Tuesday, August 9
Chat Transcript: Swing Trading Strong Stocks Using the Holy Grail Technique
Thanks to everyone who participated in the chat this week. Here's the complete transcript for those who couldn't make it:
Posted on August 9, 2005 at 8:00, GMT
| Zoomie | well, my wife was in labor, and i had a boy |
| CMaoxian | great zoomie! |
| Zoomie | ty :) |
| CMaoxian | how long was the labor? |
| Zoomie | "soft" labor at night, 12 hours, |
| 6thworld | evening all |
| Zoomie | and only 1 hour of hard labor |
| Zoomie | 7 lbs 2 oz |
| Zoomie | 3 weeks early |
| 6thworld | zoomie congrats! |
| Zoomie | ty |
| CMaoxian | hi 6th |
| 6thworld | hi cm |
| skip | good evening |
| CMaoxian | 7lbs 2oz is big for three weeks early i think |
| CMaoxian | hi skip |
| Zoomie | i think so too |
| 6thworld | that's a big baby |
| Zoomie | i am runt of family |
| Zoomie | i was 6 lbs 6 oz |
| Zoomie | 6 weeks early |
| nickm | i think right on time :) |
| Zoomie | beinng bern arly did not afekt me tho |
| CMaoxian | i can tell you're giddy, zoomie |
| Zoomie | ya, it's great |
| 6thworld | Yikes TOL has been taking a beating |
| CMaoxian | folks who set a buy stop above yesterday's high in BIDU got murdered, lol |
| chud | i tried to dummy BIDU today and lost a few bucks |
| sally | what candle did you enter chud? |
| chud | sally: off the 10:15 bar using 5 min. chart |
| roger | Hi C hello everyone |
| CMaoxian | hi roger |
| james | howdy |
| jfra | hey all |
| Zoomie | hi |
| pj | hi |
| CMaoxian | are you guys familiar with the Holy Grail technique Linda Raschke wrote about in her book, Street Smarts? |
| roger | no |
| Trigon | heard about it but never used it myself |
| nickm | 20 ema pullbacks? |
| james | i'm not - i did read mike's post about it today though - the link |
| jfra | no |
| pj | no |
| chud | i'm familiar with it from reading maoxian.com |
| 6thworld | no |
| Zoomie | yes, but haven't used it |
| skip | yes, but also haven't used it |
| sally | no |
| Red | Howdy all! |
| CMaoxian | My StreetSmarts book is in a box in NY so i don't have the original text, but here's how LBR described it on her site: |
| CMaoxian | "The 'Holy Grail' trade was originally described in my Street Smarts book. The setup occurs when the market's trend has been strong enough to cause a 14-period ADX to rise above 30. When the price then retraces back to the 20-period EMA, odds favor a retest of the most recently formed high or low." |
| CMaoxian | The first step is to identify which sectors are the strongest relative performers of late... |
| CMaoxian | i keep a spreadsheet where i rank 24 different ETFs every week by long-term and short-term relative performance |
| CMaoxian | you don't have to be this fancy, you just have to be aware of what's strong |
| CMaoxian | here's a look at a slice of the spreadsheet |
| CMaoxian |  |
| CMaoxian | you can see how the rankings have changed week to week |
| nickm | can u explain how you rank them? |
| CMaoxian | but the top four sectors have been there for awhile as well as the REITs |
| CMaoxian | nick, i use a weighted average of their relative performance over the last year |
| CMaoxian | you don't have to be that fancy |
| CMaoxian | i think everyone is aware that Oil Service and Energy and Biotech and REITs/Housing have all been super strong |
| jfra | no doubt |
| nickm | relative performance is ? relative strength (RS)? |
| CMaoxian | don't confuse relative performance will Wilder's Relative Strength Index (RSI) |
| CMaoxian | so once you've identified the strong sectors, you can concentrate on the stocks in those sectors alone |
| CMaoxian | by concentrating only on the stocks in the strong sectors, you narrow your focus which is a good thing |
| nickm | can u expand on your rating pls? |
| roger | C do you rank them by percent change..i.e relative strength..not RSI |
| CMaoxian | right, roger |
| roger | k |
| nickm | tx... |
| CMaoxian | next you run a scan looking for stocks in those sectors that have an ADX at or above 30 |
