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US home builders’ bonds have become the biggest losers in the market for debt, with ratings below investment grade.

The debt sold by D.R. Horton Inc., KB Home and other construction companies has fallen an average 3% since May, leaving investors with losses around 1.1% for the year, including reinvested interest.

It equals the worst performance of the 37 industries tracked by Merrill Lynch

Channeling is one of the most reliable and accurate trading techniques that provide traders with precise entry and exit points as well as stop-losses and take-profit recommendations.

Channeling stock is a stock that moves up and down in repeated waves between two parallel lines. A lower line is called a support trendline and an upper ? a resistance trendline. A support trendline connects the series of lows and resistance connects the highs. The area between these two lines is referred to as the channel. We need at least 4 dots (2 lows and 2 highs) to draw the channel. The more times the price touches and rebounds from the support and resistance lines without penetration, the more significant and reliable the channel becomes.

There are three types of channels:
– An ascending or a rising channel makes consecutive higher highs and higher lows.
– A descending or a falling channel makes consecutive lower highs and lower lows.
– A horizontal channel or a rectangle channel makes horizontal highs and lows.

Channeling offers several different efficient techniques for each type of channels. The most effective way of trading channel is to trade in the direction of the channel, going long at rising channel and shorting the falling channel. There are following basic rules of channel trading:
– Buy (or cover short position) at support level
– sell (or take a short position) at resistance level

Channel is considered ?trade-able? if it consists of at least two lows and two highs.

Following is the real life example of how you can profit using this simple technique. Let?s look at the chart of QQQQ for the period from the January 2004. We can easily locate two relative highs: 38.54 in January 2004 (1/20/2004) and 40.33 in December (12/15/2004) and two relative lows: 32.52in August 2004 (8/13/2004) and 34.98 in April 2005 (4/29/2005). Now we are able to draw two trend lines ? a resistance line connecting two highs and a support line connecting two lows. These lines are near parallel giving as a perfect channel. Following our basic trading rules we can place a buy order when the price crosses the support trend line and sell when the price crosses the resistance trend line. This simple technique will provide you with the perfect trading entry/exit points: sell on January 6, 2006 at 42.5 and buy on May 23, 2006 at 38.65.

There are several ways to locate the channeling stocks. You can manually look through charts or utilize the pattern recognition services. Following links provide you with the list of channeling stocks and ETFs.

http://www.thegreedytrader.com/Risingchannelingstock.aspx
http://www.thegreedytrader.com/Fallingchannelingstock.aspx

To narrow your search you can use an advanced technical analysis filter to find a list of channeling stocks and ETFs with price testing the support or resistance line. For example, use the following links to find a list of equities with rising channel pattern with price near support level and equities with falling channel near resistance.

http://www.thegreedytrader.com/RisingChannelSupport.aspx
http://www.thegreedytrader.com/FallingChannelResistance.aspx

In addition to the basic trading rules a channeling technique provides risk management in form of stop-loss rules:
1. If you enter a long position at a channel support level, set a moving stop-loss slightly below the support.
2. If you open a short position at a channel resistance level, set a moving stop-loss slightly above the resistance.

There are additional trading rules and techniques that can help to improve performance and reduce the risk in case of the channel breakout, false breakout and channel narrowing.

Breakout appears when price breaks through the support or resistance line. You can tight protected stop-loss order to limit your risk. Some traders Read more…

Penny Stocks.

Even the name of them hints at the promise of something for nothing!

Spend a Penny – get back one, two, ten dollars!!

Penny Stocks investing is one place and time where you MUST leave your emotions at the door and become utterly ‘Spock’ like.

Spock like?

Yup – use pure logic! No emotions.

See, you need to always keep in mind that these penny stocks are companies starting out in the business world, not the big dogs trying to make another penny. They aren?t necessarily bad investments, but they aren?t good enough to get an investment banker?s money in an IPO.

Be realistic about penny stocks and realize that you won?t find the next tremendously big thing here, but you can find some exciting opportunities with good work.

So what to look for, what are the signs that would indicate a Penny Stock investment worth considering?

? A consistently high volume of shares that are actually being traded is one thing that you should definitely look for in a penny stock investment. But be careful here, because it’s possible to skew the results of average volume trading, go with the consistent volume to get a good idea of what the stock will provide as an acceptable rate of return. Also, make sure the liquidity of the penny stock is something you make a note to look at, how many people are selling and buying everyday? Don?t end up being left with ?dead money?, effectively money that you can only release by selling the penny stock at the bid (dumping, in other words) and losing money because the price is diving.

? The company?s profitability is also very important. If it is a start up company that is running a loss then see why they are losing money. It’s not at all uncommon for this to happen but you need to assure yourself that they can manage it and turn it around or will they continue to struggle and lose money for your future. If they grow then your investment grows. Try and make time to do some in depth research to find the right companies and find the best return you can get for your dollar. The more diligence you put in at the beginning – the more profit you look to take out at the end.

