Monday, March 30, 2009

A Weak Monday

Just a weak day, not much can be said about today's action. The best place to be was on the short side, and one of our picks, Schnitzer Steel, was off 11%. Unfortunately, most of this move occurred in the first five minutes, so it was not a good trade for our basic opening range breakout strategy. However, it did provide some good scapling opportunities for traders who like to be more active.

Unless we get some big news over night, I expect Tuesday to be a bit more quiet. We often get a bit of a turnaround on Tuesdays, particularly after a couple down days in a row. And, considering the size of today's move to the downside, there will be more opportunities on the long side for the next couple of days.

Good Trading!

Scott Cole

Friday, March 27, 2009

Stocks end week on down note

U.S. Stocks opened lower and never recovered, but traded in a narrow range today. This was a classic case of profit taking after a big up week for the major averages. Volume was very light today, and the averages generally closed near Thursday's lows.

Due to the narrow trading range in the averages today, there were not many big directional moves in individual stocks. However, many are now set up for some big moves early next week.

With all this in mind, I suspect we will see some more selling next week. We will be getting another look at the jobs market next week, which will likely have a significant impact. Any sign of improvement could help the market rally. It is all about perception, however, so pay attention to Wall Street estimates to get a feel for what direction the market will head, based upon the number reported.

Scott Cole
www.bestdaytradingstocks.com

Tuesday, March 24, 2009

Stocks Give Back Some of Monday's Gains

Well, considering that I was traveling both last Tuesday and yesterday while the market was making big gains, many people might wish that I had stayed on a plane today! After yesterday's nearly 500 point advance in the Dow, it gave back over 100 points today, and the other major averages were distinctly weaker. As Don Worden mentions in his TC2000 notes yesterday, the market rise actually occurred on volume that was lighter than last Friday. That is an indication that there was no major accumulation in yesterday's big rise.

Another ominous sign today was that the market sold off in the last hour. After opening lower, and staying down for the first half of the day, the Dow clawed its way back into positive territory. At about 3 pm, it was down only marginally, and Maria Bartiromo arrived with her pom poms on CNBC, ecstatic about the positive vibes on the floor at the NYSE.

I had no doubt a couple weeks ago that we were due for a nice rally, and we have already gotten it. Unfortunately, these are pretty common within Bear Markets. The 2000-2003 market shows many of these rallies, more so than the current Bear. But, there are far too many analysts willing to call this month's bottom THE BOTTOM, which suggests to me we may still have some pain to deal with. We may not make a new low, but we certainly will not be surpassing the 2007 highs any time soon.

Let's look at some long range issues. Our interest rates are being MANIPULATED by the Federal Reserve now at artificially low levels, while our government adds to our national debt at an alarming rate. Ultimately, this WILL result in significant inflationary problems as the Dollar will get pounded, and we will no doubt see higher personal and corporate taxes to pay for all this largesse.

Generally speaking, the current time period is more similar to the 1966-1982 period that involved an unpopular war, energy troubles, and rising debt. Until the Dow broke out above 1000 for good in 1982, it traded in a sideways pattern with several Bear markets in between. Unfortunately, our issues now seem to be worse.

Yes, we will likely see some recovery down the road, maybe even later this year. But, don't expect a raging bull market to be the result. What is going on in Washington right now will hamstring American business and the economy for years to come.

Naturally, as daytraders, we love this volatility. We've seen a good number of 5% to 10% daily swings in a number of stocks as of late. As long as we have this volatility, we will have great daytrading opportunities, no matter what the overall market is doing, and we will keep you posted!

Scott Cole
www.bestdaytradingstocks.com

Sunday, March 22, 2009

The Week Ahead

At the end of last week we had a modest pullback in the U.S. stock market after a couple weeks worth of big gains that saw the major averages rise over 15% from their recent lows. We saw the big follow through day we wanted to see that confirmed the recent rally may have some legs. This is no guarantee that the rally is sustainable, but major rallies do not start without that follow through day.

Now, we will see if the rally can hold. I suspect we will have a bit more pullback early this week, and then we'll if the market can break through last week's highs. A lot depends upon what comes out of Washington, as Congress begins debate on the Obama budget. Friday's release of the Congressional Budget Office's forecast of economic growth and budget deficits suggests that Obama's grand plans may need to be scaled back quite a bit, as moderate Democrats, particularly those elected in more conservative districts, worry about their re-election prospects in 2010. With that in mind, keep an eye on the rhetoric out of Washington, as it may have an impact on the markets.

