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”.

Incyte Corporation (INCY)

Incyte Corporation is a biopharmaceutical company. The Company is focused on the discovery, development and commercialization of therapeutics to treat medical needs, primarily in oncology. Forbes listed the company to it´s "Most innovative companies" list. Now the market capitalization is significantly smaller than the other medical giants, but aren´t we looking for growing companies? The company showed this quarter again some really good numbers:

I do not usually follow this kind of patterns, but when the fundamentals and other aspects of my strategy are right, why should I ignore a beautiful trend channel like this. The buy zone starts around 94$ and the first target would be 133$. Of course there is always the chance that the bears might push the stock down so that the channel is broken. Someone might recognize this as a bearish flag.

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.

SANOFI

The beginning of april gave some strong bullish signals. One of them occured with the sanofi´s stock. The conditions were one every timeframe bullish. I opened the position on the 1 of april at 93,46€ and it got closed due the stop order on the market opening of the 16th of april due an gap down at 97,39€.

Buy gold now?

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.

Volatility adjusted position sizes

We know that  volatility is derived from the past changes of the securitys price and we know it is calculated by multiplying the square root of time in years with the standard deviation of the securitys price within that timeframe.

What I am interested about, is using it to determine position sizes and its effects on reducing losses. Volatilty can work on one´s favor or  it can also lead to major losses. The volatility index is known as the "fear index" which indicates the bad times for stock options. 

 Volatility adjusted positions are crucial for reducing risk. A position could be determined by subtracting the current volatility percentage from 1 and multiplying the factor with the usual contract size. Obviously your broker must offer splittable contracts or then you have to trade large amounts to enter such positions. Also cfd (contracts for difference) brokers offer microlots to trade with.

                                                           VAP. = (1- Vola%) * contract size
                                                                                or
                                                           VAP.= (1-√T*σ) * contract size

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. 

Observing A Trend From A Market Technicians Viewpoint

There are many books about technical analysis out there, that are full of chart setups and candle stick analyses, but what they usually don´t have, is the explanation of traders behavior in a specific market situation. A successful daytrader, knows where the majority of traders have placed their stop orders and limit orders. That information is enough to make a successful trade, since where the orders are placed there will usually emerge a larger movement.

Lets have a look at the SP500 daily chart.

The blue dotline indicates the way of the trend. In general, trendfollowers usually set their stops above or below the last high or low, depending on the position of course. So if we look at the first 1,2,3 formation, we can see that when the price hits the significant high 2 the price breaks out. So the price reached above the last high and triggered stop orders from those who were positioned short. So short sellers have to buy the security and sometimes they even turn their position, which means they have to buy twice as much. And also many traders have their buy orders placed above the line.That is why often, but definitely not always, there comes movement into the market when crossing a significant high or low.  

That explains also why a breakout of a triangle formation has so much volume. The price oscillates up and down, but not making higher highs or lower lows. As the range of the movement gets smaller and smaller, eventually the price breaks out of the formation skyrocketing or falling. The traders move their sell and buy orders outside of the triangle and when the price breaks the formation, it triggers the bundle of orders.