
It would be pretty subjective trying to work out which approach is best because the holding period reduction muddies the water as does the greater value of a smoother versus a lumpier profit profile.

Click to enlarge

I pretty much chose a stock at random and there was an example of what I'm writing about. Looking at the Bhp chart above, let's say you noticed the 1-2-3 buy signal forming in the first week of November. You might have gone long knowing that you could use the low from November 2nd as your stop. Gratifyingly, the stock took off and if you were using a 5 wave completion as your stop you might have got out when the 5th started to stall sometime in the 3rd week of the month. By contrast, if you were to wait for the last swing low to be breached which would be a reasonable, conservative trend following approach then you could have ridden the rise for another 2 weeks. In the end, though, your stop would have been around 4075, maybe 30 cents better than the other method but with a much longer holding period.

Then again, if you were trend following with a looser stop you might have stayed in till late January when the stock signalled a decent correction or a change of trend with a 1-2-3 pattern. Your exit in this case might have been close to 4290.

In this case you've held the position for two more months but made another, say, 7% on your original investment.

It's probably a matter of preference as to which approach you prefer, depending on how much time you have to devote to trading, how much action you want and how many better opportunities you might come across.

My preference is the targetted approach as I want to capture momentum and I feel that I have the time to find something else that's moving when a stock stalls. My only problem now is to actually stick to this plan. In the Bhp example above, I would probably have sold a third after a couple of days - just in case - and another third a few days later. I'm practising changing this habit using intraday trading in some high cap, high volume stocks in order to fast track things. 

Excitement. Tue Feb 23

I'm still thinking about some of my impressions from the Van Tharp book. The guy's not lacking in ego, he suggests you read the book 4 or 5 times and that you'll pick up on different points each time. Fortunately for him, he can walk the walk and the book does justify multiple readings.
There is a fairly limited psychological section in the book and it gives an example of a self assessment from Tom Basso, a successful money manager. One of the quotes from Basso says, "I certainly don't think of myself as compulsive. I don't find trading exciting at all. It's just a business to me. I look at trading as an interesting brain tease."
I found this slightly irritating because I really enjoy trading, I would do it as a hobby or at least something similar that was challenging mentally. But actually it's a sensible approach and I think I reacted badly because it hit home. What I've been doing is caring too much about the outcome of any particular trade. When I've had my best periods trading I've been willing to accept whatever the result might be.
I've written before about trading statistically rather than focussing on a single trade so that you measure success by how well you stick to your plan rather than by whether any particular trade made money. I've found it hard to put into practice though and it's only by dint of repetition that I've been able to improve in this area. However, one of the things that Tharp does with Basso is to test whether you can make money by using a random entry with the idea being that your money management is far more important than anything else so that even with a coin toss entry it can provide a winning edge.
They found that they could easily do it and somehow the idea has had a liberating effect for me. Rather than fretting too much about the perfect trade selection it has got me much more comfortable with the casino idea where you keep taking the bets because you always have an edge. Given that I spent 10 years as a market maker where much of your business is about capturing edge, you would think that this would be an easy concept to grasp. I suppose the difference is that when you're a market maker you understand that you're trying to make edge. A lot of the trades you take are passive where you're obliged to go one way regardless of any directional opinion you might hold. Obviously you hedge and a lot of the time you don't really care where the stock goes.
When you're doing directional trading, you've had to form an opinion and it can then be harder to accept mistakes. But if you realise that your returns are determined in a small way by your entries and in a large way by your exits and risk management then the importance of your initial opinion is much reduced and it should be easier to take the right follow up action.
We'll see what happens but it was an "ah ha!" moment for me.

Pragmatic Elliott wave use. Mon Feb 22

As I mentioned in the last post, I've been re-reading one of Van Tharp's trading books. I can see from the book that the author is a systematic person. For example, he seems quite anti Elliott wave techniques because he sees them as an attempt to find some magical order in the market in a Da Vinci code sort of a way. No doubt, a lot of people are attracted to that, but for me it's a tremendously useful technique.
What I like about using Elliott wave ideas is that you are trying to put patterns in context and you gain more information that way. For example, a market has just had a good surge up after building a base, what an Elliott wave person might call a third wave. A correction follows and you get what looks like a straightforward 1-2-3 signal down. I would rarely take this because I would interpret it as a correction which won't go far. On the other hand, if the same pattern was in the direction of the trend after a correction I'd be very happy to go with it.
So I use the technique in a pragmatic way and because it is not easy to backtest - eg it's not just a matter of scanning for 1-2-3 breakouts - and many are uncomfortable with this subjective approach to chart interpretation there are not always going to be a lot of people using the same method as me.

