Fitz Bits: Eliminate Your Biggest Mistake
OK, let's look at some charts:
Last week I attended the Genius Network Conference in Orange County. It was an all-star cast that included such prominent figures as Arianna Huffington, Daymond John, Verne Harnish, Peter Diamandis, Dan Sullivan, Tim Ferriss, Brendan Burchard, Dean Graziosi and, of course, Joe Polish, the genius who hosted the annual event.
Now, I'm sure you've heard of some of these folks. Others might be unfamiliar to you. But make no mistake -- each is the top in their field, and they form a perfect "head-and-shoulders" pattern above their competition. None of them seem to trade stocks and options. Yet I learned a great deal about trading from these non-traders.
How can that be? Well, trading is just a business. It's not particularly unique. Irrespective of how we spend our time working, the goal is the same: to get paid for our efforts. The better we are at something, the more we get paid. But I don't define "better" in terms of how much you know about something. I define better in terms of execution. Do you actually do the things you know you should do?
Look, if you've been trading for any period of time during which you've been a student of the market (i.e., actually trading, rather than gambling), then you know what you need to do. You know what your mistakes are. If I were to tell you to write down your No. 1 mistake that you make over and over, it would take you about 10 seconds to complete the task.
So here's the obvious question. If it's a mistake, then why do you keep repeating it? Answer: Because it is gratifying to you on some unhealthy level. For whatever reason, you are compelled to repeat the same money-losing behavior with each trade you make.
That's not good business.
If you want to improve your chances of running a successful trading business, take action right now and eliminate the biggest mistake that you keep repeating. While necessity may be the mother of invention, procrastination is the mother of mediocrity and stubbornness is the mother of failure.
Let's look at some energy stocks.
This weekly chart of the EnergySelect Sector SPDR (XLE) shows a well-defined uptrend that has just gotten ahead of itself. After chopping around for much of 2012, this energy ETF has been moving up nicely in a series of higher highs and lows. This type of move really isn't as much of a breakout as it is a steepening uptrend -- and I've drawn the steep support line that has been in effect for much of this year.
When that steeper trendline breaks, the stock will often revert back to the shallower slope before it finds reliable support. That would put XLE about $6 above a logical buy point.
This daily chart of Halliburton shows a trend break and consolidation at around $67 to $70. The 50-day moving average is now support, not resistance. If you are inclined to short this stock, I'd suggest putting a buy-stop just above $70. After all, the stock is still in a long-term uptrend, as measured by the direction of the 200-day moving average. So if you're going to go against the long-term trend, at least have a well-defined risk.
This weekly chart of Schlumberger shows a breakout above $100 that saw the stock running another 20% before it corrected. Now the stock is under pressure. I think this is in no-man's land -- too late to short and too early to buy. If you're long, you've got another 6% of potential decline before the test of the 40-week moving average, which should be at $100 in another week or so.
This daily chart of Exxon Mobil shows some consolidation right around $100 -- actually, just a bit below that level. But the 200-day moving average still represents solid support, and that makes the stock worth watching. When a stock is trending higher, we want to buy it on dips. That's the current situation. However, I think you've got the luxury of waiting a bit. With the stock trading in such a tight range, why not wait to see if current support holds by insisting that it close above $100 before you buy? One more thing: Before you buy, you must understand that this is not a trade -- it's a long-term hold that you're simply buying on a dip.
Be careful out there.
At the time of publication, Fitzpatrick had no positions in the stocks mentioned.