MeetMe Inc. (MEET)

MeetMe, Inc. is a social media technology company that owns and operates the MeetMe mobile applications and meetme.com. The Company is a location-based social network for meeting new people both on the Web and on mobile platforms, including on iPhone, Android, iPad and other tablets that facilitate interactions among users. The Company provides users with access to a menu of resources that promote social interaction, information sharing and other topics of interest. The Company offers online marketing capabilities, which enable marketers to display their advertisements in different formats and in different locations. (google finance)

The stock price is in an accelerating bullish movement well above the 200 day moving average. The price plunged after some director’s offloaded shares in august. This may indicate that the Q3 earnings report will not be as positive as the Q2:

However if the Q3 report is surprisingly positive I am looking forward on buying at 8,20$. 4 analysts have rated the stock as a “buy” and none as “sell” or “underperform”.

Stock of the week

I am slowly moving away from day trading to swing trading or trend trading, since my daily job does not allow me to follow positions throughout the day. That is why I am working on a strategy which requires me to take a look at the positions after the closing bell. I am not moving away from technical analysis though, but I am increasing the significance of fundamental data. The strategy will follow William O´neill´s strategy and Michael Voigt´s represented "market technique". From this point on I will try to find an interesting stock every week and maybe trade it. I will write a short blog entry about it so that I can in the future look back how my recommended stocks performed. The markets are not good at the moment so I doubt they perform in the near future well.

Dycom Industries Inc. (DY)

Dycom’s business primarily benefits from increased demand for network bandwidth and mobile broadband, given the proliferation of smart phones. The company has been continuously benefiting from extensive deployment of 1-Gigabyte wireline networks by major customers. Most of the telecommunication companies are deploying fiber-to-the-home and fiber-to-the-node technologies to enable video offerings and 1-gigabit high-speed connections, thereby opening up significant opportunities for Dycom. As the picture below shows, the company´s  quarterly and annual numbers look promising. The stock has also a 89% institutional ownership and it´s stock is ranked number one among the competitors according to IBD ( Investors Business Daily).

 The only problem my strategy is facing with this stock is the risk/ reward ratio. Assuming the stock would increase in value by 50% and having a price of 94,98$ the stop order at 46,61$ we get a ratio of 54%. Also considering the order costs, I am risking 46% more than my theoretical profit could be. A good ratio would be above 100%. That is why I am only watching this stock. Maybe the price will form a new bottom soon, so could set the sell stop order on a more reasonable level.

My recent trades

Delta Air Lines (DAL) long position

 Facebook (FB) Long position

Fresenius Medical (FMEG) Long position 

 Neopost (NPOS) Short position

Axel Springer (SPRG) Long position ended up with a huge loss here. The market took my position out with the trailing stop order. Should have avoided the big candles. 

Schlumberger (SLB) Short position

My recent position trades

 Deutsche Telekom (DTEGn) on a 4 hour chart. Buy @ 16,640 because crossover point 2. Sell via trailing stop.

Hochtief (HOTG) on a 4 hour chart. Buy @ 72,393 sell at 75,527. Buy because of crossover point 2. Trailing stop exit. 

 Osram Licht (OSRn) on a 4 hour chart. Buy at 50,813 sell at 53,890. Signal was given by market crossing over point 2. Trailing stop exit.

Keep calm and follow your trading plan

.. is something that is good to repeat to yourself, when a position runs against you or a friend tells you about a new "hot stock". I am nobody to tell you about success in trading, but as much as I have observed other traders, the ones who make trading decisions on a gut feeling end up loosing their money. Also traders who allocate all their equity on one instrument often end up being wrong. 

As much as I know, professional traders do not trade like this. The winners are the ones who have a very specific trading plan. The trading plan has been tested and implemented and a track record of years proves that it works. Success in trading is not about risking all equity in one good trade. It is about a system that tends to beat the market on the longer term. A system with tight stops for example, can be profitable even if it is 1/5 times right. The stops cut the losses short and the winning trade breaks the losses even. "let your winners run" is a phrase which you can read in many books. It is true but you should never limit your scope with phrases like this. Some traders are satisfied with as little as 10 pips per day. These traders could make the 10 pips in the morning and then do something else. 10 pips does not sound like much but imagine trading those 10 pips with large volume. 

