04-02-2015 Journal- $LRAD, $AMRN

So the bull came out to the backyard, hot air puffing out of its nostrils and the right forefoot pounding on the soft soil below. “What are you doing in my backyard?” was the signal beaming at the bear, not the words.  The bear looking up, was going to laugh but thought better of it, turned slowly and strutted out back to the neutral land still within sight. Now, how do you enjoy a barbecue party with an ugly bear starring at you?

DJ-30 daily

Today green bar, again, stopped the downdraft momentum from further movement.  This put the odd on next week move at 50/50; in other words, there is no favorable bias on either up or down.  The odd of bouncing is the same as dropping; hence I decided to close my two shorts $SPXU and $TZA before closing bell.  If I’m not getting a sense of direction and I’m holding the stock, it is prudent that I close the position immediately; otherwise, it becomes a gamble.

Sure some people says the whole stock market is a casino and everything is a gamble.  Not for me.  If you know how to count card at the BlackJack table, you are not gambling.  You are entering into a business enterprise using statistic as a guidebook to develop a business plan that will make money if you exercise discipline and hard work to follow a proven counting system.  This is not gambling.  Gambling is when you have an even odd (aka 50/50) in an outcome.  But the moment you “perceive” an edge is forming, you are no longer gambling ’cause you are simply follow the law of physic- Newton’s first law of motion:

I. Every object in a state of uniform motion tends to remain in that state of motion unless an external force is applied to it.

The purpose of technical analysis is to identify price action using Newton’s First law of motion.  Popular breakout patterns such as  Cup & handle, Head and Shoulder, etc. are all based on this simple law of motion to identify high probability of a trend movement to remain in that state of motion BEFORE an external force stop the trend.  When you have a system to analyze and capture a piece of the “motion” before it is stopped by opposing force, you are no longer gambling.

Thus without a sense of direction, the short play with $SPXU and $TZA became a gamble in my mind; hence my closing out the position.  This decision also involved accepting the consequence of missing the trade opportunity.  It would be like pulling the chip out of the black bet on the roulette table and found out the ball actually landed on black pocket.  You vented your frustration and then moved on.

$AMRN rallied hard early in the day and I automatically added more shares to take advantage of Newton’s 1st law of motion.  Unfortunately, an opposing force was applied and price tumbled back down to negative territory.  Basically, my reason for adding shares to surf on Newton’s 1st law of motion had vanished.  Thus, for all intent and purpose, I had no business holding a much larger position when the edge disappeared.  Hence my selling down my $AMRN position to raise cash and reduce risk before the closing bell.

AMRN_weekly

From the weekly chart above, $AMRN had another red bar.  While still inside the Andrew Pitchfork’s range, it is now in the lower section which is close to breaking below the uptrend line.  At this point, the risk is higher in holding too large a position. Under Newton’s 1st law of motion, the down momentum (motion) is still in force (three red bars consecutively).  IF this week was a green bar, then an opposing force had applied and the probability of a bounce would be higher; alas, it wasn’t the case this week.

$LRAD actually looked much better this week.

LRAD_weekly

A green bar this week was a bounce off from the converged 79 & 89 MA lines.  The probability of a continued bounce is high.

Due to losses sustained from buying up $AMRN and then selling them back down at lower price as well as losses from closing out the $SPXU and $TZA, my port gave back 0.9% for the day.  YTD gain is now at 15.7%.

Current holdings:

LRAD, AMRN and 62% cash.

My 2 cents.



Categories: trading journal

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