Lessons Learned in Nov 2019

I learned some painful lessons in November, 2019. But, then again, every lesson learned (when it comes to the Markets) is usually painful, so I suppose there's nothing unusual about that. And because I have only recently found my "niche" as an options swing-trader, I should probably just assume that I still have many painful lessons to come.

Let's talk about the positive take-aways from November first.

For the first time ever, I went a whole month without having any options contracts expire. That, for me, is a big, big deal. September and October were horrible in that regard, with 5 expired trades in September, and 4 in October. Lesson learned: Pick expiration dates that are at least a month out, and choose strike prices that are deep in the money to ensure they maintain some intrinsic value and suffer less time-decay.

Speaking of expiration dates, I also learned a lesson that was the flip-side of the one above, which is: Don't pick an expiration date so far in the future that there isn't a market for the trade. I made the astonishingly dumb mistake of trading an option for which I turned out to be the only one interested and/or trading. If there's no market for it, you can't sell it, no matter how "profitable" it looks. I bought calls at $1.19, hoping the price would rise. And it did! It's now priced at around $1.60... but it's still showing a loss, because of the initial spread (duh!) and the fact that no one is interested in buying it! (double-duh!) Luckily, it wasn't a huge trade, but it was (and still is) painful, all the same.

After a lackluster and disappointing October, November gave me nice gains. From 1 November to 30 November, I banked almost 700% in profits. Absolutely no complaints there! (My portfolio suffered a mild retracement the first week of December, but that's another story.)

In October, I made 43 trades, with 28 of them turning into gainers, and 15 of them losers. As always, I worked very hard at minimizing losing trades and maximizing winning trades but, honestly, I feel I could have done a much better job of it. I will have to keep reminding myself going forward that losses are losses, whether they are "realized" or not, and so it is better to close them out quickly and efficiently while the losses are still manageable. Bad news doesn't get better with age.

My best trades in November:

Bought Target ($TGT) 20Dec 112 Calls for $4.97 on 11/18 and sold them on 11/20 for $10.05 for 102.2% profit. Bought more at $4.14 on 11/19 and sold those for the same $10.05 for 142.8% profit.

Bought BJ's Wholesale ($BJ) 20Dec 22.5 Puts in two purchases on 11/20 for $0.33 and $0.35 and sold them all on 11/21 for $0.82 for a 148.5% and 134.3% profit respectively.

Bought Dollar Tree ($DLTR) 20Dec 108 Puts on 11/21 for $4.60 and 11/25 for $2.60, and then sold them all off 11/26 for $12.33 for a 168.0% and 374% profit respectively.

Bought Best Buy ($BBY) 20Dec $72.5 Calls at $3.95 on 11/21 and $4.23 on 11/25 and sold them on 11/26 for $6.95 for 75.9% and 77.1% profit respectively.

On the downside, I had several trades that were carried over into December which have either shown a significant loss ($DLTR -60%, $UBER -28%, and $GTT -6%), or are still pending ($NLNK, $DELL, $KEYS, $URBN, and $VEEV).

On the $DLTR losing trade, I was simply guilty of "going back to the well" one time too many. As to the UBER and GTT trades, I believe I was guilty of paying too much attention to the short term charts without back-checking my assumptions against the longer-term charts. I definitely held the losing $DLTR trade too long.

I did better in November than in October at cutting losses while they were still in the 10-20% range. Remember - due to the "spread," most options trades start out with an instant 10-20% loss from the moment you make the initial buy. That's a significant downside to options trading. The upside, of course, is the leverage that can bring you profits of 100-300% in a matter of days.

All in all, a good month.  I can only hope I take these lessons seriously and have as good a December.

Jesse Livermore's Trading Advice

Jesse Lauriston Livermore

Livermore's trades are legendary and have led to his being regarded as arguably, one of the greatest traders who ever lived. He inexplicably took a massive short position the day before the San Francisco earthquake on April 18 1906. By selling Union Pacific stock, he amassed $250,000 when much of San Francisco was destroyed. These intuitive decisions that almost always resulted in huge profit, were a mystery to Livermore as much as anybody else. All he knew was, that when he got a gut feeling, he was wise to follow it.   

In the crash of 1907 Livermore had huge short positions that could have netted him immense profits. He was, however, requested by J. P. Morgan, who had bailed out the entire New York Stock Exchange during the crash, to refrain from further short selling in the interests of the national economy. Livermore agreed and instead, profited to the tune of $3 million by buying into the rebound. 

