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Getting Perspective on Oil

This column was originally published on RealMoney on Oct. 12 at 11:04 a.m. EDT. It's being republished as a bonus for readers.

Have you ever gone through a period when making sound trading decisions seems a lot harder than usual?

It's more than just being out of sync with the market. In fact, it's as if you're out of sync with yourself, and your trading results are suffering.

Yesterday, I wrote about the importance of being aware of your natural approach to trading. But this type of awareness is not an outcome; it's an ongoing process that requires attention every day you move your money around.

Simply put, you are learning more about the most important trading tool you have: You.

Of the many times I've been out of sync, I've found the one common element is a distraction stemming from my personal life. Perhaps you're in a relationship that isn't working; in fact, it's really become an energy-sucker. This isn't necessarily a romantic relationship -- it could arise from a situation at work or from someone else who generates too much heat for too little light.

Whatever the reason, outside distractions are tough to leave outside. Because trading is such a mental game, any distractions put you at a disadvantage.

It's like running a race with slippery shoes: Even if you're the world's fastest runner, you won't go anywhere if you can't get traction.

If outside forces are draining your energy, try taking a different approach to the weekend. I know a lot of people in the trading community who spend their weekends researching stocks and creating next week's game plan.

Instead, try cleaning house by dealing with all the junk that's been bugging you. Instead of focusing on next week's challenges, deal with last week's distractions. You'll find yourself much better prepared to think clearly and to make better trading decisions.

Let's look at some reader picks.


A reader asked for my take on Syntax-Brillian (BRCL), a stock that I first featured back in August when it had broken out above $3.50.

Although the stock is now substantially higher, there's no sign that the uptrend is in trouble. But the breakout is almost 17% below the current price, so it's not practical to put a stop back down below $5. Instead, try using some discipline in money management and use a trailing stop to protect profits in case the uptrend ends.

Qiao Xing Universal Telephone

I've been holding Qiao Xing Universal Telephone (XING) for the past few months. This Chinese telecom company is higher than it's been since 2000, when it was on the way down to $1. I've highlighted the long volume bar that accompanies the trading action late in the first quarter. With so much stock changing hands during that time, I'm assuming that the average price basis of the crowd is around $10. If you're long, there's no reason to sell now, though it's certainly advisable to protect your profits with a trailing stop.

CBOE Oil Index

A reader asked me if I thought oil had bottomed. If we were to look at a daily chart of the CBOE Oil Index, or OIX, we'd see a potential bottom, because it's back above the June low. But this weekly chart gives a better perspective.

First, note how many times this trend line has been tagged since 2005 -- so much for the assertion that prices don't trend. But the first significant break of this trend line occurred last June. That was the shot across the bow, and a warning that the trend was in trouble. The subsequent August high did not reach the prior May high, so we have a lower low followed by a lower high.

Now the index is convincingly below the trend line. Typically, a rally from this point will run back up to the trend line. That's where the most meaningful information will be gleaned. A failure to move back above the trend line is solid evidence that supply is much greater than demand. If that occurs, I sure wouldn't be long.

ABB Ltd.

ABB Ltd. (ABB - Get Report) has been trading in a very tight range for the past couple of months, but it just barely broke above resistance. The on-balance-volume line has been moving gradually higher, indicating accumulation of this stock throughout this sideways range.

However, I think this move has a lot more work to do before I'd be tempted to buy. So far, the stock is still around the resistance line, and the stochastics momentum indicator is starting to roll over. I'd be patient with ABB, watching for additional signs of a resumption of the uptrend.

FMC Technologies

A reader asked me for my take on FMC Technologies (FTI - Get Report). First, there's no getting around the nasty downtrend that has been in place for the past few months. But the two tags of $50 have identified a level at which demand outstrips supply. As such, any pullback that fell below $50 would signal a resumption of the downtrend. I wouldn't buy FMC Technologies yet, but if I owned it, I wouldn't sell, either.

Be careful out there.
At the time of publication, Fitzpatrick was long Qiao Xing Universal Telephone, though positions may change at any time.

Fitzpatrick is a freelance writer and trading consultant who trades for his own account in Encinitas, Calif., and contributes to Short Advisor. He is a former co-manager of a hedge fund and teaches seminars on technical analysis, options trading and asset-protection strategies for traders and business owners. Fitzpatrick graduated from the McGeorge School of Law and was a fellow at the Pacific Legal Foundation, a nonprofit public interest firm specializing in constitutional law. He also practiced law in the private sector before pursuing trading as a full-time career. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Fitzpatrick cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.

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