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Welcome to this week's Rapid Recap. It is June 11th 2015 and I am Sasha Evdakov and today we'll be talking about catching the bottom of a stock. This week we’ll be focusing on the lesson more so and less on a lot of different stock picks I will get some stock picks and just chart insights to the members of the critical charts probably tomorrow or Saturday, giving you a chance to review those charts over the next few days.
We'll talk a little bit about the market today though we'll get to that in a second but the priority today will be a little bit more on the lesson and less on the picks.
Couple of announcements real quick, if you're trying to contact me on Twitter, I don't really check it that much, it's really there for notification purposes so if you have a specific question make sure to shoot me an emailed directly or go ahead and use the contact form and I will definitely get back with you much quicker than a social media on Twitter or Facebook.
Now I do have those accounts and you know but I honestly just don't use them that much they're low connection value for me but maybe things will pick up if I get second and third assistant so I already have one but I don't know if I want to have other people answering a bunch of other stuff just makes things more complicated.
The other thing that I'm working on is the Shorting book, it's in the proofer’s one of my other people is actually looking at proofing the book right now. One of the editors there, so that way there's less grammar mistakes and so on. That should be released early July, mid-July probably at the latest so that's kind of the plan it’s just a couple things to wrap up there.
We’re also trying to do a few more broker videos over the next couple months so that's kind of the plan and finally I wanted to see if you wanted me to do an in depth or more in-depth video about choosing computer parts for your trading system. Typically I upgrade my computer about every 14 to 16 months, you know from getting new parts and so on to fully upgrading.
It just really depends on the cycle but will be upgrading it again this summer actually this next week and I wanted to see if you wanted me to go in detail about which parts I choose and why I choose the parts that I do as well as giving you some insight to a low-end trading computer to mid-range computer to the one that I actually use or even higher-end computer.
We can do that if you're interested just comment in the YouTube video section and just let me know you're fine with that or send me the email or maybe some feedback through the contact form either way I'll get those eventually and I will take a look but probably will end up doing that but I just want to confirm that it's not overly technical and maybe strays away from the core of the channel so if you're interested in that just let me know.
Let’s hop in and let's just take a look at some stocks, the market overall, where we're at and how it's behaving. First off today, again we're going to be talking about a little bit about catching that bottom but overall the market, if we look at the market we can see that basically since around March we’re coming in near that same area.
If you take this back on the Spyders you could almost say… December because we had a little spike there but you know we've been trending sideways for quite some time and It’s been a stock pickers market now if we zoom more daily into the last few spikes in what's been going and on what's happening you're probably more concerned about what's going on right, here right now. The last two days we kind of had a little pop after how many days downward we had a couple days seven days downward, two couple days upward.
Now to me oftentimes two-day pop especially when the stocks have been moving like this is not anything to be excited about there's not a lot of fear in the market, a lot of people are over-leveraged you know the fear is not there. We have a lot of people that just believe okay the market's going higher and that’s actually a very dangerous place to be in, it's very dangerous to be in there.
If we look at the Diamonds again the same concept really applies. Overall we haven't done too much to the upside or the downside personally I rather have markets that pullback in a nice healthy way or power higher rather than just kind of bouncing around there because it becomes a very dangerous playing field and you have to become more of a stock picker. If we look at overall, what's been going on and what's happening, if I just take the last couple days, let’s just say the last week.
What are we really doing? Well, we came down. Let's just look at the bigger picture, overall we've been heading lower. Overall the last month let's say we've been having lower if you can agree with me there understand that the trend line from where it was to where it is now its lower , we have that in mind.
Looking at the spikes here overall the majority of the spikes with the exception of a few are the red bearish spikes, so we have red bearish spikes overall with the exception of maybe a couple of green spikes here and there that commend but now as we zoom in deeper we’ll take this exact spike right here and then we'll compare it relative to this one because they're in the same region or rang so they're in the same range where they compete at the same price level, right? and the one that's higher to me is actually this one and looking at the result of what happened today, we’re basically idling with Doji on the light volume.