Possibly his greatest known trade was during the stock market crash of 1929. He had amassed huge short positions before the market tumbled, using more than 100 stockbrokers to hide what he was doing. When the crash came he netted approximately $100 million and, following a series of newspaper articles declaring him the Great Bear of Wall Street, was blamed as personally responsible for the crash by bankrupt members of the public.

His advice:

"All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis."

"The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor."

"Wall Street never changes. The pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes."

"Stocks are never too high to buy or too low to sell."

"Instead of hoping, he must fear; instead of fearing he must hope. He must fear that his loss will develop into a much bigger loss, and hope that his profit may become a big profit."


"What beat me was not having brains enough to stick to my own game."

"The Wall Street fool... thinks he must trade all the time. The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street among the professionals who feel that they must take home some money every day, as though they were working for a regular wage."

"It never was my thinking that made me the big money for me. It always was my sitting."

"It is almost as important to know what not to do as to know what should be done."

"A man must believe in himself and his judgment if he expects to make a living at this game. That’s why I don’t believe in tips."

"Without faith in his own judgment no man can go very far in this game."

"A man can excuse his mistakes only by capitalizing them to his subsequent profit."

"The game taught me the game. And it didn’t spare the rod while teaching."

"If I hadn’t made money some of the time I might have acquired market wisdom quicker."

"There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win."

"A man will risk half his fortune in the stock market with less reflection than he devotes to the selection of a medium-priced automobile."

"I was convinced whatever was wrong was wrong with me and not with the market."

"I never argue with the tape. Getting sore at the market does not get you anywhere."

"A loss never bothers me after I take it. I forget it overnight. But being wrong – not taking the loss, that is what does the damage to the pocketbook and to the soul."

 

Bernard Baruch - "Dr. Facts"

Bernard Baruch was known as "Dr. Facts." Just out of college, he lost $8000 of his father's money, and later on, another $6000 in the stock market. Determined to learn from his mistakes, he studied the market intently, and in 1897 turned 100 shares of American Sugar Refining into $60,000. After some large gains and losses, in 1901, the year President McKinley was shot, he turned the market uncertainty into a short sale that netted him $700,000 in profits. In the great crash of 1929, Baruch earned over $615,000. His estate, at his death in 1965, was worth over $14 million, even after having given away over $20 million.

"When good news about the market hits the front page of the New York Times, sell. "

"The main purpose of the stock market is to make fools of as many men as possible. "

"I made my money by selling too soon. "

"Nobody ever lost money taking a profit. "

"There is something about inside information which seems to paralyse a man's reasoning powers. "

"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong. "

"If all you have is a hammer, everything looks like a nail. "

"If you get all the facts, your judgment can be right; if you don't get all the facts, it can't be right. "

"In the last analysis, our only freedom is the freedom to discipline ourselves. "

"Millions saw the apple fall, but Newton was the one who asked why."

"Most of the successful people I've known are the ones who do more listening than talking. "

"Never follow the crowd. "

"Never pay the slightest attention to what a company president ever says about his stock. "

"A speculator is a man who observes the future, and acts before it occurs. "

"Consider and reconsider the facts, and your opinions. Stubbornness as to opinions - cockiness -must be entirely eliminated."

"Every man has a right to his opinion, but no man has a right to be wrong in his facts. "

"Do not blame anybody for your mistakes and failures. "

"Don't try to buy at the bottom and sell at the top. It can't be done except by liars. "

"During my eighty-seven years I have witnessed a whole succession of technological revolutions. But none of them has done away with the need for character in the individual or the ability to think. "

"Only as you do know yourself can your brain serve you as a sharp and efficient tool. Know your own failings, passions, and prejudices so you can separate them from what you see. "

"Two things are bad for the heart - running up stairs and running down people. "

"Whatever failures I have known, whatever errors I have committed, whatever follies I have witnessed in private and public life have been the consequence of action without thought. "

Cramer Quotes

"Lesson number one: When it comes to buying or selling a stock, don't tell me where you bought it, tell me where it's going. That's all that matters."

"Lesson number two: Always use limit orders. Only amateurs and fools enter market orders... Never use market orders, ever!"

"Keep up on your stocks... The problem isn't the time. It's the desire to do the work. You have to ask yourself whether you like this stuff enough to stay on top of it."

"Ignorance - and the buy and hold pattern it instills - is not bliss."