The bottom line is that the markets were deeply oversold, and the market was way overdue for some kind of a rally. Short covering was clearly the primary driver in the market's rally over the last couple weeks, as there really has not been any very positive economic news. However, I think it is interesting that, since the Fed announced its plan to start buying hundreds of billions of dollars worth of Treasury securities in an effort to but a ceiling on interest rates, the market has traded lower. In my view, this is an artificial propping up of the Treasury markets, that, when combined with the incredible amount of fiscal spending and other Treasury spending in the last six months, can only lead to inflation down the road.

Scott Cole
www.bestdaytradingstocks.com

Thursday, March 19, 2009

Fed Plan Boosts Stocks

Ben Bernanke and the Federal Reserve announced a more aggressive plan to buy Treasury securities and mortgages, sending stock prices up yesterday afternoon, and putting a short-term top in interest rates. This announcement came after a solid up day in stocks the day before, which was the follow through day we had been looking for, signifying this could be a sizable Bear Market rally at the least.

While stocks and Treasuries rallied on the news, the U.S. Dollar plunged, as it is clear the Fed will be running the printing presses at high capacity to pay for its Treasury purchases. Combined with the Obama administrations aggressive budget plans, the long term outlook for U.S. assets may be shaky. For now however, the direction in stocks appears to be to the upside. As such, daytraders should be wary of the short side, although we are overdue for a pullback.

In other markets, commodity prices were mixed on the session. It was notable that Gold prices dropped substantially yesterday after the Fed announcement. Gold closed at its lowest price since late January. A head and shoulders top pattern was broken to the downside, and targets a price of under $800 for the precious metal in the next few weeks.

Scott Cole

Sunday, March 15, 2009

How To Start Your Day Trading Business

In the current economic environment, many of us are looking for new ways to make a living. Many of us are sick and tired of the daily grind and are searching for ways to work at home. That is why many people turn to day trading stocks, currencies and futures markets.

Unfortunately, the vast majority of people who enter the world of day trading are unsuccessful. Trading is an extremely difficult profession, and most people are not psychologically prepared for the pitfalls. They read one or two trading books and feel that they are armed and ready for the challenge. However, most of these books contain conventional wisdom, and a regurgitation of old ideas that rarely work.

Also, most people are not prepared to accept that most trades will turn out to be losing trades, breakeven trades, or very small winners. Most people want to be right the majority of the time, but trading is not about being right, it is about making money.

With all this in mind, here are a few basic ideas on how to start your day trading business.

1. First you must determine how much capital you can trade with. This must be purely risk capital, money you can afford to lose without hurting your lifestyle. You can start day trading futures indexes with as little as $5,000, but you need $25,000 to day trade stocks.

2. Be sure you have ANOTHER means of income to pay your basic bills. It is extremely difficult for a new trader to live of income from day trading. If you’ve recently lost your job, find a part time job elsewhere that still allows you the time to day trade, if day trading is the direction you want to try.

3. Develop a specific strategy for day trading whatever market you intend to trade. For instance, if you plan on day trading E-Mini S&P 500 futures, you must first determine whether you want to be an intraday scalper or whether you want to profit from large directional moves. Remember, if you intend to be a scalper, you must be glued to the computer screen for hours each day. That can be tough for most people.

4. Determine what your basic profit goal will be, and DO NOT make this a monetary figure! Gary Smith, who wrote “How I Trade For a Living” simply had the goal of being profitable every month. It didn’t matter whether he made $200 or $2,000 in a month, he simply wanted to make a profit. Adjust your goal for how you will trade. If you intend to scalp, you probably want to be profitable each week, if not every day.

5. Determine which market, or markets you intend to day trade, and then learn all you can about what makes those markets work, and what influences their prices. In the stock market, it is very difficult to learn all there is about how the market works, but if you learn the basics, you will gain a better understanding.

6. Paper trade first, then trade with very little leverage once you are ready to start using real money. You want to get a feel for whether your strategy will work or not. Confidence is a key to success. Also, even if your strategy is working while you paper trade, things change when real money is on the line! You must maintain the discipline to follow your strategy, if you are confident it will work in the long run!

7. Keep detailed records of your trades! This will help you identify your skills and faults as a trader, and will benefit you in the long run!


These are just some basic thoughts on starting a day trading business. There is an awful lot to learn in this business, and the fact is, most people fail. Trading is just like any other skill profession…it requires education and experience to become successful, otherwise, we would all be doing it!