These are the light volume, because we're looking at this twenty-day and I use twenty-day because that is a month average, so 20 trading days in a month, right? That's why we use the 20-day moving average, for those of you that didn't know. Most of the spikes that are above that average here recently are basically red with the exception of this one and this one but most are red.
To me overall going in the direction, the averages where is the probability, the probability of success is to the downside, statistically speaking again the winning part would be to the downside, right? Take this into account as we look at the broader market's overall and you can do this you know with the Spyders, S&P the RUT and all these different things they're all very similar as you dig deeper to IWM, QQQ all these things kind of play on that similar level.
Looking at some individual stocks, let's just take a look. Let's take a look at ZOES, this one been running well. If we look at the weekly chart right here we had two million volume bars or two million shares right here trading and then the stock wasn’t able to power higher. It attempted this last week to pop higher in six million, not enough volume, not enough price movement to break that and then this week we ended up taking care of that with 4 million shares.
If I compare the energy four million shares versus that previous swing high of two million we had twice the amount and energy coming into the stock making it power higher. Again looking at the overall, let’s just say spikes, now I look at other things beyond just spikes but to simplify things in this video because there's a lot of beginner people, intermediate people, some advanced people. So to simplify things let's just look at the big spikes.
The big spikes here they are, here we have some of the bigger spikes and then we have a few of the red spikes right here so where do we have more spikes is that the Greens spikes? Or the red spikes? Simply things obviously it's the green spikes so potentially we’re waiting for the stock to break higher. You know you could have set this up to a lower swing point and waited for it to break lower but you know the probability more was in your favor was for the upside.
That's where more potential of success was, was to the upside. So you're waiting for that and then once that breaks that's what you want to see and powers higher that's where you get in, you enter and you ride that stock.
Looking at it overall on a daily which has more on a training day basis you can see that over here, here's our highs, you can see that pickup was actually already starting right there few days early and you could have tried and nibble some right here. Early point but again something to be careful of but you had a huge huge area of volume right here that was basically coming into that stock.
That’s one idea for you. Apple heavily traded stock. I talked about this on multiple times but some people din’t believe me, they say “Oh No Apple's going higher Apple's going higher” but earnings came out right here, stock rejected.
I told you that when it comes back to this level right here which had happened right here that stock could potentially sell off again. Why? because we have a bearish engulfing bar here with major volume and it wasn't going up on heavy volume, it was going up on lighter volume. So it rejected on major volume.
Again now that stock went higher for day you have people cheer that stock “Oh it’s going higher and then again that stock go and sells off a little bit today. Now we could consolidate for a while here, for a little bit and then that stock could power higher.
That's kind of what we're doing, what we're doing right now. It doesn't mean it's going to go higher or lower, we're consolidating. Looking at the weekly consolidation after we consolidate, stock can go higher and there's nothing wrong with the stock it's just looking at the daily looking at the shorter term picture you know that stock was rejecting at those levels once it break those levels you know it shows me the volume, it shows me the price, it shows me the action, it shows me the health of stock I'm all in.
I’m not a polar bear I'm just watching the stock in the way that it acts, reacts, moves and breathes, that's what I'm watching. How is it’s heartbeat going, that’s what I’m watching I'm well watching these stocks and until then I'm patient.
I’m patient, I'm out of the stock you know until then I can day trade it you know I don't mind day trading stocks you know but honestly the bigger money is made on swing trades because you're holding the stock for multiple weeks, months or years at a time but for these kinds of moves right here if you're consolidating.
If you're in that stock back here and you're waiting patiently you know that's fine but if you're in if you're doing are shorter move trades and you're in and out of stocks more frequently and you’re more active like I am then you know during this time period you may not trade or maybe you do day trades on this stock where when you see this rejection right here at these levels.
You trade it, may be trade it for a little while then get out. Then again you may try to trade it and then again it starts popping right here and you get out again. So it’s shorter term trades you know but when you're waiting for the break, the break right here we got 135 let's say then you can potentially get it for a longer position but until then you know be patient.