| CMaoxian | so here's an example from July 1 running the scan on the Biotech sector stocks |
| CMaoxian |  |
| CMaoxian | i'm using metastock to do the scan |
| CMaoxian | so four stocks came up and i can look at each of them individually to see if they've come into the 20-day EMA |
| james | ALKS meets that criteria now - it seems - if i'm understanding this right |
| jfra | so CM, the holy grail involves looking to take advantage of stocks/sectors that have pulled back and could resume their prior trend? |
| CMaoxian | yes, jfra |
| CMaoxian | of the four, only ALKS met the criteria on July 1 |
| CMaoxian | here's the ALKS chart |
| CMaoxian |  |
| james | oops i meant now |
| CMaoxian | yes james, now as well, but there's a difference |
| CMaoxian | you see on the ALKS chart i posted how the Japanese candlestick is a hammer? that's a good thing, whereas the candle ALKS formed today is ugly |
| CMaoxian | you could still put a buy stop above today's high in ALKS, but i doubt you'd get filled |
| jfra | it also hasn't pulled back to it's 20EMA |
| CMaoxian | anyway, the recent swing high is the immediate target and you could either take your profits there, or take partial profits and let it run |
| CMaoxian | it traded down to its 20 day EMA, jfra |
| CMaoxian | your protective stop goes below the bar that you entered above |
| jfra | it did on July 1, but it's above it now..no? |
| CMaoxian | it traded down to it today, jfra |
| jfra | gotcha |
| chud | you think daily is the best time frame for holy grail entrys? |
| CMaoxian | the Holy Grail can be used on any time frame, chud, and i hate trading off the daily time frame as you know |
| CMaoxian | so you just scan all the stocks in all the strong sectors every night, see if the ADX is at or above 30, and then manually review the charts to see which look best |
| CMaoxian | Folks who have day jobs are attracted to the daily time frame because it's something they can do, but i much prefer daytrading |
| james | lets use another sector - the biotechs dance to a completely different drummer |
| roger | C any site to find sector components..?? |
| roger | or are just trading the etf's? |
| CMaoxian | roger, i look at the component stocks that make up each ETF |
| james | prophet is nice roger |
| roger | thx |
| sally | do you use any sentiment indicators with the grail? |
| CMaoxian | no, sally |
| james | Prophet |
| jfra | so u use daily to identify stocks and then get micro on them... |
| nickm | roger Yahoo! finance has good list |
| roger | thx james |
| roger | thx nickm |
| james | that too nick |
| chud | jfra: you can set up the scans for any timeframe you choose |
| CMaoxian | here's Schlumberger: |
| CMaoxian |  |
| Dreamtrove | Jello |
| CMaoxian | As you know, SLB is an Oil Service/Energy sector stock |
| sally | pudding? |
| chud | i'm currently still holding half of my position in a successful holy grail trade of XLE. |
| CMaoxian | dozens of Energy stocks all set up on this day |
| jfra | do you start scaling out at immediate target? |
| CMaoxian | jfra, that's a personal choice, some people just exit all, some exit part and let the rest ride |
| james | i'd have to admit - i'd be early entering that trade |
| CMaoxian | did you enter it on the same date SLB set up, chud? |
| chud | yes, above the July 18 bar |
| Dreamtrove | chairman, i question this trade |
| chud | i sold half at the previous high |
| Dreamtrove | what's the info on which you're buying pre-pop |
| jfra | nice chud |
| CMaoxian | here's Burlington Resources, another energy stock, different date |
| CMaoxian |  |
| CMaoxian | a nice reversal up candle to get long above in BR |
| Dreamtrove | i've seen a lot of similar charts tank though, I don't think what we're seeing is a technical event |
| Dreamtrove | It looks like technically it could've gone either way, but there was positive news |
| chud | technically it could always go either way |