By the way, I'm losing enthusiasm for posting trades every day as I don't think I'm getting much value out of it now and the posts are probably becoming humdrum. What I'll do instead is to post on issues of interest I might be working on and perhaps use the odd example to illustrate.

Missing the point. Sat Feb 20

I don't get many comments but I got one the other day which I found insulting. On reflection, I decided it might not be deliberately snide and I replied politely. It did get me thinking that if it was a genuine reaction then this reader had completely missed the point and so maybe the point wasn't as obvious as I thought.

The aim of this diary is to show the day to day reality of trading, using my own experience as an example.

I've worked with lots of other traders and managed some too and I think that the ups and downs I have are pretty representative. You would never know this from reading the average trading book. Most that I've read, even the good ones, paint an unrealistic picture of what it takes to trade for a living. The author will show nice set ups which develop in text book fashion and explain how you ride the trend and then get off at some optimum point.
Trading is easy in principle. You find a method and a time frame that suits you. You trade appropriate size to your budget, you cut your losses short and run your profits. Most people of average intelligence can, if they're interested, understand technical trading with little difficulty.
Equally, most people know what it takes to be fit and healthy. Eat well, exercise regularly, avoid stressful situations. Unless you are unlucky with illness or accidents there is very little reason to be unfit and the vast majority of people want to be in good shape and yet....

The really challenging part of trading is the psychological element. As soon as you put on a position or form an opinion you become invested in it and the human tendency is to listen to information that supports your view and ignore that which doesn't. The ideal is to think statistically, ie I have no idea whether this pattern will work this time but in the long run doing such trades will be profitable.
I've been doing this work for a long time and I still work on these issues. I have periods where I flow with the market, lose my ego and make a lot of money and others when it's a battle to stick to my disciplines.
I've been willing to honestly show this struggle through the trading diary, primarily to help myself but also to help others.
I don't particularly enjoy the experience - or appreciate it being pointed out! - but nevertheless I'm quite aware that I'm going to look stupid quite often. I also know that if you can't cope with being wrong you will never trade successfully. I was re-reading Van Tharp's excellent book, "Trade your way to financial freedom", and the first page I opened to was headed by a quote from Robert Kiyosaki, "Avoiding mistakes makes people stupid and having to be right makes you obsolete".

Taking away the punchbowl. Fri Feb 19

I was quite hopeful when I got to work this morning about a couple of long positions given that overnight markets were strong again but after the US market close the Fed raised the discount rate by 25 basis points. This is seen as a prelude to a rise in the Fed funds rate so overnight futures are down and any early rises quickly evaporated.
I decided to cut my long positions although they are still above yesterday's lows which might usually be a fairly conservative stop. However, since I didn't feel that my entries were all that great and the trades were retracement type momentum plays, I'm happy to clear the decks and see if something better might turn up. Both the stocks are more trading range situations than reversal rallies but still not great bullish charts. Anyway, out of 40,000 Asciano at 177.5 for a 200 dollar loss with another 46 in costs. Out of the last 33k of Fairfax for 177 which is a further 1320 profit to make 1760 overall less 49 costs.

12.22 I've just shorted 15,000 David Jones at 486.5 average price. The stock had a retracement rally where it made higher lows over 8 successive days. There was the opportunity to take this short position on Wednesday when it finally broke the previous day's low. This is the third successive new low but I'm still able to get short at very close to the signal level of 487. The stock is in a downtrend so this is a resumption trade but even if it actually makes a higher low in an a-b-c retracement rally, there's still a reasonable opportunity to make some money because a higher low will often be only marginally above the previous one in retracements. The danger is if the retracement is not complete and my stop is just above the recent high at 500.
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2.22 The market held for most of the morning but since midday it has dropped so that the Xjo index is now down close to 1%. The Kospi and the Hang Seng are harder hit again with globex overnight S&P futures down over 1% as well. I'm interested to see what happens with the Xjo index. Usually when you have a big up day as we did on Wednesday, there's some follow through and at present this is looking like a correction of that move on the intraday 60 minute chart below. Holding 4600 will be key as a break of Tuesday's high will probably negate the chance of significant further rallies.

4.11 The market rallied from 2pm to close down 20 points which is a strong result relative to other markets in this time zone and overnight action in the US futures.

So far, so good for Djs which closed at 480.

Settling down. Thu Feb 18

After the euphoria yesterday, and despite reasonably good overnight action, the Aussie market has dipped 17 points in the first hour and 25 minutes of trading. Interestingly, although the Euro dipped again after its short covering rally on Tuesday and the USD rallied, base metals, oil and gold held most of their gains of the previous day.
Despite the drop, which is now 22 points, I'm much more sanguine about holding long positions. It seems to me that yesterday was confirmation that the month long sell down is over for now and the next week or so will see a rising market.

