The Trader Daily

 | Jul 03, 2014 | 7:30 AM EDT
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Regardless of one's timeframe, the major equity indices are in a bull trend. I don't think there's a trader alive that would dispute this statement. But what's important for active traders to remember is that when markets are locked in strong and persistent trends, bad trades and investments (in the direction of the trend) often get bailed out.

I see it on Twitter, from the guys I trade with on a daily basis and in my own trading. Sloppy trades are made, excessive risk is taken for mediocre (or less than mediocre) reward, or discipline is thrown completely out the window. The bottom line, however, is that a strong trend forgives an inordinate number of poor decisions. 

As we navigate the major indices currently trading at multi-year or all-time highs, take a few hours to do a self-check of your own trading. Are you being sloppy with your stops? Has your discipline been thrown out the window due to a market that always seems to bounce back? Have you fallen victim to the thinking that prices can only rise?

These are tough questions for any trader to answer because they force one to recognize and acknowledge some pretty major flaws in their business plan. That said, if you don't move to correct issues such as these in a hurry, you'll lose a tremendous amount of emotional and monetary capital the moment the market's trend changes. 

Additional Notes:

  1. Despite the company's ongoing recall issues, General Motors' (GM) stock continues to perform well. The persistent bid under GM has been a source of frustration for a number of more fundamentally-driven investors. But as discussed in past Trader Daily reports, as traders, the price action is all we really care about. On Wednesday, the stock was rejected from its early-March highs. But given what a meaningful swing high that area represented, I don't believe the rejection should have come as too great a surprise. Keeping in mind that some degree of profit should probably be booked along the way to reduce one's overall risk, I believe the stock's worth holding, as long as it continues to close weekly bars above $35.50. Once the stock closes above $37.75 - $38, $39.80 becomes our next upside target.
  2. I first started discussing JC Penney (JCP) on May 30. Now, more than a month later, the stock has finally decided to move. As someone that's long JCP, Wednesday's move higher was a welcomed sight. That said, I was disappointed to see it close the session well off its early morning highs. The bottom line is that I'm long the stock, and barring a collapse under $8 - $8.20, I think the stock works highs. A weekly close above $10 is still needed to attract the attention of the momentum-buying crowd.
  3. Largely because of the overnight gaps, the iShares 20+ Year Treasury Bond ETF (TLT) hasn't been an easy short. That said, it's traded relatively true to the volume profile posted on June 30. With the TLT closing Wednesday's session mere pennies above $111, short sellers now must proceed with a bit more caution. Any rejection (such as a daily candlestick with a long lower shadow or tail) from $110.50-$111 would likely result in an immediate bounce back toward $112.25-$112.50. A close under $110.50 adds fuel to the bearish momentum and puts the top of the next balance area, roughly $109.20, into our near-term view.

Any trading or volume profile related questions can be posted in the comments section below, emailed to me at or posted to my twitter feed @ByrneRWS

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