"The biggest rewards come from identifying stocks of unknown companies at the beginning of their journey, whe they might be worth no more than a hundred million dollars and are undiscovered, unknown, unloved, and most important, uncovered by Wall Street."

"There are no asterisks in this game. You can't say, Well, I would have had a great year if it weren't for WorldCom.. or Enron."

"The key to balance sheet analysis is to figure out what kind of interest the company has to pay each year on its equivalent of a mortgage it might have taken out."

"There are always unknowable facts in the investment process. Always. But we can;t let them undermine judgment to the point that judgments can't be made."

"I am trying to get you to buy stocks that go up quickly, in a time frame that matters to you now, and get you to avoid stocks that go down rapidly, that could wipe you out.... I don't care how we catch the moves... I just want us to catch the darned moves."

"This [is] the best house in a bad neighborhood thesis: No company, no matter how good, can truly transcend its sector."

"You must never forget that these are [just] pieces of paper. Pieces of paper can go down the drain as quickly as toilet paper if they are the wrong ones, or we get into the wrong market."

"Investing [is] a much more lonely and difficult process than most people think. You have to love stocks when people hate them, you have to leave stocks when people love them."

"I know human behavior. I know what happens in real life when you ignore the playbook, when you stick with the so-called secular growth stocks while the elephants are dancing to the cyclical tune. What happens is you panic. You sell at the worst time, the bottom. You bail."

"The stock market is not a science. It is just a humbling collection of pricing decisions involving the supply of equities and a level of demand mitigated by greed and fear."

"On Wall Street, we care about growth, growth, and more growth... Nothing trumps growth."

"While I accept the simple equation that E x M = P, I refuse to be bounded by it."

"The M anticipates the E."

"If you are going to buy stock in a business, you must find out what metrics [in that sector] are important."

"The market cares more about future growth than it does about past growth."

"That's right, all the way down [the analysts] kept reinterating their buys, saying how cheap the stock is, trapping you in [it] for the horrible slide. But at the bottom, they cut their numbers... and take the stock to a hold or a sell. That's precisely the moment I cover my shorts or begin to buy. How do I know when to get off? I sell it when all of the analysts love it again."

"If they [big market particpants] even smell [Fed interest] rate hikes, they are going to sell whole groups because they anticipate decline in the economy... when these elephants move, they move stocks with them. To ignore their activities - especially when they are so easily predicted and anticipated - is a tremendous waste of money for all investors."

"A chart is never enough to buy a stock from. Never. Don't be conned into believing that looking at a chart can suffice for homework; it simply can't."

"I am always on the hunt for damaged stocks where the merchandise underneath isn;t that badly damaged... Not damaged companies, but damaged stock prices."

"You have to be willing to change your mind and your direction. Nowhere in the commandments of investing is it written, One shall not change one's mind even if it may be wrong."

"The reason I failed so dramatically when I first bought stocks is that I, like everyone else who has ever bought a stock... foolishly believed in [these] three rules: (1) Buy and hold because that's how you make the most money, (2) trading is always wrong, owning is always right, and (3) Speculation is the height of evil.

"If you chose to never sell becasue, say, you are afraid of the tax man, or because you despise paying commissions, you need to get your head examined."

"Approach it like a job. Investing can be a hobby, but trading can't."

"The saving grace of stocks is that they can only go to zero. Don't laugh. I've owned some stocks that were so bad that it was a blessing that they stopped at zero."

"They irrationally fear the losses that could come from the single-digit stocks that don't make it; they act as if stocks can go to minus something."

"I don't care about the past, I don't care about where you bought the stock, the only thing I care about with a stock is what's going to happen next. Most people don't grasp this simple concept."

"We can anticipate what the crowd wants, the chattering classes, those people who can't control themselves because they think that every idea is the next Microsft or Amgen... My method expploits the crowd's inability to distinguish a 10x idea from a lot of ideas that just fizzle and gets you in and out before the fizzling starts.""

"Speculating, particularly when you are younger, is not only prudent, it is essential."

"You have to be prepared to love the stocks at one moment and leave them unmercifully the next. You may have to flip on a dime. Flexibility is everything when you trade these kinds of [red hot] names."

"Why is the investing intelligensia so unwilling to embrace a Game Breaker strategy? I think it is because such a strategy involves two decisions, a buy and a sell. The traditional... approach to investing, which I scorn, simply doesn't consider any purchase of a stock that requires a later sell as part of the investment process."