11.45 By the way, I mentioned the other day that One Steel might have issues with iron ore pricing affecting their probability. Ost are vertically integrated and are self sufficient in iron ore so this is a potential problem for Bsl but not Ost. It didn't greatly affect my Ost trading as I was guided by my reading of the chart but it might have made me slightly less agressive in cutting the position.

1.30 The index has stabilised and I've added a long in Fairfax, 44,000 at 173.5. The stock is probably in a trading range now unlike a lot of other stocks which are in downtrends. I'm looking for a rally towards the highs so a fairly modest target in the mid 180s. There's a higher low on Tuesday and although the best entry point was yesterday at 172, the slippage is not bad.
Click to enlarge

2.49 Out of a quarter of the Fxj position at 177 for a 440 dollar profit.

4.20 A fairly typical "hangover" day finished with a small loss of 13 points on the index. Asciano was up 1 at 178 and Fairfax closed strongly at 179.

Snap back. Wed Feb 17

Strong overnight action in Europe and the US has broken the stalemate and confirmed that the retracement rally is up and running. Approaching midday, the Xjo index is up 83 points or 1.8%.
I've got definite cuts to make in Challenger and One Steel but I've only done part of the Cgf so far as recently these rallies have tended to wane as the day goes on. This one looks unlikely to fall back much though so I might have to bite the bullet sooner rather than later.
I've got a few potential longs which I should have bought early, with hindsight, and the best opportunities look to be in Asciano, Fairfax and Qantas.

12.44 Bought back 5k Cgf at 378.5 (v 2nd tranche at 373.25). This was a small loss of 263 dollars which exactly cancelled out the small gain yesterday so I'm just down the costs of 24 dollars. Also bought back 5k of the second tranche at 376 (v 376.5).

1 pm Ost was at 350 soon after the market opening which provided confirmation that I should cut. So far I've bought back 5,000 at 344 for a loss of 1100.

2.01 There hasn't been anything by way of a pullback in the overall market although a couple of my stocks have paused. I've taken the opportunity to clear the decks and get out of my short positions. I've bought the last 5k of Cgf at 378 for an overall 50 dollar loss less 24 costs. Out of Tse too at 379 for 200 down and another 24 dollars for costs. These are fine but Ost is a bit harder to take, out of the last 10,000 short at 346 for a loss of 2400, 3500 all up and another 31 dollars in costs.

4.02 I've gone long in Asciano. In this stock the sell off over the last month held around the November highs and after 5 waves down the stock has just made a buy signal at 178. It's possible that this will just be a mild retracement rally but it's in technically better shape than a lot of stocks so there's the chance of new highs or at least getting close to the January highs. Long 40,000 at 178.
Click to enlarge.

Read your notes. Tue Feb 16

I completely forgot to check the reporting calendar yesterday despite copious notes to do so, otherwise I would have seen that One Steel was due to report this morning. The result was very good and despite general unease about the outlook for steel companies - can they push through price increase when their input costs surge with the iron ore price - the market has pushed the stock up 6% to 341.

Compounding my irritation, as I noted in the blog yesterday, there was a reasonable chance of another minor high. Here's the 60 minute chart showing the correction. The lows yesterday held above the highs from the leg up on the 10th February so that was a reasonably good sign.

Click to enlarge

Resistance is around 346-350 and the stock has been as high as 345 this morning so we'll see how it goes.

Overall the index is up a healthy 1% thanks largely to Westpac whose strong report has lifted them about 5% and has dragged the rest of the banking sector up too.

3.21 Back in the office after some external business. The early strong gains are evaporating although Ost is still up at 340. I've bought back 5,000 Cgf at 368 for a small profit of 368 against yesterday's sale at 373.25.

Once again the Xjo index went all the way up to resistance and failed so I'm still looking for lower levels. I would like to see the pattern complete soon. I think there'll be easier gains on the bullish retracements and for the moment I'm largely sitting on my hands.

4.01 I'm short 10k of Transfield at 377. I've been bearish this for a while but squared up when it started to go into a congestion phase. I think it has completed a weak a-b-c retracement and I'll look to short the other 10k tomorrow on confirmation, especially if it sells below 375 on reasonable volume.

4.27 The Xjo index rose 22 points. I'm short Cgf which fell 3 to 368, Ost which rose 18 to 340 and Tse which closed at 375.

