Short Spy Continued

Chart patterns are not so easy.  The previous setup http://hotelonboardwalk.blogspot.com/2014/04/short-spy-trying-out-stock-charting.html shows we are getting ready to go short.  The problem was the candle was not really a shooting star, since we were not at the proper resistance level.

Now this setup looks more promising, but it is always difficult to know where to draw the support and resistance lines.

Look at the last two trading days by the red arrow.  Shooting star type of candle at the resistance line, followed by a small Harami.  These two candles indicate a down day for the next session, but they are not the clearest signals, and they may not be at the proper resistance level.

If the MACD means anything, it could still be time to buy, but that contradicts the candlestick patterns.

Take a closer look to see why this is so difficult.  There is a tiny shadow on the top of the green candlestick (where the red arrow is), so is it a shooting star, or not?  Then the next red candle is fully contained in the previous candle, so is it a harami?  Harami in this case means the green candle is pregnant with a red candle, so the the next session to follow should be red, or down.

This subtle pair of indicators means SPY should be down tomorrow, but it is easy to miss.  Also, candlesticks only tell what will happen the next session, and often only if they are on the proper support or resistance level.  It could stay near this level for another few sessions before we get a clearer signal.  By the way rather than short SPY, or buy to open some SPY puts, you could also buy some SPXU, which shorts SPY without having to worry about expiration.  You still have to know when to get out, as this instrument seems go down fast, but that's what stop and limit orders are for.  Remember, this is a short term trade, as the SPY is generally on an up trend for the long term.

This exercise is a good reminder to just keep a long term view of investing.  Trying to understand and follow all these signals may give an advantage to short term traders, but the billionaires seem to still to do better with a buy and hold strategy.

Anyway, I expect to see the market down soon, but how far, and for how long?  And how soon?  Who knows?  This could be a year to sell in May, and come back in September, but that old expression does not seem to be based in reality either.

Again, not a recommendation - just an exercise in chart pattern reading skills.

Short SPY - Trying Out Stock Charting Skills

As I get a better understanding of chart patterns, I see more and more trading opportunities.  I thought it would be a good idea to document some of my ideas, to see if I can improve my predictions.

I am looking at this short position for Monday, April 21, 2014.  It may be a coincidence, but the market always seems to be up just before a holiday weekend.   The following week will tell me if I was correct or not.

Here is my idea to short SPY.  The market has been on an uptrend, but temporarily on a down trend.  See how it went down in February, and then just kept going up.  That's why the idea to be short is temporary.  In general, it is a good idea to follow the market, and stay long for the long term, but there could be some quick opportunities, if you know when to get in and out.  I don't think the indexes are as good for shorting as individual stocks, but I like what is developing on the charts.

Notice that the index breaks down as it tests the support level (blue line) for the third time, and then comes right back up to the resistance (green line).

SPY 1 Month, Daily Chart for April 17, 2014 (click chart to enlarge)

I think it will not stay around $187 for more than a few days, at most.  Then it should be down to my first target of $181.50 within a few days.

I made a few notes on the chart, that seem to support my thesis, but we'll have to wait and see, won't we?

Here is the daily chart of SPY for Apr 17, 2014.  Notice the price and volume action at the close.

This is close to what I was expecting.  The intraday action was forming something similar to a shooting star, where it opened near the previous close, shot up, and then headed back down in high volume.  It didn't close as low as I had hoped, but we may not be at the top of the resistance level yet.  I think it will be there in a few days.

My idea is to be short for the next pull back, then look for a chance to get long.

I tend to be most successful with long term investments, where I don't have to be concerned with a few price fluctuations.  This type of short term trading is more risky, so be careful to use a small percent of your portfolio to trade for the short term vs. a larger amount to invest for the long term.  I started late, so I am looking for ways to improve my tiny retirement portfolio.

Disclaimer: I may be holding some of the positions I discuss, so this information is not meant to be a recommendation to buy or sell anything.  It is more of a log for me to see how my trades have gone.  The charts are from freestockcharts.com, which I find very useful

Money As Debt

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Money As Debt Paul Grignon's 47-minute animated presentation of "Money as Debt" tells in very simple and effective graphic terms what money is and how it is being created. It is an entertaining way to get the message out. The Cowichan Citizens Coalition and its "Duncan Initiative" received high praise from those who previewed it. I recommend it as a painless but hard-hitting educational tool and encourage the widest distribution and use by all groups concerned with the present unsustainable monetary system in Canada and the United States.

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How to Improve a Blog

I saw that problogger has a one question interview series, and an interesting question.

What one thing did you do on your blog in 2007 that improved it the most?

The responses should prove helpful to anyone interested in making money from blogging.

http://www.problogger.net/archives/2007/12/27/one-question-interview-summer-series/

Here is my response:

I actually got the idea to start blogging in 2007 from http://problogger.net. I started http://systemnotesorg.blogspot.com with the idea that if my posts were useful to me whenever I needed to remember how to do something, then they would be useful to other sysadmins.

The one thing that put my blog on the map was to publish a 17-page study guide for a Red Hat Linux certification -- the RHCE (Red Hat Certified Engineer). Within a week of publishing, the traffic went from a few visits a day to over 500, and then gradually tapered off to around a hundred a day.

People say content is king for a blog. That may not always be true, but in this case some comprehensive, quality, original content that people want made a huge difference.

