Saturday, January 1, 2011

1/2/11 Quint Tatro Audio

http://financialsense.com/financial-sense-newshour/in-depth/quint-tatro/trade-the-trader

'navid' at the Cara site posted the above link.  I highly recommend you listen to it.  Then we can discuss it.

Re: Great audio talk/ 'Sell 200k shares in order to buy 5m' newSubmitted by 2nd_ave (5117 comments) on Sat, 01/01/2011 - 19:41 #76957 (in reply to #76951)

navid- Beautiful! I can't thank you enough for posting the link. Driving prices down/running stops prior to loading up? Did I say 'beautiful?'

I recall throwing out comments throughout 2009 challenging the utility of technical analysis (ie, if everyone is using the same signals, does it make sense to follow them)- Tatro's take is as good as it gets.

For anyone who watched the 2009 rally wearing Smokey shades: Take the time to listen to the interview- you won't be disappointed.

97 comments:

  1. Pattern Recognition newSubmitted by 2nd_ave (5118 comments) on Sat, 01/01/2011 - 20:00 #76959 (in reply to #76957)
    Tatro speaks about James De Porre's incredible ability to recognize patterns. That rings true.

    (a) My guess is that mathematicians and musicians would be natural pattern traders. Dexterity in either field hinges on recognizing patterns.

    (b) Vad. If you spend any time at all on this site, you know what I mean.

    (c) Patterns recur time and again. However, if it's possible to reliably predict how large numbers of traders will react to a certain pattern (ie, the crowd has now been 'trained' to react differently than in the past), then it's time for a 'change-up-' ie, the game is to fade the crowd.

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  2. OK, I actually listened to the whole interview. Besides your comments, I would add 2.

    1- How many points he made that we've covered here.

    2- Have a real reason to close out your trades. IE, "The whole market looks toppy here, so I better step back"....Hopefully that's not what I did on Thursday;)

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  3. 2011...

    RB surfaces to let us know his son made the US men's U17 soccer team. Only to sink back into the ether of the internet.

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  4. Interview...I did find it interesting he commented on the failed H&S pattern back in July 09. Perhaps we are at a similar junction here, but with everyone bullish. Technically though, the trend remains.

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  5. TOF/CP- I just watched a video where Brain Shannon commented on BYD/GMO. He likes both.

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  6. Tatro makes an interesting point about bull/bear signals-

    (a) It's not bearish signals that he looks for, it's failed bullish patterns. So the market sells off on a bad jobs number? That's not as bearish as selling off on a good number.

    (b) I have to assume the reverse is true also. Bad earnings and the stock moves up? Look out.

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  7. 2nd- I think he was talking about patterns only. Not reactions to news events. The CRM example was the one he used. Take a look at the chart. Great reaction to earnings...Bull flag that breaks up...then reverses instead of consolidating again or moving higher. FWIF, I'd like to see how CRM handles the 123 area.

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  8. Interview...I'll consider this site as a journal :)

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  9. I listened to the interview. My first thought was why listen to someone whose original hero was Jim Cramer. He is also quite young. However, he makes some good points.

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  10. Re: Great audio talk/ 'Sell 200k shares in order to buy 5m'
    Submitted by 2nd_ave (5120 comments) on Sat, 01/01/2011 - 21:46 #76964 (in reply to #76957)
    Tatro points out it's not illegal (when building large positions) to run stops in the manner he described, and that institutions use the tactic on a daily basis.

    That's fine, of course, if you're an institutional fund manager. For the rest of us- it just doesn't seem right.

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  11. In fact, it almost sounds as if Tatro has advised institutions to use the tactic. That wasn't clear from the interview, so I left it as just an institutional tactic.

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  12. Re: San Francisco wins bid to host 2013 America's Cup newSubmitted by 2nd_ave (5120 comments) on Sat, 01/01/2011 - 22:04 #76965 (in reply to #76962)
    loannetter- So you're looking to relocate? The Bay Area and Vancouver have much in common (as you know). The only problem I have with SF is its inability (or its unwillingess) to clean things up. A mayor/city council with vision could turn Market/Van Ness into the Avenue des Champs-Élysées, and the Golden Gate into Stanley Park.

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  13. WTF is wrong with SF, anyway? I remember it as a pretty decent place to visit in the sixties. Now I drive in only to work- I was going to say 'and occasionally dine,' but 'infrequently' is more like it- a lot of good restaurants have opened on the Peninsula.

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  14. I think the video makes a more nuanced point.
    I think the guy uses TA and he is giving some good advice, but he isn't saying what I'm reading by some here.
    The premise that all traders using TA use the same signals or patterns is problematic because it simply isn't true.

    Do you trade breakouts?
    Fibonacci?
    Candlesticks?
    Bars?
    Lines?
    Point and figure?
    Support and resistance?
    trendlines?
    RSI?
    MACD?
    Histo?
    Trends?
    Pullbacks?
    Trend knockouts?
    Gatekeepers?
    The reverse of some of these?

    It's ALL TA.
    Are you getting the idea that not everyone is using the same TA? GOOD!

    Do you screen several thousand stocks and their sectors to know what is happening?
    Do you then screen for certain patterns that fit your methodology?
    I notice this guy screens 2300 stocks and by doing so he knows what the sectors are doing.
    Do you? Do you have the software to screen the entire universe of stocks, ETF's and indices?
    If not, then how do you know?
    Do you know what your indicators mean and what they are the product of? Do you know that indicators are rearward looking and based on price? Do you trade price?
    Do you trade news?
    Fundamentals?
    Does your method account for errors, weaknesses and gaps? What percentage of the time does your method work?