? Understand the danger of penny stocks, the speed within which they can and normally do rise and fall in value. Always create an exit plan on any investment (i.e. knowledge of “at what price you sell the stock regardless”), have a solid plan on where to start and make sure it includes where exactly to finish. If you buy a stock and make a 20% return on investment then you are doing extremely well. Do it right five times and you are in the money, wrong five times and you may very well be done. Listen to what Read more…

As investors, and we all are investors these days, it is important that we understand the idiosyncrasies of the Stock Market pricing data we use to help us in our decision making efforts. On Wall Street, investing can be a minefield for those who don’t take the time to appreciate why securities prices are at the levels that appear on quarterly account statements. At least four times per year, security prices are more a function of institutional marketing practices than they are a reflection of the economic forces that we would like to think are their primary determining factors. Not even close… Around the end of every calendar quarter, we hear the financial media matter-of-factly report that Institutional Window Dressing Activities” are in full swing. But that is as far, and as deep, as it ever goes. What are they talking about, and just what does it mean to you as an investor?

There are at least three forms of Window Dressing, none of which should make you particularly happy and all of which should make you question the integrity of organizations that either authorize, implement, or condone their use. The better-known variety involves the culling from portfolios of stocks with significant losses and replacing them with shares of companies whose shares have been the most popular during recent months. Not only does this practice make the managers look smarter on reports sent to major clients, it also makes Mutual Fund performance numbers appear significantly more attractive to prospective “fund switchers”. On the sell side of the ledger, prices of the weakest performing stocks are pushed down even further. Obviously, all fund managements will take part in the ritual if they choose to survive. This form of window dressing is, by most definitions, neither investing nor speculating. But no one seems to care about the ethics, the legality, or the fact that this “Buy High, Sell Low” picture is being painted with your Mutual Fund palette.

A more subtle form of Window Dressing takes place throughout the calendar quarter, but is “unwound” before the portfolio’s Quarterly Reports reach the glossies. In this less prevalent (but even more fraudulent) variety, the managers invest in securities that are clearly out of sync with the fund’s published investment policy during a period when their particular specialty has fallen from grace with the gurus. For example, adding commodity ETFs, or popular emerging country issues to a Large Cap Value Fund, etc. Profits are taken before the Quarter Ends so that the fund’s holdings report remains uncompromised, but with enhanced quarterly results. A third form of Window Dressing is referred to as “survivorship”, but it impacts Mutual Fund investors alone while the others undermine the information used by (and the market performance of) individual security investors. You may want to research it.

I cannot understand why the media reports so superficially on these “business as usual” practices. Perhaps ninety percent of the price movement in the equity markets is the result of institutional trading, and institutional money managers seem to be more concerned with politics and marketing than they are with investing. They are trying to impress their major clients with their brilliance by reporting ownership of all the hot tickets and none of the major losers. At the same time, they are manipulating the performance statistics contained in their promotional materials. They have made “Buy High, Sell Low” the accepted investment strategy of the Mutual Fund industry. Meanwhile, individual security investors receive inaccurate signals and incur collateral losses by moving in the wrong direction.

From an analytical point of view, this quarterly market value reality (artificially created demand for some stocks and unwarranted weakness in others) throws almost any individual security or market sector statistic totally out of wack with the underlying company fundamentals. But it gets even more fuzzy, and not in the lovable sense. Just for the fun of Read more…

Openwave Systems Inc. provides Communication Service Providers (CSPs), including wireless and wireline carriers, Internet Service Providers (ISPs), portals, and broadband providers worldwide, with the software and services they need to build boundary-free, multi-network communications services for their subscribers.

Openwave has a very unique and valuable business in the wireless data market. It has a dominate market share of 50% in both the browser and in the gateway transitions for mobile phones. Both products are a core element in the data cell phone market.

Our philosophy is to own the critical elements in markets that appear to have revolutionary growth. In January 2004 we wrote an article saying the wireless revolution has begun. Today based on very recent guidance from Texas Instrument (NYSE:TXN) Qualcomm (NASDAQ:QCOM) and other third party data it appears that wireless data market is actually accelerating. That appears opposite common wisdom judged by the way the world equity market and Openwave stock is trading for the last month. Usually revolutionary growth acceleration is misunderstood. I believe that robust growth from wireless data will catch many people by surprise when it is fully recognized.

The browser and the gateway business are key?s to Openwave’s success. Again it is our philosophy to own critical monopolistic elements inside an industry. We often equate our philosophy to a roof over your head and the gutter that controls the flow of water. Most water when it rain will land on a shingle but will collect in high volume in the gutters. Thus a single gutter can control as much water as all the shingles combined. This model of finding the essential elements or monopolist companies, judged by the many top rankings awarded to us by third party profession indicates a very successful approach.

