TICK trading the S&P 500 using SSO

Here is an interesting TICK triggered trading plan worked out for yesterday. This is, more or less, what I was trying to accomplish on Friday. I did catch a good chunk of the two largest moves of the day but working strictly off of the 200SMA is somewhat profit restricting. I have liked the idea of fading to the 200SMA and have tried that a few times with limited success (read: more loss than profit).

So here is an example of back testing a day using some of my newer ideas. I know the day is recent so the results may be to optimistic but the theory is sound and the charting is a great exercise. I will do the same thing for the SSO side of the day, although I would tend to try to not trade against a trend setting day...once I realized that is what it was.

For the TICK chart (second chart):
Plot the 25 or 30 SMA, red
Plot the 200 SMA, green
Bollinger Bands at 20 period, 2 standard deviations (I just like these, I don't think I would use them for triggers though. I like the narrow and wide indication of volatility.

Here is the SSO chart for yesterday:

I know the TICK chart is tight, I use it much narrower and with wider spacing but this is easier than trying to split the day into two charts.
May 8th observations:

TICK strong off the start, 25 over 200 and both UTing.


Trades as charted:

0938h - Entry on first up bar after a bottom... coincided with a 200 entry.
NOTE: Expanding volume confirmation after entry
0950h - Exit on second full bar below the entry bar in TICK, R1 failed test as the primary
1051h - Entry after first positive TICK bar following 25 over 200 cross pullback to -800 range
NOTE: This happens to have been the second test of the primary pivot point
1120h - Exit after failed test of the 200SMA, no TICK reason, could have held
NOTE: the next entry the tick level was lower yet produced an even price from the previous exit... sign of an UT in progress.
1150h - Enter test of 200SMA, TICK testing low trend line
NOTE: 25tick SMA steeper slope than 200SMA, UTing, more positive TICKs
1221h - Exit second failed test of R1 (R1 is a good resistance level)
1251h - Enter following low TICK, bear -800, VWMA test, increasing TICK
NOTE: TICK not trending, horizontal ... tight stops or target trades, aim for R1 again
1258h - Exit, R1 again, don't wait for the fail due to third time testing and neutral 25SMA TICK
NOTE: no new highs or lows for the next period, wait for the 200sma test.
1400h - 200SMA test and TICK low reading
NOTE: TICK returns to small UT here, breaks R1 on good volume, stop at VWMA
NOTE: TICK lows do not produce new price lows, stop to R1
1455h - Exit as yesterday's high test failed for 4 or 6 bars, TICK turns DT afterwards so exit imminent anyway

The rest of the day TICK highs and lows do not produce new price highs or lows. I don't care much for trying to play the EOD volatility anyway.

Jeff.

January 9th...more could have's

Well, I am nearing the end of the speculative chart work now. So this may be the last one...perhaps one live one for Monday if my account doesn't get linked to my platform until sometime on Monday.

So let's take a quick look at Friday. I set the pivot points up as usual:
Dark blue is the previous close, Light blue is the primary pivot point,

Green are S1-3, Red are R1-3
Averages - Red 30sma, Blue 50 sma, Green 200sma

Green arrows are buy and red arrows are sells

Capped Energy chart

The move off the start is a rather steep selloff and would indicate some good shorting opportunities and I would jump over to HED to take advantage of those, but first let's look at the TLM chart.

Activity here didn't start until late into the morning as the p;rice bounced off of the S1. I don't mind holding this one through some pullbacks as the price difference is slow and not large, having said that the exit just before 1130h is mainly due to the swings and failure to get any closer to the nearing 200sma. I may have jumped on the previous pullback but it is hard to say without being there live. Second trade is pretty standard but deviates from a pure PP200 a bit. Trade three is right on the money and as the price cleared the 200sma so well it would be worth holding for at least the PP target. Again the price is not that volatile so it is OK to risk holding it through some of these pullbacks.