    By now you should be getting the notion that blanket statements about TA are a little silly.

    The video says a heck of a lot more. It isn't so much about TA not working, afterall he's using TA. It's about not tilting at windmills and chasing rainbows.

    Example: I'm a trend trader. I trade knockouts and pullbacks. My method (Landry's method) factors in the weaknesses he discusses.
    I buy re-established trends after pullbacks and knockouts. AAMOF, I may be one of the traders taking advantage of those buying breakouts, fibs and support/resistance. If I don't have a trend, I sit or do something else. The same patterns work exactly the same long or short.
    It all depends on what you are trading and if you know your method.

    I have to admit, sometimes I read this blog and wonder what some posts are about. I read about some picks, bring up a chart and if it doesn't have an upward trend in a bull market or downward trend in a bear market I wonder what the poster is looking at.

    BUT, not all TA traders are trading the same patterns. Not by a longshot.

    FF

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  15. I learned just over a year ago that running stops was the game on Wall Street. Primary mover is the E-Mini S&P 500 futures contract. Things follow from there.

    The source of my "knowledge" is the blogger known as "Swinger" who presently blogs behind the second level of paid subscriptions on the Stops and Targets website.

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  16. Craig- His main point (aside from pushing his book) was that traders get played by (presumably) smarter traders. Which after all is what trading is. And in order to play traders, one must be familiar with the signals traders use.

    He is not saying (nor am I) that TA is universally used (or understood, for that matter) in the same way by all.

    I do, however, admit to using a blanket statement to 'explain' the bear slaughter that occurred in '09- what I had in mind was SOH. Landry followers would have had the opposite result. Overall, I think the majority of technicians were caught off guard.

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  17. Note also that Tatro (along with Vad, Landry, and we can now include De Porre) is adamant about the importance of letting the market tell us where it's headed (and leaving behind our own biases +/- tuning out outside noise).

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  18. He also reminded me of De Porre's ability to wait for the right pitch. I followed the 'RevShark' on/off for many years in the early 2000s. Tatro's personal anecdotes were instructive. As they say- when the student is ready... We all take our own paths. I found this particular audio (btw, illini- I had the opposite reaction to his comments about Cramer- in the upside down world of trading psychology, we may someday come to the realization that JC made money the way we all do- by risk-managing the reality of not being right all the time) to be quite helpful at this juncture- it illuminates a door worth venturing into...

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  19. And of course, I learn more by listening than by talking. So I appreciate the feedback, Craig.

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  20. Mark,
    If my son did make the Olympic team would i still have to pay his way to the games?
    I have been on trading hiatus since, T day. Hope everyone had wonderful holidays. I have no feel for this market. at least 16 positive days out of the last 20. Has only happened in few times in the last 100 years. Yet not a large % up. is it distribution or consolidation before a blast off. Don't have a clue.
    Happy New Year,
    Bob

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  21. Bob- If nothing else, I would think your Chamber of Commerce would be pleased to cover his expenses.

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  22. "I just watched a video where Brain Shannon commented on BYD/GMO. He likes both. "

    Thanks Mark, I don't know the guy but maybe I should start listening. I'm pretty certain GMO will be starting mine production mid year, Hanlong is on schedule with their pahsed investments and the bank financing has all I's dotted and T's crossed.

    The only thing that kind of troubles me is the county still hasn't dropped their protest.

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  23. Anyway, I think it's fair to say there are differences between the elite, the educated, and the educated elite. Just because someone is educated doesn't qualify them as an elite, and not all elite are necessarily educated in the normally accepted standards, although it often is the case.

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  24. 2nd,
    Good interview. Lot of good points. Thanks for bringing it to my attention.
    Bob

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  25. EXACTLY.

    SOH'ers were trying to force their bias on the market and predict the direction of the market.....with predictable results.
    Most trend followers are, as the name implies, followers, so they tend to let the market decide and that makes it less likely to be caught off-guard.

    I guess my *general* problem with his premise is how many traders use opposing signals or different time frames. Some of those are easier to game or run than others.

    I do like a lot of what he says about knowing your system, how to counter it's inherent weaknesses, and not chasing rainbows.

    I also think a lot of J6P/amateurs know just enough about patterns to get themselves in trouble. A H&S on a daily chart isn't really a reliable pattern to trade on. A H&S at a major top on a weekly chart is more meaningful. It doesn't hurt to be prepared there, but you still have to wait for the market to decide.

    I'm having a lot more fun and I'm more relaxed these days with better defined trades.
    In that sense the video is spot on.
    Get to know a method in and out that takes into account the weaknesses and follow it. he makes a good point there.
    It's helped to have a professional that knows the game coaching me.

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  26. 2nd, Why are you down on The City? It is one of my favorite places in the world.Even the seedier side. Also Where is the Peninsula. Is that Marin.
    Bob

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  27. Tatro,
    The best part of the interview." If I read the Local Paper..... I would want to buy gold, short the dollar, build a bunker and buy ammo." Sounds like he reads that other site we love.
    RB

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  28. CP, Barring banning lobbying and outside money, I think Ritholtz's 'NASCAR' advertising idea would work well.

    All politicians, lobbyists, 'experts' that testify at hearings, advise government, etc. should have to wear jumpsuits with logos commensurate in size to the amount of money they receive from various interests.
    American flags commensurate in size for donations from within one's district/state for donations from individual voters under a lower limit, say $200, would indicate support by individual voters.
    Then we could see at a glance, like we do at NASCAR races, who was bought (sponsored) by whom, and by how much in comparison to support from voters and regular citizens.

