The Power of Effortless Trading

Hi Einstein's,

Okay, who really wants to learn to trade? Why is it so damn hard? Why aren't u making any money? Why are you at best breaking even? Stay tuned....

For those who think its easy to become a great trader, please remember these famous poets and their devine words...

It surely is a long way to the top...



the reason I bring this up? I have been out of service for a couple of weeks and dealing with matters of a personal nature... No I am not in rehab. (that's for quitters) But I will be on sabbatical for several weeks. I don't know that I will have capacity to do much "blogtification" but I will check in from time to time to see if anyone new is posting or reading.

please enjoy the number 1 rock video of all time.

also for those who may have been interested- I did finish most of my sons Halloween costume so here is a picture of him doing his best to Bring honor to our family and the Emperor.

Hard Times Flush the Chumps.

I would consider the last 5 trading days as an indication that the markets are going to crash next week...If I was a chump. Since I am in the non chump classification I will simply chalk up recent price action to "distribution" or noise. In reality its only hindsight bias that ever really gives us a clear enough picture of history. We humans like to make sense of everything and have it all figured out. Why? So we can sleep at night, so we can feel smarter than we really are. I do know this; panic over Gold, Oil, China and the toys little Johnny gets in his Christmas stalking this year has not paid off for the bears in the past 4 years. So why get excited about a little sell off? Its like my friend St. Thomas says; "Price is King"

Kenesis Aequus Rex

She's been a swimmer since the flood... What's wrong with you?

Trade What You See...

I'm done talking to you people! Just look at the chart and do what you are told. Stop listening to mad money and wasting your time reading the wall street journal. Just find a nice 5 year break out like this one and take a position. It is that simple.

My bear market trading plans have gone up in smoke....for now that is.

Climbing Jacobs Ladder

Yesterday I talked about the advice that was given me by my 6 year old son, Jacob. He told me that it was time to start looking into Biotechnology and the like. So what did I do? I did what any trader would do with the advice he was given by a 1st grader... I laughed and posted something on my blog. But then I decided to be teachable, and avoid making the mistakes my parents made with me. I sifted through Bio-Pharma stocks all morning. I will share with you the one I like best. Please notice that the chart below is a screen shot that I took this morning. If you look at the stock price right now it is already up about 5% from the point I decided to watch it for a break out. As far as I am concerned this is about as good a breakout as one could expect. Check out VIVO. I am looking for a close above $29.50

Never send a monster to do the work of an evil scientist

My son has developed an interest in chemistry. I asked him why he was constantly trying to detonate various home made explosives in his bedroom... He just responded by telling me that he didn't have time to explain things to a novice. He did tell me that he thinks Biotechnology investments look good for a tactical addition to my current allocation in equities. Well since he has had 573 good trades in a row I decided I would follow his lead. So tomorrow I am going to be looking for some good prospects. Help me people- what looks good in Bio-pharma stocks right now? I don't have time to search on my own and my son charges me $100 bucks per stock he advises me on. What can I say? I taught him well.

Who will blink first?

Well I must admit I am a little nervous about the Fed meeting tomorrow. I honestly can't say I see overwhelming conviction behind the movement of the major markets. I have learned that I really don't need to understand the driving force behind any move. Yes I am still short the Dow using the ETF known as the "Ultra short" DXD

DOW Below 12500 before Oct 1st 2008

I never call my shots but if I did I would say that the DOW is just starting its next big push to the down side. I drew a nice little channel that uses the last 3 tops we have had for its upper extreme. I see us creating that 3rd high today. I can't help it but I am bearish for the short term. even though I always say that day to day movement is nothing but noise. I can hear a growl behind the din and it's coming from the bears. If you don't see it that way I want to know why. what is it that makes you so intent on being wrong? Talk to me America!

This is how a military pilot says "Extreem peril is imminent"

If this Air Force Jockey were a Central Bank Chairman it would look similar but the radio transmission would read back something like this...
The Federal Reserve Board on Friday approved actions by the Boards of Directors of the Federal Reserve Banks...decreasing the discount rate at the Banks from 6-1/4 percent to 5-3/4 percent, effective immediately.
In reality the message is the same from both the Pilot and the Banker... What is that message you may ask? I think you get the point but it’s probably something like the following… "Hey everyone; don't look now but we are about to take it up the tail pipe! Repeatedly!"

Needless to say but I am still Bearish on the broad market. Sure next week might turn out more bull than I think, but thats a big part of being a good trader (being wrong, sometimes the majority of the time) Eventually we get on the right side of the market and have the nerve to stick it out. until then we shut down the loosing trades as fast as is realistic.