Buy $12.46 Sell $12.60 Gain 14 cents ps Return 1.1%
Buy $12.50 Sell $12.62 Gain 12 cents ps Return 1%
Buy $12.47 Sell $12.72 Gain 25 cents ps Return 2%

$0.51 gain per share or 3.1% overall return on trades

300 shares traded for $153

Now to HED for the "short" action

Based on the Capped Energy chart this was really the only decent trade as this entry corresponded with Energy falling through it's PP...as the PPs more or less line up with this fund it makes the trades fairly easy. With Energy leading this the trade is worth holding through the small pullbacks.

Buy $16.45 Sell $17.00 Gain 55 cents ps Return 3.3%

$0.55 gain per share or 3.3% overall return on trades

200 shares traded for $110

SU can only be traded for 100 shares per trade so it will not be prime on my list anymore but is worth watching yet at least to keep it in my list for some time when I can trade multiple lots.



Long positions were hard to find on this one. I may not have even made these trades at all if I were only watching SU or I may have tried and lost on a couple of trades before giving up. Only trading 100 shares makes this a tougher one to make any real headway on as the volatility is not that great.

Buy $28.05 Sell $28.40 Gain 35 cents ps Return 1.2%
Buy $27.60 Sell $27.76 Gain 16 cents ps Return 0.6%

$0.51 gain per share or 1.8% overall return on trades

100 shares traded for $51

Jeff.

January 6th trading plan, PP200

Yesterday's plan was to use the new idea of the Pivot Points as entry and exit and the 200sma as a genreal bias indicator...although I could not trade for the whole day it turned out that most of the good moves were in the monring anyway and I was done by 1030h.

So here are the charts for the trades of the day, Suncor with two trades.



Buy $28.60 Sell $29.40 Gain 1 dollar ps Return 3.5%
Buy $29.63 Sell $29.60 Gain (-3) cents ps Return (-0.01)%

$0.97 gain per share or 3.3% overall return on trades

First is a bounce off of the R1 for a early entry. I may have considered selling as the price hovered just below R2 but these were live trades, not historical speculation and I decided to hold it through and was rewarded by another 25 cent move. The second trade was placed as the price bounced off of R2 but was exited at 100oh due to weakness in the overall market as seen by the decline in price on the following Capped Energy index.

This index chart gives me my signals for trade exits and worked well yesterday. I will be following this index even more closely now as the last two trades of the day were on HED, the Energy bear ETF, chart follows:



Buy $14.31 Sell $14.64 Gain 33 cents ps Return 2.3%
Buy $14.65 Sell $14.85 Gain 20 cents ps Return 1.4%

$0.53 gain per share or 3.7% overall return on trades

The strong inverse correlation between the Capped energy and the HED ETF make for a nice combination as the index tends to lead the ETF by enough time to make the trades and enough time to place a good exit. The only factor is that the quotes tend to move ahead of the actual price more so than a regular stock, partly due to the low volume and difference method used for valuation. This one could be a decent vehicle to perform some true scalping...but I don't know how the low volume would affect such a strategy.

The Energy index dropped through R1 nicely, and would have been a great short sell trade on SU if I could short. Instead I look at the HED and see the corresponding gain in price. Using the PP200 plan I would not enter until R1 was broken on the way down which equates to S1 broken on the way up on HED for about about a 20 cent gain (conservative). Enter at 1055h exit at 1110h as the index stalls but the ETF doesn't drop off as quick.

Realistically I would have placed a more aggressive position trade at 1050h and exited at the same point for a gain of 38 cents. Both of these are just "could haves" though so I don;t count them as anything but a bit of chartwork.

Jeff.

Crude Oil, HOU and HOD ETFs

Someone asked me about investing in oil the other day. I am not going to be doing so but I do watch other charts and markets seeing as I have to buy gas and it affects almost every facet of life somehow. So one method of offsetting the additional costs of oil induced increases is to own oil stocks that pay when the oil price is high. Dividends are nice but not necessary...in my view.

So, this brings me around to another of the Exchange Traded Funds (ETF).

The short story is that these funds track the sector, or commodity they are named for.

Horizons BetaPro NYMEX Crude Oil Bull Plus ETF... or HOU.TO.