Scott Cole
www.bestdaytradingstocks.com

Friday, March 13, 2009

Stocks end week on positive note

U.S. stocks closed modestly higher on Friday, ending with weekly gains not seen since last November. In all of the major averages, we managed to close above last week's high as well, a very positive sign. Another very positive sign is the formation I see on the weekly charts of the Nasdaq and Nasdaq 100 indexes, which suggest a successful test of the November lows may have occurred. We won't know if that is the case until the January highs are taken out, but the price pattern is very attractive. The only problem I see is that volume tailed off this week compared to last week. Therefore, if prices are to go higher, we need to see more volume.

More to come!

Scott Cole
www.bestdaytradingstocks.com

Thursday, March 12, 2009

Positive Economic and Market News Boosts Stocks

U.S. stocks rallied nicely today on the back of retail sales data for February was not as bad as expected; GE's credit rating was cut less than expected; Bank of America indicates it has been profitable so far this year; and GM said it does not need an extra $2 billion loan it thought it may need in March. The result was a big rally on volume that was greater than Wednesday's but less than Tuesday's.

We are now sitting right at some resistance levels in the S&P 500, and it will not surprise me to see the market trade lower on Friday ahead of the weekend, as traders look to book some nice profits for the week. However, it is nice to see some follow through, which suggests this rally has at least some short-term legs. To convince me that this will be a stronger Bear Market rally, we'll need to see another big up day next week.

Because the market had rallied for a couple days prior to today, we did not have many low risk stock picks for day trades to the long side. However, one of those pics scored big, and was yet another example of a great directional trade that ran into the close...Netflix. The chart is below.

Good Trading!

Scott Cole
www.bestdaytradingstocks.com

Best Stock to Day Trade

I've been sending out my daily list of best stocks to day trade for a couple weeks now, and my subscribers have had the opportunity to nail some nice moves. I wanted to highlight one trade in particular that had all of the characteristics we look for in identifying a potential day trading opportunity.

If you will recall, Tuesday was a huge up day in the stock market, and most stocks exhibited nice gains. However, we are looking for the lowest risk opportunities, so in the case of potential long trades, we tend to look for stocks that are actually already trading in an uptrend of intermediate term duration. These are the stock market leaders.

Heading into Tuesday, SNDA was among those stocks that had been trading higher for a few months, and was threatening to break out again. Furthermore, even while the market had declined sharply in the previous few days, SNDA was holding its own. Its trading range contracted sharply on Monday and its volume was light. All we needed for this stock to make a sharp move to the upside was a solid up day in the overall market, which was long over due for such a day. The chart below is a daily chart of SNDA going back a month.




As you can see on the daily chart, on Tuesday, SNDA headed much higher. This was a classic directional move, that lasted a couple days, and exhibits many of the characteristics we look for in our day trades. See the intraday chart below.



As you can see, you could have applied any type of opening range breakout strategy to capture this one directional move for the day.

Scott Cole
www.bestdaytradingstocks.com

Wednesday, March 11, 2009

Stocks manage modest follow through

U.S. stocks made modest gains today, after Tuesday's huge run up. The market now sits within close proximity to overhead resistance in the form of a moving average I utilize as part of my analyses. With today's narrow range, and the fact that the averages closed near where they opened, the trading pattern suggests that Thursday or Friday could be a sizable day to the downside. But, since the market was so oversold before yesterday's rally, I am not sure we will get a huge move to the downside. What would be a clear sign of strength is if the market can rally on Thursday, and ultimate close above today's highs. If we could then close above last week's highs, then we might be on to something!

With all this in mind, be careful trading the next couple days!

Scott Cole
www.bestdaytradingstocks.com

Tuesday, March 10, 2009

We Were Due!

We finally got that overdue stock rally we've been looking for! The question now is, will it last? I can tell you with some confidence that Friday's low will hold for a while. Whether this turns out to be just a Bear Market rally, or the beginning of a new Bull Market, only time will tell. In either case, for a significant rally to occur from here, we need to see a nice follow through day in the next week or so. And, we certainly do not want to see a 100+ point down day tomorrow.

Today's rally was sparked by a memo sent out to Citigroup employees that indicated the bank is on pace to make a profit in the current quarter, for the first time since 2007. The market viewed that very positively, as the financials opened strongly to the upside. Later in the day Barney Frank suggested that the uptick rule may be back in place in the near future. I really don't know if that will have much impact or not, but the market seemed to take it as an extra positive.

