"Swing Scalping" in 2010

Let’s face it traders, 2009 was the toughest year in the decade for pure day trading despite the huge move off March lows to finish with some nice gains in the overall averages. The absence of the retail investor led to anemic volume and the rise of HFT computer models was not a good recipe for momentum day trading. Over the years I have always been able to adapt to changes in the marketplace (a quality everygood trader must posess - my SFOmag article) but I must say that this has been one of the toughest hurdles. Although it was another profitable year at TodayTrader, my day trading profits were not near the level I have come accustomed to over the years. I finished the year on a positive note by applying some more patient and selective strategies (to be discussed in YouTube video) and I am encouraged going into 2010. I also accepted the fact early on in 2009 that HFT is here to stay and focused a lot more in my swing trading account as a way to beat the bots.

A technique that has made me some big profits during my day trading career is being able to see a setup (usually accompanied by volume), study the level II and tape, anticipate the move and then pounce with huge size and ride the momentum. With the onslaught of HFT algorithms these setups have been much harder to predict with the price action mimicking that of a Richter scale in many cases making it too risky to play the size I was used to. Since we have always used a lot of setups on a daily chart I started to buy these in my swing account based on intraday volume. I started to notice more and more the same trades I was getting jigged out of day trading were really showing some nice profits in the swing account. A good recent example is SRZ on 12/18. I entered this trade in both accounts at $3.13 based on the daily chart setup and volume. After hitting a high of $3.17 the stock pull backed to $3.08 (2 cents off lows), wicked, and eventually went back thru highs on bigger volume to go as high as $3.52 without a bar reversal. In this case I was able to stay in the trade in both accounts but there would be many times I would get worked out of the day trade.

OK, nice entry in SRZ, now what. I have always applied the same strategies, rules and disciplines in my swing trading as I do my day trading. In the case of SRZ I had a strong gut feeling based on volume. I grabbed a pretty big chunk at $3.13 and scalped out of 2/3 of the position at $3.48 for some nice gains using a stop below the 10 MA at $3.20 on the remaining. We like to refer to it as “swing scalping” at TodayTrader. The advantage that a full time trader has over other swing traders is they are monitoring the markets intraday and can catch these setups. Most swing traders just trade off the daily charts and miss the intraday opportunities. DON’T underestimate this. It was by far my most profitable setup in my swing account. Another good example is F on 12/18. This is one that I had been stalking and already long but bought more at the breakout above $9.14 based on the volume. Once again, it paid off to be an intraday market participant in this action.

So if you are having a hard time beating the bots on an intraday level you might want to give “swing scalping “a try. You can enter a trade with much less size and many times will get a few days of follow thru. “Swing Scalping” can be very profitable but like any style of trading one must apply rules and disciplines

There are other techniques I deploy in my swing trading but in every one of them I am quick to take at least half of my position off to lock in profits when I get a move in my direction and quick to cut losses when it goes against me. I also remained hedged at all times using SDS varying my size with market conditions. The lack of volume scares me and wouldn’t be surprised to see a sudden downside move in at some point in January. This is not a prediction and I will continue to react and not out-think the market.

Making Holiday Shopping Profitable

This is one of my favorite times of year! Everyone gets in a good mood, there is a lot of energy in the air as people get excited about the holidays and it provides investors a great opportunity to turn holiday shopping into profitable investment opportunities.

You probably read that last line and thought what the heck is he talking about? Well I find the holiday shopping season to be the best time to find retail stocks that I want to buy for the upcoming year. I go to the mall to do my shopping and I look at all the different stores to see who is busy and who isn’t. I also look to see which stores are giving the highest discounts and which are not.

Again, you are probably asking, OK, what does this tell you about which retailers to invest in for the upcoming year?
Look at it this way, when you look inside a store and see it full of happy customers, lining up to pay for items and the sound of the cash register, well that is an inside peek at a company that will probably have great holiday earnings. No matter how many numbers you crunch, seeing people actually lining up to buy things, gives you a true picture of how good or bad that retailer will do for the season. Is this a basic investment theory, yes it is. But, we tend to forget that keeping things simple can be the easiest way to make a profit.