Eye of the tiger. Mon Feb 15

It's now the Year of the Tiger and I think we might be in the eye of the storm, the quiet period before another sell off as Chinese markets are closed today and US markets tonight. Two hours into the trading day and we're up 1 point having bounced off early mild lows.
I'm still working with the scenario that this is a choppy retracement but the sell off  is incomplete. The fact that we haven't bounced with any vigour is lending weight to this thesis. Here's the latest 60 minute chart of the Xjo.
Click to enlarge.

Given my overall views, I'm leaning to the short side and looking for stocks which have had a similar sort of unconvincing rally. One Steel is one of these and it's my featured trade today. After a hard sell down from 365 to 299 it had a rally of about 50% to Friday's high of 333. Today it's slipping again and I've short 7,500 shares at 322. When I look at the intraday chart I can see the possibility of another look at that 333 level so I'm keeping some of my powder dry in case I get the opportunity to short some more at a better price.

3.50 We've been in a tight range since lunchtime after falling through till 1.30 pm. The Xjo index is down 18 points.

I've now sold 12,500 Ost at 322 and I'm selling more Challenger to complete the trade I started on Friday. My plan is to move my position size to AUD 75k as I'm comfortable with how I'm going over the last couple of months.

4.19 Not much change in the index, down 17 on the close. Sold 10,000 Cgf at 373.25 so short 20k all up. Cgf closed down 10 at 371. Also short 15,000 Ost so far at 322 which is where it closed.

Mr Early Riser. Fri Feb 12

I've been Mr Early Riser today as a friend has spruced up my main trading computer with new ram and memory and a good spring clean. I was just about ready for the market open although there's still all those stupid glitches in Outlook where you have to change date formats and whatnot.
Anyway, the US lead was strong with base metals particularly favoured but the Aussie market is still sceptical and it's been the standard sell off from a gap higher opening. At 11.40 am we're up 8 points, the high was a gain of 39 points.
Boral looked like it could fall early but once again some buying appeared so I've just bought back the last 7k at 567 for a loss of 1875, 2738 overall and another 35 in costs.
On the brighter side, I sold 2k more of my Fortescue long at 494 on the open for a gain of 480 dollars. Incitec Pivot is also up a few cents at 349. Potash in the US rose by 5% and that often provides a good lead for Ipl. I suspect that if the market can recover then the stock will rally along with it. It's through the short term resistance at 347 and it popped through the 4th wave high from the pullback which was at 352.

12.48 The market is still slipping lower. I went too soon in Boral which is back to 560.
Overall the Xjo index and the futures chart have rallied without breaching resistance so I'm still looking at the market going lower.
I've got a potential short in Challenger which broke down through support just below 400 and fell quite quickly to 351. It touched 395 yesterday and opened there again today but has reversed throughout the day.
Click to enlarge

1.27 Short 10,000 Cgf at 376.5 as the stock follows the lead of the rest of the sector.

2.17 Although the market has been drifting lower all day and is close to the lows I wouldn't be surprised to see an afternoon rally as twice this week we've discounted good overnight rises.

Fortescue reports on Monday so I'll be selling out the last 5k at some point this afternoon. My target is around 500, we reached 494 this morning and although I think the target is conservative there's also a fair bit of downside in what's an unpredictable company.

3.37 A small rally petered out leaving the market unchanged. I'm also going to sell out of Ipl by the close because the rally is just too choppy, there's no drive to it.

4.15 Out of Ipl at 348 for 800, 1100 overall and 30 costs. Out of the last 5,000 Fmg long just before and after the match out for a 491.5 average for a gain of 1175 and 1905 dollars overall less 30 in costs.

I didn't sell the last 5k of Cgf as they finished reasonably well at 381 with the 60 minute chart looking as if there's more room to retrace up.

The market managed a gain of 8 points with my short squeeze coming late on by way of the Spi.

Overcooked. Thu Feb 11

With US markets, hobbled by heavy snow on the East coast, finishing with small losses, we've taken stock and after dipping into the red early, at 11.04 am we've gained 27 points. It looks like the selling was overdone in Bhp and Cba which did, after all, report solidly and both are now higher by 1%.
I've finished buying Ipl with the purchase of another 5k at 340. I've also gone long 4 other stocks although I'm not convinced about the market having made a final low so these positions may just be for the day.
The pick is Fortescue which has been bravely holding the 440 support level and looks ready for a short term kick back towards 500. Long 10,000 at 468.
Click to enlarge.

11.43 I've bought back 3,000 Bld at 569 as on the day after the result and with no upgrade pressure - ie one upgrade, one downgrade - the stock is holding and just down 3 cents. I might be clutching at straws a little continuing short so I'll watch closely. Loss was 864 dollars on the 3k.

Market's up nearly 1% now.