In wireless data market the gateway and the browsers form what we believe are that critical element in the industry with Openwave a dominate position in both those markets. This dominance of the critical element/monopoly creates a natural mote or barrier as Openwave is in a better position to bundle, integrate, and test its products, thus become a natural extension of their browser and/or gateway for every new service they enters. This bundled approach as Microsoft has proven over time not only has a higher comfort advantage for it?s users but also often could be produced at a far lower cost which the phone companies enjoy. These many economies of scale of a dominate player is attractive to the phone companies when they are both reviewing new or existing services. Put yourself in the place of a large carrier do you want to work with a new firm, with no proven history which would include additional integration, testing, billing plus on going maintenance or would you prefer an existing firm to increase their service or possibly just bundle the service into a existing product. That?s why it?s very hard for new wireless firms to make a presence in the wireless data market and the more established companies to consolidate when newer wire data services form.

It appears industry wide that the consolidators including Comverse Technology Inc. (NADSAQ: CMVT) and Amdocs Ltd. (NYSE:DOX) appear to have advantage over many newer companies. Both of those companies specializes more on the back end. The higher growth market for phones will be with the data services and in my opinion Openwave is the best positioned as the industry continues to consolidate.

About 60% of Openwave quarter is already booked not including about an addition 10% is pay as you go. That means Openwave needs about 30% of addition new revenues in the quarter. That indicates that Openwave has far smaller hurdle rate than most companies. The data supports that the number of new data phones growing combined with the rising usage of each phone with no new major competitive threats entering the market the probability of carriers to reorder is increasing.

Openwave’s high valued license revenues.

Last quarter Openwave reported that licensing revenues was over 50% of total revenues and it had 97% gross margins. The licensing revenues make up over Read more…

Within the last several weeks the Federal Reserve announced its long range goals for the economy and the stock market rallied.

But then, several days later, the Middle East ignited once more, sending markets sharply lower.

The Fed?s policies quite rightly inform stock valuations, because the Fed directly influences interest rates. When rates rise, investors have the option of moving their money to bonds, to CD?s, and to other interest bearing vehicles, and out of equities.

But what does the Middle East have to do with the value of Altria, parent company of Phillip Morris, maker of Marlboro cigarettes, and majority owner of Kraft?

Altria, along with most other big stocks dipped when investors heard about Lebanon. With world tensions rising, you?d think people would smoke more and Altria would spike on such news.

This example shows that markets overreact to events.

You can take advantage of this fact through diligent observation and patience because bad news is cyclical. There is regularity to it, despite its erratic appearance.

Before 9/11, for example, there was a period of unusual calm, an absence of bad news, especially for the United States. If you live in the Midwest you know that there is an eerie calm before storms, and you can take your cue from it, and seek shelter.

Recently, a stalemate was preventing progress in the Mideast, and pressures were building. The sensitive investor could have predicted there would be an aggressive change in the status quo.

Moreover, the Group of Eight conference was convening in St. Petersberg, and this event is usually accompanied by tensions and protests, with various factions Read more…

One of the things that separates successful traders from the majority of market participants is that they have a detailed plan that guides them when to close trades. For them, this is essential. It is fair to say that when a lot of traders buy shares they have little idea of under what conditions they would consider selling. It would also be fair to say that a fair percentage of market participants routinely adopt a ?buy and hold? approach.

Whilst trading routinely involves decision making, there are no more important decisions you have to make than when to sell shares. Many traders often overlook this part of trading or underestimate how important that it is.

Importantly, the outcome of every trade is dependent on the exit. If you enter in a timely manner and then exit poorly, the trade could very easily be a loss. If your entry happens to be poor but your exit is good, you might actually still salvage a profit, or at the worst, minimise a loss. The exits, and not the entries, determine the outcome of your trades.

Any form of backtesting will illustrate this point. You can take an entry signal but combine it with different exit strategies. You will quickly discover that you can drastically affect the overall results with only minor adjustments to the exit strategy.

It could be argued that you cannot even conclude that a particular entry signal is effective because the final results are so dependent on the exit strategy used. Bad exits can make a good entry look bad and good exits can make a bad entry look good.

Selling shares is probably the most difficult decision you will face but it is the most important. The decision is especially difficult when you are faced with a loss and all you want to do is wait for the shares to return to your buying price. The situation is made worse when the shares continue to move away from you, making your loss even greater than you would have ever imagined.

There are a number of reasons why people will not sell shares when they are faced with a loss. Consider the emotions in a person who is contemplating cutting a loss. Cutting Read more…

You know it?s absolutely crazy. Every time you think you understand the stock market, something comes up that makes you wonder whether there is any sanity in it at all.

