Registered User
Joined: 12/8/2004
Posts: 1,301
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Today I shorted 500 shares of JC Penney. The stock is above its 50ma, 100ma, 150ma, and 200ma. This has always been an absolute no-no in my trading. I did it because it broke trend on 1/20, I cannot believe retail stocks can possibly hold up in 2006, and I believe we have still not seen the correction we are going to see in the overall market. Their next reported earnings date is 2/16/06. I am not going to put a stop loss on this stock until after this date.
Now I need figure out why I would go against a successful trading strategy and do this. What's worse is if it turns out to be successful did I now open myself up to an undiciplined trading style? Shame on me!!!
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Registered User
Joined: 1/29/2005
Posts: 3
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Discipline can be very good in trading however, When that intrinsic voice is trying to tell you something I feel you should go with it.
I'm not even to the discipline level of trading yet so excuse my ignorance...
Regards and Good Luck on your short.
P.S. your posts are veery informative what little I understand.
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Registered User
Joined: 3/7/2005
Posts: 148
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Have no cents,judging from your comments it looks like you think the market is going lower.
This is always a tough call right or wrong
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Registered User
Joined: 10/7/2004
Posts: 2,126
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Nocents just some comments. From a technical point of view there is no support for your trade. If you based this in the small divergences presented in ROC, TSV, and somewhat MS, my opinion is that they are of short term. The first 2 not even violating the 0 line. JCP is a retailer with positive momentum, in fact even the weekly chart would say it looks as strong as a Buffalo. The reatiler sector may get hit, but that doesnt mean JCP will. Could it be more bear than 2001, look at what JCP was doing then. In my book you never go short on a stock that first have all of the MA's in positive territory and with a great volume pattern. And this stock at this particular time looks excellently bullish. If you are trying to pick tops and bottoms, it will burn you. I tried that at an earlier time - know what is all about. I have also gotten burned in the past being short, at the rate of $10,000 a day (recovered from that too). You must also realize that whether bull or bear market there is always about 1/3 of the stocks in the opposite direction; the same in sector rotation. As I mentioned in a different post, in my book the intermediate trend of this market hasn't even been changed yet so.
So what is your rationale for this short? Your correction speculation. Not enough for me. I think that you should keep your eye on this one, and pull out when you need too - earnings or not. To say that you are going to hold until a definitive date is non-sense. If the stock goes up $5 you still wait until earnings? Makes no sense.
You may want to do some reviewing of your investing/trading strategies.
good luck
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Registered User
Joined: 12/8/2004
Posts: 1,301
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As I mentioned, I normally never do this. I agree there ARE no technical reasons to short this stock. It did break its trend of lows that has been in effect for months, but nothing other than that. I do start with market sectors before I choose my stocks.
The second reason I am shorting the stock is because the industry(department stores) has been trading below it's 200 day and `50 day moving averages. In an upturn market the leaders like JC Penney are the first to go up. The second rate places get pulled up. When the sector is going down, JCP will be one of the last to go, but it WILL GO nevertheless.
The economy is slowing and gas prices look like they will remain high for a good part of the year. This does not bode well for retailing.
We will have some type of correction shortly. There is nothing in the current market environment that will push this stock over 58.00 before their earnings announcement. 58 dollars is my mental stop on the stock. I'm not too concerned about it hitting that. It has tried and failed numerous times since July.
I look at this as less than a 2 dollar a share potential loss, and a 12 dollar potential gain(october low).
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Registered User
Joined: 12/8/2004
Posts: 1,301
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it should read below 200 and 150 day moving averages above.
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Registered User
Joined: 10/7/2004
Posts: 2,126
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OK Nocents, it is your call.
Good luck
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Registered User
Joined: 11/28/2005
Posts: 15
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I like your theory on JCP coming down with the other stocks in the industry. I'm rootin' for you but I'm not going to bet with you, well, not unless I find time to dig into it and convince myself of the odds. I'll probably just watch from the sidelines. I am however looking for stocks to short (or place puts) because I am 90% cash right now and frankly, I agree that there is more likelihood of down than up (and I'm usually bullish to a fault).
