Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

The One That Got Away (by cccactii)

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Hello everyone,

I have been on a trip and have only been able to skim the SOH postings for the past few days, but I have been reviewing my past trades recently to try and learn from my mistakes and better manage my successful positions,in order to prepare for what may lie ahead.

I was quite bearish the past several years and I imagined that I would get an opportunity to buy stocks and bonds at prices that my generation had never seen. My thesis was a rally after the plunge and a retest or break much lower. I was not, and will not be surprised to see the S&P 500 break well below 500, but the printing press may have rendered that idea mere wishful thinking – at least for the time being. At some point, via time and price, my bearish thesis will be foolhardy to maintain as it will have been fully realized, and I will have missed a great opportunity, in maintaining that view. Have I missed that opportunity?

The point of this is to try and be prepared for that opportunity and recognize that I may have real captured value, and it is safe to hold onto the position long term. How long is the question, and for many of you this exercise may not pertain, as your methods and time frames do not mesh with my own. However, one should not be too quick to trade away a great position.

Last year I remembered scrambling around trying to find some decent bonds or convertibles as they were in a death plunge and I perceived that deep value could be found. I called several brokers asking if they had a good bond desk or trader that could help me identify potential investments. One Financial Advisor thought I was taking on too much risk looking to buy lower quality bonds after they had plunged to record spreads vs investment grade bonds. I am certain that they would have thought that buying the same bonds was a prudent decision when they were at all time highs.

I bought HYG, but I wound up buying some Freeport McMoRan Pref. M shares. When I bought these there was so much going on during the implosion of our financial system, I did not have time to really think through any long positions I might take,other than the idea of buying them for a bounce and letting the dust settle. I then planned to buy stocks and bonds long term when the S&P 500 came into the 500 range. I needed to be a little less bearish and look at some charts.

After I bought these shares, I was worried about the Phelps Dodge acquisition and the possibility of too much debt. I was bearish on copper as I believed the excess of the worldwide building boom would take its toll on demand. It is embarrassing to admit that I bought these on Dec. 5th 2008, at just over 33 and sold them a month later in the low 40's. FCX stock was getting crushed and it seemed like bankruptcy was our national fate. I got spooked and sold them with the idea that I would buy them lower. Here is a chart for your amusement.

Fcx

I had been using Aberdeen Asia Pacific Income Fund (FAX) to augment the low yield in my money market funds. I noticed it plunged twice in 2008 and quickly recovered. I bought a fair amount at 3.30's during the crash and sold 75% of it around 5. I really like the idea of cashing dividends when my entry is low risk. I will be buying FAX starting at the mid 4's and more lower should that opportunity present itself again.

I love buying death but need to be more objective about tempering my bearishness and sitting tight in something other than gold and silver when I have bought it at the right price. I hope to see comments on what some of you are looking at to prepare for a more bullish time period and what are your vehicles and prices that you would be wanting to buy them at. Here is a 2 year look at FAX. 

Fax 

Next week, I plan on doing a post on the one that did not get away , as well as an interview with a gold broker that Bill Fleckenstein has suggested his readers may want to use for physical metal acquisitions. She is a very sharp gal and has a birds eye view on the physical gold and silver markets that I think readers may find helpful no matter which side of the metal battle you may be involved with. She has agreed to log onto SOH and answer any questions after the post, and I am looking forward to this, as she has been most helpful in cleansing my view in that market.

The High and Tight Flag (by Biffermas)

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Bulkowski. That name has spawned some interesting salvos on the message board dismissing his prognostications. I can't speak to his market direction calls, but I would like to address one of his positive themes in trading: research. It's one thing to cite a chart pattern as being worthwhile and then trading it. It's quite another to cite a chart pattern, find hundreds of examples in both bull and bear market scenarios, assess the probability of success, and then perform a prospective study on whether the pattern continues to work. Because I spent 11 years rotting in college, graduate, and professional programs, I performed a fair amount of research myself and appreciate this approach to problem solving over the "gut" instincts typically used in trading methodologies.

Today I'll cover Bulkowski's best performing setup for both bull and bear markets, the High and Tight Flag. This pattern is the most reliable of the 23 setups covered. Here I've listed two charts of SCSS: the setup, and the resulting breakout.

Setup 

Conclusion 

Keep in mind that 54% of these experience throwback, which simply means that following breakout the price retreats to the horizontal support before ultimately moving higher to the target.