2.36 Figures today include buoyant employment numbers for Australia and better than expected inflation figures for China but the market has stalled since the China numbers were announced despite a solid start in the Hang Seng.

State of play is long Fmg (last 477) and long Ipl (last 344) with an ongoing short in Bld which is still at 569.

3.39 I'm uneasy about the index, still worrying about new lows but I guess I'm going to stick with my signals, maybe reduce position size a smidgin.

4.14 The market was held back by the weakness in Telstra today but still managed to advance 41 points.

Until the market has clearly turned, I'm cautious about long positions so I sold the extra 5,000 Ipl out at 346 on the match for a 300 dollar profit. I wanted to see it break through 347 but it never quite managed it today.

Similarly, Fortescue couldn't quite break through short term resistance at 481 so I sold out 3k at 475 for a 210 dollar gain but essentially to reduce risk.

Bail out bounceback. Wed Feb 10

Rumours of a reluctant Germany bailing out Greece helped the DJIA to surge as much as 230 points last night before closing up 150. What was bad was now good, so the AUD rallied along with gold, oil and base metals.
This morning has bought a modicum of caution as early gains have tapered off leaving us, at 12.23 pm, with a rise of 43 points.
Reporting season is also in its stride with big guns Bhp and Cba announcing this morning. Both results were solid but management have expressed caution so they've sold off their early highs quite sharply.
I wish I could say the same about Boral which reported a better than expected result thanks to keeping a close eye on costs but if anything their commentary, which was eagerly awaited, is more circumspect than analysts were expecting. Nevertheless, the stock opened up 5% and has basically held that level in a slipping market. I've done nothing and while it's worse than I expected and it looks like it might push some more intraday, I'm looking at resistance at 589 and 603 and will use those as potential stops for the moment.
Otherwise, I bought 2,500 Cey at 358 for a loss of 100 dollars and sold out the Lihir at 288.5 for a gain of 1200 dollars less 37 costs. Lihir had no support after the open so I dumped them. They've since hit 285 and I'm a little tempted to buy a few back for another push up.
Normally I'd be quite keen to buy some stocks after a nice 5 wave down push in the Xjo index, a lot of reluctance to fall any further over the last few days and a reversal up, but when I look closely at the 60 minute chart of the Xjo it looks to me as though there could be one more leg down to complete the move.
Click to enlarge.

This is a blown up look at the 5th wave down on the daily chart for the Xjo. It looks like a small 1st and 2nd wave were followed by an extended 3rd which developed into 5 of its own followed by a 4th wave retracement which may have just completed. If so then you could expect another leg down to a slight new low.
Generally it's not a great idea to fine tune these things too much but I've got enough doubts to hold off on buying a couple of stocks I like. Also, the bail out is not confirmed and things could sour just as quickly.

2.25 The Xjo index is now up a mere 15 points but I've just bought back the late 5k of Cey for 351, so 150 dollars profit there and 200 overall less 23 costs. It's a pretty scratchy trade and I'm happy to be out for a touch better than square. Bld is finally edging back but only after having been up 6% plus for a while, it's still up 27 at 575.

2.32 Up just 8 now. I'm looking to buy some Incitec at 340. They look as if they've made their 3rd higher low since a 5 wave move down. Most analysts are neutral to bullish with recent upgrades last week.

2.55 Long 10,000 Ipl at 340. 5k to go, towards the close of trading.

4.10 After working its way into the red, some late buying in the match out pushed the index to a rise of 8 points for the day. Since my scenario for the index is playing out I decided to buy the rest of the Ipl tomorrow. Bld was the second best percentage mover in the top 100 so that wasn't my finest hour. Still short 10k with the last sale at 572.

Lihir worked out well enough with a finish down at 282.

Fingertips. Tue Feb 9

The market is desperately trying to hold the 4500 index level and has clawed its way back to the 4490s after opening lower. My take is that it won't manage to hold but that we are close to the end of this wave of the sell off.
I've got a featured trade today, at least, in Lihir Gold. So far, I've bought 10,000 at 281. I'm taking the view that this is a tradeable retracement rally because there was a big drive down from 350 to 270 and the first real resistance is at 311.

Click to enlarge

12.02 The market is tumbling into the ravine, now down 44 points at 4477. Unfortunately, Cey is hanging in there at early support so I bought 2,500 back at 348 for a little 150 dollar profit because I'm going to be out of the office later for an hour or two. Boral is also defying gravity, sitting unchanged at 548.

Of my stocks Challenger has been the hardest hit over the last few days and although I've made a few dollars on the short side with intraday trading, I could easily have cleaned up with some overnight positions. When stocks are in a steep down trend, I tend to leave them alone if not already short. Here's the Cgf chart.