In any event, the S&P 500 closed up well over 700 today, which was a supposed magic number on the downside. The first area of resistance is in the 740-745 range, which marks the November low. Beyond that, 775-800 will provide significant resistance.

Heading into today, we had a number of stock picks that were set up nicely for a day trade to the upside, that were presented in our daily newsletter. Take the time to receive a two week free trial at www.bestdaytradingstocks.com.

Today's rally in stocks essentially marked the end of the recent uptrend in Gold and Silver, and I am not sure these markets will test their February highs any time soon. Elsewhere, commodities were mixed, with some in agriculture and copper, but crude oil was lower, which was a bit surprising. The Dollar was flat, while Treasuries were a little lower.

Scott Cole

Monday, March 9, 2009

Stocks Continue Slide Downward

U.S. Stocks chopped around for most of the session, before late in the day they once again decided that the path of least resistance was to the downside. Except for the $41 billion merger between Merck and Schering Plough, there was no other news able to support the market.

One disturbing trend I have noticed in recent trading sessions is that the Nasdaq stocks are selling off harder than the Dow and S&P 500. I guess this just could be due to the fact that the financials have gone about as low as they can go. The big bellweather tech stocks, ie, GOOG, AAPL and RIMM are leading the way down, especially Google.

As I mentioned yesterday, I think we are due for a solid bounce, or at least a couple months where the averages trend sideways. With today's down market, the readings on the ADX climbed again, and it will continue to do so, even if the market heads a little higher from here over the next few days. Furthermore, the sentiment is overwhelmingly negative, as another pundit suggested that 600 is the next target level for the S&P 500 and beyond that, 500. 500? Wow, I can remember the first time it broke above that level in 1995! Well, we have quite a ways to go to get down there, although at the rate we are going, and with the continued blundering in Washington, maybe it won't be long until we get down there.

Still, even though we are over due for a bounce, don't run out and buy any stocks yet! You don't have to pick tops and bottoms to make good money. It is the meat in the middle of a trend that will line your pockets, and the trend remains down until further notice.

As for daytraders, since we are due for an upside move, be a little cautious. Today was a topsy turvy day that resolved itself to the downside, but the choppiness was brutal for daytraders looking to capitalize on big directional moves. These may be coming to the upside soon.

Scott Cole
www.bestdaytradingstocks.com

Sunday, March 8, 2009

Daytrading Thoughts for Monday

Due to the significant declines in the market over the last couple of weeks, our pool of reasonable stocks to daytrade from the long side has evaporated substantially. I had to expand my normal stock screens just to come up with a list of potential trades for Monday, otherwise, I was faced with no candidates based on my normal screens.

On the other hand, with the averages in such a steady downtrend, we need some sort of rally to present some better shorting opportunities as well.

This may suggest that we are due for some kind of a rally, so watch out for that. This rally will come as a result of sheer exhaustion on the part of the sellers, rather than from any demand for stocks. However, even if that is the case, there is the chance of a decent rally, as the oversold tensions get tighter and tighter.

The bottom line is you need to be very cautious with your trading in the coming days! This is not the time to swing for the fences!

Scott Cole
www.bestdaytradingstocks.com

Friday, March 6, 2009

Stocks end brutal week with mixed day

U.S. Stocks closed on a mixed note Friday, ending a tumultuous week that saw the major averages close at 12 year lows. This type of downswing will likely end when the sellers are exhausted, rather than with any significant economic or political catalyst. The bottom line is that investors are not willing to step in and buy stocks when there is so much uncertainty coming out of Washington, and economic data continues to be weak.

Today, the government reported that the U.S. economy shed another 652,000 jobs in February, and the January and December reports were revised downward sharply. No real surprise there. The fact that the report was not worse allowed the market to rally initially, before selling off. Late in the session, the shorts covered and squared their positions for the weekend.

More to come!

Scott Cole
www.bestdaytradingstocks.com

Thursday, March 5, 2009

Stocks drop again as Bear Market roars back

Well, Wednesday was a one hit wonder, as the Bear returned with a vengeance on Thursday, wiping out of Wednesday's gains, as the Nasdaq finally closed below its November closing low. I felt like today would be a quiet day, but news that GM can not continue to operate as a going concern if its viability plan does not work. Can we rally from here? Yes, we can, but it will take some sort of big surprise or catalyst.

