Welcome back

Hello, just back from a short hoilday in Australia and would shortly resume my trading again.

November was somewhat unusual . Historically tends to be one of the weaker months of the year for the market. That is definitely not the case this year, with a relentless rally still moving forward.

Economic Reports – This is probably the ‘rocket fuel’ that is leading this rally. Last week the Producer Price Index (PPI) came in with a decline of almost 1% for October. If energy prices are included the October decline was just over 1.5%. This helps the market because inflation concerns have been at the forefront of the bearish case for the last several months. To add to this, the Consumer Price Index (CPI) came in with just a 0.1% increase for October. Although this is all good news for the bulls, the Federal Open Market Committee (FOMC) did note last week that they are still concerned about inflation. But even with this concern, this factor should be rated as a bullish one for the market.

Energy Prices – Along with the rest of the good inflation news, oil prices continue to decline. The December crude oil futures contract dropped almost $5 per barrel last week. After all the doom and gloom in the media during the summer about oil going through the roof, it is now hardly mentioned in the mainstream media. This is also a bullish factor for the market right now.

Earnings Reports – The main earnings season is now over, but November does bring earnings reports for the major retail stocks. There was really no outstanding news here, with Wal-Mart and Target coming in slightly above estimates, and Home Depot missing estimates. Overall this is probably a neutral factor for the market right now.

Other factors – We are about to start the holiday season, which means a couple of things for the market. First of all, next week should be fairly quiet for the market, with no trading Thursday and a half day on Friday. The other areas the market will be watching are any reports or comments about the holiday shopping season from the major retailers. Good reports would likely keep the rally going, while some disappointing numbers could start a market pullback of some kind.

The Buy Setup-A real case study

Alast week’s,I put up a simple buying strategy that can use to help to time trading entries and at the same time increase the likelihood of successfully trading the markets.

The setup only involves three steps. Two steps are for the setup and the third step involves the buy action trigger.

First – Look for a recent new high price.

Second – Look for three or more consecutive lower highs.

Third – We buy the stock when it trades one tick above the previous day’s high price.

Let’s take a look at a real example: The chart above is a daily chart of Continental Airlines [CAL]. On October 12th, after making a new high , the stock then pulls back for three days in a row. Each high is lower than the previous high (the second thing that we look for). But notice that the third lower high isn’t the same candle stick color as the previous two highs. That brings the question, “Does the color of the candlestick matter?” Absolutely not! All we are concerned with are the high prices; we aren’t concerned with the stock’s opening and closing prices.

Now that we have three down days we draw in or mentally make note of the third day’s high price and we set up the trade to buy one tick above this high price (our final step). In this case the stock closed at $30.83 but the price trigger was $31.29.

The next day the stock did move above the third day’s high price and the trigger price was hit and a beautiful little rally followed.

That's indeed a good trading

Breaking the cold streaks

In the journey of trading, we do not always win on every games we play, every trader, no matter what their skills, has cold streaks.

The only way to break this “Cold Streak” is to stop trading for a while and call a time out
So that you can come back in a different state of mind.

If your schedule permit, why not take a break and engage in activities that will restore your mind to a state of rest and relaxation.

After a complete break will we have a refresh eyes to track the market again for potential trades and monitor price movement.

The most important is to sort out what has gone wrong.

This above process will help to move you into a better frame of mind and stop self abuses and self-destructive cold streaks.

In summary, you need time to reflect and improve, this will make trading more fun because you do not destroy your account and suffer self-abuse that comes along with it.

Warren Buffer did not trade the whole year of 1999.