This is a fairly new fund so the 200sma is just getting going, les thana year old. I circled the nicest positive divergence you could ask for. The price is levelling out and the MACD has been steadily rising since October. Personally I would give this one another chance for a pullback before buying in but if a little risk is in the books then it could be purchased now too. Perhaps scale into the investment.

The nice thing about this is there is little fear of the underlying company doing anything weird (Enron anyone?) as there is no underlying company.

Here is a zoom in of the main activity lately...

It looks to me like $10 is about as low as it can go...but that certainly is not a guarantee. Once the red 30sma crosses the blue 50sma I would consider it back in the bullish territory...by then the price could be back up to $20 quite easily. The trick is whether it will stay up or not. As a position trader I would not wait quite that long anyway...one more low to see where the support really is then it would be time to read the chart again. Anything under $10 would be worth the risk for a small position.

This brings back memories of the CTP strategy.

As I will be day trading my full account I don't even have room to sneak 100 shares of this ETF or I just might...although if it drops to $10 even, again, it would certainly be doable, I'd make it work for that.

Here is the inverse ETF, Horizons BetaPro NYMEX Crude Oil Bear Plus ETF... or HOD.TO

This is for those who want to play against oil climbing.

Jeff.

Pivot points and the 200sma

When I first started trading I tried to set up semi-mechanical systems with limited success. I liked the idea of having the indicators make the decisions to buy and sell for me, mostly. The trouble was I did not trust it as well as perhaps I should have, I was new. I do not believe that mechanical systems are a great idea but they can work. One of the key factors is that they have to change according to the market, as any plan must.

So this is as close to mechanical as I am likely to get as I notice some correlation between the pivot points and the 200 sma line in my charts that perhaps can help to set the trade bias for the short term and perhaps even be used for some lazy trading.

Actually, this is not so much for lazy trading as it might be to let me track a few stocks at the same time. This comes back to the fact that I cannot use short sells in my trading and I will therefore need to watch more charts in order to be able to keep money active while things are turning down.

Pivot points and the 200sma are not so much points or lines as they are zones of support and resistance. In this sense they are areas to watch for activity that may indicate a good time to enter or exit a stock based on other indicators such as the quotes, volume, time and sales and correlating indices.

Here are two charts for today, the first fo SU and the second for TLM.
Blue is the previous day close
Red are the R1, R2, R3
Green arrows are buy points and red are sell points
Green line is the 200 simple moving average



For SU the primary pivot point is below the chart.

The mechanical idea here is that the pivot points and closing price will act as triggers for opening a trade long. Closing the trade is given more leeway but these points will also play into this as well. I did watch these this morning and know that the trades as indicated were definitely possible and would look just like they do on the charts, nice clean setups. A few of them I tracked but most I did not watch that closely.

Buy $26.60 Sell $27.40 Gain 80 cents ps Return 3%
Buy $27.40 Sell $28.00 Gain 60 cents ps Return 2.2%
Buy $27.75 Sell $28.10 Gain 35 cents ps Return 1.3%
Buy $27.80 Sell $28.10 Gain 30 cents ps Return 1%

$2.05 gain per share or 7.5% overall return on trades

Here is where the 200sma relationship keeps the trades capped. As the price drops below 200 the best next trades would be short, but I cannot trade short sells so this just keeps me out of the action here which is where the ETF comes in, but that is another story.

TLM followed a very similar idea, as it should as it also follows the capped energy index reasonably well, although today was a bit off as I couldn't really rely on the strong sector as an indicator.

Buy $12.90 Sell $13.10 Gain 20 cents ps Return 1.6%
Buy $13.02 Sell $13.22 Gain 22 cents ps Return 1.7%
Buy $13.16 Sell $13.24 Gain 8 cents ps Return 0.6%

50 cents gain per share or 3.8% overall return on trades

Keep in mind that I plan on having a certain dollar amount committed to these trades so SU might be a 100 share position and TLM would be a 300 share position. In those cases the net gains would be $165 and $120 respectively.