Moreover it is important to keep some kind of track of your trades. Imagine trading endlessly and never making one note of your past trades. That way you could not draw any conclusions from you trades. An Excel sheet comes in very handy for this specific matter. In excel you could keep very good track of your trades. One could make a table which computes the standard deviation of the returns, derive volatility from the standard deviation and then calculate the VaR (value at risk) on a daily basis. Also a last touch could be adding a column where one could add always the signal or reason why the specific trade was executed. This way one could always look back at the failures and analyze how to avoid them in the future.

Technical & fundamental data working together on the EURODOLLAR

On the 2nd of June there was a news event where the change of the European Consumer Price Index was announced in percentages. In the picture below we have the EUR/USD pair on a hourly chart. The change was announced at 12:00 am (GMT +2) at the same time the currency was on a significant technical level of 1,10061 which was the previous high. According to the market structure crossing this level triggered some buy orders, which already stood in the orderbook. Therefore the currency launched to a strong intraday trend. In the picture the blue line indicates when the change was announced and the red line indicates a trailing stop scenario. Underneath we have the volume indicator to indicate the significance of this event.

Understanding (technical) market structure

Let us start with the picture above. We have three types of bullish trends: the accelerating bullish trend A, the regular bullish trend B and the decelerating bullish trend C. In an accelerating bullish trend the price makes higher highs and lows alternately making a "convex" slope. The trend is considered to be stronger than the trends B and C. The trend C again is losing momentum and is drawing a more "concave" pattern.

 We can find some theoretical "support" points and draw trend lines (yellow with trend A, orange with trend B and grey with trend C). In the trends A and B, one has to draw multiple lines, because the trends momentum is increasing/ decreasing. In trend B the trader is satisfied to draw only one line, which runs through all lows of the price slope.

One can find very effective entry points at the price level where the price embarks through the previous highs level (E). Adding a volume  indicator or looking at the order book at these levels, usually shows some significant order flow. This is where market technique oriented traders (private and institutional) traders enter their position. A trend following trader could set his/ her stop orders at the previous lows level. E.g. Entry at point E1. After the entry the trader wants to protect his/ her position and puts a stop order to the level S1 (only after the price has significantly risen through E1!)

A bullish trend makes alternately higher highs and lows. To exit the train at the right stop we have to understand when the trend has been broken and when it is reversing. Point B1 is the first lower low to appear ( its level is below the previous low). Many traders might hesitate and close their position now, where the trend might as well continue in the initial direction. However the price does another peak B2 which is a lower high. The price continues to drop below the previous lows level B3. Now the trend is considered to be reversed ( bearish) This is the last point where one should get rid of the position. Here the price usually makes rapid movements, since traders have set their stops here and some of them are changing from optimist to pessimist and reversing their position. This causes strong volume on the sell side.

This concept can be used from tick-time frames to weekly charts, but one has to keep in mind that the superior time frames set the major "winds" of the market: it is recommended to trade a bullish trend on the shorter time frames, when the trend is also bullish on the longer time frames.

A couple of trades

These trades were rather following a position trading strategy since they were kept through several days. The first one was traded with the BNRGn (Brenntag Ag). Open at 53,53 and close at 55,16 with a 163 point difference. The first picture illustrates the instrument on the daily chart. We can see that the price had just recovered from a minor drop and the trend is strong bullish. 

 BNRGn (Brenntag Ag) on the 15 minute chart where the trade was executed. This is  one of those trades where I placed the stop order just right. The price started oscillating with high volatility just after the position was closed on the 17th of march. Green line entry, red line exit. 

 The second trade was executed also with a stock derivative of the German market. G1AG (Gea Group) Firstly the daily chart, then the 15 minute chart.

 The picture does not quite show that actually the the first low in the picture is many points below the second (higher) low. This observation made me trade this movement. The exit was executed with a market order, since the stop was  lying down at 43,90 and the instrument started showing reversal signs on the 17th ( a reversed 1-2-3 pattern).

