Every news reporter is talking about how bad the markets are, while market technicians have been waiting for the S&P500 to simply reach the bottom of its monthly channel!

The S&P500 reached the trendline of the lower channel on the monthly chart yesterday, January 18, 2008. It was tested THREE times already in April 2005, October 2005 and July of 2006. From there we shot higher and finally we are bad down. I bet you that once the market starts to go up all of these gloomy days will start sailing again. The information on the news gives us no information of what investors should do, only what happened.

Well, we have foresight - the Charts! The Charts tell us that is this monthly chart fails below $1325.99 then there is little chart support left, and we should exit the market and prepare for a recession; however, there is no threat of a recession, the only thing that is going on is a GAME that is being play with support and resistance! Forget about what the news is saying.

The market has reached a bottom area ranging from $1326.70 to $1355.73. This will be a real BULL MARKET again. When we do go up from here, the financial sector will stabilize and start moving up! It is time to catch the bottom. I am in SPY (the S&P500 ETF) and PEY, an ETF that pays just over a 9% dividend per month; it contains 60% of the financial sector stocks that are high quality companies that consistently raise their dividend every year.

People say don’t gamble on the stock market, but I believe having a certain level of speculation in your portfolio can pay off big. The secret is to find a stock that will reward you much more than the risk that is involved. A good example has been the recent high flying DNDN. A week ago DNDN was trading at around $5 and the company was meeting with an FDA advisory board.

Now if their drug didn’t get approval from the board, DNDN could of easily dropped to $2-$3 so you could potential lose half of your investment overnight. Now if DNDN got the green light, the reward could definitely be more than the 2-3 points it could potential dropped. Well DNDN did get the green light and it gapped to $18 the next morning. One of my friends bough about 10k shares the day it was halted and sold at $18 when it reopened. He easily made over $100k on this one trade alone.

The risk was definitely there, but like I said if you weigh out the risk/reward and make the right kind of speculation you can hit the jackpot. This type of gambling should only be done with a small portion of your overall portfolio.

Remember when I put up the chart on TRA a few weeks ago and said it looked nice, it was about $14, now it’s over $17 and still looks strong. Here is linke to that old post.

BBBY is looking strong and just made a new 52wk high.

AMT has been trading in a range and just broke out and make a new 52wk high, this one could go higher.

There are many investment strategies that work, but one that has remained very consistent for me is the insider buying strategy. In the 3 years that I have been using this strategy I have only had two stocks that have not made a gain. I usually do 1-2 insider plays a month.

The concept is quite simple, when insiders buy stocks in their own company, we have to assume they know something we don’t. People usually buy stocks for one reason, they believe it will go up. There’s lots of insider selling that takes place everyday, but this can be for many reasons so less significance is given to the selling. I get my insider buying stock picks from InsideMove.com.

A trading system is not needed for the long term investor or swing trader. I do believe a trading system is required for the short term day trader. This is a very tough game and I believe in order to gain an upper hand in the short term game you need to have all the right tools in place.

I’m a very visual trader, this means I like to see what is happening in the markets, and like to watch a lot of charts to catch breakouts. My system consist of 8 19″ lcds running off 1 computer. There are 4 video cards powering the system which creates one large desktop. [Read more →]

The Fibonacci retracement levels is a theory I find often works. If I miss a run in a stock I will often setup my charts with fibonacci support levels and wait for the stock to retrace, if it bounces off any of these levels I will enter. This can be used in long term and daytrading charts.

Sample: If the Nasdaq rallies 100 points and then corrects, it will often correct 61.8%. Right at, or close to the 61.8% retracement (you have heard us use this term many, many times) the Nasdaq is likely to reverse and start advancing again. Of course it is not this simple. Fibonacci support and resistance levels can fail. There are other Fibonacci levels which may turn the markets (78.6%, 127.2%, 161.8%, etc.). But the fact that it does happen is what is called a trader’s “edge.”

These levels are often used with the Elliot Wave theory that states most stocks will move in 3 and 5 waves.

IFON had a run intra-day run and bounced off fibonacci levels for quick daytrades.