It is a shame that short selling will no longer be available to me as there were as many opportunities to short as there were to go long even with the strong rally over the day. I consider the fact that there will be no taxes on any of the profits and that will make up for a large part of this minor restriction.

Jeff.

Pivot Points and their relevance

I stumbled upon pivot points a while ago quite by accident. It was mentioned in an article and the term intrigued me enough to go looking them up. Now I do not trade without them, real or fake trading. I have found that they make very good targets and I suppose it is not so much that they are predictive, as it would appear by the following chart, but more likely a self fulfilling prophetic tool because many traders are using them.

TLM on Friday. The pivot points are represented by the three red lines which are resistance level 1, 2 and 3. The primary pivot point is just below the chart and labelled PP.

Alas, I did no trading on Friday. Busy with holidaying.

I have been plotting these lines on SU, AEM, the gold index and the energy index as well as the TSX or whatever other chart I might be using for trading and reference. TLM seems to follow them even closer than the other stocks, which I found interesting.

The blue circle represents the only questionable period as the price spent a bit of time consolidating before breaking R1. I expect that I might have shorted at about 0945h to try to catch a pullback from R1 to only exit the trade a few minutes later as the price did not successfully break the 10sma. Perhaps the trade would have broke even or a few cents per share profit. Then again I cannot short in the TFTA so this trade is moot.

The price ratcheted upwards towards R1 after testing 10sma a couple of times so this would have made a very nice position entry. This is the kind of setup where scaling out of a trade would come in nicely. R2 would be the target but the price cleanly broke that level and pulled back to test it. Selling half of the position and leaving the rest go would be a good call.

Following just the pivot points and trading long only, there would have been a trade just before noon for about 10 cents per share, one at 1345h for 5 or 6 cents and one last trade shortly after 1400h for about 30 cents per share...but that would involve watching all day.

The whole point is that pivot points are one of the few tools that are not dependant on the price and volume on the day of trading. These lines are calculated easily and are placed at anytime after the previous day's close as they have been determined by the previous day, week and/or month's price movement alone and have been used for quite some time by traders to determine where the trading range may be for a given day. They have proven very useful to me.

I won't get into the formula that I use but it is a standard one that is easily found on a variety of sites online. Setting up a spreadsheet with formulae to calculate these is easy enough as well so you can just enter the open, high, low and close and have the points. The open is not used but I like to reference it. Some trading platforms have these as an automatic tool, which would be really nice but I am not going there any time soon as these are pricey packages that may not even work with my broker feed...so I haven't looked too closely at that yet.

Jeff.

Consolidation setup today.

Here is another take on the same chart as I posted earlier but looking at the one trade that I missed and let run mostly out before entering.

This is a classic example of a triangle consolidation pattern that is the basis of my old CTP strategy, here is an example of the same strategy in day trading.

In CTP the red arrows would indicate trades entered and exited, basically buy low sell high and short high and cover low. Entering these trades would put me in a position to take advantage of the breakout in either direction.

In today's case the trade would be long only and have been entered at about 1000h as the price hits and bounces off of the S1 green line. Entry around $22.75ish for the prime position, $22.80ish and $22.85ish as secondary entries.

Once the price breaks out the trendline gets established (dashed red) at 1018h and holds as it bounces along at 1025h to R1 when it breaks the line around $23.20. I would choose to exit at R1 though. I could choose to exit half of the position at this point for a guaranteed 45 to 60 cents per share then let the rest ride to $23.35 for 60 to 75 per share on the balance. This takes the chance that the price will drop while I still hold a position.

Profits

Ranging from $80 to $120 depending on entry, exit and scaling strategies.

Yes, this is a hindsight trade but it is only a matter of not having entered this trade at the S1 bounce, just a matter of timing. The consolidation setup would only have been acting as confirmation of my trade, not really part of the entry plan until I have a larger capital to work with. In that case the pattern would indicate adding to the position along the way, scaling into the trade.

I don't normally get into speculating on trades, but, seeing as I am already doing it, let's see what a scaled trade might do here.