Where the first two trades were long positions, the third was held short. This was exercised with the CHK (Chesapeake). This stock has been extremely bearish since the middle of 2014. The position was entered at 15,04 where the price broke through the last low. The 15 minute chart illustrates that the entry point had clearly some bearish volume, since the price plunged immediately. The position was closed manually with a market order due to a possible reversal. A 103 point trade. 

EUROSTOXX and SMI open with a gap down

Always look at the big picture

Like you should not have a long position on the S&P 500 at the same time as you are short on the Dow Jones, you should apply the same rule to different time frames. A trader should always remember to look first  at the "general weather situation" before moving on to smaller time frames. One can see a trend reversal on a 15 minute chart but when looking at the daily chart, it appears only to be a correction of a bullish trend. The "the trend is your friend" rule applies also here.

Here is one example of a well constructed position:

Picture 1. We start the trading session by looking at the daily EUROSTOXX chart. We are                   now at breaking point 2 and see that this could be used as a trend confirmation.

Picture 2. Next we move to a samaller timeframe, for example the hourly chart. We can now identify a formation here and place our order. The direction of the position is now the same as the direction of the main trend.

Picture 3. to give you a hint what it would look like on the 15 min chart.

What about gold?

XAUUSD with Simple Moving Averages 200 and 50

As we know gold as the safe haven for investors, we may have some potential to buy in the near future .

Last week major stock indexes declined and as soon as they start to trend down we know there is a lot "air" for gold. On the other hand, blue chip companies have had a great year and therefore ivestors are holding on the stocks to receive generous dividends. Moreover there is  a rumor about gold that the Indian government would loosen their tight regulation regarding importing gold.

From the technical perspective, we had almost a breakout of the downtrend last week at 1.268, but it turned out to be a testing of the resistance or false breakout. As soon as we have some 1,2,3 formations and a breakout over the 2, I would buy. A turbo-long certificate would be the suitable. A drop below 1.180 would mean, that it is still a bearish climate.

Trailing stop by Michael Voigt

I recently read a book written by Michael Voigt that deals with breakout strategies. It also puts forth a trailing stop strategy for break out traders. The pros of the stop are, that it works in every market and on every time frame. The cons are that it does not work with highly volatile instruments that oscillate a lot.

The basic idea of the trailing stop is to "trail" the price. The stop is basically moved  to the closing price of the previous period. However there are some enhancements added to it.

The most important one, is observing the price movements that show signs of oscillation. Always when the price opens and closes within the area of the previous period, we are talking about an "inside bar". The inside bar has nothing to do with candlestick formations. Often when there is an "inside bar" the price tends to oscillate within the next periods. So the stop should be dragged to the close of the period before the previous.

So here is the OMX Helsinki 25 Index on the daily timeframe. As you can see the stop works well when the market is in a trend and continues to make higher highs and lows.

Potential trade for the year 2014?

Investors celebrated the year 2013 taking home some big profits. The stock index that rose the most was the Venezuelan IBC Index. With 2706,38 points and 474,1 percent it was the ultimate outperformer. After that came the DFM-General index with 99,9 percent. As third came the Argentinian index Merval. The Japanese Nikkei 225 index landed as fourth with 52,7 percent in performance. The Finnish HEX performed 23,1 percent and was 17th.

As it remains a little uncertain whether these indices keep rising, we can take a look elsewhere, e.g. the weekly chart of EUR/PLN spot price.  Massive triangle formation. I am not saying this will happen, but there is a probability. And that is what trading is based on: Probabilities.

Stocks for 2014

As Gold´s price keeps declining, investors move more and more their money into stocks. That is why it is a good time to make some stock picks for 2014.

Since AAPL suffered the biggest price decline in 2012 it seems that it is now in a steady trend making higher highs and lows.  Analyst speculate it to climb to 700 in the next 12 to 18 months. There is also a rumor that the company will be launching "wearable technology", something similar to Samsungs products. 

At the beginning of November Wall Marts (WMT) Stock price broke out of a bullish flag formation reaching an all-time high of 81,37. After that the stock consolidated to 77,80 which is significant and offers a great point to place the stop. So now we are waiting for a breakout over the A-TH.

Let´s wait that Nokia´s (NOK1V) stock will break over 6,0. Analysts are estimating Nokia to give out a dividend of 0,4 euros.