I liked your previous post about finding stocks that have tried unsuccessfully to break up through their 50MA a few times, but haven't really found any that were what I was looking for. Any ideas for others that may fit this trading pattern? Maybe I'll just have to write a complicated pcf to find some (which is tough as a beginner).
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Registered User
Joined: 12/8/2004
Posts: 1,301
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QUOTE (gsherrmann) I like your theory on JCP coming down with the other stocks in the industry. I'm rootin' for you but I'm not going to bet with you, well, not unless I find time to dig into it and convince myself of the odds. I'll probably just watch from the sidelines. I am however looking for stocks to short (or place puts) because I am 90% cash right now and frankly, I agree that there is more likelihood of down than up (and I'm usually bullish to a fault).
I liked your previous post about finding stocks that have tried unsuccessfully to break up through their 50MA a few times, but haven't really found any that were what I was looking for. Any ideas for others that may fit this trading pattern? Maybe I'll just have to write a complicated pcf to find some (which is tough as a beginner).
Try putting a 50 day moving average in your price chart. Then put a 50day regression line of your 50 day moving average. Sort the charts by slope and only look at sort values at 0 and below.
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Registered User
Joined: 12/8/2004
Posts: 1,301
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Time warner looks like a pretty good short candidate. Draw a trendline through all of the highs from Dec 6th to the present. As long as it stays beneath that trendline you're in good shape. I may short that one tomorrow, especially if it shows any strength.
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Registered User
Joined: 12/8/2004
Posts: 1,301
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Autodesk looks like a good short too.
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Registered User
Joined: 12/2/2004
Posts: 1,775
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Please, no one ever mention AMZN to me. A few weeks ago I shorted it and stopped out for small loss. Then as it hovered for weeks near 50 I kept saying to myself over and over that it was in ideal short postion and I should try again; surely it would come down to fill the Nov. gap when it spiked on SP500 inclusion. Got lazy, quit watching it and now look what it did.
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Registered User
Joined: 11/28/2005
Posts: 15
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Thanks NoCents, I always include the 50MA in my charts, but I have not done a regression on it. I'll try that over the weekend. Unfortunately I'm out of town the next two days without a laptop. Please hold off the correction until at least Monday. One more question. Under what conditions would you traders choose a PUT vs. shorting the stock, and visa versa.
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Registered User
Joined: 12/18/2004
Posts: 180
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QUOTE (gsherrmann) Thanks NoCents, I always include the 50MA in my charts, but I have not done a regression on it. I'll try that over the weekend. Unfortunately I'm out of town the next two days without a laptop. Please hold off the correction until at least Monday. One more question. Under what conditions would you traders choose a PUT vs. shorting the stock, and visa versa.
gsherrmann, I think a short-cut that will suffice is AVGC50-AVGC50.50. I'm not sure what the significance of looking back 50 days for the downslope is, but I assume you could set it for any period you wanted (for 20 days, AVGC50-AVGC50.20). Piece of cake!
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Registered User
Joined: 3/9/2005
Posts: 5
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Greetings fellow traders, a couple of days ago, my home developed system tracking volatility indices signaled a 1.3 standard deviation that the VIX, VXN and VXO were rising implying the markets will drop in the very near term. Just today (yesterday's data) there is an updated signal of 2.3 & 3.3 standard deviations that these volatility indices will drop instead - thus there is a very, very strong indication that the markets will be rising in the near term. Complementing this, the DOW and QQQQ's have just posted 3.3 and 2.3 standard deviation signals that they will rise as well. The probabilities of likelihood of all these signals are around 90% certainty within the next 30 days.
I compared the JCP stock to the DOW and S&P indices and note that JCP tracks the market in general. That said, I'd not be shorting the JCP stock at this time.
Time will tell... watch your trade carefully... marcel
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Registered User
Joined: 12/8/2004
Posts: 1,301
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Retail stocks are normally very seasonal. Until it makes it to a new high, I am not too concerned.