Buy at $22.70, 22.80, 22.90 and 23.05, 400 shares average price $22.8625.

Exit half at $23.25 and the balance at $23.35 for a $145 net gain.

Not bad, but I expect I would just buy in all at once at the bottom and scale out instead.

Buy 400 at $22.70.

Sell 100 at $23.10, 23.25, and 200 at $23.35.

Profit of $205 net.

No matter the trade style the fact remains that the trade is a profitable one so there is no sense in trying to speculate on the maximum profitability except for the purpose of getting familiar with differing ideas.

Jeff.

Dec 30th...not trading, just watching

Today I decided not to even track fake trading but to watch the price moves and pay attention to the volume and pivot point importance, we'll see if I can resist.

Chart is at the bottom.

The price opened close enough to yesterday's close for the 200sma to be relevant right away and it did not fail to act as resistance along with the primary pivot point. I decided that this would be a good sorting day to start. The first few minutes resulted in the PP being tested and not broken. I am not positive if I would have entered a short at this point just because it was still early but the volume was low enough that I could have. Just the fact that the volume dropped off as the price climbed higher is a very good indication of a pending reversal.

The first trade tracked

On the bottom, $22.65, the price bounced so cleanly off of the S1 that, had I been in a short trade I would have exited within five cents of the bottom. Either way trade number two was cleanly setup right here as well. I would have considered this a no brainer entry with the 200sma as target one and the PP as target two. Given the way it tested the 200 three times I would have bailed at that point, $22.95ish.

The second trade tracked

$22.95 would have been my limit order entry for this next short trade and I expect I would have missed the initial entry so close after my exit... I would have seen it hit shortly thereafter and rode it down to the S1 area and bailed around $22.70.

The range

This day is trading between the S1 and 200sma so far which only has a little more than 30 cent spread, not a large target so entries and exits must be quick as 30 cents can dry up really quick. Small targets can be fun to trade but are not worth the effort when they start to get too small. This is one reason why trading a smaller stock can be good as the position size can compensate for the small moves and the cost of commissions.

The third trade tracked...eenie meenie minie moe....

My next trade was to be another short starting above the 200sma, $22.95 most likely, but the price did not show the signs of slowing down. Once it broke both the 200 and PP the entry may be for a long at $23.05, at least that would be the plan. It pulled back to just under this and I would have been filled at my price...or lower which is always nice to see.

Note that I am typing this as the maket progresses so it is a live blog in that sense, at this point the quotes are about 3:1 asks in the range which usually indicates a good time to close the trade as there is more selling pressure than buying BUT the price is not wavering much so I would stay in and see where it goes, R1 is near $23.30, the next target. I see the volume slumping as the price stops climbing so I would bail as the bids are at $23.25, my most likley close price.

Profit

Just to work out the profit on this one trade, entry and exit difference is 20 cents X 200 shares is $40 less $10 commission for a net gain of $30. Based on the value of the trade this is a 0.6% gain.

Watching for the next trade to be a short as the price hovers under the R1 except it looks like a good uptrend right now so I would wait for other signs before placing an order or I would check my gains and see if I even wanted to do any more trading.

Estimating the three trades (assume that I missed the first big drop and didn't get in on the large gain at 1000h) I would be seeing 65 cents per share x 200 shares = $130 less $30 commissions for a $100 gain...roughly 2% gain based on trade value.

Profit protection

This is the point where I would exercise a few of my rules. I have made my goal for the day, I should not let greed interfere with my decisions, do not try to place a trade and hope that the price does what I expect...or want it to do. So I resist the urge to apply more trades and just watch what the price actually does for a bit. It turns out to be uptrending after wavering below R1 then finally breaking through. Based on the quotes and the volume it looked like it might drop off but the indices I use looked like it would hold and gain. Not enough correlation to really make a confident trade anyway.

Interestingly it broke at $23.38 and dropped to $23.10. I was right but my timing was off a bit. I may have held it through the 8 cent gain (my short would have been targeted at $23.30 as an entry) and made some profit but I likely would not have. I didn't really watch close enough to see if I would have nailed the top on this one.

