Pre-Market Analysis - GS 7/1

Daily Chart



I see a Bullish HIDDEN Divergence for the 2-day period 29-30 Jun, which I interpret as a possibility that the downtrend (pink channel) is ending

To help me visualize where GS could go, I've drawn an uptrend channel (dotted lines in green). I'm thinking that today could either be another day with a close that's not far off from the open (ie. GS' consolidating), or, a mildly bullish day with GS trading up and within my green channel.

As far as sentiments among the financial sector are concerned, nothing much has changed ie they aren't good. But I was telling D last night that because sentiments are so negative, contrarians will probably start going long, so will those who have been waiting to scoop up fair-value stocks especially if they think that financials have bottomed out. The industry is currently being monitored rather closely by regulators and several changes in policies have been imposed on them; some have taken the initiative to do something ie. reviewing corporate governance rules. All these at first glance seem to be taking the wind out of the industry's sails, but could just prove effective in winning back some investors confidence

Yesterday's very choppy session with relatively long bullish and bearish candles tells me that the views on financials are quite polarized now, mirroring those of the market in general.

So I'm going to shut up now and suggest that as scalpers, we make sure to watch our technicals, keep the news on (briefing.com is a blessing), always wait for price confirmation before even considering an entry, then check to see if indicators are telling consistent stories, and use at least 2 time-frames for entry and monitoring of our positions.

Also, watch the indices. Although sometimes i wonder which is leading which (market leading or individual stocks leading), and GS has this habit of not trending with the market, i still think it's a good practice to keep tabs on the movement of the major indices. For those who find it easier to look at changes in absolute value rather than percentage, simply enter the index's symbol on your trading window like this:

GS 6/30 (Trades)

Havoc day, but it's been fun :-)




Momentum Trade

My first momentum (paper) trade:

Bot 10 GS Jul08 180 Put $8.30
Sld 10 GS Jul08 180 Put $9.06

Didn't capture a screenshot of the trade before logging out of the simulated platform and trade record was not there anymore when I logged in again...

Pre-Market Analysis - GS 6/30

Am in the midst of putting up some sort of a tutorial material to share more about technicals with D, using GS as an example, since we are trading it actively anyways. (Besides GS, I'm also looking at RIMM, DRYS, MON, MOS and...

...ERHE - grotesque looking chart but I've to watch it coz someone in the family has been holding this for 3 years and I'm plotting to execute a swift exit on her behalf once I get D's greenlight to go ahead)...

Briefly on GS' very short-term trend

Everything I see tells me GS is continuing its downward move within the pink channel that I've drawn in my CCC (crazily chaotic chart). Not expecting GS to do anything out of the ordinary today. Been tuning in to CNBC (which was playing in the background as I worked) and haven't heard anything that's changed my view of where GS' heading in the next few days (I'm not going to think beyond that for obvious reasons - the market's irrational, common sense's not common, and Fed is erratic).

More on GS today maybe later if I can find time.

Today's D's birthday and I'm taking him out for dinner after he knocks off. For this year, instead of a proper hallmark card, I've made him a very personalized e-card (Seabloke, in the unlikelihood that you want to see it, you'll have to drop by with my favorite breakfast, coz I can't seem to send it out via email at all...I had to send the file to the folder shared by D and me and had him open it from there...totally spoilt the surprise...E&%(#%%&**....)

It's called an eye for an eye after he gave me an e-cake 15 years ago.

:-D

GS Story

On GS 27 Jun 08 (Fri)

After posting my entry at around 2am, GS went fairly flat and finally consolidated half an hour before market closed. Even though it moved up and down within a narrow range from 2:20am to 3:35am, I had chosen not to enter because the setup I was waiting for simply never appeared.

On the few occasions that D spotted an opportunity for entry, I would point out the reasons that I would not enter if I were him. It's simple for me: Once I see 2 elements that ruin my "perfect" setup, I'll stop counting and just not trade. More often than not, I welcome the chance for a break and will happily go for a stretch or a nice, warm shower.

I don't care about "missed opportunities". It's happened so many times: a nice long trend developed and I didn't do a thing. I know for a fact that had I gone in and made a killing, it would have had been a fluke if I had gone in without first seeing the setup for a proper entry.