    Then we could get over this whoo-ha about "elites", name calling and agendas.
    Some politicians might have to include their automobiles to get enough space.

    FF

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  29. RB- It's my understanding the costs are paid for. No money for the kids, of course, but the bulk of the cost is covered. Chase played on to different teams until he went to play for Colonge Germany.

    The Penisula is south of SF. Milbre, Burlingame, Hillsbourgh, Redwood City, Atherton, Palo Alto, etc.

    Your point (and Tatro's) about a bunker mentality is spot on. Also lines up with FF's new style.

    I'm sure FF laughs at some of my trades, but finding something that works/is comfortable to each of us is important. For now I'm still not 'comfortable' chasing the leaders. I'd rather use the capital I have to pick under valued, technically bottoming or just turning stocks. 10-15-20% moves are plenty for me.

    I'm still sticking to my plan that the leaders will have trouble hear and capital will move into areas that are less volatile with more upside potential.

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  30. No, I don't laugh at any trades. I don't understand some trades (not a requirement) but not everyone trades the same and I'm good with that. I want everyone here to make a killing.
    I have to admit some of those charts worry me and that I wouldn't trade them either way, long or short because they aren't trending or they don't have persistent trends or are played out.

    I have my list of possible set-ups, entries, targets and stops, so I only check charts of posted trades in passing.

    Trading the trend doesn't mean chasing leaders. There are plenty of trend transitions that reverse, establish a new trend, then pullback which are high percentage trades. Technical bottoms to me are those with longer bases that break out and pullback. The methodology requires a trend, it requires a pullback and it requires room to run. Overplayed trends aren't part of the methodology. Knockouts and pullbacks are inconsistent with 'chasing', they are the opposite of 'chasing'.

    I just stick with a few patterns I know well and trade those to my best ability. If there are no set-ups I just wait.
    If the market reverses, it may establish a trend down, and I will trade it short with the same patterns.

    No one knows where the market will go, what if anything will have trouble or where capital will go. I don't know and don't need to know. There will be stocks that are volatile, which I want, and there will be bigger, slower moving less volatile (less beta) stocks. Volatility has nothing to do with upside potential. AAMOF, the more volatile a stock is, the faster and higher it can go. Upside has nothing to do with volatility. Volatility does determine how fast they might go up (or down), but not how far.
    Humans decide that.

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  31. Mark,
    Neil is not going anywhere. His High school team is injury riddled and has a poor inexp D and a indecisive goalie.Neil has been moved from striker to mid field because his team is lacking possession ability. In other words being a striker is not much fun if your team does not have the ball. Some how they are still rated # 1, but that is due to a lot of luck. Maybe we can get your daughter to transfer here she plays a little goalie right?

    So it sounds like you are looking for sector rotation. Are you looking at dividend paying stocks? I still like Oil. I see a pull back coming so I am looking to buy dips in refiners and drillers. I like WNR and ATPG. You have always had a significant energy position. Are you still in?

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  32. FF
    Sounds like you are trading what I am striving to do in my trading. What setups do you like and on what time frame. I like to enter a tending stock on strength after a pull back( or pull forward) of at least three candles on a daily chart, but there cannot be significant resistance above. Invariably this method will get in on so called bear flags and on mini C/H formations without thinking about it.
    RB

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  33. Bar of strength Method. http://www.freestockcharts.com?emailChartID=a2c50174-36cd-4636-9299-1071be5066c8.

    Until recently it was real hard finding any trending stocks with more than three candles. They would not pullback for longer than one day.

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  34. I have enough put options right now for a decent protection against a possible abrupt down move in stocks. If such a move does not materialize by January OpEx, I will lose about 1% of my port that is currently invested in January puts. In order to protect that 1% of my port against the possibility of the stock market staying together until January OpEx, I decided to dip my toes into TBT again (I exited my last 4th round trip on it at $39.80) and placed a buy stop limit order for TBT at $37.40/$37.50 for 2.5% of my port. I believe TBT will keep trending higher until the overdue market correction arrives. Currently, TBT has pulled back to the lower trend line of that uptrend, and buying some now would be a good idea, IMO, especially since in my case a TBT position would be a good hedge on my put options.

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  35. RoBear:
    I'm trading trending equities that pullback not more than 8-9 days before re-establishing the trend.
    Enter when price bar clears the upper end of the pullback/knockout bar, place stop under the pullback/knockout bar. There is some discretion on these depending on historic volatility (how much it can move and still remain outside normal noise). Initial price target is usually the same as entry minus stop. At price target take 1/2 profits and move stop to break even and let it run. If it moves in my favor I trail stops slowly giving it more room as it goes. If it doesn't and takes me out at break even I still got 1/2 price target.
    so I use a short term swing entry then move stop to break even with intention of getting much higher longer term gains. Can also repeat if the pattern repeats.
    I don't have to wait for three days but it usually is between two and nine days. With discretion it could be more or less, but I want the down move (or up move for shorts) to be exhausted. The question I ask is, 'would this move have knocked me out of this position?'.
    If yes, then it likely shook out the weak hands and left those who were serious...and likely those who shook it to begin with who now accumulate at their price and re-establish the trend in doing so.

    Latest examples have been WFT, FTK.

    Your link sent me to worden freestock charts with a QQQQ chart.
    I changed it to a daily 3 mos chart. If you do likewise you would see: A set up would look like the knockout/pullback in qqqq on nov 16th. Entry would be above that bar @ about 52.50 on the 18th, stop @ about 50.75. Price target would be $54.25.

