This past Wednesday, the founder of Sierra Alpha Research, David Keller, CMT presented to the New York Chapter meeting of the CMT Association on the topic of timeframes. He spoke about how he defines and uses three frequently referenced timeframes: short, medium, and long-term, as well as the common pitfalls he's seen people fall into over the course of his nearly 20 years as a Technical Analysis practitioner.
This past week I came across a potential trade setup in an Indian micro-cap stock that really got me thinking about the question, "Who am I as a market participant?". With all the noise created on a daily basis, it's easy to lose sight of your answer to this simple question, but doing so inhibits your ability to make any decision about markets responsibly.
In early April I tweeted about AMD's potential breakdown from its 15-month bull-flag and its potential implications for the stock. In hindsight I'm glad I did because it's great to have this real-time example of my mindset, and the mindset of others in the marketplace, as the pattern played out. It was also a great opportunity to get constructive feedback in the comments section from many of the bulls at the time. Now that I've used my one joke per post allowance, let's move onto how the stock has performed since.
Everyone always wants to talk about how high the stock they just bought is going, or how much money they're going to make on a new position. "JC I think Apple goes to a Trillion Dollar Market Cap!" or "JC Bitcoin is going to $100,000!". These are things I hear frequently, or at least some sort of variation of these comments.
This is perfectly normal behavior. We should not be afraid of it. But more importantly, I think we need to be aware of the implications of these feelings. The thing is, once we are already in a position, our emotions get involved. When our stress levels rise, we act emotionally, rather than logically. This is how we're hard-wired. It would be abnormal for us not to think this way. But again, the important thing is to be conscious of it and not let it dictate our actions.
I thought this would be a good time to share some of my thoughts on position sizing. I've noticed this week many people who never mentioned a futures contract are now opining on the futures market at all hours of the night. I know what that feels like. I've been there. 2008 was an amazing experience for me. It's not the lifestyle that I want to live. Sleeping at night is healthy. If my positions are too big, I'm not sleeping.
To me, the key to avoiding bad decisions is to keep stress and emotional levels low. It's hard to do that when there is too much money involved for you to handle responsibly. So we want to identify how much is too much. It's not an easy answer and most likely something you'll learn over time. When you get that feeling like you've just been punched in the stomach, you're probably too big. You'll know it when you feel it. Most of us have been there, multiple times.
All-time highs across the board in Small-caps these days. Some are in shock. I personally just don't understand why stocks that are in uptrends going up is anything outside of perfectly normal? I would argue that any other result is what we should consider unusual. If the market teaches us one thing is that trends are much more likely to continue than to completely reverse.
In September I put out a post about small-caps breaking out of year long bases. If you recall, at the time, the sentiment around the market was about how high stocks were and how they could not go much further. My argument at that point was the exact opposite. Small-cap stocks had done nothing for an entire year. To suggest the stock market was too stretched was irresponsible, in my opinion. Not only did we want to be long stocks, we wanted to be "very aggressively long" equities.
Pretty much every day for the past 15 years I've been asked the same question: What should I invest in? The way I get asked is always changing, of course. It's been, "How many houses should I buy in Miami since real estate only goes up?" to, "Which marijuana penny stock should I buy?" to, "Which crypto do I buy" (not if. which one?). The "sexy assets" of each era are all different, but the idea is the same. Because of my interest in markets, this question is constantly fired my way.
The answer I give isn't always well received, but it comes from the bottom of my heart. If you want to invest, where better to do that than in yourself? Go buy a book and spend the time to read it. Go reach out to someone you look up to and buy them a drink, or coffee or lunch and learn from them. Go travel to a far away land and meet with the locals. All of these "investments" are probably going to go a lot further than the litecoin you just bought because your nephew told you it's a good idea and you saw someone talking about it on the tv.
I get asked a lot about moving averages. Many people think they are this incredible indicator that will lead to riches. Unfortunately, they're the furthest thing from that. These are just invisible lines that people like to paint different colors to exaggerate their meaning. There are all different kinds of moving averages: some are shorter-term, some are longer-term, some give more weight to recent prices while others are equally weighted. I like to say that if you have enough moving averages on your screen, one of them will work!
Today I'd like to share with you in simple terms how I use them:
It's a busy time of the year for me. I've been given the opportunity to join a panel of amazing analysts at the 2nd annual Evidence-Based Investing Conference put on by my friends at Ritholtz Wealth Management. I will also be giving an hour long presentation at the Chicago Board of Trade on Technical Analysis and the Intermarket Relationships that I incorporate when making decisions about the current market environment. In a few weeks I will be presenting in San Leandro, CA at the Deaf Community Center and we'll have a sign language interpreter there to help us. This will be a lot of fun!
Here are all of the details. I hope you can join me for one or all of these!
I've been using Investopedia.com for as long as I can remember. Especially early in my career, whenever I had a question about the market or didn't know what something meant, Investopedia was always there to help. Whether it was a simple definition or I just needed an explanation on something more complicated, this website been a reliable source of educational material throughout my many years in this business.
Today, I am excited to announce that I have partnered up with the amazing people at Investopedia to launch their first ever Technical Analysis Course! It is such an honor for me to be a part of this incredible company. It's like my career has come full circle. This is so cool! You can go through all of the videos and supplemental information at your own pace. That's the best part!
Tuesday was a special day for us stock market participants. We don't always have such a spectacular display of completed Bullish Engulfings on a single day. It was an amazing thing to watch. Last night I could barely sleep. I just wanted to come back and make sure that actually happened. Man, what a rush!
For those of you who are less enthusiastic about Bullish Engulfings, or "outside days" as they call them in the West, these things don't happen too often, and there are even fewer instances where they all take place in unison. We're pretty stoked about it, I gotta tell you. What we're referring to here specially is the fact that yesterday, the lows of the day in many cases were below the prior day's lows, but the highs and closing prices were both above the prior day's high. The double extreme here is evidence of an overwhelming amount of demand relative to supply. Here is what it looks like:
Earlier in 2017, I mentioned this was going to be an exciting year filled with new additions to AllStarCharts.com. I’m excited to announce one of the many today with the launching ofAll Star Charts EDU. This new addition is an educational section of the site dedicated to helping users grow their knowledge of technical analysis. With each one of these tools and principles, I also explain how I personally use it and how it helps me throughout my process. I think this will give you a better understanding as to how I approach the market and can also be used as a resource in the future.