It's Friday, I'm short the dow and I will now do the happy dance... In true tech geek fashion!!!

Thanks to the Market and John Raker!

Game over man game over!

After today's fed decision to leave rates alone for six more weeks it was any ones guess as to what Uncle Ben and the boys really think. I know that the last thing you need is one more egg head telling you what to think... But here I go anyway. The Fed is lost. They don't know what to do. everyone wants to ignore the fact that there is no way in hell the US government can meet its current debt obligations and we can't go on printing money forever. The credit crunch that started with NEW and a bunch of its loan shark competition capitulating is just getting into full swing. Ben can't admit it because he doesn't want to fuel the fire. He knows where the bodies are buried but won't own up to the harsh reality of the American self destruction cycle and the role that all his big time banking ass pals had in our walk down the primrose path. I am ready to short this market right now! In fact I reentered my new favorite ETF today DXD. Could I be wrong? Yes. If there is one thing I have learned about the market is that it can not be reasoned with. So like always my stops are in place and I am still looking for the next bull market.

If you don't know what the picture has to do with this post; you need a smartbomb of a different kind. But for the one person who reads this blog... click on the post heading and the sound byte will jar what’s left of your barely sentient consciousness into recall.

Grin and Bear it...

You may have felt like you were listening to an alien when I was writing about flight to safety and asset allocation… I’ll admit that even as I was doing it I was feeling a little cowardly. But now I am pleased with my choice. With the Dow giving back all of its recent gains this week most of us are a bit shocked.

Right now my only active trade is a position I took on Wednesday. Here it is. I went long a few shares of the Proshares Ultra short ETF for the Dow. Symbol DXD. This is an ETF that seeks 2 times the negative performance of the DJIA. In 2 days I am looking at a modest gain of about 7% Not bad.
That’s it for now… Lets see where next week takes us.

Flight to Safety

It is official. I have no trades going. All my money is safely earning 5% or well allocated in a diversified mix that even Harry Markowitz would be proud of. I'm still looking for good trades so please everyone chime in here and give me some ideas.

Bubble, or no Bubble?

There are a lot of people calling this market a bubble. I for one don't think it is. Let me tell you why. EARNINGS. in the tech bubble of the 90s we had stocks that had never turned a dime of profit trading at 60 70 or even 100 dollars per share. that is not a good thing for long term holdings. In today's markets we have a lot of things going for us that we didn't back then. In the end I am going to keep it simple. looking for companies who have a one year earnings growth rate that exceeds the P/E Ratio. I.e. if a stock has a P/E of 100 and a earnings growth rate of 100% in the last year I am OK. If corporate earnings are less or nonexistent, I am hot water when the market turns. Remember earnings drive prices and when we don't see earnings it is something else driving that demand. If we enter a bear market the company with no earnings will crater as smart money moves to value. so watch for good earnings on your bullish trades and stick to proper position sizing.

Summer Time Rolls

Well now. In most circles that are replete with neophytes of trading there is always this expectation that the summer time is the time that all the slack jaws in the market just loaf and wait for fall to roll around. For all my fans that are wondering; I am long and not doubting myself. Stops are in place and I give the overbought condition of the indices no thought. You may remember ABM from a few posts back. Yes I am long and pleased with the trade. when I last looked I was up about 10%. A rain maker? No. A good trade? yes! I also went long BTU about a month ago. I like coal for future upside... Why? Most of the electricity in the USA comes form coal fired power plants. If I am wrong; oh darn. I bought again on a later breakout; thus doubling in. I opt for a doubling method when I scale in to stock trades' unless I can't come up with the needed money. If any body has questions...Reply to this post and we can shoot the breeze. Good luck this week in the capital markets... Oh and one more thing. You are not smart enough to match brain pans with the market; so don't try. Just trade with confidence and let time tell the story! Your pal- DD

If you are coming here to learn something...

Beware of the man who works hard to learn something, learns it, and finds himself no wiser than before. Kurt Vonnegut

Trade Like a Ninja

Don't let recent movement in the market detour you in your quest. A Trading Ninja is always confident in his plan. Pounce on the enemy, and eliminate doubt. Who is the enemy? You can find the answer to that question by looking in the mirror, or on Mad Money. Don't give in to the temptation to think that something needs to change in the market before we can begin making money.

THE MARKET NEVER CHANGES. The only thing that changes is how we perceive the market, hence our beliefs about the expected outcome of our actions will change. Stick to what makes you money. As traders we can not afford to fall prey to self doubt. YOU are the best judge of the market concerning your trades, and your money.