    This is just an example using QQQQ. Since it has a low historic volatility (the market overall is about a 13) it is unlikely I would trade it, but it should give you an idea of what the set-ups look like.
    You will notice a few days later there is more selling yet it never drops below the initial knockout or gets close to the stop, and then takes off and exceeds the PT, so the trade would have make $.
    Risk is 2% of port if stopped out. Example: Using $100,000 port value, a 2% loss if stopped out would be $2000. So $2000 / 1.75 initial stop amount would be about 1200 shares (1142) initial position size. Sell 600 @ $54.25, then move stop on remaining 600 to $52.50.

    Actual example FTK: Entry was 3.95, initial PT was $5.20, had tighter stop of $3.35. Hit initial PT last week. Move stop on remaining position to 3.95. Hope this helps.

    FF

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  36. Guys I don't know jack about LNG but the stock looks unbelievable on a weekly chart. There was significant long term resistance at $5; there were 5 separate attempts to break through this level and it finally broke through a few weeks ago, came back and tested the $5 level and it is now support. I'd highly suggest going long this stock on a longer term basis based solely on the chart. I'm going to do the same this week most likely.

    Also, I totally agree with the leader stocks in the nasdaq showing significant weakness. I was actually very close to buying puts in QQQQ on Friday. I think this is a very good trade depending on price of the puts (I would probably go with $57 or so strike prices that expire in Feb/Mar). Apple had significant resistance at $325, broke above it then failed. Same chart patterns with GOOG, NFLX, CRM, etc.

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  37. RB- I've seen ATPG pop up before. I'm basically flat right now as I took profits in PXP/MMR recently. MMR is more liquids than MMR and has 38% of their proven reserves in the North Sea. Short float is crazy. I just sent an email to my oil guy for his take on it. I've never really followed the refiners. I did like the chart of VLO @ 19.00ish at the start of Dec. Didn't take a position.


    My oil guy is very bullish on energy for 2011, and I'm going to get back in with at least 35% of my port at some point. Look for plays that have a good ration of liquids to gas. 70/30 would be ideal.

    TOF makes a good point above about LNG. I don't have a take on the stock, but am bullish on liquid natty. TLM just partnered with a large player to develop an LNG terminal in Eastern Canada. Mog's contention is that LNatty will become a huge source of income in the long run North America will become net exporters. Time frame is tricky, as Lnatty plants take a while to build/permit.

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  38. By Edward McAllister

    NEW YORK, Dec 14 (Reuters) - Encana Corp (ECA.TO), Canada's biggest natural gas producer, said it is interested in marketing gas produced in the United States for shipment overseas as domestic production increases.

    Encana, which has interests in shale gas formations across the United States, on Monday came out in support of Cheniere Energy's (LNG.A) plan to cool U.S. gas and ship it to markets across the world as liquefied natural gas (LNG).

    "With specific reference to (Cheniere's) application, Encana is interested in exploring LNG export market possibilities as one of many market options for its North American production," Encana's chief executive officer Randy Eresman said in a letter to the Department of Energy.

    Cheniere is currently seeking DOE approval to export LNG from Sabine Pass in Louisiana to all countries -- members of the World Trade Organization or not -- that have LNG import capacity. Currently, the company only has approval to export to countries with which the United States has a free trade agreement, which is restrictive for LNG exports.

    "Allowing (Cheniere) to open the door to new markets in the form of LNG will have a salutary effect on U.S. development efforts," Encana's letter said.

    A period inviting industry comment on the project, part of the DOE's decision-making process, closed on Monday. According to the DOE website, no objections were made to Cheniere's project, with Encana the only gas producer to come out in favor . However, postings of comments via mail could be delayed a few days, said a source at the Department for Energy who oversees the process.

    Encana is not in talks to supply gas to Cheniere's project, a company spokesman said on Tuesday, but is watching to see if it gets all the necessary approvals to go ahead with construction.

    "We would potentially speak to them going forward, that would be a logical conclusion. If they are successful, it is something we would certainly consider," the spokesman said.

    Cheniere's project, which could export up to 16 million tonnes per year of LNG, is one of three proposed LNG export plans in North America as increased production from shale gas and tepid demand push U.S. inventories to record highs. The Federal Energy Regulatory Commission (FERC) is currently considering Cheniere's project.

    The Encana spokesman said that the company is in favor of all three proposed export plants, including the Kitimat project in West Canada and the Freeport-Macquarie one in Texas. (Editing by Marguerita Choy)

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  39. Also, as far as charts go, the 5 year chart of SPF sure as hell looks like an inverted H&S.

    FD: Long small position at $4.60. Probably will hold for long term.

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  40. TLM press release...


    CALGARY, ALBERTA--(Marketwire - Dec. 20, 2010) - Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) today announced it has reached agreement to create a strategic partnership with Sasol Limited to develop the Farrell Creek assets in Talisman's Montney shale play in northeastern British Columbia. Talisman will sell a 50% working interest in its Farrell Creek assets to Sasol for a total consideration of C$ 1,050 million.

    "This is a strategic move towards unlocking some of the value of our Montney assets for us and our new partner, consistent with the strategy of de-risking and developing Talisman's very large shale opportunities in the region," said John A. Manzoni, President & CEO of Talisman.

    "We believe this transaction reflects the quality and potential of our broader Montney position. We are delighted to have Sasol as a partner. They are a world-class company and their expertise will enable us to jointly explore the option of a GTL facility in western Canada."