Macquarie Group has also been suffering and is heavily down today, partly because of disappointing (though improved) guidance but I expect it's also a play on the withdrawal of the wholesale funding guarantee.

12.26 It's reporting season of course and I've been referring to my trading calendar regularly although I managed to forget about Awc which probably explains the rally yesterday. Boral reports tomorrow but I'm willing to hold on to my short, I think it's probably the factor that's helping the stock to outperform over the last couple of days and the risk/reward favours the downside. I do have a small buy lower down though, I'm willing to reduce position size a little if I don't have to pay up for the privilege.

3.28 Back from my appointment and like Lazarus, the market is back from the dead. Now down only 15 points and above 4500, 4506.

4.13 The finish was about the same level at 4505. The only addition was to buy another 10,000 Lgl at 284, making 20k at 282.5.

Banking jitters. Mon Feb 8

The late, late show in the US market helped to set things up for a bounce back today but the Reserve bank in Australia is pulling the guarantee shortly so the banks are under pressure. Cba, for example, opened up 50 cents, pulled back 80 to be down 30 on the day and is now up 37. The othe big banks are still down on the day and in the major resource stocks we're simply matching some late overseas mark ups without any buying enthusiasm. All in all, it means we've risen 13 points at 11.17 am.
My take is that the fall is incomplete but we could easily rally for a couple of days so I'm buying my shorts on weakness.
In Alumina I bought 10k at 156.5 on the open for a 600 dollar gain, leaving me short 10k. This was an open of up 0.5 cents only compared to 2% US gains for Alcoa. I should have bought the other 10k, it's 159 now but not enthusiastically bid. Bld and Cey are flat, while Tse which was well bid on Friday has reversed to be down 12 at 373. I bought 2k at 375 for a 250 gain.
I'm short Challenger on some intraday trading but although it's working it's a marginal trade and not worth featuring.
Aristocrat is maybe my best option but I'm still reluctant because I'd like to get long in the 420s rather than the 440s. Here's the daily chart.

Click to enlarge.

I got a buy signal on the trade at 446 but I'm waiting to see how solid the early market gains are as this stock can be thin and affected by sentiment.

12.21 The market has been rallying, up 35 now. I'm out of Tse, I think I can get short at better levels. Bought 2k at 372 then the last 2,500 shares at 382 for another 450 profit, so 700 all up, less 16 costs.

I think the significant break was at around 410 so it's possible that with a higher low on the cards, the stock can push back towards 400.

1.56 Today has been quite volatile, clearly indecision reigns, and after the surge to midday the market pulled back. It's steadied again but Asian markets are down, ignoring the late US rally, and I'm betwixt and between.
Awc surged as high as 164.5 and I bought back the last 10k for 163, a 50 dollar loss. Overall, the deal made 1200 less 32 costs.
Bld and Cey are steady but I'm more hopeful than confident at the moment.

3.47 I'm just short Boral and Centennial Coal. I've been watching the 60 minute chart for Cey and with the retracement rally having stalled below 365, I think there's a good chance that it drives down below Friday's low of 342.

4.13 The Xjo index has closed with a gain of 7 points on a choppy, lacklustre day. Nobody's convinced by the late US rally but if Europe turns around then there could be some buying tomorrow.

Atishoo, atishoo, we all fall down. Fri Feb 5

The fear of contagion affected markets last night with Portugal the new target as a bond auction was unsuccessful while Spain is also in the spotlight. Allied to fears of a jobless recovery or perhaps further unemployment in the US the mood is now distinctly frosty. An hour into trading and we're down 2.6% and waiting for Asian markets to open to gauge the mood. I suspect we can fall another 1% today because the US markets finished on their lows and it's another leg down.
So far I've bought back the last 5,000 Ipl for 324.5 (v 338) which is another 675 gain, 2300 in total less 33 costs. I've also bought back 2,500 Cey at 342 (v 365) for a gain of 575 - this is the second tranche of selling, the first was done at lower levels.
I do have a new trade to feature although as the market gapped down it's not going to be the greatest of entry points. I'm trying to short on the early oversold bounce. The stock is Boral which is a new one for my watchlist but I've got rid of Csr because there's too much corporate and legal action going on.
Boral fell through support on Monday and had a good retracement which briefly popped through the previous breakdown level at 567. It's failed again and looks less mature than some of the other downtrends. So far I'm short 7,500 at a tick under 535 and the stock is at 538.