| james | ok - let me clear something up - there is no volume study on these charts? - the red line is an avg of the adx? |
| CMaoxian | it's a high probability trade, dreamy |
| CMaoxian | no james, the thick red line IS the ADX |
| james | ok |
| CMaoxian | i just stuck it in the volume panel for space reasons |
| Dreamtrove | is this adx overlayed on the volume then? |
| CMaoxian | yes, dreamy |
| CMaoxian | left scale for the observant is ADX |
| jfra | interesting stuff |
| CMaoxian | Utilities have been super strong too, so here's a boring utility stock that set up |
| CMaoxian | Public Service Enterprise, 6th's home utility i believe |
| 6thworld | this is quite an interesting way to set up a trade |
| CMaoxian |  |
| chud | in my charting program, for ADX, I am given DXPeriod and Average. What would you set Average to on these, if DXPeriod is 14? |
| CMaoxian | it ain't called the Holy Grail for nuttin, 6th |
| 6thworld | wouldn't you say that everone is trading this setup then? |
| james | there's 2 entries on that chart - yum yum |
| CMaoxian | everyone who has read Raschke's book and has the patience to look for them every night might, 6th |
| sally | what is your win percentage on this set up, cm? |
| CMaoxian | i never play it, sally |
| CMaoxian | i'm just yacking about it |
| sally | :-) |
| jfra | CM, it doesn't matter that the ADX might be sloping down and heading below 30? |
| CMaoxian | probably jfra, but i try not to overthink things |
| chud | holy grail = 100% win |
| 6thworld | chud i doubt that |
| Zoomie | LBR notes that the ADX will turn down, as the stock turns down, and approaches 20 EMA |
| chud | thus "holy grail" |
| Zoomie | that is OK, and expected |
| sally | there is a holygrail site |
| 6thworld | chud that would be the 10,872% question |
| Dreamtrove | well, chud nothing is 100% because there's always the potential of news |
| CMaoxian | like anything else, this prolly works about half the time ;-) |
| 6thworld | brb, screaming baby |
| jfra | Does Raschke have a setup for when investment banks botch an IPO by around 100mil? |
| james | lmao |
| CMaoxian | they didn't botch BIDU, they got it just right, an oblivious public pushed the price to stupid levels |
| jfra | true |
| james | they did price it at 64 PE |
| james | at 27 |
| CMaoxian | the public prolly whipped up by those fat obnoxious bastards on CNBC |
| Dreamtrove | chairman, does this work when you change the timeframe? |
| chud | works for any timeframe dreamtrove |
| roger | hahahaaaaaaaaa |
| james | obnoxious? never |
| roger | CNBC=POS |
| sally | works even in intraday? |
| chud | yep sally |
| CMaoxian | yes, sally |
| CMaoxian | last chart is of a REIT |
| CMaoxian |  |
| Dreamtrove | is bidu worth it though, compared to sina et al? |
| nickm | i have seen it become a holy trap on some shorter time frames ( 5 min es or er2) because linda I think trades es |
| 6thworld | is that today's chart? |
| CMaoxian | these charts are all thru last Friday |
| CMaoxian | now ASN is interesting because you could say that price recently came in and you should be looking for a grail, but look at that candle... that's fugly! |
| jfra | CM, you place sell stop below low of last dark candle? |
| Dreamtrove | so what's going on here, just a bounce below MA and back up above? |
| CMaoxian | yes, dreamy |
| CMaoxian | below the candle you entered above, jfra |
| chud | that's why you don't try to get in early and buy intraday as it hits the 20EMA |
| jfra | thanks |
| CMaoxian | the REITs, the Housing stocks all put in major reversal bars last week |
| CMaoxian | so the top is in there, at least for a bit |
| james | anyone read the article in the NYT yesterday about bill gross not playing fair and lending out his bonds? pretty cheeky stuff |
| CMaoxian | didn't read it james, send me the link |
| CMaoxian | ok, that's my introduction to the Holy Grail |
| CMaoxian | hope you enjoyed it and my explanations were not the usual clear-as-mud |
