The day that was - June 29th 2007

Some early buying on low volume led to end of day selling on higher volume. The DOW experienced an intraday swing of over 200 points. Up almost 100 by mid morning to down almost 100 by late afternoon. The combination of higher crude oil prices, the car bombs discovered in London, the holiday coming up, the already volatile markets conditions, and the end of the quarter "shifting" of assets by the money managers at mutual funds all led to the markets behavior.

Look at the DOW chart I have in my public chart list. Keep in mind that we are still inside a trading range. The markets are still undecided here. While I am bullish on the markets for the near future the fact that we are in this sideways trading range makes it difficult to get too heavy on new trades. What is happening here is that for every attempt the bulls attempt to rally the bears come to the party and kill it. Makes swing trades very difficult.

The one current open position in the FP80 portfolio (BIG) also pulled back on Friday but is still above the buy price. We are waiting for it to advance above $30.50 as a confirmation of more buying intensity before we go in with an additional 1/3 of our swing trade funds. Scaling into a swing trade or position trade is the safest and smartest way to trade. You get the advantage of having some of your money in at the lowest price while at the same time we are testing the trade (dipping our toes in the water). And if everything is OK then we go in all the way. Normally I would scale into a swing trade by starting with 1/2 of my normal swing trade funds allocated for any one trade. And upon confirmation of a successful setup I add the second portion. But with the increased volatility right now I am temporarily using 1/3 as my starting position. By doing this the risk is reduced even further if the markets take a dive and the stop loss point is triggered then the loss on the trade is even less than if you had gone all in from the start. Reducing ones risk is always a key to success.

To help illustrate the concept of how one should divide up their capital for swing trading see the chart here (click on the chart to enlarge). Remember, it does not matter how much you set aside for swing trading. The concept is to take whatever that amount of funds is and divide it up into 10 slices. And then each swing trade becomes one slice of your total swing trade funds.

I am working on some new swing trade charts and ideas. And I will post new charts by Sunday night for you to view.

Final thought for the day. The hype in Apple (AAPL) is done. The excitement in the iPhone is done. And for now the stock price of AAPL will likely pullback as the hype is quickly vanishing.