"I am neither a bear nor a bull, I am an agnostic opportunist. I want to make money short- and long-term. I want to find good situations and exploit them. "

"I got in the business because Lynch said you didn't have to go to Harvard Business School to be in the business, that you could pick stocks. Lynch gave me hope that amateurs could turn pro. "

"I think there are a thousand stocks out there that could make you rich, totally independent of what you do for a living. "

"The people who are buying stocks just because they're going up, and they don't know what the company does, deserve to lose money. "

"I'm not smarter than the market, but I can recognize a good tape and a bad tape. I recognize when it's right and when it's wrong and that's what my strength is. "

"It's the most objective industry in the world. If your numbers stink, you're out. If your numbers are good, you get more money. It's... Darwinian, it's beautiful, it's brutal, it works. "

"I think that stocks have been this tremendous, tremendous equalizer for people in this country. Guys who can't make a lot of money at their jobs have been able to make a lot of money in the stock market. "

"My advantage is that I'm very good at interpreting the information. "

"You'll do as well as most professionals. Most professionals don't beat the market. Let's not over-rate my industry."

"Peter Lynch made me a lot of money. So I like him. I had my IRA with him when I was making $125 a week as a cub reporter. He made me more money than I made in my job."

"We are all wrong so often that it amazes me that we can have any conviction at all over the direction of things to come. But we must. "

Cramer's 10 Commandments of Trading

#1. Never turn a trade into an investment.

#2. You first loss is your best loss.

#3. It's okay to take a loss when you already have one.

#4. Never turn a trading gain into an investment loss.

#5. Tips are for waiters.

#6. You don't have a profit until you sell.

#7. Control losses; Winners take care of themselves.

#8. Don't fear missing anything.

#9. Don't trade headlines.

#10. Don't trade flow.

Cramer's 25 Investment Rules

1. Bulls and bears make money; pigs get slaughtered.

2. It's okay to pay taxes.

3. Don't buy all at once; arrogance is a sin.

4. Look for broken stocks, not broken companies.

5. Diversification is the only free lunch.

6. Buy and homework; not buy and hold.

7. No one ever made a dime by panicking.

8. Own the best of breed; it is worth it.

9. He who defends everything, defends nothing. Discipline trumps conviction.

10. The fundamentals must be good in takeovers.

11. Don't own too many stocks.

12. Cash and sitting on the sidelines are fine alternatives.

13. No woulda shoulda coulda.

14. Expect corrections; don't be afraid of them.

15. Don't forget bonds.

16. Never subsidize losers with winners.

17. Hope is not part of the equation; this is not a sporting event - this is money.

18. Be flexible.

19. When high-level people quit a company, something is wrong.

20. Patience is a virtue; giving up on value is a sin.

21. Just because someone says it on TV doesn't make it so.

22. Always wait thirty days after an earnings preannouncement before you buy.

23. Never underestimate the Wall Street promotion machine.

24. Be able to explain your stock picks to someone else.

25. There is always a bull market somewhere.

Farley's 20 Golden Rules for Traders

1. Forget the news, remember the chart.

2. Buy the first pullback from a new high. Sell the first pullback from a new low.

3. Buy at support; sell at resistance.

4. Short rallies, not sell-offs.

5. Don't buy up into a major moving average, or sell down into one. (see #3)

6. Don't chase momentum if you can't find the exit.

7. Exhaustion gaps get filled. Breakaway and continuation gaps don't.

8. Trends test the point of last support or resistance.

9. Trade with the tick, not against it.

10. If you have to look, it isn't there.

11. Sell the second high, buy the second low.

12. The trend is your friend in the last hour.

13. Avoid the open; they see you coming, sucker.

14. 1 - 2 - 3 - Drop - Up. Look for downtrends to reverse after a top, two lower highs, and a double bottom.

15. Bulls live above the 200 day MA, bears live below.

16. Price has memory.

17. Big volume kills moves.

18. Trends never turn on a dime. The first dip always finds buyers, and the first sharp rise always finds sellers.

19. Bottoms take longer to form than tops.

20. Beat the crowd in and out the door.

20 Rules for Effective Trade Execution:

(From Hardrightedge.com)

1. Seek favorable conditions for trade entry, or stay out of the market until they appear. Bad execution ruins a perfect set-up.

