Notes to Self

1. Be more patient. You are right a lot, but you are almost always early. Wait for a base to form or a top to carve out before you get in, now you have an idea of how long it might take for a long term base to form after a huge killing of a stock, months and possibly years.

2. Look at longer term trends such as M&A activity, Corporate cash holdings, Commodity trends (future of coal), Look at trends happening around you that you can visibly see or touch (solar panels in your neighborhood, use of twitter, etc)

3. Make meditation as much a part of your trading career as you do your life. Mindfulness and seeing the big picture without judging or the ego of having to be right about market direction will only work wonders for your trading.

Work – Rewards

U know how these things happen man, when you’re just starting at something you can never get what you’re looking for. But after a long time of sticking with what your doing and learning and putting in work, the rewards just start coming in droves. It’s almost like, once you master it, it just flows to you. And it’s probably your change in attitude that has the most effect.

Practice and Repetition

After reading Jesse Stine’s superstock book, I’ve been very intrigued by the possibility of making a living trading while not spending all trading day in front of a screen. Finding unremembered and unappreciated stocks with good fundamentals and big bases is his approach and I am beginning to see this pattern over and over in my search for these stocks. However, there is much that I need to practice as I have just started my superstock journey. For example, I still need to learn how to read financial reports and contact management to figure out a company’s earnings sustainability. I need to learn how to calculate operating leverage quickly and accurately. I need to figure out what is important in earnings call transcripts and press releases. I need to get a feel for good and bad message boards and good and bad traders on those message boards.

Now, I think that all of these things can be learned by applying the ten thousand hour rule. And of course, while I don’t need to accomplish this as fast as I can (3 hours a day, 5 days a week, 50 weeks a year would take me over 13 years to master this), I can do the necessary targeted practice to learn more efficiently.

My plan is to identify stocks of two categories: 1) potential superstocks  2)recent superstocks that have already completed their run. 

I will research the potential as much as I can while applying as much as I can of what I learn by reverse-engineering, so to speak, the recent superstocks. For the recent ones, I will go back and see the earnings during breakout and the subsequent earnings. I will try to match up key words and figures from the 10-Qs and transcripts that were release before the blockbuster earnings and subsequent periods of growth to pick out what caused the sustainable earnings, whether it was increased backlog, acquisitions, or anything else. And I will also research why a superstock’s run stopped whether it was a secondary offering, huge insider selling, a messy message board, or a technical chart factor like expanding weekly ranges.

After doing these targeted exercises enough, I should be able to pick these things out in my sleep! I’ll make jesse and more importantly myself proud.

Using this trade journal

I will begin using this journal just like my other one. I will write down how I feel about the markets and about my performance, emotions, and mindstates. I will also write down my evolving rules of engagement so to speak with the market and with my approach.

Let’s get started!

Junk Bond Doomsaying before rally?

http://www.marketwatch.com/story/corporate-bond-rally-is-next-to-bust-some-fear-2014-05-13

This story details how UBS and other banks/Noriel Roubini recently advised investors to sell Junk Bonds. UBS made the call to investors on monday. JNK gapped higher before selling off midday, then rallying back at the end of day ending at a new high for the day. Volume was also relatively high this day which may evidence the selling of dumb money and the subsequent picking up of smart money.

Let’s see how this scenario plays out in the next few weeks and months. JNK is currently in a long term ascending triangle formation at multiyear highs. Note: Kimble charting has said that junk bonds are sitting right under a magic resistance line that it hasn’t broke in over 10 years. He says that junk bonds usually correct pretty far once this line is tested.

Options trickery?

I recently purchased uvxy shares for what I thought was a low risk entry above a falling support line that I thought might hold. However in two days I was down almost 8%, ridiculous-until the market reversed on day 2 and I returned to down 3%. The main reason I even considered the uvxy a good investment was because of the divergence between the iwm/qqq and the spy/dia. It just seemed off to me, and the fact that the iwm was bear flagging under the 200 day also fave me some extra conviction that more was coming. Plus Russia is always hanging around in the back up to no good.
I am seeing tweets about rising call volume on the vix tonight on stock twits. This brings me to a question: is this call volume actual smart money trying to hedge, or is it a ploy to deceive investors to skew their sentiment bearish as the bigs advance the market?
We’ll find out in the next few weeks.