    This transaction allows Talisman to develop the Farrell Creek area and unlock some of the value of the estimated 44 tcfe of net contingent resource held across its Montney shale play. Farrell Creek represents approximately 22% (9.6 tcfe) of Talisman's resource potential in the play and about 27% (51,000 net acres) of the company's 190,000 net Tier 1 acres of land in the Montney. Sasol will pay 25% of the consideration (approximately $260 million) in cash at closing and carry 75% of Talisman's future capital commitments in the Farrell Creek area to a total of approximately $790 million.

    "The acquisition of this high quality natural gas asset will accelerate our upstream growth while also advancing Sasol's already strong GTL value proposition," said Sasol chief executive, Pat Davies.

    "In partnering with a credible international shale gas operator such as Talisman, we reap the dual benefit of leveraging their experience, as we grow our own shale gas expertise," Davies said.

    The play has been largely de-risked and production at Farrell Creek is expected to exit this year at between 40-60 mmcfe/d. Talisman's processing facilities at Farrell Creek have been expanded to 120 mmcf/d and the company has secured over 500 mmcf/d of egress capacity from the region.

    As part of the agreement, the partners have agreed to conduct a feasibility study around the economic viability of a facility in western Canada to convert natural gas to liquid fuels, using Sasol's commercial Gas to Liquids (GTL) technology. This could provide a strategic alternative to traditional North American pipeline or LNG marketing. The outlook for GTL could be very positive if North American natural gas prices continue to decouple from oil prices. The GTL process produces premium, clean liquids fuels.

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  41. 2nd- Thanks for posting the link to the Tatro interview, I probably would have just skipped it otherwise. He makes a number of good points. As you know, Vad recently developed his online Taoist Trader course and so I put the Tao Te Ching on my reading list. I also decided that a re-reading of Sun Tzu's Art of War was in order. Check out Chap 11 (The Nine Kinds of Terrain) if you have a chance...

    "Deploy your troops and plan out your strategies in such a way that the enemy cannot fathom your movements." And similar remarks distinguish Group-3 think from Group-2 think.

    That H&S pattern failure in July 2009 was incredibly important as it turned out and as a little pitchfork work shows the channel it established lasted until May 2010...

    http://www.screencast.com/t/FM4RZUj5M

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  42. GBCI - Retesting support @ the 200 SMA, let's see what happens here...

    I can't think of any good reasons for a huge market sell-off... I also think it's time for beaten-down markets to begin showing some upside.

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  43. BTW, it looks like a failed H&S in Jul-Aug has given rise to the current channel we're in...

    http://www.screencast.com/t/VAOPIKUl2588

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  44. Nice Kyle. But it looks like a nice inverted H&S no?

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  45. Mark -- I was looking at the Head as the 1129 in early Aug and the 2 shoulders being 1099 in mid-July and the roughly equal level in mid-Aug before it went down to 1039 @ end-of-Aug. It's the end-of-Aug continuation of the selloff that failed to materialize. The sharp upturn on 1 Sept ended it.

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  46. Kyle- Yep. OK. I was looking a little wider obviously. How's the trading going? It seems to me you are doing some swing trades and day trading like Vad. Any good swing ideas. I'm looking all over the place for ideas today.

    I really do like RAS here. Easy out if it fails. SPF is also interesting. I'm trying to do my homework on that one right now. I also like C here.

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  47. Mark - I would say this year has gone only Fair but I'm getting much better. I came into the year knowing that I had a lot of work to do. I was trying to work 3 different approaches: Vad's day-trading tape reading approach, Landry's swing trade entry on pullbacks approach, and an options selling approach for income generation. The swing trading hurt the most...tying up money on multi-day moves that may never materialize isn't for me. Too much can go wrong overnight, so I understand why Vad does what he does much better now. I very much like the risk mgmt available in Vad's approach. If the move doesn't materialize as expected in oh say the next 5-min then exit -- done deal. So I'm going to focus on day trading & option writing mainly in 2011. My put writes in CREE, CSCO and CLX (of all things) are working nicely.

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  48. "I'm trading trending equities that pullback not more than 8-9 days before re-establishing the trend."

    Craig, thanks for an excellent summary of your trading strategy! This is a strategy that I should also try to learn, so as to be able to use it in addition to my usual and dangerous style of scaling in on weakness without stops.

    I have a couple of questions about your strategy. How do you determine which bar has been the final pullback/knockout bar? It is not uncommon for a stock to have 5 down days, then one or two strong short covering up days, and then a continuation of the down trend.

    The other question is: how do you determine the place at which to place your stop?

    Thanks!

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  49. Craig, if you could also post your entries according to your strategy in real time, I would really appreciate it, as it would help all of us to learn this strategy.

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  50. Mark - Take a look at the TGB chart from Oct 14 and the eventual gap down on Nov 3 as a good example of what 'News' can do. Too much risk for me in holding these little pieces of shit for longer than say 5-min. One of my Lessons Learned from 2010.

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  51. Kyle- Thanks. That was really interesting. What percentage of your capital do you allocate to put writting and day trading? I like the combo because it takes advantage of the size of your port and creates an income stream.

    Craig- I agree with David. You present a very good case. Thanks!

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  52. TGB- Yeah, I hear you. A stop would have killed you also as it opened at the bottom of the range.

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  53. Here's a link to the Shannon video I talked about yesterday. The scary part? I know almost ALL of those stocks. Yikes!

    http://www.alphatrends.net/

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  54. Mark - I would say 15-20% on the put writes (CREE 60's, V 60's & 65's, CLX 60's...ie REAL companies that if assigned I could easily work w/ Call writes to reduce the basis) I absolutely hate being blindsided and TGB really just pissed me off. Re day-trading, despite what Vad says wrt the real stop level, I'm not going to be day-trading 1000sh of LVS anytime soon. I can only manage the guts to hang out 15-25k at a time. There's always that thought of "What if the comcast connection goes down when I'm in the middle of this F'in trade?"

