Today’s Trading Lesson…
Understanding the Difference Between Order Flow, Stock Price Momentum and Great Trading Ideas.
I love making money. I’m sure you do too.
The current momentum gives us a reason to believe in the stock market again. The previous four months made us work hard. We didn’t become traders to work hard! We want the lifestyle, the glamour and the income.
July through early November was blue collar trading. The recent two weeks showed the return of white collar trading. The visualized image of “trading is easy.” Just buy, even stocks pointing lower will go higher!
Let’s be careful here…
Momentum is nice, but order flow is what we want. Order flow is sustained buying or selling pressure. Buyers or sellers are committing money, a lot of money, over time.
Order flow makes your bias easy, you clearly should be long or short. Momentum is tricky. You need flawless timing. Best case scenario is momentum in the direction of order flow. Golden. Order flow plus momentum is a great trading idea.
Today we see hundreds of stocks tearing into their sixth or seventh day higher. Many with zero bullish order flow.
A buy? Yes? High probability for follow through. No.
This trade idea frustrated me for a long time. Learn from my losses (2000-2001). If you trade pure momentum without order flow, be prepared to make decisive decisions. Hesitate and you are done.
Trades with order flow give you more leeway. More big money committed to the idea, They are not changing sides in one day.
Great ideas, ideas that you can build a long-term career on are built on order flow. Look to the left and ask; “How much have the institutions committed to this stock?”
Momentum is fun, but order flow is the girl you bring home to meet your mom.
On the Tape Today...
$MDT 11-15-16 (Click to Enlarge)
$MDT selling momentum creating opportunity on the short side but a new trade needs a day or two. Expecting the stock to bounce from over sold into a limit or to short in the $80.50 area. Looking for a target to cover @ $77.25 (see chart)
$VLO three day pause at resistance sets up a new long with short-term resistance @ $64 and the ultimate target to sell $65.75. Looking fo r an entry with a $63.25 buy stop.
$GS set to open lower this morning after a vicious six day rally. Looking to sell the first advance in price today. If a rally does not happen in the first half hour, planning to exit.
$UAL trading higher pre-market. Already showing a $2.00 gain. Most likely off the Warren Buffet disclosure about some of his holdings. Sell the news. The stock advance from $52 to $65 (pre market) is a tremendous move and great opportunity for a swing trader to sell when the ducks are quacking.
How Incredibly Successful People THINK | Brendon Burchard
Dow on pace for 7th straight up session
U.S. stock futures on Tuesday pointed to a modestly higher open, putting the Dow Jones Industrial Average on track for its seventh winning session in a row.
Investors are waiting for readings on retail sales and manufacturing, as well as watching out for fresh signals from President-elect Donald Trump.
“Equities remain indecently comfortable,” said David Buik, market commentator at Panmure Gordon, in a note on Tuesday. “Risk seems to be back on the table as the Dow maintains record levels.”
“There seems only one game in town — guessing the names of the main dramatis personae of Donald Trump’s administration,” Buik also said.
Continue Reading on marketwatch.com
Stock Market Today: Heatmap of the S&P 500
Stock Trading Today 11-15-16 | Small Caps Rally Again
Small Caps Pop, While Nasdaq Fizzles; Morgan Stanley Up
U.S. stock indexes struggled Monday, showing hesitation for the third session in a row. Volume in the stock market today was running modestly higher on both major exchanges, according to preliminary data.
After the small cap S&P 600 logged a tone-changing gain of 3.1% Wednesday, the small cap index remains one of the few with strong follow-up action. The Nasdaq and S&P 500 haven’t moved much in the past three sessions.
If the uptrend is to avoid rolling over, the major indexes are going to have to get with it.
Banks have been one of the market’s stronger sectors. Eight banks have nailed down spots in the IBD 50, a list of the best stocks in fundamentals and technicals.
