There are a few ways to reduce your trading risks and we employ those at ActiveTradingPartners.com.

1.  We use a “Scale in and Scale out” method for entering and exiting our trades.  This means we look to buy in tranches of about 1/3 of an intended $$ position at a time.  We look for Fibonacci pivots and oversold indicators to begin working into a position, but never all at one time.

2. We look for “Waterfall declines”.  That is right, we like to buy when everyone else likes to cry.  This means we prefer to enter trade set ups when it appears the vast majority of the downside risk has been “wrung out” as it were.  Recent example was our entering OREX at 4.01-4.12 after it had waterfall declined from $6 at it’s high.  The stock rose over 18% within 72 hours.

3.  We like Waterfall patterns in ETF’s as well, trading the opposite pair off the baseline ETF.  For example, if I think the SP 500 index is in the process of topping out, then we take positions in the Bear ETF such as BGZ to take advantage of the upside exhaustion and corrective reversal.  We enter into the BGZ trade 1/3 tranche at a time, carefully watching for Fibonacci pivots, Elliott Wave patterns, and exhaustion signals.

If you would like to improve your risk adjusted trading results, minimize your losers and maximize your winners, please give us a try.  Click HERE to subscribe you’ll be up and running in no time!

Samples are our recent trade into BGZ, which is 3x short the Russell 1000 Index.  The Elliott Patterns we interpreted said the market rally would wane as we hit 1071/1074, 1085, and 1092.  As those areas were hit on the SP 500, we would purchase 1/3 positions into BGZ, inevitably profiting from the overbought reversal to the downside in the markets.  This reversal happened on cue on Friday last week, July 16th.  Our BGZ position rose 8.5% in just one day of trade, allowing us to enter into a “green” profitable territory on our scaled in position.

Scaling in eliminates the traders desire to let the ego over-take their emotions.  By this, we mean your trading system is useless if your emotions can’t be kept in check both on the downside and the upside.  At ATP, we try to combat that by scaling into and out of positions, forcing ourselves to buy while others cry… and sell when they yell.  It is extremely difficult to go counter-trend against the noise of the markets, but certainly if you plan to do so you must have a plan of action.  Trading with emotion is a sure-fire way to lose money in the markets.  Taking your time and being methodical with scale in entry points into a trade, reduces your risk of entry and allows for a much greater probability of profits, as well as greatly reduced losses on the trades in which you are wrong.

Never dive “all in” into a trade position, no matter how confident you are of the entry timing, chart, and price.  Always scale in methodically.  Worst case the position takes off to the upside for you and you didn’t buy a full position, but that is so much better than going all in one one trade and mis-timing your entry, costing your trading account major dollars.

Dave Banister

ActiveTradingPartners.com

TheMarketTrendForecast.com

Some are saying the market just bottomed at 1011 at the 38% re-tracement area, but the elliott wave patterns that I rely on do not appear to me to be complete. I could still be wrong and we keep on climbing here and I get egg on my face, certainly possible. However, you don’t normally get a straight 8 of 9 days down pattern to 1011 like we just saw and then end a correction there as a C wave in an A B C pattern. C waves are made up of either 3 or 5 waves within, and that was one clear wave down. These happen in fast moving markets and lead to a rare correction pattern called a “running” correction.

In the video below, I educate and illustrate on how these look and apply it to the current state of the Market. I’m looking for the following MAX topping areas for all three indices. Dow 10450, Nasdaq 2295, and SP 500 1104-1115. We are within 1-2 % here of a nice reversal to the downside that can be played via shorting. The ultimate target remains 942 on the SP 500 index, and of course those are the 50% fibonacci downside levels of the 13 month rally, and would fit neatly into the first 180 point SP 500 drop from 1220-1040. This means 1130 is the recent major B wave top, and 180 points from there is about 950 to complete the correction pattern in this bull market.

Please review to get updated. This current rally has hit 1099 on the SP 500, past the 1092 area I saw a gap on, but below the 78% re-tracement area as well, this 7 day rally is getting long in the tooth. Options expiry week makes it even harder, reminds me of my Mid April top call in fact…

View the Video to find out what I think is next and how to trade it:

Taken from TheMarketTrendForecast.com

Let me first start by saying I’ve been a long term “Gold Bull” since the fall of 2001, based both on economic factors as well as Elliott Wave patterns that I think are clear on Gold’s Bull rise. As we are now almost in a Fibonacci 21 months of Gold rally off the October 2008 bottom, I think this pattern is getting long in the tooth.

Gold has risen from $681 at the nadir of the fall of 2008 to $1265 so far, with potential to run to about $1300-$1325 an ounce on this final leg up. It stands to reason, as with any Bull Market that the Bull gets tired and at some point has to hibernate. This wave pattern is clearly 5 waves since the October 2008 lows, and we are in the final stages of the 5th wave of this pattern in my opinion. That means we can have a blow-off top, or we truncate here and start correcting hard.

Bull patterns tend to peak when most are not expecting it, and I forecasted a market top in Mid January and again in Mid April this year in the SP 500 index just prior to huge drops. These forecasts were based on sentiment and Elliott Wave patterns. I am now viewing the $681 to $1,265 rally in Gold as a 5 wave bullish structure that is in the final stages of ascent. Fifth waves are notoriously difficult to predict, but taking some off the table here for intermediate traders is probably a wise decision. Correcting 38% or 50% of the $600 rally would take Gold back to $1030 to $965 area plus or minus, and not invalidate a larger bull structure.