2. Watch the tape before you trade. Look for evidence to confirm your opinion. Time, crowd, and trend must support the reversal, breakout, or fade you're expecting to happen.

3. Choose to execute, or stand aside. Staying out of the market is an aggressive way to trade.

4. Filter the trade through your personal plan.

5. Stay on the sidelines and wait for the opportunity to develop.

6. Decide how long you want to be in the market before you execute. Don't daytrade an investment or invest in a swing trade.

7. Take positions with the market flow, not against it. It's more fun to surf the waves than to get eaten by the sharks.

8. Avoid the open. They see you coming, sucker.

9. Stand apart from the crowd. Its emotions often signal opportunity in the opposite direction. Profit rarely follows the herd.

10. Maintain an open mind and let the the market show its hand before you trade it.

11. Keep your hands off the keyboard until you're ready to act.

12. When confusion reigns, and the crowd lacks direction, stand aside.

13. Take overnight positions before trading intra-day markets. Longer holding periods reduce the risk of bad execution.

14. Lower your position size until you show a track record.

15. Trade a swing strategy in a range-bound market, and a momentum strategy in trending markets.

16. An excellent entry on a mediocre position will make you more money than a bad entry on a good position.

17. Step in front of the crowd on pullbacks and stand behind them on breakouts. Be prepared to move against them on reversals.

18. Find the breaking point where the crowd will lose control, give up, or show exuberance. Then execute the trade just before they do.

19. Use market orders to get in fast when you can watch the market. Use limit orders when you have a life outside the markets.

20. Focus on execution, not technology. Fast terminals can make a good trader better, but can also make a bad trader worse.

William O'Neil's Wisdom

William J. O'Neil

William J. O'Neil made his first investment of only $300 in Procter & Gamble while serving in the Air Force. After graduating from Southern Methodist University and a tour of duty in the Air Force, he began his career as a stockbroker in Los Angeles. While a young broker, O'Neil started studying historical stock market winners. He identified seven key characteristics all these leading stocks had in common before their big price advancements, and increased his personal portfolio over 2,000% in just 26 months. He went on to become a multi-millionaire as the founder of a prestigious brokerage and Investors Business Daily.

"The stock market is human nature on parade. "

"When the forgotten old dogs begin to bark and spearhead the market's advance, the stock market is on its last feeble legs."

"First, you must recognize that you are simply not going to be right all of the time... In a lifetime of investing, you'll probably only be right five or six times out of ten. So you absolutely must have a rule to always protect yourself."

"My rule is simple -- any stock that I buy that declines 7% or 8% below my actual purchase price, I will always without exception, sell to cut short my loss."

"Your first loss is always your smallest loss. The only insurance policy you can take out to protect against a large devastating loss is to cut them all without exception while they're still small. "

"I will never average down in price. If I bought at $50, I will never buy more at $45 or $40 -- that's risking more money in a stock that's already wrong and not working -- so why put more good money after bad?"

"The real key to stock market success is not to be right all the time (which you can't be) but to have more of your money in the stocks you're right on and lose less percentage wise and have fewer dollars in the stocks where you're wrong."

"Money is made by putting your eggs slowly and intelligently into fewer baskets you know well and watching those very carefully. Over-diversification is a hedge for ignorance."

"Our buy and sell rules were not based on our personal beliefs, systems, philosophy or opinions, but precisely on how the stock market actually worked for the last half century."

"It should be noted that Wall Street completely missed the homebuilders as a group with strong potential. Most leading firms all downgraded the group in the spring of 2001, saying they should be sold and that strength in housing sales couldn't last. The better housing stocks have since then doubled. Housing analysts gave costly advice."

"I have always avoided low-quality companies. As a rough definition, I place any company with a price below $10 in this category. You won't get the same quality of sponsorship (ownership by institutional investors) behind these companies that you do in true market leaders."

"Our research shows that most of the companies that had the best performance in the stock market started big runs with high earnings multiples."

"You absolutely must learn, write down, and follow some specific sell rules on when to best sell and take a profit on the way up while a stock is still advancing and popular. For example: If your stock breaks out of a sound price base structure and advances for many months and, on top of that, then runs up in price for one or two weeks at a much faster rate than in any other prior weeks since the beginning of the move up, this is a climax top, and the stock should always be sold while everyone else is all excited by the exceptionally strong price action. Typically, one day in this climax period will be up more points than any other day in the whole move up. Sell, get out while you can, and nail down your profit."