| chud | is there else in Raschke's book worth paying $150 for? |
| james | NYTimes article |
| jfra | ..lol..they were fine.. |
| CMaoxian | borrow it from a friend, chud |
| chud | i aint got no friends |
| jfra | CM, we're friends? |
| CMaoxian | i'd let you borrow mine 'cept it's in a box in NY |
| jfra | probably blocks from my pad |
| 6thworld | hmm i'm close to NY |
| chud | the library doesnt want it unfortunately |
| 6thworld | lol |
| james | basically its about pimco having 45% of the bonds the CBOT was using as the underlying in the june(?) contract - anyway - he didnt lend them out |
| CMaoxian | thx james, i'll delicious that and look at it later |
| sigi | CM, great job..... I missed the first 15mins...... will you have the transcription on your site again? |
| CMaoxian | yes sigi, as always |
| sigi | Excellent ! Thanks as always! |
| sharkbait | nice explanation CM, and simple |
| CMaoxian | simple but not easy... the real trick is pulling the trigger |
| james | and chilling out through the drawdowns |
| jfra | CM, u run the sector strength scan on a weekly basis and then zero in from there? |
| CMaoxian | yes, jfra |
| Zoomie | good exercise, to run that scan |
| ks | CM, what happened to the gratuitous chick pic every friday? |
| CMaoxian | ks about a thousand people have asked me that. seems the chick pic was the best thing i ever posted |
| Zoomie | keep on top of stuff |
| james | lol |
| chud | I like to scan the IBD 100 stocks for holy grails |
| jfra | seems like it's the same 5 usual suspect sectors..no? |
| 6thworld | Indiana Scan and the Holy Grail |
| sally | what time period do you use chud? |
| chud | that's on the daily time periods sally |
| CMaoxian | yes chud, that's the same thing really, the IBD list is all relative performance based |
| james | lord - i wonder what the IBD % return would be if it weren't published |
| sally | you take the top 50 ibd? |
| chud | all 100 |
| jfra | CM, what happened to finding the hot stock du jour and picking spots? |
| CMaoxian | that's what i do jfra, this was just a lesson i thought folks would be interested in... i NEVER trade off the daily |
| jfra | gotcha |
| Zoomie | do you find weekly charts trend better CM? |
| CMaoxian | yes, zoomie |
| CMaoxian | Crude Earl is $64 a barrel, sheesh |
| chud | i've been liking the slowish action of this XLE etf |
| Zoomie | hey, it was bound to sink in for me sooner or later |
| CMaoxian | the XLE is very liquid, very tradeable |
| james | and the outcry about it mao is silent - earl's gonna get much nastier |
| chud | and i don't get paranoid about stop-running as much with XLE as individual stocks |
| CMaoxian | i need to make something clear, i read some nitwit say that trading and investing are the same because they're both transactions |
| CMaoxian | that's like saying apples and oranges are the same because they're both fruit |
| CMaoxian | your approach to trading and investing should be 180 degrees different imo |
| CMaoxian | trading is short-term, chart-based, "valuation" means nothing, but you're obsessed with taking a small loss if it goes wrong |
| CMaoxian | investing is long-term, fundamentals-based, "valuation" means everything, but you're not too worried about getting a precise, to-the-penny entry |
| CMaoxian | trading is about reacting - making frequent quick decisions; investing is about thinking - making infrequent long-considered decisions |
| CMaoxian | ok, my rant is over ;-) |
| ks | What do you guys think of the long gold-short oil trade. The trade looks really compelling here |
| roger | gold vs dollar |
| james | yeah |
| chud | top pickers |
| jfra | I don't know if my platform lets me trade ETFs |
| jfra | daytrade, that is |
| Zoomie | CM, do you "trade" the weeklies? |
| CMaoxian | no zoomie |
| chud | i bet it does jfra. just like stocks most places. |
| Zoomie | k, file and forget....I will find that hard |
| sharkbait | do you always break your entries down to an intraday time frame? |