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  55. TGB - It's interesting, in Vad's book Techniques of Tape Reading (p. 6), he talks about a stock ESOL that he was trying to trade in Mar 97. It came down from 30 to 15. Vad bought 2000sh for an overnight rebound play. It opened @ 8 the next morning. He was mostly done w/ overnight holds after that. My lesson was TGB...

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  56. RB- Do I have your email? I got a email from MOG re- ATPG.

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  57. David,
    The safest entry is when price clears the top of the knockout/pullback bar. There is some discretion here as it may be more days and then it is likely all the shorts were covered and the action is accumulation.
    The stop is a product of how much the stock can move. You want the stop to be below the lowest knockout/pullback bar and outside of normal volatility/noise so it doesn't get hit with normal volatility, yet you don't want it too loose for obvious reasons. I bought Landry's new book and before I subscribed to his service I tested his system on about 100 trending charts to see what the results were. I couldn't find ONE stock where the stop was hit on a textbook entry in the conditions that existed in the first few weeks of December where entering at the top of the knockout with a stop below came back in far enough to hit the stop. That is what convinced me to buy the service. We all know at some point that will not work and stops will get hit, but this will also likely coincide with indices and sectors doing the same and he will be providing a list of shorts with entries, stops and targets, so it works equally both ways.
    The interesting thing is how patient he is and how much room he gives stops after he takes initial profits and is in 'trail and scale' mode. Example: XL capital. He got in around $9.40 in 2009 and after it hit the initial profit target of 11.90 and moved in his favor he scaled the stop up to $16.40 where it has been since. It was trading right around $22 recently and his stop is still at $16.40 and the service is still in XL. This gives it plenty of room to not get knocked out needlessly and provides enough room for a discretionary exit should something crazy happen. But it also allows it to run much, much higher where the big gains can happen. To me that is the beauty of the system. Before if a stock turned down I would exit with a small loss and invariably it would make a massive run up while I stood in the station, or I would get a big run up and I would exit with decent gains and it would run up even further. This system plays into both of my weaknesses. It allows me partial profits, it has well defined risk and stops, and it gives me the chance, once partial profits are taken, to more or less set the stop at break even and forget it. The service for me provides actual trades and a professional COACH to trade alongside and provide support in the form of screening the entire market and warning me (or encouraging me) about what is happening in the entire trading universe. I have paid way more for other types of lessons and coaching and they never made me this much $$$ in so little time.

    Dave has a free chart show every Thursday from 8AM to 9PM pacific time which is incredibly helpful. You can sign up at Davelandry.com. It is a webcast and a lot of people ask questions, he outlines his approach and people ask about certain stocks, if they fit his method, and where he would enter, place stops, etc. It's usually about an hour but it isn't unusual to run an hour and 30 mins. I highly recommend it and his new book, 'The Layman's Guide to Trading Stocks', which has helped me immeasurably.

    He will also answer e-mails if you have a question. He's very open and available.
    He will be a little conciliatory when we don't have trending markets. Some here may recall the posts 2nd made from Landry during the summer when it was day after day of "follow existing positions as there is no trend, just sit on your hands", because the markets were just going sideways. To me this is really great as it teaches me to WAIT until the conditions fit my method and to not force trades.

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  58. Talisman - Sounds like an old Guess Who song:

    http://www.youtube.com/watch?v=gRVauDrXUpo&p=26F331D40B9876BE

    I've thought for months liquids production is the right play, along with LNG export.

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  59. TGB - There's a well defined bottom trend-line there, I wouldn't advocate buying over about $5.00~$5.50 This illustrates why I prefer buying near recent lows, I have difficulty agreeing a $1B company is a POS in this environment but I can agree they can become overbought in a shorter time frame. Anyone who'd done their DD would have known about the upcoming mine permit, difficulties involved, and probability of refusal?

    Immersion in my dimensia isn't a requirement, nor is it condoned...

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  60. I meant dimentia of course, see what I'm saying (of course you can't, in the literal sense)?

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  61. cp - LVS has a $31B MktCap and it's just another POS Trading Vehicle IMHO... the intra-day behavior is more 'readable' BECAUSE there are more 'BIG FISH' dominating its movement but that's about it...Again JMHO...

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  62. Yep, and MCP has an incredible market cap as well, which based upon my judgment is a warning sign.

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  63. cp - Yep, let's talk MCP & REE a bit.

    2 of Vad's main setups are JBE (Jump-Base-Explosion) and DBI (Drop-Base-Implosion). As the Tatro audio mentions, some of the standard setups are failing. I added JBR (Jump-Base-Reversal) and DBR(Drop-Base-Rebound) to my own nomenclature this year (these are basically OGR Opening-Gap-Reversals in Landry speak). A couple of Vad's Friday trades were of the DBR variety..

    http://tradinglog.realitytrader.com/

    [09:33] {Threei} Long Setup: MCP .50 break small shares
    [09:33] {Threei} looked up and it was .70
    [09:33] {Threei} anyway, see if pulls back just under .50
    [09:33] {Threei} for the second chance
    [09:33] {Threei} small shares!
    [09:33] {Threei} here it is
    [09:33] {Threei} same setup
    [09:34] {Threei} if stays above .35
    [09:34] {Threei} 1:1
    [09:34] {Threei} and more
    [09:34] {Threei} 1:2

    and REE...