These things take time to build and that's why you always want to watch and take your profits.
We talked about ESPR multiple times in the rapid recaps. This stock had multiple breaks, looking at this stair step pattern, right here you can see worked great. Here multiple stair-step patterns, increase in volume. Let’s just take a look at the daily and will go over here look at the daily this is December 2014 stair step here this was at the forty dollar mark again stair-step here fifty dollar mark, stair-step here, seventy dollar mark.
Catching a good run you know you have to watch for these opportunities but if you're zoomed in right here it's hard to see these threes, right? When you're zoomed in inside the forest you got to zoom out. We zoom out look at the bigger picture or look at the weekly, now we look at it and the stock now is showing you some trouble. Volumes picking up to the downside the move is a little extended based on all these people that got and right here and right here and right here.
They want to take profits they’re at the fifty dollar level but if you tried to get in it right here you're already a little bit late to the party that stock wants to take some profits a lot of people there want to take profits so you're always peeling shares in the strength and when a stock is moving lower like this, you step aside because its fast.
Now you want to wait for it to come back find that bottom and then you can get into that stock you got to wait for it to find the bottom and then you can go higher again so finding a bottom can be a 50 percent retracement to one of these levels right here or it can be really low somewhere down here.
This goes along with other stocks like a WYNN. If we look at the monthly on the WYNN, we have the stock reaching the 242s and now it's down at 104, looking at WYNN the bottom could be right here at 83 could have potentially get down to 2009 levels, sixteen dollars a share, it could.
How do you know a stock is having its bottom? Let’s talk about then a second. First thing you look at the previous movement what has it done before. Those of you that have taken the technical analysis course here it is first you look at the ABCD pattern, I won't break this down to slow because just will take a while to break this down but here's our A to B, B to C, and C to D pattern when the ABCD pattern has finish, something new happens in our case the ABC the projected move of C to D has finished and we're looking now for a potential retracement.
Potentially here or may be down here and will start a new retracement pattern but there's our ABCD pattern, you see it. If you look at it on the daily It’s little harder to see. Zoom back out maybe you can see it over here A to B, B to C, and C to D and within that we also had A to B, B to C, and C to D.
Going to the downside we had the same concept A to B, B to C, and C to D, another A to B, B to C, and C to D. We continue moving in this pattern. Looking at the longer term picture what is that stock telling you what is it, what is it showing you? That's what you're watching. So we're making lower highs and lower lows.
Now looking at J.C Penney, again where's the bottom in this stock? you know where is that bottom so again looking at A to B, B to C, and C to D you know once this stock starts selling so heavy. It makes it so difficult for them to get out of these positions or to get out of these areas so that's the monthly chart.
Here the stock has been under 10 bucks much, eleven dollars since 2013. Its been under ten dollars for almost two years, I mean do you want to trade this stock? Do you want to hold this for five ten years? for hoping and praying that this stock will go back up? Probably not.
The same thing happens with stock like SHLD take a look at this one since basically 2007 the stock hit its highs. 2008 it hit its highs once that sell-off began it didn't stop. Let's just call it since 2007 the stock has had a sell-off and it hasn't stopped since and today were down 3 percent and then we reached its highs then again, I’ll give you some more insight right here A to B, B to C, and C to D and once we complete the move what happens okay so you're watching these things.
Let's take it to the weekly so against similar concept. Here's our downward pattern stock attempts to get higher 50 percent retracement, let’s just take this to a Fibonacci level here. There's our highs, stock got to 61.8 percent almost perfectly look at how that works out and then the stock continues lower and now we’re coming into the lows of those previous 2009 lows. So the stock is looking weak.
What do you want to see when you start looking for bottom fishing? Obviously I wouldn't bottom fish these things, I don't like bottom fishing for stocks because you don't know how long you'll be fishing at the bottom, you don't know how long you'll be waiting for that stock to go higher. Like in this case you know you could be waiting for six-and-a-half years and that could be your retirement right there.
