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A Few Lessons from the International Traders Expo in New York City
02/27/2014 8:59 am EST
Editor’s Note: This issue will be the last for The Trader Talk podcast e-Letter. We would like to thank all of our loyal subscribers through the years. We would also like to let you know that starting next week, your subscription will be replaced by Tom Aspray’s Trading Lessons e-Letter, and we are confident that you will find the Trading Lessons just as useful and insightful as the Trader Talk podcast.
Host Rob Booker regales us with his adventures and experiences at The International Traders Expo in New York City that took place, February 16-18. While at the Expo, Rob sat in on the presentation of long-time futures trader John Person, who discussed the dropping stock of Starbucks Coffee Company. Next Rob describes a distribution bar, which is a fascinating term he heard at the conference. Rob also quotes John Person again, who commented that on the daily chart, the futures contract on natural gas has printed five Doji candles in a row, which signifies a reversal pattern or a big turn-around on the horizon. All of these and a few more tidbits from the New York Expo are highlighted here.
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Jason Pyles: So, Rob, I know you went to New York for the Traders Expo. How was it?
Rob Booker: It was pretty good. It was well attended. There was a ton of people there and, Jason, in recent years, I think that attendance has been declining to a certain degree but this time, there were a lot of people there and I think that’s what makes it a good time.
Jason Pyles: Yeah, it sounds like it. The snow didn’t deter people then?
Rob Booker: No, I thought it would. I thought, wow, this is going to be really tough but I mean it is kind of weird to have the Traders Expo in New York in February, right.
Jason Pyles: Yeah.
Rob Booker: It is a little bit strange. They have it in Las Vegas later in the year but, I don’t know, but New York is a great place to have it. It is a lot of fun and I took a long walk in the snow. I mean being in the warm weather all the time kind of gets boring.
Jason Pyles: Yeah, I could see that for sure.
Rob Booker: Does it get boring to be in the cold weather all the time?
Jason Pyles: Well, yeah. I lived in Tucson for a long time. I remember how I just longed for an overcast day like back in West Virginia.
Rob Booker: Exactly. That’s awesome. I tried to pay attention at the Expo for our listeners that can’t attend or didn’t go or whatever and come away with a few lessons that maybe everybody can take from the Expo itself.
Jason Pyles: Oh, this is good stuff. I’m ready for this.
Rob Booker: All right, so I went to, right before I spoke, I popped in on John Person. He is a long-time futures trader and a pretty well known one. He actually got hit by a car two or three days before the Expo and he still showed up.
Jason Pyles: Wow.
Rob Booker: Like actually hit by a car, like he was in a parking lot loading groceries in his wife’s new car that he just bought for her and somebody had left the engine running in their car with their child in the car across the parking lot and left the car in reverse and the car started to back out and moved, gained momentum. He was putting groceries in the car and it smashed into him. He couldn’t believe it.
Jason Pyles: Oh no. Did it injure him?
Rob Booker: Yeah. He was really hurt. I moderated the live trading challenge between him and another trader and he’s sitting there trading live in front of the attendees to the conference with this searing, throbbing back pain that has all of a sudden hit him and I thought we’d have to stop the entire competition just so he could take a break or whatever but he was just, I can’t believe that he would even show up for the show let alone trade live in front of a lot of people.
Jason Pyles: That is terrible.
NEXT PAGE: Seasonality Patterns of Some Stocks|pagebreak|
Rob Booker: Yeah, it is terrible. One of the things that I learned by stopping in on John’s presentation, let’s see, it was on Monday morning, and it was just a few minutes across the hall that I was going to speak and so I stopped by and saw John for a few minutes. You can get more information about John at personsplanet.com.
He was talking about the fact that a lot of people were panicking or worried or talking about the fact that Starbucks and some other stocks had been dropping and they were worried about it, and I am going to look at a chart here and, yeah, as a matter of fact, through the month of January, from December on, Starbucks did. It dropped from $76 to $71 and maybe even a little bit higher if you go all the way back to the beginning of January, $78. If you even go back a little bit further, wow, like to December from $79 down to $71, and he said “you know that’s a lot of traders are worried and they’re saying wow, that is super worrisome.” I don’t know if I can trust Starbucks or whatever. It is up in the last couple of days and John said what most traders fail to realize is that it will always make a correction in some super common or with a lot of reliability, it will make a correction in January and that sets it up for a pretty powerful move in February and March, all the way through April, and he listed off a few more. I think it was a cruise line or all of the cruise lines, Disney, and Starbucks, they will do this typically and I thought I am definitely going to pass this information on to the podcast listeners.
Jason Pyles: That’s neat so does it have to do with it being the beginning of the year, Rob, or not?
Rob Booker: Well, you know, I couldn’t stay for his entire presentation.
Jason Pyles: Okay.