Hopefully, if you had any long positions yesterday, you closed them out at the close. The market opened sharply lower today, then continued lower. Not a good idea to hold short term long positions over night in this type of market.

You will notice that there are not many picks for Friday's trading. The market is deeply oversold, so it is possible for a quick turnaround, especially on an intraday basis. However, there are not many stocks offering decent buy setups either, since few are showing much strength in the face of this huge down turn.

Friday we have the release of the February employment report watch for that and see how the market reacts!

Good Trading!

Scott Cole
www.bestdaytradingstocks.com

Stock Index Futures Pointing To Lower Open

U.S. Stock index futures are trading sharply lower ahead of the open on Thursday, as Europe and the UK cut interest rates. This is helping to boost the Dollar Index to three year highs, but its overall gains have been somewhat muted as it is still trading within its recent ranges against the British Pound and the Euro.

No real surprises in jobless claims data out this morning, but productivity figures contracted.

The main news out is that GM's auditors suggest its viability as a going concern is very questionable. Without continuing help from the government, GM will need to start liquidating assets. That is what is pressuring futures prices this morning.

Obviously, many stocks will open to the downside today, but I am not sure there will be much follow through considering that the employment report is due out tomorrow. With that in mind, day traders can likely expect a choppy session with a downward bias. However, if Tuesday's lows are violated, watch for more weakness.

I will say that at this point, sentiment is quite bearish and the mood is bleak. Watch out for any upside surprises that could potentially spark a sharp rally, as a lot of short sellers will get caught with their pants down. Until then, however, the trend is down, and rallies will be viewed as shorting opportunities until we finally get a follow through rally.

More to come!

Scott Cole

Wednesday, March 4, 2009

Stocks Finally Manage Some Gains

Dear Trader,

Finally, the losing streak for the market is over! But, unfortunately, stocks closed well off their highs for the session. Obviously, the general bias of the market was to the upside. The news out of China indicating some signs of a recovering economy helped boost some of our long choices at the open. This resulted in some big gaps for a couple of our picks, but the pullback in the last 30 minutes of trading resulted in muted gains.

Since we are in a down market, it is generally not a good idea to maintain long positions overnight, until the market proves it can sustain a rally for more than a few days on occasion.

Watch for a quiet session on Thursday ahead of Friday's employment report.

Good Trading!

Scott Cole

Tuesday, March 3, 2009

Stocks decline in less volatile trade

U.S. stocks closed lower again Tuesday, but in less volatile and quieter trade, as Treasury Secretary Geithner finally made another appearance, this time in front of the House Banking committee. Fed Chairman Bernanke spoke in front of a Senate panel as well. The overall reaction in the financial markets was muted. Geithner was making the case for the Obama budget, but he was mainly preaching to the choir.

In other markets, the Dollar continued a bit higher, while the precious metals sold off sharply, as traders in Gold and Silver are all trying to exit through the same door. Gold has pulled back nearly $100 in just over a week. With the Dollar trading higher, there is no real reason for most to own Gold at this point. Whether this is a pullback within a long term uptrend has yet to be determined. A significant breakout above $1,000 is likely what is needed for that market to go much higher.

Watch out for the ADP employment survey on Wednesday.

Scott Cole

Monday, March 2, 2009

Stocks Sink on Continued Global Economic Worries

The bear market in global equities sank to new lows on Monday, as the Dow Jones closed at its lowest level since Spring 1997. Yep, if you began investing in 1998, you are in the red, dividends not withstanding.

As a result of today's significant drop, our daytrading picks showed some significant profits. These included UPL, OIH, RIMM and CPO. For Tuesday, the best set ups are to the long side. For more info, go to our website below to see how you can sign up for a free 2 week trial.

Scott Cole


Stocks down sharply at Mid-day on Monday

It is near mid-day in U.S. trading, and stocks are considerably weaker once again, as it was announced over the weekend that the government needed to invest another $30 billion in AIG. U.S. stocks opened lower, and are trading at their lows on the session, down about 25 points on the S&P 500 to around 710. The Dollar is rallying strongly as a result of the global meltdown, particularly against the British Pound. Commodities are getting pounded in mid-day trading, with crude oil down about 10% on the session.

As I mentioned yesterday, I started a new daily newsletter covering the best stocks to daytrade. You can find out more information at the link below!

Scott Cole

Sunday, March 1, 2009

Daytrading Newsletter

We have just started our daily daytrading newsletter that will identify the best stocks to daytrade, and provide subscribers with a system for trading them. For more details, go to

Scott Cole