| CMaoxian | what do you mean, shark? |
| sharkbait | do you look for set ups on a daily or weekly basis and then refine it down to finding your entry point on an intraday time frame? |
| CMaoxian | no shark, never |
| CMaoxian | not that you couldn't do that, i just don't |
| sharkbait | tx |
| CMaoxian | my daytrading philosophy is centered entirely on Unusual Suspects |
| chud | when you invest, do you enter willy nilly when your sentiment indicators tell you to get in chairman? |
| CMaoxian | pretty much, chud |
| roger | i think investing should be based on secular trends |
| CMaoxian | yes, roger |
| roger | trading is for instant gratification |
| chud | BBH closed at the 20EMA today, though the candle was pretty ugly |
| CMaoxian | yes chud, i think the market has put in a top here, not sure how long it will last of course |
| nickm | can u explain more how you look for UNUSUAL SUSPECTS? |
| CMaoxian | abnormal trading activity, nick |
| CMaoxian | explosive, crazy action |
| CMaoxian | BIDU qualified |
| james | it did on friday - no doubt |
| sally | no trend yet on BIDU, would you go long or short? |
| CMaoxian | sally i don't really look at trend when daytrading, besides up being up and down being down |
| CMaoxian | if it's not obvious which way it's going i'll stay away |
| nickm | i have listen to your last presentation on dummy trading... but was looking how to find candidates |
| jfra | I've been getting reamed recently with buying 10:30 breakouts that fizzle, drop back into the prior range, get stopped out from 1-3PM and then it's up 20-40% 1-2 days later...low volatility is killing me..BCON, HOMS... |
| james | i tried to short it on friday - forget about it |
| roger | can't short an ipo |
| james | a small - very small amount - basically to see if it was shortable |
| roger | don't think you can short BIDU |
| CMaoxian | no shares will be available to short in BIDU for a good long while |
| james | not with 4 mil float |
| chud | doesnt it take 30 days from ipo? |
| jfra | yes |
| james | i dont know |
| CMaoxian | there are other rules that apply too, james |
| chud | those rules will probably save people money |
| jfra | like if the ceo's broker is on vacation |
| james | lol |
| james | wicked action today in a lot of the oils - oil itself closed strong - but the stocks got pistol whipped into the close |
| chud | yea james, i saw that |
| roger | when in doubt get out |
| james | SU has been a pet of mine - and that didn't act right at all |
| 6thworld | ok, good night all |
| james | later 6th |
| sharkbait | SU didn't have a bad day, did it? |
| Zoomie | see ya 6th |
| jfra | see ya |
| nickm | cu 6 |
| chud | SU up but long upper wick |
| james | it closed up - but anyone who bought today has a loss |
| sharkbait | ok |
| jfra | yeah, not too nice |
| james | i.e. it gapped up |
| chud | no just ran up then came back down |
| chud | yea gapped up too sorry |
| CMaoxian | last Wed bar in Sunoco is ugly |
| CMaoxian | bearish bozu bozo acting as resistance |
| roger | C good dialog...good room...you still have same e-mail?? |
| CMaoxian | yes roger, you can always reach me at chairman@maoxian.com |
| roger | cool cya |
| jfra | CM, do you set a daily p&l level that once reached you call it a day? |
| CMaoxian | no jfra, but i do set a daily loss level |
| jfra | I'm thinking of setting a win level, cause I ain't been holding my early gains recently |
| chud | what yearly % return do you reckon most traders count on for a living? |
| CMaoxian | if you cut your profits short, you're gonna burn out and go back to your day job answering the phone at some used-stock sales firm |
| james | depends on the account size chud |
| jfra | speaking of which, there's the phone..;-) |
| CMaoxian | sell part, jfra, go to B/E and let 'em ride |
| jfra | I hear ya |
| jfra | B/E? |
| CMaoxian | Break Even |
| Dreamtrove | what's the loss level %wise? |
