I have been hearing a lot about trading systems failing or not working properly over the past few months and it makes me smirk every time. A recent article in SFO Magazine states that traditional technical analysis no longer applies due to program trading or computer algorithms making the trades. The author claims that computers don’t have emotions, therefore they don’t buy based on patterns or make decisions the way a human would. He specifically states that moving averages are now useless. Really? I guess I am screwed. Maybe this has some merit but I don’t buy in to it completely.

Traders and investors always seem to blame their systems and/ or indicators for poor performance when 99% of the time they should be looking in the mirror. They need to look in-between the ears to locate the problem. As I have explained in the past, the system is not the Holy Grail of Trading. I wrote a post last year that was missed by many since it was written shortly after the fourth of July holiday. Now seems to be the time to discuss this topic, more so than last summer.

• What do you think?
• What is your Holy Grail of Trading?
• Has your system stopped working or have you disconnected with the changing market environment?

Original Post:
Do you have a wonderful trading system, one that consistently makes you money? You probably believe that you have found your holy grail but this couldn’t be further from the truth. Your system has very little to do with consistent profitability in the markets.

I often here amateur investors talk about that the “best way” or “only way” to invest and argue why their way is better than everyone else’s. The passion and energy exuded by these novice investors is wonderful but they are missing the point completely. No one can say that options are better than stocks, commodities are better than options or forex is better than everything, etc… Each investor develops a system that is suited to their own personal character traits and they use a vehicle (stocks, options, forex, commodities, real estate, etc…) that can help them reach their goals.

Investors also debate systems within a market such as: trend trading, swing trading, scalping, shorting, day trading, buy and hold, fundamental trading, technical trading, Elliot wave theory, moving average crossovers, etc… They all work if the “person” understands the holy grail of trading. And that is being able to understand YOU and how your mind works.

However, it is not the system that makes one successful. It is YOU that makes the system work properly. What do I mean? Each individual must master their own personal psychological impacts on their trading results. You must work on YOU to become consistently successful! I recommend reading The Disciplined Trader by Mark Douglas if you would like to understand the psychological trader in you.

To say that one system or vehicle is the “way to go” is ignorant.

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It’s good to be back, back to research. Honestly, I love researching stocks, even after a long day of work. I don’t consider studying charts work and sometimes believe they help relieve stress after a long day and/or week of ‘regular’ life.

I have not studied the market since late March but ran at least a dozen screens this weekend and viewed hundreds of charts and compiled a list of 10 that I will be watching for possible positions. I will most likely give myself another week or two to get back into the market rhythm but these ten look solid for mid-to-longer term buys (trend/ momentum buys). Remember, we are not day-trading here.

Some names will be familiar as I have owned and/or covered them over the past 6-12 months. Others will be new to the blog but they all have solid fundamental and technical characteristics. These stocks are currently presenting favorable odds for future gains based on the CANSLIM-like characteristics.

I must be clear that I am NOT declaring them buys at this point in time but they should be gearing-up for positive moves giving us potential positions (based on risk/reward setups). The stocks are listed in random order so I am not favoring one more than another until I get my market bearings back.

Let me know what you think of my ten and certainly leave comments for stocks on your watchlists that you think I may be overlooking.

10 Stocks to Watch:

• MA – 228.60, buys along the 200-d m.a. are ideal for this winner (I own shares)
• V – 66.11, any accumulation near $60 is ideal in my opinion (I own shares)
• FSLR – 268.30, extended with an ideal accumulation point above the 50-d m.a.
• GU – 14.12, the stock gained 60% while I was away; ideal entry near $12
• PPO – 23.19, good looking young stock with ideal accumulation near $20
• GTLS – 35.48, poor ending to the week but a buy near the 200-d m.a. is fine
• TITN – 22.39, solid young stock with an ideal entry point near $20 (looking good)
• SD – 44.28, made almost every screen I ran this week (buy near $40)
• CLR – 38.38, yes, this stock is extended but I like it near $30 or the next base
• RIMM – 115.85, I’ll jump on this one if it has anther run in it (classic superstar)

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I must say that the Caribbean beaches along the Yucatan peninsula are absolutely beautiful. The water is crystal clear with a blue – turquoise tone that I have never seen. I have been to Hawaii and to Caribbean islands but this water was more beautiful. I would still choose Hawaii over Mexico for a total breathtaking experience but the color of the water here ranks with the best of them.

We relaxed on the beaches, played volleyball, visited the Mayan ruins, shopped in the villages, enjoyed the local dancers, tasted the Mexican cuisine and enjoyed a few coronas (and cocktails). And best of all: swimming with the dolphins!

Enjoy the images. Regular posting will return this week. I see that GU and BX started to move while I was away. I bought and sold GU earlier in the year but will be looking for a possible position after I start to run screens again.

The Next Chinese IPO - GU
Gushan (GU) Making a Move

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