"How many times have you been wrong? When a stock is dropping, that's what the market is telling you -- "you're wrong." There are plenty of people who thought that Enron was severely underpriced at $30. Everyone needs sell rules, otherwise you're not being realistic. Nothing lasts forever. The big leaders in one market cycle do not normally come back and lead in the next bull market cycle. If you want to learn more about when to sell or how to create a realistic set of sell rules to improve your investment results, that includes being prepared to not fight the market. It doesn't care what you think about a company, or what you paid for it."

"Recognize this about the stock market -- it is a wonderful example of psychology on parade. It's a matter of historical fact that 82% of the best-performing stocks over the last 50 years had a blow-off top before they started coming down. I don't know about you, but if I saw something that happened 82% of the time, I'd pay attention."

"I did a study of the people that were doing very well in the market. I got copies of their prospectus and quarterly reports and plotted on charts precisely where they had purchased each of their stocks. There were over 100 of these securities and when I laid them out on a table, I made my first real discovery: Not some, not most, but every single stock had been bought when it went to a new high price. So the first thing I learned about how to get superior performance is not to buy stocks that are near their lows, but to buy stocks that are coming out of broad bases and beginning to make new highs relative to the preceding price base."

O'Neil says that certain changes in volume and price indicate selling or distribution. When institutions and professional investors start to sell, it means a trend reversal is imminent. He says most people miss these signs because they occur while the market is still advancing. But the signs, he says, are clear. They are:

The strong market leaders often sputter first, ahead of the general market.

Some low priced, low quality speculative stocks begin to move up.

The market averages have moved into new high ground.

Market volume increases while the price level stays the same or rises only marginally.

The Dow shows stalling action. This usually occurs in the third to ninth day of the advance.

There are often significant divergences between different market averages.

These are the key factors, and O'Neil says one, notably the volume increase while prices falter, occurs on just one or two days, so if you miss it, well you miss it. But we do get a second chance. After these indicators occur and the market turns, O'Neil says the market will have an attempted bounce back. If the first attempted rally fails, it is a sign that a market reversal is in progress.

How do we know a rally has failed? If the rally sputters in its third, fourth or fifth day, or if the rally recovers less than half of the market drop, it is a sign of market weakness. Another sign is if the first market resurgence ends abruptly on the second day with a strong opening in the morning but closing down at the closing bell.

Spotting the Market Bottom....

James Cramer on The 5 Signs of a Market Mega-Bottom

First: The pain makes the front page of the New York Times. If the market-woes stories aren;t on the front page, then simply wait; the bottom hasn't been reached yet. It is simply incredible how right this indicator always is.

Second: The Investors Intelligence survey of money managers. While you might expect that a good time to invest is when the managers are bullish, that's actually the worst time to invest. When the market managers show a definitive majority of bears, you have reached the bottom.

Third: Mutual fund withdrawals. Consistent, repeated outflows of several months in duration accompany all the big bottoms.

Fourth: The VIX, or Volatility Index. A reading above 40 in the VIX indicates a market bottom. Any reading below 30 indicates the market can't be trusted.

Fifth: Oscillator readings indicating the market is oversold.

Remember, this is a checklist. Anyone one of these indicators may not be definitive, but if all five have occured, it is officially a mega-bottom, and time to buy, buy, buy.

(from Jim Cramer's Real Money, pp 212-219)

Opportunity

"Opportunity is missed by most people because it is dressed in overalls, and looks like work." - Thomas Alva Edison

"Whatever we possess becomes of double value when we have the opportunity of sharing it with others." - Jean Nicolas Bouilly

"A wise man will make more opportunities than he finds." - Sir Francis Bacon

"Failure is the opportunity to begin again more intelligently." - Moshe Arens

"Too many people are thinking of security instead of opportunity. They seem more afraid of life than death." - James Francis Byrnes

"Opportunity doesn't knock. It presents itself when you beat down the door." - Kyle Chandler

"Luck is the time when preparation and opportunity meet." - Roy D. Chapin Jr.

"Small opportunities are often the beginnings of great enterprises." - Demosthenes

"We are told that talent creates its own opportunities. But it sometimes seems that intense desire creates not only its own opportunities, but its own talents." - Eric Hoffer

"There is no security on earth. There is only opportunity." - Gen. Douglas McArthur

Market Wisdom...