| CMaoxian | it's a dollar loss level dreamy, which represents a fraction of a percent of the account |
| chud | i know james. but i'm trying to get an idea of what account size the average trader is using |
| CMaoxian | the average account size of the average trader is prolly about 1/10th the size of what it should be ... most are massively undercapitalized |
| james | i would say 25K is average - i dont really know |
| james | so - they would need at least 100% |
| james | if not more |
| chud | 25,000 - they gotta be good |
| nickm | chud... local buzz is if you swing/invest try to get average 20% return... daytrading should be higher |
| james | precise |
| Dreamtrove | okay, but you can't necessarily do that |
| Dreamtrove | I mean say you buy a stock at 10, you can't set your stop at 10 immediately |
| Dreamtrove | and if the next trade is 9.92 etc. |
| CMaoxian | dreamy, jfra said he's taking profits too soon which means he has profits |
| Dreamtrove | oh ok |
| Dreamtrove | profits are good |
| jfra | I go up quickly, and get hosed..trading too low priced stocks me thinks |
| Dreamtrove | solution to that is instead of selling, just move up the stop |
| CMaoxian | yeah or sell part and sit there waiting |
| Dreamtrove | low as in dollar or low as in mkt cap? |
| jfra | anyone want to partner..i'll get in, u get us out |
| CMaoxian | taking partial profits has a great psychological benefit |
| Dreamtrove | yeah the sell half plan also good |
| jfra | I vaguely remember |
| chud | especially if the price reverses |
| Dreamtrove | not to mention statistical ones, it lowers your avg in price |
| Dreamtrove | lol |
| nickm | thanks CM ... good night all |
| CMaoxian | right chud, and if it doesn't reverse, you hate yourself less for not having made more... it's easier to control greed than it is fear |
| chud | yep |
| CMaoxian | and on that note, anyone have any parting thoughts comments questions, etc? |
| Dreamtrove | okay here's a question |
| Dreamtrove | I always screw up the scaling in idea |
| jfra | ..greeny cut rates manana? |
| jfra | lol |
| james | hell yeah |
| james | and the rest of the year |
| Dreamtrove | like I buy at 10, I buy more at 10.20, and again at 10.50, and then it tops at say 10.55 and tanks |
| CMaoxian | i never do that dreamy, so i don't know what to say |
| james | ok - i'm out |
| jfra | S&P up 75 |
| james | great discussion tonight MAO - thanks |
| jfra | later |
| CMaoxian | you're welcome, james |
| sigi | I appreciate the discourse, education and the time you take to facilitate and initiate the chat, CM ! |
| Zoomie | thanks CM, awesome chat |
| CMaoxian | get some sleep, zoomie, you'll need it |
| Zoomie | ty |
| Zoomie | how old is baby CM? |
| CMaoxian | mine or yours? ;-) |
| Zoomie | your baby.. |
| CMaoxian | Baby T is now 7 months old |
| Zoomie | cool |
| CMaoxian | send a pic of happy family when you get the chance |
| Zoomie | k |
| jfra | dream, it's overall mkt. based..these days that is more often than not a bad move |
| Dreamtrove | hmm okay |
| chud | yea Chairman, enjoyed the grail lessons. always good to have another 100% setup up my sleave |
| Zoomie | will do |
| skip | CM thanks so much...really enjoyed tonight's topic |
| CMaoxian | anytime, skip |
| JohnD | Thanks CM, great of you to have us... |
| Zoomie | k, bye all |
| CMaoxian | thx for coming by, JohnD |
| jfra | CM, thanks again..great chat.. |
| CMaoxian | my pleasure, jfra |
| sigi | Thanks again CM and Ciao! |
| CMaoxian | admin is doing the cut signal across the throat |
| chud | i think the chat users may be setting up a holy grail pattern |
| Dreamtrove | argh admin |
| pj | CM, thanks a lot. Great chat |
| chud | 50 by end of month i predict |
| CMaoxian | i'm thinking 200 chud |
| CMaoxian | an explosive breakout ;-) |
| Red | fabulous CM, cheers! and good night |
| CMaoxian | Good night, all, thanks for coming by |
Previous Entry >>> How Do You Do, Baidu?
© 2000 - 2005
Chairman MaoXian
Chairman MaoXian