Trading the Easy Way

Welcome to another snowless weekend - aaghh. Withdrawal symptoms? Moi? Oh yes indeed - so much so, that it's back off to the Alps during the coming week for a bit more high altitude exposure, rather than having to negotiate the rocks that are jutting out of the 'home pistes' - not to mention just a little overcrowding due to the limited snow cover that has plagued the season.

Oops - sorry - I nearly forgot WICS is about stocks trading, and that your interest in my sliding around on planks is probably minimal at best.

Onward then to "the markets".

You'll doubtless recall that I've been mentioning 'M & A' activity these past few weeks, suggesting that there will likely be quite a lot of it as the year progresses, and we can now add EMI/Warner (Possible merger) to the list, as well as Countrywide Estate Agents (Acquisition) - not to mention the current rumours of the latter effect regarding Debenhams. Amazing - and certainly another indicator that "The Top" (aka the end of the bull run) is close at hand. Nonetheless, it's highly likely that Europe's major indices, FTSE included, still have a fair bit more energy to dissipate to the upside, so the fat lady hasn't entered stage left just yet - she's clearing her throat in anticipation but her matinee performance will be in the USA for sure - 'Insider Deals' (the equivalent of 'Director Dealings' in the UK) are running now at an all time high across the pond, in the 'sell' direction.

In effect, we're watching the closing acts of the overall bull phase, and like all closing acts, they'll be followed by the fireworks - and I confess to a certain impatience the nearer we get to them - not a good emotion for a supposedly professional trader! All the more reason to step back a little and take a few days off - and I'm not being at all facetious in saying that. Whenever you feel a bit 'stale' or you sense that somehow you're a little 'disconnected' from the markets - in whatever way - then by far the best advice you can give yourself is "Take a few days off." You will never regret having done so. (I don't feel in the least 'stale' though - just impatient and a tad unfit through too little skiing - I hate having to cut out the afternoon patisserie when the weight creeps ever upwards!)

Moving along - but still vaguely on the "psychological trail", you will of course know that Lloyds TSB announced a profit of £3.71bn during the week, after HSBC had published their record - breaking results. Several emails (after the HSBC announcement) asked whether buying Lloyds TSB in anticipation of their results might be a good idea, and several more told me a few of you had already done so. Hmmm - have a wee look at the Lloyds chart - it's a great example of NOT listening to 'The News'.

Next, it appears that the last couple of WICS (where an email question and my reply were included), have been particularly well received - so whenever I get a question that might be of interest to others, I'll reproduce it and my response. Have no fear - I'll never use anything other than totally anonymously so please don't be inhibited in your mentoring requests. I promise that I'm more than happy to help and as mentioned in the manual, the only 'stupid' question is the one you don't ask! (I'm not of course promising that every answer will be helpful - but if it's not, please tell me and I'll try harder next time!)

Anyway, here's another one for you: (my replies are in bold type - and the prices are now of course out of date, which is of no consequence.)

"Ian, I placed a buy order for Amec at 472.0 on Monday. On Friday the market gapped and I was filled at 490.6, the price closed at 478.7 and I was showing a loss.
Presumably the correct thing to do is continue with the trade because if the analysis is right, then I will eventually come into profit. However, where do I place my stop loss with an entry price of 490.6, if I follow the 20dma, then I risk more than 4% of my bank and if keep my potential loss to 4% of bank I am above the dma? Any advice would be most welcome.>>>once in, you're in! SL needs to remain where you intended in the first place - 20 dma looks a bit tight to me - 25 with some leeway would suggest 449? Gaps are always a pest in such cases but your analysis was good & the statistics suggest you won't likely lose more than 4%. Any individual trade of course can buck the statistics but we need to deal in probabilities overall.

Normally I am at work when the market opens and do not have access to the screens, however, this Friday I was at home until 8:30 a.m. On inspection I found my order was not filled until turned 8:20, the market had been well above my order for some time (I checked with the FT charts later) but nothing had happened. I admit to mixed feelings; on the one
hand, I had been right about the share but on the other my foresight had seen me with a loss at the end of the day>>>> that is meaningless overall!. I wonder whether I should be moving the bulk of my business to another spread bettor. Again any comment on their competency would be helpful - but am I right to expect quicker action from my company or do I have to live with these events as part of trading life?>>> there's always a rush at that time of day but rarely would it work that badly against you overall. They can only deal with fills on a '1st come 1st served' basis & it would have depended on how much interest there had been in Amec at the time - a lot - obviously, as evidenced by the gap up. But you should always have at least 2 Spread Bet accounts available to you."

Just one point to add to the above, and that is that you really MUST consider having at least two spread betting accounts available, because not everyone offers everything. I always recommend (to beginners in particular) a 'Trading Academy' account with Finspreads, because of the facility to trade at very small stakes for a couple of months. Sure, the spreads tend to be wide, but nothing is totally free! (Oh, and just to clarify something for the more cynical among you: no spread bet company nor brokerage pays me anything no matter how many accounts are opened via TTEW. I have NO financial interest whatever in such matters - so you can be 100% certain that I have no bias in that regard.)

On to today's charts then, and as mentioned above, we'll take a quick look at Lloyds TSB just because it rather proves the point that a belief that "big profits" will by definition = "price jump", may not necessarily indicate which way the price is likely to jump! Then we'll examine JJB Sports, which was the subject of a question from one of you that I answered in WICS of 11th February - have a read of that as you examine the chart. Finally, we'll see on the chart of Experian, that triangle formations can sometimes develop over a long timescale - just to give you a 'feel' for studying such things over whatever timescale they form. If you type 'triangle' or 'triangles' into the search engine, you'll find lots to compare Experian with - and I trust you'll see that triangles can evolve over as short a time as a couple of weeks, or very much longer indeed.

And that's all for this weekend - I'll be back at my desk next weekend and I look forward to speaking to you again then - it would be helpful if you can 'hold' mentoring enquiries till I get back some time next Saturday afternoon.

All the best,

Ian.

TTEW

'IMPORTANT NOTICE: These WICS charts are for EDUCATIONAL PURPOSES ONLY. They represent only MY understanding of what is happening in the market for any particular share, stock, commodity or index. In NO circumstances should they be construed as recommendations to trade. If I choose to trade what I see, that is MY decision. YOU must, in turn, come to YOUR OWN conclusions about what action, if any, YOU might choose to take'

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