JAZZ- This is the 3rd time I have recommended this stock in 8 months. First time 60% gain within days, second time we got stopped out for no gain and it ran up 80% later on (Stopped out in early Feb).

3rd time now is at 7.75 with recent heavy insider buy at $8.30 in a new secondary offering at $8.30. The same Director/Insider has bought in the past at major pivot bottoms, and this time he took up $7 million worth of the secondary offering. Insider Buy LINK

WBB Initiates coverage with Buy on May 17th- $15 Target

JAZZ has has two drugs on the market, and they are estimating 60-80 cents in adjusted EPS this year, and 30-40% revenue growth. They have a Fibromyalgia drug pending FDA approval in November, with a panel advisory in late summer early fall. Approval there will push the stock way up. The stock has pulled way back from 14 to 7.75. JAZZ is paying down 1/2 their debt with this offering, and the debt is at 15%.

Further, JAZZ likely to be added to the Russell 2000 index with news tonight due on that, and the date is June 25th. Index funds must have the stock in their portfolio by that closing day.

1/3 position, max $8, but try to buy 7.90 or lower. Stop loss at$7.34 for a 5-6% max downside on a 1/3 initial position:

All of this is explained in this 5 minute video and everyone should watch it. In the video I mention the Hedge fund taking up the entire offering, that is incorrect, they took up $7 million of the offering

The SP 500 gapped up and ran higher today on the back of good economic news out of China.  Recall around May 18th I forecasted a near term bottom in the Shanghai Chinese Index here on TMTF for our subscribers.  The theory was it would bottom before the US markets, and that an A B C correction was completing or in the final stages of completing.

What we have now is a series of choppy and overlapping A B C patterns in the US indices which must be reviewed now.  I see two scenarios, and the bull scenario is a move over 111 decisively on the SPY ETF is very bullish and starts to portend the 2010 lows are in for the indices.  The Bear scenario is we take the SPY up to 111 and reverse down to new lows.

These are updated in the sub 5 minute video below, and it may be interesting to see how these lay out.  31% Fibonacci re-tracement of the 2009-2010 bull move has already occured as mentioned on TMTF recently.  However, the amount of time is rather short to complete a correction… review the video to see where we stand.

Back in Mid-April I had forecasted that a top was likely in the market indices in the US, and that we would likely see an A B C Correction to the downside. The forecast was to move to the sidelines if you were a mutual fund/index investor. Since then, the market has unfolded in an A B C fashion to the downside. It appeared to me on May 25th in pre-market this week that we would be completing the first leg of that ABC correction, and on May 25th for my TMTF and ATP service, I did an SP 500 index video in pre-market predicting a bottom that morning.  I had seen a 3-3-5 Elliott Wave correction since mid April unfold and this is a classic Elliott Wave pattern, but most of the time E wave forecasters miss it.  I then outlined a 103.50-104.50 SPY ETF likely bottom (104.38 was the actual) and a move to 113 on the SPY.  Since then, we did bottom as forecasted and now have hit 110.76 on the SPY.  The video below now brings us up to date:

Back in the third week of April I predicted on Kitco.com a topping in the broader market indices.    The theory was the VIX levels were extremely and historically too low concomitant with extremely high historical readings in investor bullish sentiment gauges.  After thirteen Fibonacci months of a bull cycle rally, it was likely an A B C correction to the downside would begin. In further follows ups on TheMarketTrendForecast.com service I run on April 20^th, I again outlined concerns with falling volumes on small cap stocks and too many “stories” being run up too far ahead of the economics.

At this point in the Bull market, it is common to have the crowd of investors move from a bias towards viewing all news as positive, to a negative slant on all news.  Nothing has changed dramatically on the problems the world had before with Debt and currencies, but the reaction to those events turns negative.  This works off the overly optimistic Elliott Wave patterns of the crowd, turning into a typical Zig Zag correction that lasts several months.  There will be trading opportunities between that Mid-April topping forecast and my forecast for a bottom around mid-September.  However, as recommended in April, Index investors and mutual fund investors should have been moving to the sidelines. I am looking for the SP 500 Index to drop to the 920-970 areas by mid-September before the next leg of the Bull market takes off.   Now, the one caveat to that forecast is actually a lot more bullish.  If the SP 500 can hold the 1100-1110 areas and pivot up strongly, we could move on to new highs.  I put the likelihood of that around 20%, so be on guard. A counter-trend rally up in the next few weeks is highly probable, but the evidence continues to suggest working our way down into the 900’s in the SP 500 before the Bull resumes in earnest.  We are selectively buying Gold and Biotech stocks in the Active Trading Partners service as well.

Gold has continued higher confirming my April 20^th forecast on TMTF of a move from 1125 to 1235 in Gold.  The Elliott Wave patterns remain extremely bullish for Gold to continue a 13 Fibonacci year cycle up into 2014.  Gold has formed a very bullish pattern intermediately for a move to $1470-$1550 at the next major pivot top.  In the interim, I expect continued consolidation in and around my $1,235 US levels before the next pivot high at $1300-$1,325 US.  Fiat currencies are burning matches as foreign governments and other entities continue to attempt to put out a fire by printing more paper and covering the same fire with it.  Until the analysts on CNBC stop questioning the validity of Gold and start questioning the validity of Fiat Paper, the bull will rage onwards with most of the pundits watching the caboose from the back of the tracks.

SP 500 Forecast from the Mid-May TMTF forecast service updates:

Gold Update Forecast- 1300 pivot likely after consolidation, with 1570 US later on: