Trader’s Narrative

Tony Oz is an accomplished trader and educator - a rare find in the trading community. He has not only demonstrated his unparalleled skill, over and over again, he has been extremely forthcoming and transparent in his methods as well.

Of his several books, “How I Make a Living Trading Stocks” is even an account of a short period of time in the post-2000 Tech bubble where he shows exactly what he traded and why in great detail. Even more amazing, during this intense bear market, he took mostly long trades. Tony’s methods are surprisingly simple. He relies on technical analysis, resistance, support as well as tape reading.

From time to time he provides general market comments but it has been a while since we last heard from him. His previous market call was in October 2008 when he caught a classic ‘falling knife’ for a quick trade. Recently, due to a family matter Tony took some time off from trading. I’m glad to hear that things have worked out well and Tony can direct his attention to the stock market once again.

Here is his most recent commentary:

The smart thing to do right now is to probably fade an extended upward swing move by identifying an intraday reversal pattern and selling the market short. If such a position is taken, it would be prudent to place a stop loss above the intraday high, this way a trader would not risk too many points. A target around S&P 920-930 should be realistic for a short position entered at 955-975.

It is always hard to call a top or a bottom no matter what the time frame a trader is looking at, so a trader should not try and do that. However, the S&P had a nice run from the 870’s to 950’s, and it may come back into the channel at some point in the near future. Consequently, going long right now may be painful if a trader’s time frame is longer than a few days. (Please note! If the market pulls back first and then it rallies the above short-sale strategy is invalid. This strategy is only valid for an “EXTENDED” upward swing, which means without a day off).

For the traders who are looking to buy a pullback from this run, a good strategy would be to use the 50% retracement rule from the low to the high.

An investor may ask, “Why is an entry here risky?” And the answer would be as so: Let’s say the S&P goes to 1020. This would be a 140+ points run from the lows we just made 7-10 days ago. A 50% retracement will take us back 70 points, which will put us back at 950, which is exactly where we are right now

Source: Tony Oz Newsletter

Tony also mentions that soon he will be updating his classic book: “How I Make a Living Trading Stocks“. This is one of the most sought after books and since it has gone out of print, the prices are astronomical. I’ve read and re-read the book many times and can attest to its value. So keep an eye out for the updated edition coming out in October 2009.

By some cosmic confluence, on the same day, we had two great trading blogs describe how they approach the trading day. Make sure you check them out and pick up some great tidbits.

PinoyTRADER has a swing or position trading strategy that relies on scans he runs the previous day (he looks at ~400 charts a day!). He does take intra-day positions also but his forte I think is in getting long on a pullback of breakout patterns.

Wallstreet Warrior (aka Trader Jamie) trades exclusively intraday price action (as far as I can tell). His strategy is a combination of dummy trading, gap plays and some stuff he has added to the mix himself. Not only does he trade like a machine, he explains his reasoning with impressive lucidity.

Don’t forget to check out the archives of each blog as well.