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Registered User
Joined: 4/7/2005
Posts: 9
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HaveNoCents,
I'm with you on the JCP trade. It really looks like it is really churning at this level. I also don't believe that retail is going to do well this year. I know that there is not a lot technically to go on, but with higher interest rates and high gas prices I simply don't believe that the consumer can keep going at the pace he has been going at. The comps are also going to be tough to beat in '06. All the best.
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Registered User
Joined: 12/8/2004
Posts: 1,301
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I shorted Best Buy today as well. I've been to 3 different best buys over the past two weeks and they are DEAD!!!!
This stock has broken down three times below its 150ma, and it has not been able to move past 51.00 in over seven months. It just tried for the 3rd time and it looks like it will fail again. The GDP numbers came out for the fourth quarter and they were dismal. This economy is slowing down.
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Registered User
Joined: 12/31/2004
Posts: 382
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does this stock has a Dividend . I think it has one.I think if i read it right its Dividend Date3: 01-Feb-06. I look at JPC and aways ask my self is this a good company or a bad company. is interest be lower or higer in 6 month. too me JCP is a good company . I looking at the charts well this would not short it with a dividen coming out on it.I woukd look for a broken retail store that has not been doing good at all like RSH. I think this one head too the teens . the more I look at rsh its a better short .
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Registered User
Joined: 11/1/2005
Posts: 240
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following these post of buys or shorts are learning oportunitys, I like to allow the mkt to point out if the trader has made a bad choice. for us who are learning following the posted stocks is interesting. I don't take the posts as advise, just what one trader is looking at.
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Joined: 4/6/2005
Posts: 9
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QUOTE (HaveNoCents) Now I need figure out why I would go against a successful trading strategy and do this. What's worse is if it turns out to be successful did I now open myself up to an undiciplined trading style? Shame on me!!!
Your dilemma points to the fact that trading psychology is far more important that a trading system. You have competing goals from competing parts: Part 1 wants to short JCP and Part 2 wants to follow your system. The path out of your problem is to cover your short and then develop a system that will allow you to short JCP. Once this is done then both parts will work together to achieve the success that you desire.
Good Luck, Dave W.
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Registered User
Joined: 12/8/2004
Posts: 1,301
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QUOTE (woodmai) QUOTE (HaveNoCents) Now I need figure out why I would go against a successful trading strategy and do this. What's worse is if it turns out to be successful did I now open myself up to an undiciplined trading style? Shame on me!!! Your dilemma points to the fact that trading psychology is far more important that a trading system. You have competing goals from competing parts: Part 1 wants to short JCP and Part 2 wants to follow your system. The path out of your problem is to cover your short and then develop a system that will allow you to short JCP. Once this is done then both parts will work together to achieve the success that you desire. Good Luck, Dave W.
You bring up an excellent point. My trading system, which isn't really my own, but stan weinstiens, leaves absolutely nothing to the imagination. It is 100% chart based, with no emphasis on any other external factors. You pick your market sectors first, and then you pick your stocks within the sector. You always make sure your trades are going in the same direction as the long and intermediate term trends.
You never short any stock above it's 150 day moving average. You never buy any stock below it's 150ma. Neither are EVER considered. I want to be able to consider other factors. I want to trade at a strong resistance level, but below the 150ma, but I haven't because I have been successful following his approach. The same with shorting. By the time something makes it to it's 150ma it has already dropped considerably. Sure, chances are it has more to go, but the first part of the move is missed. I want to be able to catch the stock when it first begins to falter.
I feel like I have nothing to lose because right now because I am totally short in the market for my stocks, and long in my mutual funds. I don't have a lot of confidence that the market can maintain its current levels, but I don't want to remove myself from the market. I also don't want to play the options game as a hedge because I am not sure of the time element involved before the market moves lower, although I truly believe it will be in february.
If what I have done turns out to be successful, I will have to revamp my trading style. If it fails, well, I guess I am back to the old system. I guess the bottom line is I want to take on more risk. Why, I'm not really sure.