I mean, just take a look at the way the DOW has been behaving of late. One would be forgiven for assuming that the market has been taken hostage by a bunch of aliens, aiming to wreak havoc on our investments!

It would seem that no sooner does the DOW Jones recover from a bad day?s trading it swings back into a disastrous trading the following day. And these wild swings appear to have spread to other major indices as well.

Exactly what is one to do under such circumstances and how do you protect your investments from being completely wiped out?

Well there appear to be two schools of thought as far as this is concerned and depending on your risk appetite you can determine which way to go.

The first school of thought is, move with the market, whichever way it goes. In other words, buy when the market is generally moving up and sell when the market is generally moving down

In this case short selling of stocks would be the route advocated by this school of thought. This is good advice if you actually know how to do so and have the expertise to come out ahead.

It is however a disastrous route to go, if you have no experience in this process, as it could quite easily result in complete loss of investment.

The second school of thought suggests that if the market is this choppy and undecided, then this is the time Read more…

While picking exchange-traded funds for you global portfolio, have you ever thought; ?maybe I should invest in the companies that develop and sponsor the ETFs?? If so, now is the time to take a stake in Barclays PLC the sponsor iShares which is the largest family of ETFs.

Barclays PLC (BCS) is a huge global financial services firm with 114,000 employees and Barclays Bank is the flagship subsidiary that traces its roots back to the 17th century. It is the second largest bank in the UK servicing 14 million consumers and 600,000 businesses. This is a cash-cow business and the business bank profits have grown more than 20% annually since 2001. The bank is also active in France, Italy, Portugal and Spain as well in Asia and the Middle East.

A related business is Barclaycard which is Europe?s biggest credit card issuer and accounts for about 13% of the groups total profits. Barclaycard issued the first credit card in the UK in 1966. Then there is the dynamic investment banking arm Barclays Capital which accounts for 23% of profits. This group focuses on debt and is getting stronger in Asia and emerging markets.

Now we come to the founder of iShares and second largest money manager in the world, Barclays Global Investors (BGI) that has operations in 47 countries and relationships with 2,500 clients. BGI created the first index strategy in 1971 and the first quantitative index strategy in 1978. Then came the creation of iShares in 2000 which ignited the ETF revolution in investing. I say revolution because iShares ETFs capitalized on and combined three major developments in 20th century investing: the growth in the popularity of common stocks, then mutual funds and finally indexing.

With more than 100 ETFs on the market iShares has garnered the majority of the ETF business and shows no signs of sitting on its lead. BGI now has more than $1.5 trillion under management and contributes 10% to Barclays bottom line while a sister group handling wealth management adds 3%. BGI now offers more than 111 iShares ETFs totaling $207 billion Read more…

Today, computers and trading software make it so easy to access information from almost anywhere. Never before have so many people had useful tools readily available to them at their fingertips.

I believe this situation presents a problem for a lot of people, in that they try to overcomplicate matters that don?t need overcomplicating. With the features of some charting software, people will try and write formulas to identify the most bizarre and complex things.

I once had a client present his entry signal to me which I estimated took 10-15 minutes to do so. After two minutes of listening, I am already starting to shake my head inside. It included things like, ?well, I wait for that indicator to cross that one and then ? ? and ?now if that indicator is still below 50 for the next 3 days and that indicator doesn?t cross above that one ? ? and how about ?must cross over that blue line at an angle of more than 45 degrees ? ? and the explanation goes on and on.

I believe that people have a tendency to complicate matters where in most instances a simple solution will be more than adequate – our entry signal when trading is no exception. As mentioned, some examples I have heard involve numerous indicators crossing each other at various angles and changing colours and all sorts of trivial conditions. In these cases, if I was to take their notes away from them, they wouldn?t be able repeat 20% of their entry signal. This is a concern.

Generally, two big problems that traders face are not having a trading plan and if they do have one, not following it. There is no need to complicate things beyond simple comprehension. One thing I have learned about trading plans, is that the easier it is to understand, the more likely you are to follow it.

People have been trading various types of markets for hundreds of years ? and making money doing it. It wasn?t too long ago that a computer was not common place in every home as we find it today.

Computers were once restricted to people wearing white lab coats and they filled up entire rooms accompanied by the deafening noise of cooling fans whirring away. In these days, hand drawn charts with few if any technical indicators were used. Yet, despite this, people still made money trading. They followed the rules that have stood the test of time.

So, if people at the beginning of the 20th century were profiting from speculation in a market, yet they didn?t have access to a PC, charting software, various technical indicators and customized lines covering a chart, clearly having these tools is not an absolute must, nor even necessary. No doubt, they are useful tools today and many people enjoy the benefits of them but they are not the most important ingredient to your success ? they are not even close.

I believe a lot of people think that the more time that can spend developing and refining their entry signal, the better off they will be ? sometimes to the detriment of more Read more…