Throwback

One final note, If you find a sluggish breakout, consider closing the position. There should be no indecision in the price action.

Gotta Dream Boy, Gotta Song (By Fayssoux)

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Gold is at all time highs, but the XAU index of gold and silver stocks is well below levels attained in 2008. The crash last year in precious metals requites scared many away from the sector, and while gains have been breathtaking in 2009, the equities of companies that mine gold have been lagging the commodity, both over the long term and in the past few weeks.  If gold prices stay high, XAU equities have some catching up to do.

XauXau2

SPX 60 Minutes Sticking to the Script (by Gary)

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Hello again.  This is Gary from Biiwii, back again after having shaken off the cobwebs that result from writing an intensive newsletter, NFTRH on the weekends.

In this week's letter, one of the themes was a possible scenario for the broad market as represented by the S&P 500.  In this case I used a 60 minute chart to identify a short term scenario revolving around a possible Head & Shoulders topping pattern.  So far, so good.

Here is a fresh chart showing the S&P's progress.  I had originally thought the lateral support of 1020 would provide a nice level for the neck line of the would-be H&S.  As it turns out, we broke out of the short term downtrend channel a bit higher, which alters the analysis only slightly from what was presented over the weekend.

Spx60min

The upside tolerance of the analysis is 1080, as represented by lateral visual resistance.  Any higher and the pattern is in trouble.  At new highs, the pattern is kaput.  But either way, the bounce from around 1020 was strongly expected and fazes me not, despite several bearish positions on various markets like the SPX itself, China, oil, euro, real estate and financials.  That is because my gold stock and UGL longs are more than making up for the effect on bearish positions. 

The plan is to watch the story told by the potential H&S top and either add short if it remains intact, or go back to the drawing board if the bulls somehow negate its potential with new highs.  For now, I will assume we are going according to plan. 

A break of the neckline brings on a measured target of 955, which is not the end of the world for the bulls and in fact could be construed as a healthy pullback.  That level is the top of a zone of strong support dating back months, so I think it is unrealistic to get overly bearish in a 'world is ending' kind of way, although when you are talking a macro Ponzi scheme, you never know. 

But for now, we are micro-managing the short term and the above represents one possible road map:  Relief rally failure at or below 1080, decline to and eventually through the neck line, bringing on a measured target of 955.

Good luck out there and thank you again Tim for a forum on one of the relative few blogs I respect in an unmitigated way in a sea of financial market stuff floating around out there.

UUP Daily (by Jeff Patterson)

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First off, thanks to TK for allowing me to post on his top notch blog. 

My name is Jeff Patterson I have been trading for 7 years now. My philosophy is to keep it simple in my analysis of charts. What you see on my charts are all the indicators I use. I do use daily, weekly and monthly time frames to filter out the volatility and noise. I will elaborate more thoroughly about my T/A later. I do not want to bore readers to death with my first chance to post.

I wanted to post my analysis of UUP. I do not recommend trading the options for this equity, they trade very poorly. I use it mainly for direction in gold equities. I did buy March puts, but more importantly at the same time I bought call options in AU and GG. If you look at the charts of AU, GG at the time I entered the puts you can see those equities were testing the bottom of their trend lines. VoilĂ , they produced nice spikes which I sold into for reasons I will spare you at the moment, but I have been dialled into these stocks for months now. By the way I am still holding those puts, just waiting for a test of the lows to sell them. 

On the chart there are some things I left out as far as further confirmations that it was just another spike up in my estimationSnapshot-33 and not a bottom, but I did not want to clutter the chart up too much.

Also UNG has a chart much like UUP that any time it tests its upper ranges it's nothing more than a spike and begs to be shorted.

STEC as an Object Lesson

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I want to share with you a trade from September that holds a lesson for us all.

The stock is STEC. I shorted it at 40.17 in mid-September. A week later, I covered the short at 30.22 for a nice profit. The stock had fallen about 25%.

Here's an updated chart (STEC is, I think, the top percentage loser today on the market, or at least very close to it):

1104-STEC

The lesson is the same for bull and bear market alike – – it makes sense to adjust stops as a position moves in your favor. I am much, much better about this (especially for shorts) than I used to be. But closing a short because It Sure Has Gone Down a Lot isn't a good reason to do so.

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