My favorite retail investment was made at this exact time of year. Back in 2006 I was walking around the mall, seeing that most of the stores were doing ok, but nothing that made me go wow, until I walked by the Apple Store.
The store was jammed packed with people looking at the new products that Apple was releasing at that time. Yes, Apple was a favorite among analysts, but the stock had pulled back from 2006 highs in December, setting up for a monster 2007. I could not believe how crowded the store was and how excited people were about these new products. When it was all said and done, Apple blew away their numbers and all possible estimates, which led to the stock running higher throughout 2007.

Here is my advice to you, the investor. When you go shopping pay attention to the stores you go into and the ones you don’t shop in as well. Look to see where the shoppers are and why they are there. We know that Best Buy was going to be busy on Black Friday, but that’s because of their loss leaders for their big sale. I want to see the lines continue after the Black Friday weekend ends (probably not going to be that big at Best Buy). You don’t need an analyst from the Wall Street to tell you that based on their numbers, retailer X is going to do well. You will see with your own eyes, who are doing well and who are not.

Enjoy your holiday season and look to make it a profitable one as well.


I look forward to hearing from those that read my blog. Please email your stories of how you found investments using methods like above. You can email me at mickey@todaytrader.com



We provide a free daily watch list of stocks that we are watching each day. You can see our daily watch list at www.todaytrader.com You do not have sign up, just click on the watch list word on the left side of the page. No registration is required and it’s free. These are stocks we are watching based on how the traded the previous day.

This is not a solicitation or recommendation to buy or sell. These are stocks we are watching for traders. We may or may not trade these picks and do not make any guarantee of success. Commentary of these stocks is for educational purposes only

Mickey Welcher is President of Spectral Asset Management LLC and works with Today Trader. He has extensive trading experience and money management for clients. If you have any questions, please contact him at mickey @todaytrader.com

Trading on a FOMC Rate Decision Day

Wednesday at 2:15PM, EST, the Fed will announce if they will change interest rates and give a brief statement about the overall economy and how it will affect future rate increases. This occurs every 6 weeks and is a highly anticipated event for the market.

The overall consensus is there will be no change in interest rates at this meeting and for the next few as well. Everyone will be listening closely to the statement, which is what will cause the market to move after this announcement.

Trading on this day is always kind of tricky. First, the volume will dry up after the first 90 minutes or so, as traders pull back and wait for the announcement. No one wants to be holding stocks and have the Fed come out and say something that causes their position to become a loser. After the announcement the market usually gyrates both up and down and can be hard to trade as well.

So, how do you trade this day you ask? We have found the best way is to trade with caution. Look for a few good trades early in the morning, taking profits by 11:30AM EST, and sitting on the sidelines until the announcement. After the announcement, be very careful and let the market make a few directional moves before entering any trades. It is common to see a fast move in one direction, followed by a fast reversal, followed by a turn back to the first move. Waiting for the 3rd move seems to be a better play, but even this can be reversed quickly in a volatile market. The best way to cut volatility is to cut your share size and keep your losses to a level you can deal with. If the market does move your way, you can always add to your positions on the way up, but be careful for that possible fast reversal.

Remember, FOMC days can have good trading in the morning and volatile trading after the announcement. There is no shame in sitting on your hands if you cannot get a good feel for the market because of this volatility.

Good luck on Wednesday.

We provide a free daily watch list of stocks that we are watching each day. You can see our daily watch list at www.todaytrader.com You do not have sign up, just click on the watch list word on the left side of the page. No registration is required and it’s free. These are stocks we are watching based on how the traded the previous day.