    [09:39] {Threei} Long Setup: REE .10 break half lot
    [09:39] {Threei} stop .95, ratger about .40

    Both stocks were lower on the day, but that's irrelevant, it was the ability to assess at the open whether it was going to be a DBI or a DBR (ie OGR)AND to have a STOP in place if you choose the wrong direction. BUT it's DONE in 5 min...one way or the other....

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  64. Anyway, I think in the case of TGB, the astute traders (assuming astute traders trade TGB), were those abandoning just following the October flash crash, I know first-hand there were some who exited quickly, and other unfortunates who's stop limits were triggered at market price (big ouch!)...

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  65. Kyle - MCP - I just can't imagine trading that way unless you've got the tools and I don't consider mine to be anywhere near that caliber.

    FWIW

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  66. Some thoughts from the blogosphere on rare earths with some degree of specificity thrown in:

    "China Shen Zhou Mining (SHZ) -- +1,083.09%

    Shen Zhou is basically a fluorite producer in Inner Mongolia with additional copper, lead and zinc resources in that same region and Xinjiang. The stock was bouncing around the $1-level from January to October, before it took off with the big theme of the fourth quarter, "Rare Earth Metals." The company only has a very small exposure to rare earths, if anything at all, and the stock price will likely come down hard when the theme is over and momentum traders exit the sector. Fundamentally, the stock should be fairly valued at around 2-3x book value, which currently stands at $0.86/share."

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  67. Everyone: Here is a webinar that explains just about everything....ie: Landry's system.
    Notice how it dovetails with yesterdays video.

    http://www.worden.com/Webinars/10_26_2010

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  68. cp - Good catch man. These are all just POS trading vehicles that have been run up because there is a whiff of 'rare-earth' exposure and if some deputy, under-secretary of jerk-off in China mentions that 'China may review the policy on rare-earth exports' at some cocktail party then the share price may be headed towards 0 overnight.

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  69. The Cara outlook for 2011:

    'In early December I opined in this space, ”In fact, the S&P just hit a two-year high, and looks to me to be going higher – from 1240 to perhaps 1290 in the next quarter.. If the earnings to be reported starting around January 10 appear in-line with expectations, then I think 1290 on the S&P is a good target. Then we have to look at the next reporting period that starts in early April.”

    'If all goes well, I think 2011 will see continued improvement in the major equity market indexes. Based on improving corporate fundamentals and modest global economic growth, I believe the S&P 500 could lift from 1250 at present to maybe 1450. I think there are too many problems in the financial sector for the S&P to return to the 1576 high point of October 2007. I don’t anticipate a 1500+ level for the S&P 500 until sometime in 2012.

    'Therein lies my personal strategy: over-weight Energy, Basic Materials and Industrials/Transports; equal-weight Technology, Telecom, Utilities and Consumers (Discretionary, Staples and Health); and under-weight Financials, for most of the year ahead. Anticipate volatility that will lead to a couple draw-downs averaging -12% to -18% during the year, protecting your portfolios with temporary inverse ETF’s and high cash positions at those times when both trends and cycles point south.

    'But in the big picture, I have turned bullish generally, believing that the European Union will manage to hold together the Euro and also manage to stifle the deleveraging of bank assets in real estate and credit derivatives positions. The US banks too will under-perform, but, with the help of Fed Chairman Bernanke, also manage to survive these asset pricing issues.'

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  70. Hey, how's your high speed rail coming along? aside: Is it really true that Cali passed a law saying batteries must recharge themselves by breathing air?

    Anyway, looking forward to 2011:

    Traffic snarl-up strands 2,000 vehicles on highway
    (Xinhua)
    Updated: 2010-12-31 10:28

    "LANZHOU - A traffic jam caused by ongoing road works and severe weather has stranded nearly 2,000 vehicles on a main highway in Northwest China's Gansu province, the local government said Thursday."

    http://www.chinadaily.com.cn/china/2010-12/31/content_11781640.htm

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  71. Kyle - I believe in your cocktail party theme, the value of napkin engineering, and also that ships in a bottle can't sail.

    These are common-sense themes that repeatedly ring true.

    So I cringe at the potential thought by some of GMO being an REE play, aside from the fact China is a net importer of moly(OMG, now classified as a strategic metal by cocktail partiers) and large portions of the country are essentially one giant construction zone.

    Asia absolutely adores steel, especially stainless, and I can understand why.

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  72. Finally, BC's thoughts align with mine. Maybe it's time I reconsider my strategies?

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  73. Ah....Why haven't the futures opened? Is there a future...

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  74. The SHZ - For me it's not a question of if, but when this one (and many others) abruptly return to previous valuations.

    I guess I should break down and enable my brokerage access to margin so I can short the piss out of these.

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  75. Absolutely, our history lies in the future!

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  76. Just think of how many "POS trading vehicles" might have been missed in the late 90's, and were, by people who had the impression that fundamentals mattered. Sure, they gave it all back and then some in a short time in 2000, but a reasonable money management scheme, taking partial profits and stops added countless wealth to those who were smart enough to use them.
    I imagine all of China will be a great short one day, as will NFLX, AAPL and a host of others, but that doesn't stop traders from profiting on them while they run up.
    I wonder, how many traders thought oil would someday revert to it's former lows. Like oil, they aren't making new rare earths anymore. Hence the name...RARE.

    I have painted my crystal ball black with a white 8 on it.

    BTW CP, GMO is warming up in the bullpen. Looks like it might be getting ready for a set up.


