Thanks to everyone who participated in the chat this week. Here’s the complete transcript for those who couldn’t make it:

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: let’s 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