Thursday, May 12, 2016

Churn and Burn

The market had a huge up day on Tuesday, the gains were entirely erased yesterday, and this morning so far we have recovered half of yesterday's losses.  Some people are calling yesterday's action a bull trap; I'm not a fan of making calls based on the action of one day.

The perma-bulls get excited every time the market is up multiple days in a row near highs and then quiet down when the market has a natural pullback.  The perma-bears take every piece of information, data, Candlestick, etc., and spin like if it's 2008 all over again.

The fact is, the SP500 has not been able to break these levels in 15 months, flat is the pain trade, a big churn and burn with most not having anything to show for it except losses.  The market has a tendency to move higher over time, so you always have to give the benefit of the doubt to the bulls.

BV, BLX, ACW, SSTK, BTE, CTRP, CP, LGF, are the stocks on my watch list today.

The rules are simple;

  • Only get involved if they go through yesterday's high plus a few pennies.
  • Based on the chart patterns, the stops are close and clear.
  • Either the market will get you in or keep you out.
  • I only play this list one way, LONG.
  • Stocks move in momentum burst of 3-5 days (stockbee), you want to buy on the first day and start unloading on the way up and on days 3,4,5.
  • You are going to be wrong half the time.
  • Position size makes all the difference in the world.
  • I work with a price stop and a time stop.
  • Stocks in the short term move from 52-week lows, 52-week highs, all time highs, etc.
  • Contraction leads to expansion, this happens at lows, highs, middle, etc.

My opinion and outlook are subject to change as new information comes in. 

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at or 646-480-7463.


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.


  1. Good points, Frank. You have an interesting market approach.

    A few remarks:

    1. You have a list of stocks that are in a range conraction stage and you anticipate a range expansion. Is a few cents above yesterday's close really considered a range expansion? I tend to take long anticipation setups only when the setup, the industry and the market are above their 10-day EMAs.
    2. What about all the fake moves near market open. For example, I have a rule not to take a signal in the first 15min if we are in a choppy or bear market, because of the many fakeouts. Strong bull markets forgive all sins and anything is allowed there.

  2. a few cents to me yes, especially in a certain type of set up, that i won't get into.
    I normally don't buy within the 1st 15 minutes unless i'm really convinced about the set up, and when i do is normally the big liquid names like lnkd.. which is exactly what i did on 5/10
    I have written about the first 15 minutes before, today i just did not put it.

    when you only take stocks above their 10day ma, strong industry, and every other rule you can imagine, your win ratio is still? you still get fake outs on stocks in strong industry, you still get fake outs when the market is above the 10day...I think the type of set up you are trading in the current market environment is a little more important, and that does not get talked about enough...many want to trade the same set up, they read in a book that used to work 25 years ago, and they want to do it in every market.

  3. I have a lot higher success rate with long setups above 10EMA. Notice that those setups take into account the current mkt evironment because they also require the industry and the general market indexes to be above 10EMA.

    I totally agree with the concept that different setups work in a different market environment. In fact, my next book is about that.