I used google analytics to watch what people were searching for, and saw that people were interested in RHCE topics. That's when I decided to publish my guide.

Investment Basics

Financial planners generally recommend long term strategies for stock purchases - (i.e. funds placed in the stock market should be looked at as not needed for seven to 10 years). Here are some investment strategies for the stock market:

Buy and Hold - The strategy most recommended. Similar to a long term savings account. The idea is to find a company you are comfortable with, and buy it for the long term. People following this strategy are usually not too concerned with the daily, and monthly ups and downs of the stock, as they plan to hold it for years. (Look at a five year graph, and a major drop in stock price looks like a small bump). Of course the investor is not married to the stock either, so if something about the financial condition of the company changes, it may be time to sell. Many investors try to beat the index funds and will be happy with an average return of 12 to 20% per year.

Day Trading - Risky, but has the potential for greater gain. Also, there are tax consequences of selling before 12 months. Still better than casino gambling, at least there is much more chance of making money, and less chance of loosing everything ;-). The biggest mistake most beginning investors make is trading too frequently.

Dollar cost averaging - The method of purchasing an investment (Stock, Mutual Fund, 401K, etc.) on a regular basis, regardless of the price. For example, suppose you decide to buy a stock with average price in the past year of $20. Rather than trying to time the market in an attempt to buy at the lowest price, the strategy is to purchase a fixed dollar amount, say $100 every month. So one month it may be at $19.75 which gives you 5.06 shares, the next month it might be $21, which would be 4.76 shares for a total of 9.82 shares. The idea is to continue accumulating shares. If the stock selected was a good company at $25, then it still good, and even a bargain at $19. If it goes up to $30, then you can buy less shares, but hopefully your homework revealed that you expect further growth for the company. With this example you would have invested $200 for 9.82 shares

Company Amount Price Shares Total Shares
XYZ Co. $100 $19.75 5.06 ... 5.06
XYZ Co. $100 $21.00 4.76 ... 9.82

At the current price you now have 9.82 shares, worth $206.22 from the $200 invested. The price continues to fluctuate, and you continue accumulating shares at market rates.

The Real Risk - Not Investing
Note that, while investing in the stock market incurs some degree of risk of loss of capital, it should be weighed against the risk of not investing at all, and letting inflation take over.

Get Started
I don't get commission for this link, but I highly recommend Sharebuilder for automatic investing. -- http://www.sharebuilder.com. There are other options, but automatic investing is the best way to stick to it. You just set up a plan and forget about it.

Interesting article on renting vs buying

I don't know if this is a fair comparison, but here is an easy way to look at leverage, which the article below seems to have missed.

If you "invest" $100k into real estate, you generally put down 20% or less, so you are starting with a $20k investment.

Let's assume that in the time it takes to quadruple the value of the real estate investment, you could have made 10 times on your money by investing in the stock market.

Investment Multiplication Future Value

Home
$100,000 x 4 $400,000
Stock
$20,000 x 10 $200,000


There is a better return on the real estate, not because it is a better investment (only four times as opposed to 10 times), but because of the leverage (now worth twice as much as the stock investment).

Actually, you invested $20K in your home and made $380K ($400K - $20K)
Which is a return of 19X on your $20K

You invested $20K in the stock market and made $180K ($200K-$20K)
Which is a return of 9X

Thus even though the house "only" quadrupled in value you made 19X on your money.

While the stock "only" went up by ten times in value you made 9X on your money.

So you did 2.11 times better on the house.
Leverage pays off.


The real estate, if renters are not paying for it, is still a liability until it is paid off, but the leverage is what makes it better. Try asking the bank for $100,000 to invest in the stock market, and they will probably laugh at you. Sure you can get a margin account, but they won't give you $100,000 for your $20,000 deposit. On the other hand, you have lenders fighting with each other to give you money for real estate.

Article: Why rent? To get richer

http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/WhyRentToGetRicher.aspx?page=1

New 125 Miles per Gallon Toyota Prius

Article from: The Future of Things (TFOT)

The Pennsylvania based Lithium Technology Corporation recently demonstrated a new type of "plug-in" Toyota Prius hybrid car. The new model is based on advanced lithium iron phosphate battery which allows the hybrid car to travel up to a distance of 125 miles per gallon of fuel – making it possibly the most efficient mass-produced car in the world.

Lithium Technology Corporation (LTC) announced that its' new lithium iron phosphate (LiFePO4) technology might be incoporated in hybrid cars expected to arrive in the market in 2008-2009. The Toyota Prius demonstrated by LTC was also equipped with a "plug-in" capability which allows it to recharge using conventional power sources (such as a power outlet in the owner's garage). Currently there are no "plug-in" capable cars on the market but special conversion kits are available and a small number of people are already using them to recharge their hybrid vehicles.

Although the new long range "plug-in" Toyota Prius might prove to be even more popular than its current version (which since the launch of its second version in 2004 has sold over 200,000 units worldwide), it is still very far from breaking the world record for the longest drive per gallon of fuel. This record was recently broken by a prototype car built by a team from St. Joseph La Joliverie University in France, which set an astonishing record of 7,148 miles per gallon of fuel (3,039 km per liter).

More information on the new lithium iron phosphate battery technology can be found on the LTC website.

Image: Current model Toyota Prius powered by 168-cell nickel metal hydride (NiMH) battery (Credit: Toyota Motor).
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