Daily AM Prep - April, 23

** Preparation for Morning Session**

MARKET CONDITIONS

World Markets News: Asian markets finished broadly lower today with shares in China leading the region. European markets are broadly higher today with shares in France leading the region. Core Retail Sales in Canada and New Home Sales in the US to be released before market opens.

Economic Calendar



SPY - Market is trading in range. Europe is up and Asia is down, hard to pick a side, so the mostly like is to go nowhere and trade around the point of control. It may try to make a new high, going to test the top of the range at 157.25, where sellers should appear. If we test the high of the fail break at 159.50, we could have a range extension (unlikely). Yesterday low should hold prices on the way down, but if it doesn´t as the up trend is broken a stronger leg to the bottom of the range at 153.75 or even lower could happen.
Bias: Neutral.
Accuracy: 50% Market is holding above 157.25. This move was stronger than expected.

AM Stock Selection Sheet download
Updated at 8:30

Want more information about the Stock Selection Sheet?
Legends - Click me
Read this before using the information provided in this page:
1.Educational purpose material only. Use this information at your own risk.2.Stocks may be added to the selection sheet at any time. They are used as a guide to select which stocks I will trade and set alerts . It does not mean that I follow all of them, that would be crazy.3.The Accuracy information is for my own use only. It is reviewed after I am done trading. This is just a way for me to measure how is my reading of the market and my confidence in it. I suggest you develop your own way to do this.4.The morning sheet will be updated between 8:00 and 9:00
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Talking about Value - The auction process - Part II

This is the continuation of the following article: Talking about Value - The auction process - Part I. Make sure you start there.

If you recall, we use an average of the closing prices to determine the reference value from our auction. Most of you will think: " I´ve seen this before, same concept as the moving average I use in my trading". Not quite the same. Take a look at the picture below and we will talk about. 

So what we did in our example was to use an average of prices to find the reference point, but in fact, value is determined by price x time x volume. The longer time stay at a certain price and the more volume is done at that price, the closer value will be to that price. We´ve come up with that conclusion in our previous articles.

You will now be introduced to Market Profile. What it does is to organize the information obtained by the auction process in a way that we can understand and measure price x time x volume. Once data is organized this way, a normal distribution of prices structure appears. The fun part is, you can apply the same concepts of a normal distribution into this data to make sense of it.

 By using the normal distribution, you can define what is value. I use 70% of it´ss area because this is the default parameter used when Market Profile was created. This is why you don´t need to know the reasons of different plays have to buy something to determine value. You determine value by watching what prices they are willing to pay and organizing it in a way you can understand it.

 It is now easier to see when prices are expensive or cheap, in relation to value. You probably asking yourself: why the heck is this information useful? Remember what a good deal is? To buy something that is lower than it´s current value (cheap) or to sell something higher (expensive) and buy it back when it comes back to value? 

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Daily PM Prep - April, 22

** Preparation for Closing Session **

MARKET CONDITIONS



SPY - The down trend line is no longer relevant. Market is back in a range mode. Small up trend inside a range is forming. It is trading around the Point of Control (POC) and likely to do that for the rest of the day as no economic news to be released today. A new high maybe formed, but at that level some selling will take price down. If the low of the day is taking out, we become bearish. A stronger bullish bias will take over if we break above 156.50 and hold, but that is unlikely.

Bias: Neutral Bullish
Accuracy: 75% market made a new high and held there. Did not do much more than this.

PM Stock Selection Sheet download - slow day today. Not much going on.
Updated at 13:35

Want more information about the Stock Selection Sheet?
Legends - Click me
Read this before using the information provided in this page:
1.Educational purpose material only. Use this information at your own risk. 2.Stocks may be added to the selection sheet at any time. They are used as a guide to select which stocks I will trade and set alerts . It does not mean that I follow all of them, that would be crazy.3.The Accuracy information is for my own use only. It is reviewed after I am done trading. This is just a way for me to measure how is my reading of the market and my confidence in it. I suggest you develop your own way to do this.4.The afternoon sheet will be updated between 13:00 and 14:00
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Daily AM Prep - April, 22


** Preparation for Morning Session**

MARKET CONDITIONS

World Markets News: Asian markets finished mixed as of the most recent closing prices. European markets are broadly higher today with shares in Germany leading the region. Existing Home Sales is to be released before the market opens.

