Hedge Fund Live's  Instablog

I’m going to stick with the theme of blogging about my trading/trading plan because it is helpful for one and second it force’s me to put my thought’s on paper and have a game plan for the next day/week/month etc.  My trading has been suspect the last few days and I feel the reason is that I’m trying to take overnight position’s and I’m so small that if one position goes wrong I could be in for a long day.  I feel pretty confident about my intraday trading but my goal is to learn how to build a book with multiple strategies.  I was talking to Schwartz after the close about the strategies I would like to employ and since it’s always helpful to put things in writing here they are:

The first strategy would consist of names I have a longer term thesis in and would require less trading.  I have been following technology for the last year and although that is limited experience I try to read as much research as possible and there are some names I would like to have a piece of for the longer term.  Some names I like for the next year are CREE, NXPI, MMI, MRVL, PMCS, TQNT, and DRWI.

The second strategy would be putting on shorter term swing trades that I derive through various technical screens, similar to the Hillside Scan’s Betty goes over every morning around 8:45AM.  One particular screen I like to watch is a proprietary screen I developed which looks at the RSI, MACD, and Bollinger Bands.  When I’m looking for longs I like to look for names that have been beaten up and are finally starting to hold/base, so I look for names with a RSI below 35 (oversold), within 50 basis points of the lower Bollinger Band, and finally a bullish MACD cross which gives me confirmation that the stock is ready to reverse.  For shorts the opposite is true: RSI above 70 (overbought), within 50 basis points of the upper Bollinger Band, and a bearish MACD cross. These screen are all done using daily charts.

My third and final strategy would be looking for pairs trades that I could have on for a time frame of one day to a two weeks.  I have been looking at pairs for the last few weeks and while I’m brand new to the strategy I have had minor success and I like how it always keeps you in the game.  Right now we have been looking at stock’s that are highly correlated (80% or higher over a one year period) and a 30 day spreads that have widened out over the last few weeks.  This strategy was working well into earnings season and once the dust settles from this quarters earnings I’m looking to actively start trading pairs again.