Despite many 2016 Q4 corporate earnings reports that were lower than expected and release of a few economic indicators also weaker than expected, U.S. stock market major indexes rose after weeks of stagnation.  A possible explanation is that President Trump aggressively began his term doing just what he had promised, enacting a number of actions that institutional investors believe will lead to improvement in the U.S. economy, thus reigniting their buying demand for stocks. 

Our stocks remain a mix of longs and shorts, although in an about-face from last week most trade signals this week are buys instead of sells.  Most of our stocks rose with the overall upward market bias, which was beneficial for many of our long positions, but left many recent shorts in the red at least temporarily.

Our review of key behaviors of successful traders has covered “the more positions the better” and “set it and forget it”.  This week, the focus is on avoiding the practice of self-charting:

Leave chart review to us – because it is not practical for this newsletter to include charts of every stock, you may be tempted to access charts on a website and review them yourself in order to obtain a greater comfort level with suggested trades, a sort of “seeing is believing” pursuit.  This is not advised for two reasons:

  • If you consult daily charts, they can look very different from weekly charts, and show so much intra-week activity that the trading patterns evident from weekly charts are not even apparent, a “can’t see the forest for the trees” situation.  This can diminish your confidence in suggested trades, leading to trades not acted on, resulting in missed profits.
  • Even if you do consult weekly charts, the story they tell in terms of trading behavior is not always readily apparent without the benefit of analytics to interpret that story.   Absent a clear visual image to confirm a listed trade signal, you may disregard a suggested trade or make a trade where none in suggested, both of which will often prove detrimental.

So, as hard as it may be to do:  resist the urge to review charts yourself, since doing so in the absence of analytics can result in visual overload, second-guessing and/or “analysis paralysis” that leads to trading contrary to recommendations and subsequent losses of capital.

Remember that charts are merely the presentation of data – it’s the underlying mathematical analysis of that data via analytics that generates trade signals. 

Highlights:  7 new weekly highs in long positions.  11 stocks with double-digit long gains:

       ABX +11%        FRPT +24%      CYBE +38%                                    NEFF +51%              

       ERF +18%        HUN +27%       NGL +32%                                                          

       SLW +10%       KMT +25%       PIR +35%

                                                           TROX +32%

Locking in long gain of +29% in ATW (8 weeks).

3 new weekly lows among short positions.  3 stocks with double-digit short gains:

                                 NPTN +26%      AGEN +35%

                                 URBN +22%