The Art of Trading Part III

Our DAA (Dual Advocacy Approach) has paid off nicely for those that follow our articles and we thank those who have emailed us with positive responses and continued interest in our research. We write what is actually occurring in the markets from the inside, not reactive, not the trends, but actually what is making up the DNA of the markets and more specifically the trades.

We are starting to pick up on some appetite for traders to start to take a little risk to the upside but the amount is so minimal it is nearly impossible to say its risk or more likely hedging or covering of short positions. With little interest overall to see price valuations move higher volume is nearly the lowest we have seen in 15 years, yes that is correct, the volume is so low it is at a 15 year low.

The lack of interest for longs to jump in and buy even at these low prices is interesting and concerning. The concern comes from the fact the “correction” or as we see the correct valuation based on current economic conditions will be overdone (as it usually is during correction times) and we may be heading there very soon. The interest for us is seeing the signs of appetite of traders to take on the appetite for risk starting in the next month or two.

Trading is still the way to make money in the short to near term. Trading as opposed to investing because of the lack of volume to sustain any rally and trading to take advantage of volatility and make profits in the short/near term. We get emails and calls every day with comments such as “How can you advocate short term trading when investing for the long term is the way to invest” – We never say not to invest for the long term, but we do believe the markets are not efficient and there is money to be made in the short term.

Who says you can’t invest for the long term and protect that investment with short term trading adding alpha to your portfolio? There is a taboo in the education of investors not to trade but to invest and rely on brokers and funds to help you invest. The reason for this is so they continue to make their nickels and dimes off of your assets. They don’t make their money only if you do, they make it no matter what happens to your valuations. Trust us, trade now and continue to trade to create the wealth you deserve.

As we always finish off our articles, here are several equities and indexes as we spoke about in prior week’s continue to garner interest – Gold, commodity ETF’s are also another favorite position as well as technology equities.

To take advantage of the opportunities in the near term look at the following:

Some of the specific equities we like from our research to the upside are as follows:

BKC – Burger King Corp. with a potential move to $20.00+

BIIB – Biogen with the potential move to $55.00 – Potential acquisition

FTO – Frontier Oil with the potential to move to $15.50

Some of the specific equities we like from our research to the downside are as follows:

SXCI – SXC Health Solutions with potential to move down to $65.00

TRW – TRW Automotive Holdings with the potential to move down to $25.00

ITRI – ITRON with the potential to move down to $60.00 – ITRON moved to $58 and provided great profits for clients.

The above equities have all shown interest by derivative traders to take risk out over the next month with the ability for the underlying equity to return double digit gains in the short term.

We base our research on the proven fact that variances in option volume is known to be a predicator of impending moves in an underlying equity and that is what we follow but we take it to a level that filters out the trading that is not based on “smart money” and get to what is really driving a specific equity.

As always, Good Luck investing.

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