This column was originally published on RealMoney on Aug. 2 at 10:00 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.
I've just returned to San Diego from a mini-vacation in Las Vegas. I hit the jackpot with the weather: The temperature remained below 100 degrees, and poolside lounge chairs were plentiful.
I'd like to say that I had a great time at the tables, but I'd be lying -- I don't gamble.
I work too hard for my money to put it at risk doing something I'm not very good at.
As we were leaving the hotel, my friend Nicki said she wanted to play some video poker.
She said she'd use just $20 and have some fun.
So she sat down and began playing. Nicki played for quite a while: up, then down, and then up again.
The stakes were too low to create stress, but it was cheap entertainment.
I asked Nicki how long she wanted to play. She said, "I'll play until I either get four of a kind or I lose the $20."
After about an hour, the $20 was gone and we started home.
On the way home, I congratulated her on her gambling skill, and told her that she had some of the essential qualities for trading.
That confused her, because I have always downplayed the similarities between trading and gambling.
I told her that she had set her stop at $20 -- nice risk control.
She also defined her risk/reward profile by setting a target of four of a kind, which would have paid around $1,400.
The trade didn't work out, but the loss was manageable and left the door open to playing again the next time we visit Las Vegas.
Would she really have quit had she drawn a four of a kind?
"Maybe not," she said.
"But if I wanted to keep playing, I would have put the money in my purse and started again with $20."
Now that's what I call good trading!
Let's get to the charts.
The recent rally in the
failed right at the early July peak. Until this pattern is broken, my bias is to the short side. I'll reconsider this bias after the Dow pulls back to test 10,700 or if it breaks above resistance.
Let's look at four charts that seem in sync with the Dow's trend.
The recent rally in
once again failed at around $23.50. On the positive side, the July low was well above the June low, so this looks like a bottom in the making. However, the current weak market favors selling the stock, not buying it. I'd reconsider that stance if it breaks above resistance.
is testing support at $26, right in the middle of its early May gap. If you've been buying on this pullback, you've been going against the grain. I'd rethink that position if support breaks down.
The market did not like
second-quarter earnings, and the bulls aren't exactly defending this stock. Tuesday's low is testing the short-term bottom established last Friday. If you're long, consider placing a tight stop. Given the lack of a near-term catalyst for this stock, you might also consider a short on any further weakness.
( CKFR) has fallen all the way back to test the October breakout. Each time that RSI has been down in the 40 area, the stock has bounced, so the current low reading, combined with the proximity of the current price to established support, increases the odds of a bounce.
However, this isn't something I'd anticipate. The trend is lower, and any further weakness would set up a decline into the high $30s. And there's no reason to hang on to a stock that's churning around in congestion.
Be careful out there.
At the time of publication, Fitzpatrick held none of the issues mentioned, though positions may change at any time.
Dan Fitzpatrick is a freelance writer and trading consultant who trades for his own account in Encinitas, Calif. 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;
to send him an email.