Stop and Smell the Roses

While the market makes up its mind; check out this tasty lick. I am looking at FLWS for an ascending triangle breakout above 2 year highs. The breakout needs to happen on volume but you can make the call on your own.

Got Shorts?

Well we have had quite the week. I have talked to lots of traders about what is going on and most of us agree that the market has most definately moved. What I can't believe is that nobody told me it was going to be to the downside.

If you are going into Monday short, be careful and willing to admit you were wrong. Its one thing to say the market is bearish now because of deep pull back. It is quite another thing to make money on that belief short term.

I am still in some bullish positions after all this but I am not treating them any differently than I would if the market was still in the calm seas of the last 6 months or so. Right now I am doing 3 important things...

1. Stick to my plan
2. Search for the new bull sectors to emerge
3. Be patient and enjoy life

That is all for now...

The Market Reveals its Remorseless Fang

Greenspan is a Jack Ass! Wow! How intelligent do you have to be to know that a recession is coming? if the world doesn't get hit by a comet we will have a recession at some point in the future. Alan- just go back to your can of Vienna sausage and leave the public commentary to Uncle Ben.

China's Government... Communist Market Manipulation. Yo East side!

The market is a lot of fun. Lets talk more after the week is over. And if you are wondering...I wasn't stopped out of anything yesterday. More on that later.

Did you all see the VIX today? that was pretty impressive. If it gets up to a 52 week high today you may as well go jump off of your balcony... Not really. NO please don't!

Strong Stocks Near Bullish Breakouts for continuation.

Here they are, no frills or smart ass commentary. Bullish stocks with my price alerts for new high breakouts. Plain and simple. If any of these breaks the following price points on good volume- I am in as long as the new high is confirmed on the day after the new high is set. These are "position trade" set ups in the classic fashion.


AMR Alert @ $41.06

NCTY Alert @ $40.00

FTEK Alert @ $30.00

DLB Alert @ $35.00

COL Alert @ $70.00

DFR Alert @ $17.00

Set your alerts and watch for the emails to roll in. If they don't, they don't. I can say no more.

Have a nice day.

Presidents Day = Nice Break From Trading

Today was a welcome holiday from monitoring my active trades. If you found frustration with the lack of market activity, you should seek professional help. I promise the markets will take their pound of flesh by and by. However, if you found your self enjoying life today, there may be hope for you and your future as a trader.

One final note for anyone who may read this post from foreign soil- I wish you a hardy "piss off!" from all the dead presidents of the US and A- Go eat some French jungle rot AKA Brie cheese

Damons Prefered Trading Strategies

I am often asked what I trade. "Are options better, or are stocks?" You can answer that question for your self. If you want to know how a pro does it, I will break it down and give you a sense of what makes the Smart Bomb tick...



I normally have between 5 and 10 active trades in a single account at any given time. The break down looks a little something like this.

• 5 long stock positions
• 3 synthetic long stock positions – 6 to12 months away from expiration
• 2 short term option plays. Usually single leg (directional) straddle, strangle, ratio spread or spread that I have legged in to.

I have found that this fits my style the best. The belief that one strategy is superior to another is simply not true. I used to think that I had to trade nothing but options to crank out superior returns. I tend to shift my thinking a little from time to time, but what you see here is a reflection of my style. I personally have associates that produce stellar returns using options only. I also have seen others replicate those returns by simply buying and selling stock.

This may come as a shock to some, but I have never seen one shred of evidence that would substantiate a claim that “option traders make more money than stock traders”

The best traders find a good mix that matches their own “Inner Holy Grail” and go with that. My holy grail is to trade stocks primarily- with options as a supplement.

BAM! There you have it.

The recent trade on ABM and the topic of 2 previous posts was a plain and simple long stock position (I bought shares) and I will buy more when it pops again. Here in the big time we call that a "scale in." That's a different subject all together.

The Super Bowl Indicator

OK- I realize that I am a bit of a Jonny come lately with my commentary on the outcome of the super bowl. For those who don’t know what I am talking about, please go buy a copy of Barron’s Dictionary of Financial Terms and look up the Super Bowl Indicator. Sorry, I don’t have time to explain it.

I have seen all kinds of chatter this year from people who know the legend and those who don’t. Anyhow, here is the bottom line: It doesn’t matter!!! Are all the talking heads listening? IT DOESN’T MATTER!!! The funniest thing is that if you know the indicator and all the lore that surrounds it, you also know that according to the legend, the Super Bowl didn’t determine the posture for the coming year. When the semifinals were over, the fate of the market was sealed. Both teams that played in the big game last Sunday are teams that, if victorious, will cause the market to rise in 2007. So again, it doesn’t matter. Oh, and even if it did matter, it still doesn’t matter. Indicators are right until they are wrong.

Nothing takes the place of price trend in the major indices! I will not apologize for it. Watch the market move and trade accordingly. I am so very tired of listening to people pontificate on market internals. Moreover, it means nothing - or did I say that already?

Listen! Dwellers of the Trade-o-sphere! When all of my bullish trades get stopped out, I will rethink my posture. For now, let us just relax and ignore the noise.

ABM Breakout Continued...

As it turns out, ABM did confirm the "nearly perfect breakout" from Monday. Any time a stock hits a new 52 week high on good volume I give it one additional day to confirm. I actually purchased this stock on Tuesday morning. I like to keep it simple and give my self plenty of room to retrace. I bought in at $25.38 and I placed my sell stop at $23.75

What is the next step? In most cases I am looking to own the stock for as long as the trend holds up. I am not using a trailing stop loss. I always adjust my stop loss orders after market close. I don’t anticipate an adjustment of my stop in this case for a few days or even weeks. When the stock bounces off of a new level of support I will raise my stop loss. Until then I will keep my initial stop in place.

A Nearly Perfect Breakout in ABM

I mentioned this stock over the weekend as a possible candidate.

ABM is technically exhibiting all that I look for in an entry. If we observe the increase in volume since the company last reported earnings and combine that with a new fifty two week high; we are looking at a perfect set up for the entry tomorrow.

I am simply looking for confirmation of this new high in the first hour of trading and I will take a long position in this stock. Buy high to go higher.

Smart Trader, Smart Rules and Smart Results

As my first official entry on the topic of trading I wanted to do a little explaining. I have no intention of being exhaustive in this entry, but I want readers to understand a little more about me and my style. I think the first thing that needs to be explained is the name of this blog. A "Smart Bomb" is a very destructive weapon in the world of firepower, but I live in the world of trading. So I guess you could say that a "Trading Smart Bomb" is a metaphor for a trader who is strategic, accurate, effective and most importantly can hit the target. The amazing thing is not what happens when the bomb hits its target... It is the amount of planning, cooperation and discipline that it takes to get in a position to drop the bomb in the first place. I could go on for hours but lets just say that I consider trading a lot like combat. So then, a smart trader has smart rules, smart habits and smart routines. Do all this and you get "smart" results.

If you have not guessed by now I was born in 1973 hence the "73"

As far as rules go lets keep it simple for now. I certainly didn't create the guidelines I am about to present, but any trader who has been around the block a few times can tell you that being a great trader is not about reinventing the wheel. The governing principles of my trading are time tested and proven to be vital to staying in the game not to mention making money. Here are 5 rules you can't break for long (and still make money) any more than you can disprove the law of gravity without breaking your neck.

1. Trade with the TREND- Trade what you see on the graph not what you wish you saw.
2. Size your position appropriately
3. NEVER add to a looser. NEVER! NEVER! NEVER!
4. Take 100% responsibility for your trades, and trust your own judgment. Don't expect to trade like me. Only I can do that, and only you can trade like you.
5. Don't argue with the market. If you are shown a loss- take it and be glad it wasn't bigger. The winning trades are out there but you cant get in them if you are too stubborn to change your posture. The market is never wrong.

If this list is confusing you are in denial and probably need to stop trading for a while. I will elaborate in much greater detail as time goes on, but for now let those 5 rules be a foundation.

* * * NEXT WEEK * * *

I am in a holding pattern for Monday. I don't have any reservation about taking new trades but I don't see myself entering anything until later in the week when I can see what kind of confirmation I get on this bullish long term trend we have enjoyed since things turned up last summer. Now if things do pop to the upside... Here are some stocks that I think are ready to bounce off support or break resistance.

IFF-EV-COH-AMG-MLHR DAVE-URBN-ADSK-ATHR FTEK-ABM-PVH-VTIV-COL

If the market stays flat going into Monday and Tuesday I don’t expect a lot of buy signals from these picks. Either way I think they are all fit for adding to a watch list. Good Trading

Smart Bomb 101

I really enjoy talking about the markets, economy, finance and most of all trading stocks and options. If you are a reader of this blog and you would also like to participate by posting opinions or asking questions, please follow a few simple guidelines...

1. Be polite
2. Be funny
3. Be intelligent
4. A little irreverence is good once in a while