GS Story

Anyways, at 9am on Sat (28 Jun), as I was about to do an AAR (After Action Review) on Fri's session, I noticed that D looked like he was rejuvenated enough for a brief tutorial on MACD. So I scrapped my idea of doing an AAR (ok, in all honesty, I doubt I had really wanted to do it in the first place...) and showed him how to identify divergences on monthly, weekly and daily charts.

About 2 hours into the session, D's attention started to dwindle and I was also getting really tired of listening to my own voice.

That was when I decided that putting everything in writing for him would be a better idea.

Something I forgot to mention- I had used a story-telling approach as I went about showing D the trends of GS since 1999 (when it went public). For me, charts always tell me stories. They are very much alive to me and I can look at them for hours and hours without taking my eyes off the screen. I draw lines and channels on them and insert comments and labels and I usually have to capture my messy charts and save them before clearing all the drawn items to draw new things for a different perspective on the same chart.

And below's a screenshot of my crazily chaotic GS daily chart for the period spanning Sep 07 - 27 Jun 08. This is the chart I'm using to tell D the story of GS when it was being traded during that particular period.

GS 6/27 (Trades)

3-Min scalp:

Bought GS Jul 08 180 Put $7.55
Sold GS Jul 08 180 Put $7.75

Exited TWS to let D trade before capturing my trade...

2nd scalp was a loss:



I'm thrilled though, coz it's my first experience at cutting loss.

What happened was that I entered at a point that was quite close to the support of my channel. I would have made a profit had I long the stock instead of a put.

Chose 180 put with a 0.4 delta because gamma was slightly higher than 185 put.

Bad choice. As price dipped, price of my put option was not catching up.

Although the setup was close to perfect, and 5min chart was agreeing with 10-min as I entered, stoch was in oversold region with a bullish cross over in the making and floor of channel was providing good support.

2 minutes into the trade, I noticed the bullish MACD divergence. I exited at a loss of $64 seconds later, immediately after the formation of a spinning top.

I'm happy. I could have lost all that D and I have earned today. I did not reverse my trade and buy a call though. I stuck to my rule and traded according to what appears to be GS' short-term trend. And I was mindful that I was scalping and I wasn't going to turn it into a day-trade just coz I couldn't bear to take a little loss.

At this point, D and I have pocketed a nice profit of $360 for the night, all in a few mins' work. Am now sipping coffee and waiting for an entry.

GS has tanked to 161.8 fib level since the beginning of its session and is now retracing to 61.8.

We'll see what happens next.

Pre-Market Analysis - GS 6/27

GS closed slightly above my support at 175.7 yesterday. Will it bounce back up again and reverse the downward trend that began in early May? Beats me. The above-average volume that accompanied yesterday's bearish candle tells me the bears are wrestling over control. Resistance is at high of 186.5... GS is trading at 176.06 now - lower than its close yesterday.

Fundamentals are not telling much. Granted there were reports of not-so-shabby earnings, the sentiments out there are not exactly great because the integrity of GS' financial report has been questioned. Furthermore, GS, along with the other leaders in the sector, are being downgraded - by each other. The sector sucks now. And will be so for as long as the housing and global credit crisis issues continue to plague the sector. On top of that, I'm really not expecting the public to believe that the Fed can continue to offer their helping hand... We're not seeing the bottom yet. Maybe when the rest in the sector begin to plunge in sympathy, that will be a sign...

That said, I'm wondering if there'll be some short-covering today.

Or will the bearish momentum pick up, pushing GS down to my support of 169.84?

Whatever the case, I don't think I'm going to go long on any GS calls in the near term. Esp not with the Dow setting a new 52-week low record...

Have not gone through option prices today. But I'm not expecting cheap puts today.

They were cheap yesterday though(at least for the first half of the trading session). With decent delta and gamma, I was able to pocket about $300 in profit in the first hour of the session, in 2 scalps that lasted merely 3 mins in total.

D was not exactly thrilled though- coz they were just paper trades. Ha ha.

Anyways, puts got pricey generally after lunch but I managed to find good bargains still.

By around 1:15 am, 2 candles with super small bodies and super long upper shadows began calling out to me. The 2nd candle closed below one of my supports, MACD was in bearish region and Stoch was coming down from overbought area. Checked against 30min time-frame to get another affirmation, and then I was in! I had 2 supports that were not too far down, one being a channel (which became support for the 1:30 candle and then a 2nd time for the 2:45 candle).

Barely 4 mins later, I was out. $136 profit. Real money. My first real money trade and first real money profit. Calls for celebration.