    FF

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  77. "David, The safest entry is when price clears the top of the knockout/pullback bar."

    OK, but how do you determine which bar is the knockout/pullback bar?

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  78. FF - GMO is a play on fundamentals, that's more than can be said when making a case for REE's IMO.

    When I find a tire on my truck with a slipped belt, I ditch it and get a new tire.

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  79. knockout/pullback bar - I was beginning to think it was as plain as the nose on everyone's face!

    Anyway, I'll just stick to what I think I know and what works for me. As a courtesy I'll also post all my trades real-time and explain my reasoning as best I can without reference to nebulous indicators, just in case someone's interested.

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  80. LOL! Watch the webinar! It isn't too long and it explains everything pretty well.

    http://www.worden.com/Webinars/10_26_2010

    FF

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  81. I don't know....REE isn't on the set-up list, which means it either isn't in a trend or it is, but isn't pulling back. You know I don't confuse the issue with facts...I mean fundamentals.

    It is rather plain. Watch the webinar!

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  82. OK, I'll watch that webinar tonight. Thanks for the ideas, Craig!

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  83. I have just listened to the Quint Tatro's interview and also found it very interesting. “Trading the trader” is an idea that I came across a few times before, but for some reason it never stayed with me. Hopefully, this time it will stay for good. During one of my previous chance meetings of this idea, I called it “level 2 thinking,” and that's what I'll be calling it from now on. With the trading experience I have now, I do agree that failed “level 1” patterns constitute safest entries, and these are the kind of entries I'll be looking for now.

    So let's start with TBT, into which I am seeking an entry now. The 1-month intraday chart shows a clear support at $37.50 that was broken on Friday. If this bearish sign gets invalidated and TBT reverts higher next week, then it should be set to move to new 6-month highs above $40. Hence, I am changing my buy stop limit order to $37.55/$37.50 and increasing it to 4% of my port.

    Next CRM. The 1-month intraday chart shows a clear support at $132 since December 20 that was broken on Friday intraday. If CRM rises above $134 next week (breaking out to a new 5-day high), then I will close my current $150 put on CRM and will instead buy some CRM outright with a stop at $130. In order not to miss that move while I am sleeping, I am placing a sell stop limit order on my $150 put at $15/$14.50, which is luckily the price I paid for it a few weeks back (so if I do get stopped out, I'll be stopped out flat).

    Next NFLX. The 1-month intraday chart shows a clear support at $177 since December 14 that was broken on Friday. If this bearish pattern gets invalidated next week and NFLX rises above $180, then I'll buy a call on it or will buy some shares outright.

    Another takeaway from the Quint Tatro's interview is the trading journal, which all trading luminaries have advised us to keep (Alexander Elder, Vadym, etc.). Today I was finally convinced that it is a worthy thing to do, especially because I realized that I can do that without any loss of time! I will simply keep a file where I will save all my posts on this blog that describe why I am opening or closing my positions.

    Good trading to all in the new year!

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  84. 84.1 MB -> 7hr:39min download time @ 3.1KBS

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  85. David - I keep an spreadsheet file record of my trades with applicable notes and dates. As an added benefit, I find it's fairly easy to tally when I'm not tying up my processor downloading videos and charts.

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  86. Also let's watch AIG, which is having a failed bullish pattern in progress – a break out above $57 on December 27, which lasted only for two days. If the stock reverts down below $57 next week, then the failed bullish pattern will be complete and it will be time to short AIG.

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  87. Guys, how about we all help each other and share the failed "level 1" patterns we find in individual stocks (i.e., patterns where a beginning TA trader would expect the stock to move in one way, and the stock instead moves in the opposite way) that constitute good "surprising" long or short entry points.

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  88. David- Good idea. I'll keep an eye out for them. I already had CRM nailed.

    FWIW, I'm sticking to my 2011 bullish call...sans the high flyers. Best thing that could happen would be a nice "orderly" (a Landry term) pull back to the rising channel, say 1220-1250ish, perhaps a little lower just to get the bears all fired up again, and a quick recapture to tap the bears an off to the races.

    Please don't forward that last sentence to my 8th grade English teacher :)

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  89. I'm pretty sure my eighth grade teacher is long gone, probably doesn't have an e-mail account either. ;)

    I like the pullback story, been trying to add for a long time now and about to give up on the idea. For me, that usually translates to wading into a new pool full of gators.

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  90. CP- I for one really enjoy your trades. Keep them up! I'll do you the same favor ;)

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  91. 2nd- Can you clean us up going into the new trading year? I'm pretty sure I can find a silly picture of Harlan if it comes to that.

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  92. So we have the EURO tanking USD rising, crude flat, and the ES up a tad. Interesting.

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  93. Yep, it'll all be different in the morning, 180* about face.

    Throw Harlan's photo up there, with his Christmas gift if you've got one.

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  94. Oh Man, CP, I remember the dial-up days.
    Bummer.

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  95. Interesting, interesting take on Natty. Really explains MOG's take better than I can. Not to long to read or download.

    TOF- Get up to speed on this brother!

    http://www.theglobeandmail.com/globe-investor/investment-ideas/features/2011-market-outlook/natural-gas-costs-unlikely-to-remain-low-through-2011/article1854785/?cmpid=rss1

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  96. It amazes me this doesn't happen considerably more often, these alcoholics are famous for making hot approaches:

    "NTSB: American Airlines mishandled plane data- AP

    Federal officials investigating an incident in which an American Airlines jet went off the end of a runway say the airline improperly downloaded information from the plane's flight recorder before turning it over to the government."

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