This is not a solicitation or recommendation to buy or sell. These are stocks we are watching for traders. We may or may not trade these picks and do not make any guarantee of success. Commentary of these stocks is for educational purposes only

Mickey Welcher is President of Spectral Asset Management LLC and works with Today Trader. He has extensive trading experience and money management for clients. If you have any questions, please contact him at mickey@todaytrader.com

Food for thought

One thing I have always loved about the stock market is how the use of Fibonacci lines makes an irrational market very rational. Today I was looking back on a monthly chart of SPY and I decided to use Fibonacci lines on the chart. If you are not familiar how to use this measurement, you measure from the peak to the trough. I used the 2007 highs and the 2009 lows to draw this measurement. After drawing these lines I was somewhat surprised, but not too surprised to see that we have made a 62% retracement off lows.

What makes this such a big deal is that this is where you would expect to see this reversal stop. We hit this line last week when we made new highs and now we look to be pulling back. Based on this chart, we will probably see a pullback to at least$100 in the SPY’s. This will be a key area for the market. If we hold up and turn back up, we will probably rally through highs. If we cannot hold up, we could see a drop down to the $87 range.

As you can see it is very interesting to see how a measurement that is based on nature can be a very valuable tool for investing and trading.

You can see our daily watch list at www.todaytrader.com You do not have sign up, just click on the watch list word on the left side of the page. No registration is required and it’s free. These are stocks we are watching based on how the traded the previous day.

This is not a solicitation or recommendation to buy or sell. These are stocks we are watching for traders. We may or may not trade these picks and do not make any guarantee of success. Commentary of these stocks is for educational purposes only

Mickey Welcher is President of Spectral Asset Management LLC and works with Today Trader. He has extensive trading experience and money management for clients. If you have any questions, please contact him at mickey@todaytrader.com

Where do we go from here?

Monday’s drop leaves us in an interesting position and the possible start of another few days to the downside. The market opened higher, but the dollar moved higher, causing commodities to drop and pushing the markets lower. The bank failures are not helping matters either, but the government seems to have that somewhat under control. So, where does the market go from here? We have seen an amazing rally since mid-March, with a small pullback in July. Since July, the market has moved straight up without much of a pullback. Monday’s drop puts us into a position where we could see another leg down. You can see we broke old support on the SPY at $108, to close at $106.91. If you look on our chart below, you will see there is room to drop down to the $104 level, which is the bottom of the short-term trend line. Saying all of this, you have to realize that every time the market wants to drop, buyers come in and push it higher. The market also knows that the government is there to prop up our economy, which is also making it very hard to short.

Tuesday will be very interesting and we could start to see some cracks in this rally. Of course, I would not be surprised to see the market rally and end the day much higher.

You can see our daily watch list at www.todaytrader.com You do not have sign up, just click on the watch list word on the left side of the page. No registration is required and it’s free. These are stocks we are watching based on how the traded the previous day.

This is not a solicitation or recommendation to buy or sell. These are stocks we are watching for traders. We may or may not trade these picks and do not make any guarantee of success. Commentary of these stocks is for educational purposes only

Mickey Welcher is President of Spectral Asset Management LLC and works with Today Trader. He has extensive trading experience and money management for clients. If you have any questions, please contact him at mickey@todaytrader.com

Paychex is ready to pay off!!

After Thursday’s big bounce it seems to get harder to find a chart that gives us a good entry point. Most stocks moved higher on Thursday as the market was up big on the day. One chart that I like is Paychex (PAYX), because it is setting up to break out of a three week trading channel. The high of this channel is $29.11, which is resistance for this upside move. If PAYX can break through this level, we should see a breakout move that is driven by trading volume. The biggest problem with this stock is the lack of strong follow through. You can see on the chart there are a lot of “wicks” on candles, which tells us the stock does not hold up well after making a move. There might only be one chance for this move, so watch PAYX closely and be ready for this breakout move.

We have a good selection of picks for Friday, and you can see these for free on our daily watch list at www.todaytrader.com You do not have sign up, just click on the watch list word on the left side of the page. No registration is required.

This is not a solicitation or recommendation to buy or sell. These are stocks we are watching for traders. We may or may not trade these picks and do not make any guarantee of success. Commentary of these stocks is for educational purposes only

Mickey Welcher is President of Spectral Asset Management LLC and works with Today Trader. He has extensive trading experience and money management for clients. If you have any questions, please contact him at micke@todaytrader.com