Click to enlarge

1.11 The market has held a level of down 2.8% through the Asian openings with those markets settling down about the same amount. The Xjo index level is 4493 which is below the November lows and I'm hard pressed to see where the next support levels are. There's a minor one at 4400 and another around 4280. It's possible that we'll turn around and regain the 4500 level either today or early next week but with the European sovereign debt crisis growing by the day, the selling momentum is quite strong. Here's the Xjo daily chart; it looks like it's in a 5th wave but there's plenty of room for extension.

I bought back the other 2,500 Cey at 347 for another 450 profit, 1025 all up less 12 dollars cost. Still short 10k at 354.

3.11 It's been pretty dull vis a vis intraday trading and we've actually rallied back above 4500 as markets in this time zone steady. The epicentre of the crisis is Southern Europe so there's not a lot of action here and even the US overnight futures are flat.
I've had some buying on for Awc but I haven't got set. Meanwhile, Tse is almost square on the day. Bld is up at 550 although I've done a bit of jobbing around there and at least got my average down to 540 for short 10k.

4.13 Once again we rallied into the close to finish down 2.3% at 4514. My short positions moved against me with Bld finishing at 551, Cey at 356 and Tse was actually up at 385. I didn't short more Tse because it looks like it's bounced off support, although I think it's just temporary. Awc at least finished on its lows and I bought 10k back at 156 to leave me short 20k. Profit 650 on that portion.
Although it was positive that we held the 4500 mark on the Xjo index, I'm sceptical that it was wise because the nature of the attacks on the European bond market are such that it probably doesn't matter what central banks or governments say or do; the fever will have to run its course.

Heavy Metal. Thu Feb 4

Almost an hour and a half into trading and the market is just sinking after holding a 25 point loss which matched the US S&P 500 fall without taking account of a resumption in selling of metals.
I completed selling in Tse at 386 so that leaves me short 13,000 at 387.5 average. It wasn't the greatest trade execution again in this but the stock is down at 384 now.
My trade of the day is another short in a resource stock, this time in Alumina. I've completed the order early, selling 30,000 shares at 162.5. I'm looking for a quick move to a new low here and I've taken the trade because there's been a decent enough bounce from last week's 153.5 low to give me some profit potential.

It has actually edged up to 163.5 since my short despite a quick sell off now to down 39 points.

12.27 The market is down 49 and I've been buying bits and pieces.

I bought 3,000 Tse at 378 because I figured my trade entry was poor so there's 9.5 cents on 3,000 which is, ah, 285 dollars profit. I also bought back another 2,500 Ipl because it rallied enough to make me unconvinced that there are further lows coming. Price was 332 and the short is at 338 so it's another 150 dollars profit and I'm still short 5,000 hoping to buy on the back foot.

1.37 Here's the Ipl chart showing a fairly neat 5 waves down. Although the 5th wave could have further to go, it looks unlikely given the size of the bounce back on Tuesday and Wednesday. I expect it's more likely to form a higher low over the next couple of days.

3.06 Transfield had another sell off so I just bought back another 3,500 at 375 for a tick under 440 profit. Still short 6,500. Also short 30k Awc, 15k Cey and 5k Ipl. Market down 38 points and slipping after an early afternoon bounce.

4.14 The market rallied into the close to finish with a respectable loss of 26 points. My positions are ok although Awc finished towards the top of the range at 165.

Attachment. Wed Feb 3

I was quite irritated when trading had finished yesterday because I knew I had become wedded to the bearish view on stocks so that I talked myself out of taking a perfectly good trade in Fortescue. It's up at 490 now after half an hour and if I was long I'd be getting out of at least half as it was a countertrend trade. The only trade I have done is to cut my half position in Qan for a 600 dollar loss as it broke the resistance at 290.
I wonder if it's the hardest trick to learn with trading - detachment - I'd looked at 60 minute charts for the Dow Jones and the Xjo at the end of the day and they both looked set for another kick up but I was still looking for bearish trades like the Qantas one. A trading buddy of mine has been working on automation for a long time as his solution to the problem of personal bias but I still prefer to trade manually. Despite the frustrations and perhaps because of the frustrations trading is as much a vehicle for self discovery as it is for profit and that's probably the enduring appeal. I've known enough traders who've made more than enough to retire on but there's no way they're going to stop.
As things stand, the second day up in a countertrend rally should be more choppy. We've had an early pullback from a strong open and we might be heading for a midday high and an afternoon sell off. Up 43 points at 10.46am.

12.30 The market has edged back since the open so it may be that the high was early. Chinese markets are just opening so if they're strong they could drag us up. Japan is flat.

1.27 The market is only up 19 points now and I'm thinking about short positions in a couple of stocks where the first retracement might have gone far enough. The best one might be Transfield which is trending down and has reversed intraday after touching 401 this morning.