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Joined: 4/6/2005
Posts: 239
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I have just finished Stan Weinstein's book and was left with a few observations while reading it. 1. The Nasdaq and day trading (as we know it) didn't exist when he wrote the book. 2. The charts he showed in the 4 stages and with the 150-day MAs were fairly slow moving, rising and falling on long timelines. When I look at stocks on the Nas today the 4 stages can happen in just a couple of months.
There is a lot of good info in Stan's book I'm just not sure how much can be directly applied to today's markets.
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Joined: 1/28/2005
Posts: 6,049
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Havenocents
The nature of all trading systems is to have wins and losses. The way we succeed with them is to limit our
losses and let our profits run. (Weinsteins Stage 2)
I dont think any trading system should be judged on
the basis of one trade.
Lets look at the pros and cons of your decision:
You made a call on the direction of the retail sector
of the economy. If you are correct or incorrect at least thought went into it. ( GOOD )
You chose JCP as your method to profit from this. You checked the chart and determined past resistance for
risk analysis. (GOOD)
In case the markets take off your risk is reduced because you have a long hedge. (GOOD)
You violated your usual trading procedure. (BAD)
All in all I think you may have only commited a minor offense.
All trading systems should have small print next to there trading rules "all things being equal".
Dont short a stock above its 150 day mav "all things being equal"
The way I see it there were enough doubts in your mind this time to violate your rules.
Good Luck
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Joined: 12/8/2004
Posts: 1,301
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I agree that with the information systems we have today things happen faster, but by the same token, they still happen. Take a look at stocks above their 50,100,and 150 day moving averages. There are still 2167 stocks where the 50,100,150ma are all in the proper order in an upward trend, and the price is above all of the averages. Many of these stocks have been in uptrends for more than 2 years.
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Joined: 12/8/2004
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Thanks for your comments diceman. You put a lot of thought into that and I appreciate it. It truly may be only a minor mistake, or maybe, not a mistake at all. I think a lot of this may be because I've had two really close friends die of a heart attack in the last three months. Both of them were younger than I am. Suddenly the risk of being wrong doesn't take on as much importance.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Havenocents
I hear where your coming from.
In 2003 and into early 2004 I had some severe family illness. Spent most of spare time in hospitals visting.
Its tuff to think clear but, you will find with time
you get back into the swing of things.
I can look at the charts now and realize I missed the eary 2003 bottom (after the 2000 bear)
At the time it was happening I saw it but it just
didnt matter.
Good Luck
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Joined: 1/28/2006
Posts: 291
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A $2 loss v. a $13 gain by my charts if it falls just right. Looking to retrace based on quarterly ms v mving avg and stoch trending lower, vlt/vst stoch weekly at cycle high (vlt flat & inverted). Of course if one looks hard enough one can always find some justification...
Nice call from what I can see from risk reward pov and leading the sheeple...perhaps your subconscious noted something you already knew.
Question: Did you note the trend break on an old watch list or did it come up on one of your scans?
Best of Luck.
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Joined: 12/8/2004
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QUOTE (awshucks)
Question: Did you note the trend break on an old watch list or did it come up on one of your scans?
Best of Luck.
Under normal circumstances, if I am going long I only look at scans of sectors over their 150ma, and vice versa for shorts. From the sectors I look at the industry and sub industry. I very rarely scan for individual stocks. If I am going short I want the stock to have at least 85% institutional ownership. The higher the better. If I am going long I hope I can find a stock with less than 70% insitutional ownership.
This was not a normal circumstance. The sector was showing great weakness, but jcp was holding it's own. From my past experiences it takes some time to bring down the big boys, but when they do come down, they drop like a rock until they reach a major support level and then they hold. It normally takes more bad news to bring them down from that point, but by then I normally have covered. Theoretically you should short the weak in the sector first, but the weak stocks had already dropped considerably.
I look at a lot of charts. Normally 300-500 per night. I only have 5 watchlists. My portfolio, my losers, my winners, possible shorts, and possible buys.
JCP broke it's intermediate term trendline on January 17th. The trend began from its October low. As far as I know there is no way to scan for this.
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