So at 2am yesterday, I went out for a smoke with D in my sexy lingerie. Woo hoo!

GS 6/26 (Trades)

My first real money trade...



Paper trades:

Pre-Market Analysis - GS 6/26

On 23 Jun, I mentioned that for at least the next few days, GS is going to consolidate or turn back down after its rally that began 12 Jun.



From the daily chart, it looks like GS is consolidating now. I see a bearish divergence for the period 19 - 25 Jun 08.

The candles seem to be telling a story that reinforces my view that GS is heading back down post consolidation :

Bulls lost momentum on 16 Jun after its rally that began on 12 Jun and bears took control the day after 16 Jun. Bulls made another attempt to seize back control on 18 Jun, lost momentum again on 19, giving up to the bears in the 2 days that follow. Yet another attempt was made by the bulls on 24 Jun, and, finally, a small-bodied bullish candle that closed near its low wrapped up yesterday's session.

GS 6/25 (Trades)

This shall be a reminder to me to never trade against my view of where GS' going in the very near term ie. for the week:

GS 6/24 (Trades)

Pre-Market Analysis - GS 6/24

As mentioned in my earlier entry, my personal take on GS is that it's either going to consolidate or go down for the rest of the week.

For today, I'll trade according to the support I see on GS' daily chart, which is in the range of 169.8 - 175.7

GS is now trading at 178.24, down from its market close of 178.59 yesterday. Taking this into consideration, I'll include my fib 138.2 level for support. At fib 138.2, GS is at around $163.76.

These are the support levels that I'll use for my scalps tonight, should I decide to trade tonight:

S1 - 175.7
S2 - 169.8
S3 - 163.76

GS & MACD Divergences (for the week of 23 Jun 08)

On GS 23 Jun 08

Here's the text message I left for D an hour and a half before the market opened yesterday, before leaving to pick him up from work:

"178.5 - Support on GS daily chart. Bearish both hidden and classic divergence on monthly, weekly and daily charts. Negative news and sentiments all over. Candlestick pattern also pointing towards a south-bound GS."

And this is GS' daily chart from May to yesterday:




GS' intraday chart from yesterday:


__________________________________________________________________________

Now back to GS 24 Jun 08 (Today).

On GS' monthly chart, these are the 2 consecutive bearish divergences which I hadn't the time to capture yesterday:



There's clearly a divergence for the period spanning Jan07 and May07 (prices reached a higher high on an upward move while MACD failed to do the same), followed by another one for the period between May07 and 0ct07. Both indicate the possible end of the upward trend that started in 2003. And indeed GS began to slide first in June, taking GS down to a fib level midway between 61.8 and 50. The 2nd correction takes GS down to below 61.8, and today, GS is sitting on 61.8 retracement level. Given the generally negative sentiments over financials, a sector that's taken a beating from a credit problem that doesn't seem to get any better, GS might just retrace further and consolidate, or reverse to a downward trend.

_________________________________________________________________________

On GS' weekly chart - Following Oct 07, the weekly chart shows GS going through a period of consolidation from mid Oct to Dec 07 with price hovering in the high range of 201 - 250.

We first see a bearish divergence for 5 - 12 Nov 08, indicating a possible end of the upward move from Sept 07. Indeed price fell to 140 in Mar 08 from Nov 07's 238. In the 2nd week of Apr, we see price going up after 3 weeks of consolidation.

On the week of 28 Apr, GS closed at 200. Here's where a bearish HIDDEN divergence is seen forming - MACD is at a higher value on 28 Apr while GS is at a lower value (when 12 Nov 07 is used as the point of reference) - indicating that the DOWNTREND that began in Nov is likely to continue. Hence I tend to think that the rally in the 2nd and 3rd week of June is but merely a correction in a continued downward move.

On the weekly chart below, the red line shows where the bearish divergence is, and the blue shows the HIDDEN divergence.



______________________________________________________________________

On GS' daily chart - We see a bullish divergence for the period 23 May to 11 Jun, and GS indeed reversed from a low of 161 on 11 Jun into an upward move the day after 11 Jun to close at 187 on 19 Jun.

Zooming out, we see a bearish HIDDEN divergence for the period 2 May - 19 Jun - and this tells me that the downward trend that began on 2 May is going to continue and that the rally from 12 - 19 Jun could be just a minor correction in the downtrend.

On the daily chart below, the red line shows where the bullish divergence is, and the blue shows the HIDDEN divergence.



Zooming out further on the daily chart, we clearly (ok i notice the paradox) see a bearish HIDDEN divergence for the period spanning the end of Oct 07 and 19 Jun 08.

The way I look at this is that the downward move from end Oct 07 is going to continue for a long, long time, and as far as the next few days is concerned, my take is that GS is going down or sideways, not particularly in that order though.

The daily chart below shows the hidden divergence:

Pre-Market Analysis - GS 6/23

Bearish Divergence Nov 2007 on monthly chart suggests that GS' uptrend since 2003 might just reverse or see a major correction. GS is now sitting between fib level of 61.8 and 50 - if it retraces to 38.2 or even 23.6, we could be looking at a reversal. For now,I'm cluelss as to where it's headed.

Bearish Hidden Divergence on 28 Apr 08 on weekly chart suggests a continuation of the downtrend that began in Nov 07

Bearish Hidden Divergence on 19 Jun 08 on daily chart suggests a continuation of the downtrend that began on 5 May 08.

News on GS has been negative mostly. And there are questions regarding the integrity of their financial reporting etc. Certain comments out there alluded that the cutting of jobs in its investment banking arm is necessitated by the lack of performance in their private equity and hedge funds. Hear say, will keep that at the back of my mind regardless.

GS 6/19 (Trades)

Sea, Air & D

My week to date has been plagued by bouts of migraine attacks and depression.

But there were moments of rapturous bliss – and I have Seabloke and Pilot, my little sister and brother, to thank for them.

Seabloke dropped by this morning with my favorite hotcakes. We had breakfast, caught 2 episodes of Desperate Housewives, gossiped, smoked and badmouthed people. The intriguing thing about Seabloke is her ability to make me feel happy for no good reason. She tickles me the way that no one else could. Everything she says makes me laugh. Even when she’s complaining, she’s delightfully amusing. When it was time for her to leave, I walked her down to the main road to get a cab. She didn’t want me to wait with her under the sun and so we hugged and parted. I took a slow walk back to the lobby, and for the rest of the day, I couldn’t forget the warmth I felt from the sun (I’ve not stepped out since Sunday), and mainly from Seabloke.

Pilot, my little brother, a man of few words and who hardly calls, called in the early evening to tell me he found out that he can have 2 HDB flats under his name and so he can jointly own another flat with a sibling, as long as the sibling fulfils the criteria of not earning an income of more than $XXX. Thinking that he wanted a flat but not a wife, I joked that Seabloke meets the criteria coz she’s a housewife who supposedly earns nothing (ok, Seabloke’s going to bring up the topic of the true economic value of a housewife again– something like $20k per month??). To which Pilot replied: “you didn’t get it, did you? I’m saying I’m an available option”. I was dumbfounded. The only thing I could say after I regained my composure was that I love him. How could I not? He was offering me the assurance that if I ever found myself alone, I won’t actually be, because he’s going to be there for me. I love my little brother, deeply.

Seabloke and Pilot are 2 of a few reasons that I love my life regardless of what curve balls it throws at me. I don’t expect to be loved, because I have come to realize that the onus is on me to love myself. Seabloke and Pilot, and even D, are a gift and blessing from Him that I’m learning not to take for granted.

GS 6/18 (Trades)

GS 6/17 (Trades)

One 6-min scalp and two 2-min scalps using Gimme Bars setup (Indicators: BB(10, 1.9) and RSI (4)).

Very nice setup during 2nd scalp as RSI was turning upwards towards and then passed 25, while first bullish candle after a downward move touched the lower band.

GS 6/16 (Trades)

1105 EST Shorted GS @ 182.43
1115 EST Covered GS @ 181.90

1220 EST Shorted GS @ 180.91
1225 EST Covered GS @ 180.74

Entry signals from BB, SS, RSI, Fib and 5-day S/R. Was more comfortable going short though weekly and daily chart suggested a short-term rally. GS closed higher than I expected. Depending on earning result tonight, it might just retrace beyond my fib 50 level towards fib 38.2.

Pre-Market Analysis - GS 6/13

GS indeed went up and closed at 166.75 yesterday.

A bullish Harami pattern has formed on the daily chart, which serves to reinforce my belief that GS is going up at least for the next 3 to 4 trading days until it hit my resistance of 177.55 - 177.78.

Pre-Market Analysis - GS & MACD Divergence

Started paper trading GS again in early June. Picked up FX again simultaneously and realized that it's still my favorite trading vehicle. But D loves GS...and that is good enough a reason for me to learn to trade equities well.

While I have done endless research on the best indicators to use for short-term trading, and love to experiment with them, I need to settle on one set to help D trade GS comfortably (especially when he's trading real money account!).

Since early this month, the indicators we've been using for price AFFIRMATION were SS(8,3) and RSI(4). We put in EMA7 (NOT for entry, but only for alternative exits from trades) but have hardly used that. I tend to wait for price confirmation firstbut D is usually impatient and will enter based on his usual method (what it is I have yet to figure out...).

Profits from my paper trading activities in Feb (a couple of days), Mid-Mar (a couple of days) and June (3 days to date) is a humble US$1,374.

I haven't an inkling how much D has made in his real money account...he trades almost everyday, and sometimes, i wonder if trading is more like a game to him than a way to get rich...er...?? In anycase, I'm happy that he gets satisfaction out of it. I'm inclined to believe that successful traders are the ones that aim to trade well, not to get rich.

Above all, I think trading shouldn't be TOO boring an activity. Anything that we do shouldn't be boring, for that matter. We can find joy in every activity we engage in; we can find joy in executing the most mundane tasks like folding of clothes and washing of dishes and separating of our dirty laundries into colors and whites. I call that the joy of doing anything or even nothing, in solitude.

I can't quite remember how it started, maybe it was Michael who reminded me, but I was prompted to throw in MACD again for my GS trades after deciding it's a lousy indicator to use for FX trading. I am interested purely in looking for divergences between the MACD and GS's price to identify potential reversal and/or trend continuation.

To complicate matters (my default mode), I look at MACD using a top-down approach (by studying monthly charts first, then weekly and finally daily)and I look for both classic and hidden divergence.

Classic Divergence
Bullish Divergence: In a DOWN move - Lower lows in price which is NOT matched by lower lows in the MACD

Bearish Divergence: In an UP move - Higher highs in price which is NOT matched by higher highs in the MACD

Classic divergences can happen at price tops or bottoms (suggesting possible reversals)as well as at price corrections

Hidden Divergence
Bullish HIDDEN Divergence: In a UPTREND - Lower lows in MACD which is NOT matched by lower lows in price (can be found in corrections in an uptrend and price retest of lows - suggest strength in upward move)

Bearish HIDDEN Divergence: In an DOWNTREND - Higher highs in MACD which is NOT matched by higher highs in price

Hidden divergence suggests trend continuation.

Anyone who's pulled out the GS chart would notice that since the issuance of its IPO in 1999, GS only started its gradual upward trend in 2003. In May 2005, it began to climb steeply from $95 to $230. It retraced once before in Aug 07 to around $162, the level at which we see GS hovering around now, providing what i see as a support for the next few trading days.

I've been telling D since Mar that GS is going DOWN. That's why i've always been more comfortable buying puts and shorting the share. But then again, I noticed that I have no loyalty when it comes to trading - i trade in whichever direction that seems right at that moment (I scalp and I can only scalp), though always keeping at the back of my mind the long-term and short-term trend. I also chuck the issue of value and morals out of the window - i don't know who I'm trading against and I don't want to know. I short as much as,if not more often than, I go long. Since I started trading GS in Mar (I was only into FX before that), I have not been able to stop conjuring up the image of a HUGE polar bear whenever the letters GS comes to mind...

Anyway, today is the first time I'm using MACD on GS to see what I can find and use for my trades tonight. This is NOT my trading plan. It's just a recce of sorts...

MACD Monthly :




MACD Weekly:




MACD Daily:




The way I would interpret the above is as follows:

Monthly Chart showing 2 consecutive bearish divergence (Apr06-Jan07; Jan07-Oct07)and 1 bearish convergence (Aug07-Mar08)tells me that the months to follow will see GS going south ie. it seems its uptrend since 2003 is ending (with GS peaking at 240 in Oct07).

Weekly and Daily Chart both showing bullish divergence suggests potential correction from previous days' downtrend and within the long-term downtrend. There's a possibility for GS to rally up to Fib 61.8 level @ $177.78 (which incidentally is very near my 2 year S/R level @ 177.56) in the next few days. As always, I'll look for price cofirmation.