In six and a half years you can make a fortune if you know how to trade or you could use six and a half years to broaden your education. In either case you don't want to just have your money being idle I would rather let it sit in the bank than a dead stock. Just because you get at least barely any interest but you get something rather than with these dead stocks they're just as bad.
Take a look at Siena so we'll do a little learning education on this one because I think it's a good learning stock. Let's take a look at the overall first of the monthly. The monthly, you can see that the stock had a pattern so here we have kind of a U-shaped volume pattern, that's from the technical analysis course. U-shape volume pattern, this is multiple years, right?
We're looking at the bigger picture, we had a couple of months lately that have popped overall the stock has been red. We had A to B, B to C, and C to D so overall the sentiment is negative in this stock.
Now we start looking a little bit more weekly on the weekly chart and what's going on and what’s happening here on this weekly. Again 2012, 2013, and 2014, weekly still it's been looking not very good so for the last year and a half still that trend is downward and even then it still downward. I started zooming in and I started looking at the critical levels so here's a critical swing low level, another one is over here now we're coming into right now here's another one level right there.
Those are kind of our main levels if we take a look at the daily you can see how those levels line up very nicely so when I'm watching when I'm watching for stock to break higher is let's just leave it on the daily. Let's just keep things simple and let’s leave it on the daily.
Here was just again keeping things simple, now again I go in more complexity than this to evaluate and analyze the stock which maybe I should do a huge course on how I get in and how I exactly manage the trade and get out of the trade but for the time being look at the volume spikes, look at these volume spikes of what's going on, they are mostly green with the exception of some over here.
Let's take this back further where and what are the volume spikes look at what we have going on here. Majority of the spikes are red so when the sentiment starts changing, we still have red here we got red big spikes here. We’re still now moving, now you start noticing something.
We got red spikes here and green space here, red spike then green spikes that means they're battling kind of like a chess game exchanging pieces or checkers which ever game you play and as we start moving things you can see more green the average amount of green bars is more. Just to keep things simple there's more green bars then there are red bars so our average becomes in our favor. That's one piece of the formula and put a little tally in there that's one thing in your favor.
The next thing you look at is the pattern so I look at the overall pattern here's the lows, the pattern pushing against the highs previous highs here and then it broke through the pattern, looking at the pattern A to B, B to C, and C to D is also starting to be in my favor. That's two things in my favor so now volume, I have a pattern, I don't have all the other are components like the monthly chart in my favor so I have less things in my favor then I would if I was choosing an overall trade for a setup, I would want see other charts also in my favor on the time frame.
Looking at this I have a few things in my favor and then I look at the behavior how’s the stock behaving on a day-to-day basis on a week to week basis. Is it powering higher? power in higher on volume is it ending higher through the day, pushing higher, is the volume continue to be steady on you know what's the overall feel and how are the earnings.
Lot of different things so in either case I hope that gives you some insight to looking at the bottom and bottom fish for some other stocks, there’s a lot more that goes along with this but I just wanted to share some insight with you maybe just to give you a little bit of taste of what to look for rather than just guessing on where the bottom is, you know you're looking for higher prices, you're looking for higher highs and higher lows that is the key when looking at these stocks to move higher when trying to find that bottom I guess.
In either case I appreciate you joining me today I think there's one more stock I wanted to cover and that would be ISLE here this one also is moving higher and powering higher. Again, we had a nice consolidation pattern right here it was just very solid, very good pausing pattern and then later that stock just powered higher and definitely breaking out here on a heavier volume here to the upside.
Take a look at this a volume right here it looks very good for potentially higher prices, little more extended now so I wouldn't chase it but so far it looks really nice.
Thanks again for joining me. I hope you enjoyed this week's rapid recap and if you have any specific questions just feel free to send me an email and I’ll try to get back to you as soon as I can.
Enjoy, have a great weekend and I’ll see you guys next week.