Economic Calendar



SPY - Prices are gaping up breaking the down trend line. Still the volume is too low to determined if this is a movement to trust. Germany is up, but so far it is just a sign markets may stay into the range. Reference level into the morning are 156.75 and the zone between 155.50 / 155.00. If we hold above 155.50/155.00 the overall bias is Neutral Bullish, as this range is likely to be respected. If we go back below this level, this trend line break is a fake and sellers take control again. Above 157.25 we become bullish.
Bias: Neutral Bullish
Accuracy: 80% - bias as a little off, but the reading was fine.

AM Stock Selection Sheet download
Updated at 9:20

Want more information about the Stock Selection Sheet?
Legends - Click me
Read this before using the information provided in this page:
1.Educational purpose material only. Use this information at your own risk.2.Stocks may be added to the selection sheet at any time. They are used as a guide to select which stocks I will trade and set alerts . It does not mean that I follow all of them, that would be crazy.3.The Accuracy information is for my own use only. It is reviewed after I am done trading. This is just a way for me to measure how is my reading of the market and my confidence in it. I suggest you develop your own way to do this.4.The morning sheet will be updated between 8:00 and 9:00
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Talking about Value - The auction process - Part I

Now we continue talking about the idea of value. We already know the building blocks: PRICE, TIME and VOLUME and different players explained in the previous article: Talking about Value - The Players. Let´s starting putting things together using the Market Profile and Auction Market Theory.

Just keep in mind that this should be just a good introduction to the subject and not the complete theory. You should dive into this topic using the following books:
  • J. Peter Steidlmayer - Steidlmayer on Markets:Trading with Market Profile
  • James F. Dalton - Mind over Markets Power Trading With Market Generated Information
  • James F. Dalton - Markets in Profile
If you decide to read just one, stick to "Mind over Markets", cause it is the best one of them. This was my bible for to study the subject. I read it twice and really study it´s concept simple because it made sense. Enough propaganda, let´s start the content!!!

The stock market is organized as an auction market, meaning the buyers will enter competitive bids and sellers will enter competitive offers at the same time. The price a stock is traded represents the highest price that a buyer is willing to pay and the lowest price that a seller is willing to sell at. Matching bids and offers are then paired together and the orders are executed.



The best way to understand how value is formed is using a simple auction example. This time we will auction a painting, instead of our usual Ipad. By using the paint example I make it harder to determine it´s value. Since the artist is fictitious you will have no reference to start with.




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Trade Review - DHR - April, 19


Stock Selection Information

Stock had it´s earning released yesterday.



Watch List Reason - ybefore (earnings yesterday before the market opened - 2nd day)
Pre-Market Volume - N/A
Trading Plan - Long > 58.50

Management

Entry Setup used: Support trade


Trading Comments

The offers could not hold below 58.50 and it could not trade much below this level. Latter my tape reading skills help to identify the 58.54 as a support level were a buyer held the bid. Below that level was my stop.
CCI divergence aid to confirm a potential support and the entry and also a place to take some profits.

Evaluation

The trade was perfectly executed. My best trade of the day. I also manage to add to the position at the right timing. Since the market was in a more sideways day, I took the profits close to the 58.75 level. If the market was moving (either way) I´d probably have held the position a little longer.
My failure: when it got back to that level again the offers were quickly taken and there was another entry possible with the same strategy, but I did not take it. 
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Daily PM Prep - April, 19

** Preparation for Closing Session **

MARKET CONDITIONS



SPY - Not much has changed from the morning analisys. Same levels and reference point (so does the bias) As expected we are trading in the bottom part of the bigger range. The POC at 155.50 was a resistance to the up move. Market is sideways today and I do not expect it to do anything else. Taking profits at the targets is a wise choice in this type of market.
Bias: Neutral
Accuracy: 

PM Stock Selection Sheet download - I am limiting myself to trade only 20 stocks, but I put the complete list.
Updated at 13:45

Want more information about the Stock Selection Sheet?
Legends - Click me
Read this before using the information provided in this page:
1.Educational purpose material only. Use this information at your own risk. 2.Stocks may be added to the selection sheet at any time. They are used as a guide to select which stocks I will trade and set alerts . It does not mean that I follow all of them, that would be crazy.3.The Accuracy information is for my own use only. It is reviewed after I am done trading. This is just a way for me to measure how is my reading of the market and my confidence in it. I suggest you develop your own way to do this.4.The afternoon sheet will be updated between 13:00 and 14:00
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