Continue Reading on investors.com
Tape Reading the SPY ETF
$SPY traded into another indecision candlestick on Monday. Interesting price action across the stock market yesterday. Not much from the $SPY, the NASDAQ continues to get hit as Facebook and Apple see distribution-type selling, while the DOW and Small Cap stocks are on fire.
Making your head spin? I hope not because professional traders love this tape.
Volatility and volume persist and it’s making a lot of part-time traders apply at a prop firm. That’s the upside. The downside? Don’t believe you are a trading wiz because you earned money on Trump fueled enthusiasm.
Stocks trading in obvious selling order flow 3 days ago, do not represent a great bullish trading idea today. It is momentum. Nothing more.
Don’t get me wrong, it’s great to take it to the bank, but keep your ego in check. I’ve witnessed hundreds of traders raise their share size because of one good trade, preceded by 3 months of losing.
If this comes across as being negative, that’s not my intention. My goal is to keep you thinking long-term. Don’t confuse unbridled bullish momentum off a post-election rally with skill. I traded with thousands of people after the internet-boom who believed it was their skill.
Learn from history, enjoy the positive P&L, but brutally assess the quality of your ideas.
A trade that earns money doesn’t mean it was a good idea. Our long-term goal is good ideas.
Stocks in Play: $HD research on finviz.com
$HD News: Home Depot earnings: These are the concerns analysts are raising
Home Depot Inc. is expected to report third-quarter earnings before the market opens on Tuesday.
While analysts express concerns about what the earnings results will be now and going forward, many prefer Home Depot HD, -1.68% over the competition, and believe the home improvement sector is in a better position than other areas of retail.
Among analysts, Home Depot shares have an average overweight ratings and $147.19 price target. That’s about 15.3% more than Monday’s closing price.
Read More on marketwatch.com
What To Expect From Home Depot, Lowe’s Q3 Earnings
Rival home-improvement retailers Home Depot (HD) and Lowe’s (LOW) report third-quarter results on Tuesday and Wednesday, respectively. Here’s a look at what to expect.
Estimates: Earnings per share up 16% to $1.58 on revenue up 6% to $23.044 billion. Wall Street expects same-store sales growth of around 4.4%, according to a Credit Suisse note last week.
Stock: Shares fell 1.7% to 127.67 in the stock market today. Home Depot found resistance at its 200-day line intraday but is still above its 50-day line.
Estimates: A 20% jump in EPS to 96 cents. Revenue is expected to rise 10% to $15.859 billion. Comps were seen rising around 3.1%, according to the Credit Suisse note.
Continue Reading on investors.com
Stocks to Trade 11-15-16 | Tuesday Edition
Short-Term Trading Momentum:
Positive the last 20 and 5 trading days | closed 2% higher from the open: IONS, NCLH, MAR, CLVS, UAL, UNH, AET, KMX, URI, JPM, COF, MCD, LMT, GS, PRGO, ESRX, MYL
Negative last 20 and 5 trading days | closed 2% lower from the open: momo, trip, v, mdt, tsla, baba, fb, amt, dish, amzn, vrx, crm, pm, yelp
Quarterly Order Flow:
Bullish Stocks to Trade: MAR, UAL, UNH, JPM, COF, LMT, RCL, STT, GS, PNC, CAT, BA, PRU, BHI, VLO, HOG, AKAM, CVX, UTX, NVDA
Bearish Stocks to Trade: acia, mdt, tsla, fb, agn, amgn, bidu, wynn, twlo, cci, cern, mck, teva, cvs, oxy, fslr, hcn, vtr
2x Normal Volume: FB, JPM, NVDA, V, MDT, PM, HD, JWN, KSS, THC, GS, AMT, AMZN, PNC, KORS, NEE, CCI, CERN, TRIP, ETN, PRU, AET, IR
Inside days: NVDA, DIS, KMI, PG, GILD, TSM, HAL, KORS, TXN, DHI, AZN, AA, ADM, AMGN, MYL, VLO, GIS, DD, ACIA