3.05 Still haven't put on any new trades apart from some intraday stuff. I'm leaning towards Fortescue as a short now as I was looking for a rally toward 500 and it reached 498 earlier on. At the moment the market has got a second wind and we're shaping up to finish on our highs so if I deal it could well be just a portion into the match with the plan of completing the trade tomorrow.

4.12 Shorted 6500 Tse, a half position, at 389. Didn't quite wait till the close as it wasn't participating in the rally to any great extent but it blipped to 392 in the match so going early cost me a few cents. My existing featured positions are shorts in Cey and Ipl. Cey pushed towards my stop level early but eased later to finish up 3 on the day at 372. Ipl also squeezed up to 343. I'm hoping that the market is, indeed, in a retracement rally and that it's close to having run its course because I could have had tighter stops on these two.
The ASX 200 finished with a gain of nearly 43 points, 9 points away from the early high.

Partial recovery. Tue Feb 2

The rot has stopped for the moment and the market is up 1.6% at 11.18 am. It's not particularly favourable for me as I have two short positions. Ipl is up 11 at 328 but I'm still quite comfortable with that. Cey is the problem. I shorted another 5k at 365 on the open, thinking that I was completing my selling at a better level and it did drift off for a few minutes but now has pushed on - with most of the rest of the coal sector - to 370 which is a gain of nearly 6%. I'm confident that the break of 360 was quite significant but it could rally to the high 380s before I could assess whether I was right or wrong.

I'm interested in the possibility of a retracement rally in Fortescue. It fell right back to support and today has reversed up to 460. I'm not willing to chase it at this point but will see if it shapes up on the intraday scale later on.

2.34 I've been out of the office for a couple of hours and the market is little changed although something might happen now with the RBA unexpectedly leaving interest rates on hold.

3.02 I'm starting to put on a short in Qantas. This gave a sell signal 3 days ago when it fell through support at 283. It has since rallied but without going through the recent pivot high at 290. I'm short 10,000 at 286.

3.06 While I was out of the office Fortescue ran up as high as 471 and is now back at 464. Still no great intraday set up so I'm leaving it along for now.

4.06 A grinding day that is finishing near the highs despite caution in other markets in this time zone. Not a lot I could do but watch my two positions move against me as they're not at stop levels. I've put on a half position in Qan which is closing at 286. I don't think I could have done much different yesterday, I closed out Ozl, for example, and half of Ipl - it's just a frustrating day. The down trend is very much in place but there's certainly the potential for another day like this which could squeeze me out.

Overdone. Mon Feb 1

The new month has started with a rally despite a weak overnight lead, we probably got oversold by Friday's close. I haven't put on any new trades so far although I've got a buy signal in Aristocrat. The problem is that it gapped up on a better than expected forecast of operating profit.

The buy was triggered on trading above 425 so I can just hope that it chops around for a while and gives me an opportunity to get long. The preceding pattern, an extended 5 wave thing, looks complete for the time being and you might typically expect a rally close to the 4th wave retracement high around 480 unless it's the start of a new bull run in which case it could go further.

12.54 Soon after midday the market took a rapid turn for the worse as confirmation of continued heat in the housing market and government gloom over budget forecasts - ludicrously estimated out to 2050 - soured the mood.
I've bought back 5,000 Ipl at 320 for a 900 dollar profit. Ozl is down a couple of cents too. Aristocrat is holding its gains and a couple of shorts I'm looking are holding above support so apart from a bit of intraday trading in the Spi, I'm watching and waiting.

1.48 Although Centennial coal is extended, the general mood of the market is for decent falls in the miners. I've had a small sell signal over the last couple of days but I've been cautious because we're so near to previous highs around 360. In the last hour, Cey has tipped below that support so I'm going to work my way into a short position. So far, I'm short 5k at 357.

2.19 I've bought back the balance of my short in Ozl. 10k at 104 and 10k at 102.5. It's right on the early September low and looks pretty weak but this was roughly my target and I'm happy to take my piece of the action. Altogether the trade made 2850 less 29 dollars costs.

3.38 The market continues to fall, down 44 points at 4526, as commodities are sold off on the back of disappointing Chinese growth numbers. I've sold another 5,000 Cey at 351, so now short 10k at 354 avg.

We're getting very close to the next support level of 4503 recorded on Nov 5th last year.

4.11 We've closed with a loss of 45 points which is about 1%. I'm imagining a day tomorrow where it opens weak and rallies, we seem pretty oversold now and if metals prices don't get hammered tonight then we'll bounce I suppose. I didn't finish my Cey selling, might get a chance tomorrow and I bought another 2500 Ipl at 315 for a further gain of 575 dollars - still short 7500 shares there. Those are the two featured positions.