Now that the stockcharts have caught up with my trades (or not trades if you will) I have the chart to post. I only labelled the trades I did end up tracking (I cannot help it). So, following is the intraday minute chart for the first part of the day. Pivot points are blue green and red horizontal lines, the 200SMA is green.

This turns out to be a pretty classic trading day. Starting at the PP, dropping tot he S1 as clean as can be then rallying right up to the R1. The rest of the day can wallow around all it wants as this is the activity that I like to capture. I feel that the trading follows these pivot points prior to the lunch hour more closely than afterwards. I will try afternoon trading after getting some serious gains going in the morning first. I expect that PM trades will be slower progressing and VTSO will be more usable as a trading tool as a result.

Jeff.

The gap fade

Today was a great day to play the longer term day trade, in fact I thought it might be best to just place a short at the earliest peak and let it run... but I don't have the patience for that right now. It certainly would have been a good application for some sort of moving stop but probably not a VTSO as that would have gotten hit pretty early in the day.

The setup was classic. I entered my pivot points, 15 minutes, checked the trading price of gold in other markets, 45 seconds and decided that the day was going to be a huge gap up and run or a fade...given the size of the gap and the trading of late I was putting my money on the fade.

This is an example of why I like the day trading arena. Time spent researching...45 seconds... as the pivot point setup is a technical tool. I know of traders who get up early, 4AM, to research the markets, check out scans to determine what stocks they are going to trade, set those stocks up in their platforms, then wait anxiously until the market opens and hope that all that time spent is worth it.

Most, in fact the vast majority of those traders are not trading right now either because the market is not reacting as they think it normally should (whatever normal is) or they have lost a lot of money and cannot stomach it anymore. A percentage I keep stumbling across is 3% of all traders ever make it consistently. With the influx of online traders right now that makes a lot of easy money available for those 3% that know how to pull it out of the market.

I feel that the research adds a bias to the idea where the price is going to go.

Consider that it can only really do one of two things, in the big picture. It can go up, it can go down, it can wallow around and churn while not really going anywhere. So all the research and watching for a slightly better then one in three guess is not my idea of a good time.

If I am wrong off the start, I lose a few bucks then change my plan. I have not invested a lot of time in deciding which way it is going to go so I won't get caught in the trap of wishing and wanting it to go my way, I have no way, I just follow the price action.

For the record, the gap up was a guaranteed move, there was next to a zero percent chance of it not jumping at least $2 off the start given the price of gold, and it went over $3. The aftermath was just a hunch and best guess. I would put a 70% or better chance of an overall fade in the current market for such a jump. Had it gapped down I would have put a similar chance of the gap NOT fading and the price continuing down, under similar market circumstances.

Back to the day.

The gap started a quick momentum move in the direction of the gap which quickly peaked and fell, the first short entry ...which I hesitated on and missed...no big deal (which is one of the other reasons I like day trading, the next setup is only minutes away, not days).

Truth be told I fumbled the first couple of prime entries, the first short, the resulting long for the rally, then the very next short...I need to close my door so nobody can chatter at me while I watch these setups but mainly I need to tailor my limit order entries to not be quite sot tight as I try to squeeze every penny out of the starting price. I refuse to chase the price, I want it to come to me, so I miss a few and usually by pennies.

I ended up 1.07% net gain, still meeting my goal but missed at least that much off the start.

Shorting the top would have me closer to 2% after just riding it until sometime after lunch. The day is not done yet but I doubt that I will trade any more as the action is slow and unpredictable now...although it may still drop to fill the morning gap, just not for sure.

I won't speculate as to how much I really might have made had I hit the trades that I setup initially as I just didn't make them.

Just another fun day in the market.

BTW, I was done by about 1030h. Another reason I don't like the typical DTing "idea". I make my money or take my losses for the day early and get the heck out, I have other stuff to do for the day... although I would love to hit a really nice day for letting trades run and sit it out to make some serious cash...another time though.

Jeff.