"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1. " - Warren Buffet

"I hate weekends because there is no stock market. " - Rene Rivkin

"How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case." - Robert G. Allen

"Successful investing is anticipating the anticipations of others." - John Maynard Keynes

"Price is what you pay. Value is what you get." - Warren Buffett

"October. This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February." - Mark Twain

"The successful man will profit from his mistakes and try again in a different way. " - Dale Carnegie

"Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it." - Will Rogers

"Markets can remain irrational longer than you can remain solvent." - John Maynard Keynes

"Whales only get harpooned when they come to the surface, and turtles can only move forward when they stick their neck out, but investors face risk no matter what they do. " - Charles A. Jaffe

"Investors don't like uncertainty." - Kenneth Lay

"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it." - Warren Buffett

"The worst mistake investors make is taking their profits too soon, and their losses too long. " - Michael Price

"Many investors seem to have forgotten a hard reality: There are frequent periods when stock markets don't do much." - Jim Rogers

"I think that the failures of Enron and WorldCom and other companies are partially failures of investors to recognize companies that are selling for a thousand times nothing, but chances are they may be worth only that. " - Arthur Levitt

"If stock market experts were so expert, they would be buying stock, not selling advice. " - Norman R. Augustine

"Anybody who plays the stock market not as an insider is like a man buying cows in the moonlight." - Daniel Drew

"People think the stock market is a place of levelheadedness but it actually works in a totally emotional way: the President gets a pimple on his nose, and the thing plummets." - Bill Forsyth

"Control of a company does not carry with it the ability to control the price of its stock." - Paul Getty

"Emotions are your worst enemy in the stock market." - Don Hays

"It's no coincidence that three of the top five stock option traders in a recent trading contest were all ex-Marines." - Robert Prechter Jr.

"Bob Dole revealed he is one of the test subjects for Viagra. He said on Larry King, 'I wish I had bought stock in it.' Only a Republican would think the best part of Viagra is the fact that you could make money off of it." - Jay Leno

"90% of the people in the stock market, professionals and amateurs alike, simply haven't done enough homework." - William J. O'Neil

"I'm involved in the stock market, which is fun and, sometimes, very painful." - Regis Philbin

"I had a couple of million dollars' worth of... stock once. And now it's not worth much more than wallpaper. I guess I just wasn't born to be rich." - Norman Rockwell

"I'm investing in a company that has patented wallet technology that will deodorize currency. That way people won't have to deal with money that smells funny." - Moby


"Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised." - Warren Buffett

After Hours Trading and Level II Charts

Okay, this blog isn't going to be anything fancy, just a place to jot down my lessons learned as I begin a new round of equities trading in 2009. Today's notes....

I realized something today that I'd never really considered before:
After hours trading is inherently wacky because of the low volume.
During the normal trading day, one wacky trade is just a blip on the tape, and is quickly "corrected" by the sheer volume of "normal" trades being executed at the market price. But after hours, a single wacky trade may end up being recorded as the opening or closing price for a given time period, and is therfore accorded a sort of legitimacy that could never happen during high volume trading. What is a "wacky" trade? Any trade where a buyer is willing to pay significantly more than the market price, or where a seller is willing to sell for significantly less than the market price.

Speaking of buying and selling, here are my (new) ideas on Level II charts:
A Level II chart shows half of a potential future development.
Actually, it shows two halfs, but only one of them is going to develop out of the current situation. If the price rises, the right half shows you where the resistance will be on the seller side. If the price drops, the left side shows you where the support will be on the buyer side. But since only one of those developments can occur in any given instant (either the price goes up, or it goes down) both sides can't be true at the same time. Of course, the price is always fluctuating, and in so doing, creates a whole new chart with each tick up or down. It's just too bad there's no way to put buyer's on the right side, and vice-versa! LOL

I read somewhere that trading stocks without looking at the Level II is a little like trying to walk thru the woods with a blindfold on. I thought I understood that at the time, but recently, I've found myself looking at the Level II even more than the regular charts. I think I finally "get it." TDAmeritrade has a streaming chart called a "depth chart", which is essentially a graphic representation of a Level II chart. I've always liked it, and now that I better understand the Level II, I am able to "see" a depth chart in my head when I look at it.

Trades today:
Sold CSTR (avg price $31.60) at $32.51 for a 2.9% profit.
Bought JAZZ at $9.00.

Earlier trades:
Sold CEP on 9/4/09 for 9.9% profit.
Sold JAZZ on 9/4/09 for 27.7% profit.