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I finally took a trade today. There were about six stocks that I was looking at getting short on. They were ETFC, EXPE, OHI, TTI, INVN, and of course the one I just got short in and that is Ball Corp (BLL) at $42.32.
The huge appeal to shorting this stock is that I can keep the risk well contained. There's a beautiful head and shoulders and if price goes against me, it will have to rise above the right shoulder at $43.05 for me to be stopped out.
In terms of target price, I see an ideal place to take profits at around $40.00, or in my case $39.90.
This trade brings me to three total shorts (first time that has been the case probably in months), and 1 long which is AAPL.
Also, remember that BLL reports earnings on October 24th.
Here's the chart setup in BLL.
Short: Ball Corp (BLL)
Readers of the weekly report know by now that short term cycle
has indeed bottomed. But some changes need to be taken into consideration. The
last short term top was due on September 7th, but came on September
14th, about 5 trading days late. The Short term bottom was due on 10th
October but actually came on 12th October. These changes call for adjustments
for future dates.
Earlier I was calling for another short term bottom around October
24th or around that time. With the shift of dates as mentioned above,
I now think that the next short term top will be around October 24th-25th,
instead of a bottom. The expected short term bottom should now move to October
29th– 30th. The final melt- up date remains the same.
From end of October till 12th-14th November.
Getting confused? Well, let me put in another way. A complex topping process is going on. We knew
that this correction was coming and was prepared for it. Now we also know that
another pop is on the way and that would run for next 8-10 days. But that would
not take us far and that is not the final pop. I have written before that we
have one more scare coming. My expectation is that we will see a swing low
around end of October. I cannot say for sure whether that low will be lower
than the current low and that will depend how high this one goes. And please
keep in mind during this short term pop will not be one straight line. Talk of
And a strong caveat: I cannot predict the future. I try to
best guess the market based on certain models. So far most of these calls have
been on track but while anticipating multiple turns in advance, one has to be
ready for quick changes in the plan. I am not playing the market till the end
of October (earlier it was 24th October). And I would not recommend
that anyone does either. Patience is the watch word.
I was little disappointed as to how much gold and silver
sold off but on the other hand these are good entry levels. Silver bounced off
from $32.50 and gold is very close to $ 1740. If you are not already holding
precious metal and planning to take core, long term position, do not jump in
all at once. You must scale in. For e.g. if you are willing to allocate $ 10000
to PM sector, instead of investing the
entire $10K at one shot, do it in 3 or 4 instalments. Therefore if tomorrow price
of silver is above $33 (close) and price of gold close above $ 1740, you may
want to allocate 25% -33% to get in. I hope you get my drift. With PMs, we are
talking very long term holding periods. Few years at least. So invest
Our dear reader dc_BEAR has sent a Bradley Date chart with a
comparison of actual SPX price movements. The comparison was originally done by
Tim Knights of SOH.
Surprisingly the dates are matching very close to the cycles
which I am working with. Let us see how it plays out but this is eerie.
I know lots of readers here trade short term. One of my friends
called in today and asked me to put in ideas about Options. This is something I
would tell regular investors to stay
away from. I want to emphasize that if you must trade and deal in options, have
separate accounts and allocate only a small amount of risk capital for option
trading. Even if you lose 100% of your option account, which is very likely,
your core investment will not be affected. My friend agreed to my suggestion. If
you folks think that this is something you would like to take a look at, I will
have to start a separate blog on Options. I absolutely would not want
retirement savings going in option play.
I have been pounding the table for “Relaxed Investor”
approach and to take a long term approach to investing for quite a while now. Yesterday,
Josh Brown of The reformed trader wrote the following:
compounding at 7 percent will double in 10.5 years. Thus, if a client has 20
years of working, saving and investing in front of him (and our nemesis
inflation compounds at just 2 to 4% a year) the reality is that we'll be just
fine (even if a bit envious at times of an Icarus trader's good fortune and a
bit smug when they inevitably crash back to earth). Dicking around with small
cap Chinese coal miners just because "they move, bro" simply doesn't
enter into this goal-oriented approach. And once the goals become simple, the
methodology ought to be every bit as simple. I tell people that if I ever start
talking about delta hedging I'm probably high on something and they should fire
I have written the same thing in the last weekly report.
That’s all for tonight. Hope the up momentum is maintained tomorrow.
Please continue with your help and support which is absolutely critical
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Take a break in your trading (or just listen to it in the background) and enjoy the brilliance of another favorite comic of mine:
The all-too-obvious head and shoulders on the NQ led me to speculate we'd get a drop (which we got last week) followed by a rise (which we're getting right now). I'm going to allow a little wiggle room, tinted below, with respect to just how high the retracement will carry, but I think this is going to run out of gas soon.
I mentioned the possible positive divergence on the SPX 60min RSI yesterday morning saying that it might deliver a strong bounce and well here we are. I have a W bottom target in the 1462 area on an open over 1444, but realistically this looks like a setup to retest the highs: