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Jeff Pierce
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Iā€™m a swing trader of momentum stocks with a holding period of anywhere from a few hours to a few months. I run a number of screens to locate the strongest/weakest stocks out there, using technical analysis to determine my entries and exits. Trying to calculate the intrinsic value of stocks in... More
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tradewithZEN
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zentrader.ca
  • The Nasdaq Sheds 5.22% ā€“ Now What? 0 comments
    Aug 18, 2011 7:09 PM | about stocks: QQQ, DIA, SPY, TZA, TNA, VIXY

    The following is a guest post by Mike McDermott, co-founder of Mercenary Trader.

    We’re in a brand new market environment…  The kind of period that separates the professional traders from the amateurs.

    It’s both a dangerous time and an incredibly opportunistic period and yet it feels like we’ve been here before.

    I don’t have to tell you the kinds of gains that are possible. You already know that in times of calamity, the skilled traders bank major coin.  Soros made his billions off the back of the Bank of England.  Paulson made a killing during the housing / financial crisis (though his risk management has slipped a little this time around…)

    Today, we’re facing renewed fears of recession, a debt situation in Europe that could trigger massive losses, and US budget issues that have eroded confidence.

    The market is responding with tremendous volatility.

    Over the past few weeks, 500  point daily ranges on the Dow have become “par for the course.”

    Buy-and-hold investors are seeing large chunks of their net worth evaporate before their eyes.  Trend followers are bailing out of speculative stocks and entering new short positions.

    Swing traders (like us) have the opportunity to set up some tremendously profitable opportunities.

    Are you ready for this environment? Are you using the volatility to grow your account?  Is your net worth higher than it was July 31, before the selling began in earnest?

    If not, then maybe its time to reassess your trading approach.  In order to survive in today’s turbulent environment, you will need skill, discipline, and a strong pipeline of trade ideas.

    The writing was on the wall.

    For months, we’ve been warning about the macro risks…

    On June 2, Jack (my partner in crime) warned about the potential for a massive “deflation shock:”

    …a scenario arises where the Federal Reserve is truly “out of bullets,” and stocks become vulnerable to massive multiple contraction, or even a crash, as corporate profits erode via (1) margin compression and (2) reduced private spending.

    A couple of weeks later I noted the risk of portfolio contagion triggering a sharp market selloff:

    As losses accumulate, leveraged investors have the potential to trigger margin calls or internal risk levels.  Hitting these thresholds, then requires additional selling to raise cash levels.  In a contagion environment, risk assets can be pushed lower regardless of fundamental strength, based simply on the fact that managers have to liquidate positions.

    This type of selling pressure can become especially intense when the end client (retail investors in mutual funds, pension investments with asset managers etc.) begin reducing their allocations to different managers.  Investment losses coupled with redemptions can lead to sharp trading dislocations.

    Frankly, if you’ve been following along, you know that we’ve been very wary about the broad market risk, and have been looking for spots to profit from a drop in select industries and sectors.

    So in August when the market fell apart, we weren’t hurt by the carnage.

    In fact, on August 4th when the Dow fell more than 500 points, we had our most profitable day this year.

    And this wasn’t a fluke…  Two trading days later on August 8th when the Dow fell more than 600 points we had our second strongest trading day (only because we had already taken some of our profits off the table)

    Leading up to the crash, we put several positions in place that allowed us to book some serious profits

    Take Freeport McMoRan (NYSE:FCX)…  On July 27th, we took a short position at $54.46.  FCX was showing signs of failure at resistance, and our expectation was that the metal miner would drop sharply if traders began to reduce their speculative positions.

    As the market began selling off in earnest, we took the opportunity to book our gains.

    On August 3 as broad markets were breaking support, we took half profits at $51.38 (see chart).  The following day as the market tanked, we captured the rest of our profits at $48.18.  Not a bad trade considering we held the position less than 2 weeks!

    Or take a look at our trade in the iShares Emerging Market (NYSEARCA:EEM) ETF…  On August 2, we entered a short position at $46.21 as the group broke down from a consolidation pattern.

    Two days later, we used the panic selling to cover half of our position at $44.24.  The second half is still open, with unrealized profits continuing to run as we tighten our risk point along the way.

    But not all of our profitable trades have been bets against the market.

    Over the past several weeks, we have generated impressive gains as precious metal prices rally, and the gold and silver miners follow suit.

    Rangold Resources (NASDAQ:GOLD) is just one example:

    On July 13th, we took a long position as the gold miner resumed its positive trend by breaking through a consolidation point.  Our purchase price was $85.36.

    Fast forward a month and while the broad market has experienced a historic selloff, our position is up about 24% and we’re looking for even larger gains!

    Despite the fact that the market has been bleeding red and crushing traditional investments, the  Mercenary Portfolio is booking profits and trading sharply higher!

    We’re talking about real capital here… We’re not running a paper account with “theoretical” trades.

    Each execution is time stamped, documented, and represents real capital on the line.  After all, that’s how its supposed to be right?  You want to follow real traders with real exposure to the market.  Anything less just wouldn’t be legit…

    So what is the Mercenary Live Feed?

    The Live Feed is our way of communicating our trades in real time. This is a completely transparent view into the trading decisions that Jack and I make on a daily basis.

    The Live Feed includes:

    • Pre-market commentary and trade setups for the day
    • Real-time alerts whenever an execution is triggered
    • Intra-day commentary on trends and events
    • A complete picture of our open trades
    • Risk points for every position on our book
    • Thesis notes on industries, sectors or themes
    • Our radar screen with issues we are currently tracking
    • Real-time text notifications to your cell phone (optional)
    • And we continue to add features and make the Live Feed even better…

    The evolution of trading is a never-ending process.  We’re getting better day by day, and that means our trade signals, our idea generation, and our research process is constantly in a series of upgrades.

    As Mercenaries, we pride ourselves on being a cut-throat group of profiteers.  A true Mercenary has no allegiance to one army or the other.  He simply fights (or trades) with the side that offers him the most profit.

    But as Mercenaries, we’re also a band of brothers.  We’re in this battle together and we all benefit from the collective knowledge of the Mercenary community

    When Steve writes in with a question about a risk point, we all get the chance to look at the trade more closely.  And when Ken offers a another security that might fit with an established trend, we all have the opportunity to enter a better trade.

    That’s what the community is all about.  We’re ruthless profiteers for sure…   But we’re in this together.

    A couple of traders have asked about WHY we offer the Live Feed…

    There are basically three main reasons:

    • We’re building a resource hub for traders.  That hub wouldn’t be complete without real-time signals.  It’s one of the many ways we fulfill our mission to traders…
    • We’re capitalists. The Live Feed is our primary source of revenue.  This pays for research staff, keeps our lights on, finances technology, and helps us cover expenses without tapping our trading capital.
    • We’re constantly getting sharper.  There’s something unique about sharing ideas with fellow traders.  In the process of explaining a concept, it becomes more clear to US.  Putting our signals out for public review keeps us on our game and makes us better traders in the long run.

    No Risk FREE Trial

    To make the decision a bit easier, we’re allowing new subscribers to test the Live Feed FREE OF CHARGE for 14 days.

    You will have access to the ENTIRE Mercenary Live Feed

    You will be able to see our current positions, risk points, market commentary,  trade setups…  EVERYTHING.

    If you decide that you don’t want to subscribe to the service, just send us an email before the 14 days are up and cancel.

    We’re confident that the Live Feed will be a strong tool in your trading arsenal – and if not, we don’t want you to pay for it…

    For details on the free trial, see our terms and conditions link on the order form.

    Real traders….Real testimonials…

    But don’t take these subscribers’ word for it, find out yourself!

    ~~~~~~~~~~~~~~

    So lets talk cost because it’s less than you might think…

    For about the daily cost of a vanilla latte at your local Starbucks, you can have access to all of our trades in real time.  At this price, just one profitable trade could cover the cost of your subscription!

    The standard pricing for the Live Feed is designed to be attractive – even for an individual trader with a limited capital base. But there is a special 10% discount for readers of zentrader.

    • $295 $265 quarterly,
    • $495 $445 semi-annually 
    • $795 $715 annually

    After your 14-day FREE trial, which you can cancel at any time, but you won’t want to after you have access to the information that we provide in the live feed that is designed to save you time and make you money. All for less than $3.00 per trading day!

    So click on the banner to your right or follow this link to reserve your 14-day free trial - at a 10% discount!

    We’ll see you in the Live Feed!

    Themes: Volatility Stocks: QQQ, DIA, SPY, TZA, TNA, VIXY
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