Rob Booker: So I don’t know and if somebody wants to leave a note in the show notes of the podcast, they can talk about this phenomenon as well or they can say well no, I actually disagree with that, I have never seen that happen and I don’t really think that is the case, but I thought it was fascinating and I thought well that is just a really interesting occurrence and you would think right at the beginning of January that Starbucks as a company would be doing really well because it is so cold outside and everybody is buying coffee in the morning.
Jason Pyles: Yeah, and in fact, I have some insights on this. No, I am just kidding, I don’t, but it seems like to me that January is kind of like a depressing month for people. It seems like people would really be leaning on Starbucks and the one time that I went on a cruise was in January and my brother and sister-in-law just went on a cruise and it was in February, so I don’t know. I don’t know if there is something to that.
Rob Booker: Oh boy, that’s funny.
Jason Pyles: Sorry.
Rob Booker: No, it’s really good, it’s really good. All right, so that was lesson #1. Lesson #2 that I took away from the conference was, this is just a term, and I know a lot of you that listen to the podcast are familiar with candle patterns and price patterns, price bars, and things like that but I heard a term during the conference, during the live trading challenge, and someone pointed out a candle, so on a chart, they pointed out a candle and the candle had a really long wick at the top or shadow at the top of the candle that was like 40% or more of the candle’s size and they called it a distribution bar. I thought, wow, that’s a fascinating term, a distribution bar. Jason, there is nothing that I have to add to that at all except for that was pretty cool. I mean I’ve been in the business for a long time and sometimes you go through the business and you never hear like what somebody really calls something or the right term for something, and that was the first time.
NEXT PAGE: What Do Dojis Signify?|pagebreak|
Jason Pyles: Yeah, because you and your buddy, you guys kind of rename like the look of candles, right? Don’t you have like a Chinese finger trap candle and things like that?
Rob Booker: Yeah, exactly, exactly. That is exactly right, so that was what it was really supposed to be called and for those of you that are listening to the podcast and you can make a comment on why it is called a distribution bar or you have any other insights on that, we’d love to hear from you because I go to the Expo to learn. I go there to speak but, of course, I go there to learn. I stop in on presentations because I want to hear what somebody that I respect has to say about something.
Jason Pyles: Nice, okay.
Rob Booker: John Person, once again, during the live trading challenge was talking about the fact that natural gas, the futures contract on natural gas, has had five doji candles in a row. Now, Jason, I don’t know if this means anything to you. Does that mean anything to you?
Jason Pyles: No, not really.
Rob Booker: Right, okay, so for five days in a row, John was talking about how natural gas has printed five candles in a row that basically are otherwise termed, Jason, like a reversal pattern or it’s probably going to turn around here or a big moment is coming, and I thought that was really interesting. On the daily chart, John pointed out that natural gas had printed five doji candles in a row and I am going to look up the term here, Jason. I could tell you the right way, Jason, to say this but I’m just going to read it for those of you that like to hear the specific terminology.
Jason Pyles: You got it.
Rob Booker: Doji forms when a securities or a financial instrument’s open and close are virtually equal. The length of the upper shadows can vary and the resulting candlestick looks like a cross, an inverted cross, or a plus sign. Alone, they are neutral patterns but any bullish or bearish bias is based on proceeding price action and future confirmation and the word doji refers to the singular and plural form. Steve Nison, who is famous for doing candle patterns, reminds us that we’re supposed to call this a doji, not a dogi. He doesn’t get mad or anything like that but you’re not supposed to call it a dogi.
Jason Pyles: But it seems like he is a little bit uptight about it though.
Rob Booker: And since he’s not listening to the podcast, I can go ahead and agree with you about that.
Jason Pyles: Okay.
Rob Booker: Stockcharts.com is where I got that information and probably should have gotten it from Steve’s website. Anyway, so when that is accompanied by, and I would love to hear what those of you who trade price patterns or candle patterns have to say about that. The relevance of a doji depends on the proceeding trend or proceeding candlesticks after an advance or a long white or bullish candlestick, a doji signals that the buying pressure is starting to weaken. After a decline or a long, dark, black or bearish candlestick, a doji signals that selling pressure is beginning to diminish. Doji indicates that the forces of supply and demand are becoming more evenly matched and a change in trend may be near.
NEXT PAGE: Dojis Need Confirmation|pagebreak|
Rob Booker: Doji alone are not enough to mark the reversal and further confirmation may be warranted, like it is actually going in the direction that you think it might go and so, for those of you that listen to the podcast, as of the time of its publication here, you might take a look at natural gas if you trade it on the futures market. I didn’t look at it again. I don’t really care much about it because I don’t trade it but that might be something interesting for those of you that look at that to see on natural gas because John said you know I haven’t ever seen this. I can’t remember one time that I’ve seen five of these in a row on natural gas so he was suggesting that maybe something big is coming for natural gas.
Jason Pyles: Do you mind if I ask you something about natural gas?
Rob Booker: Yeah, of course, I mind if you ask me something.
Jason Pyles: Well, it’s been really curious to me actually because from the part of the country that I’m from, I know a lot of people are interested in natural gas and what it’s doing. I’ve heard a number of times now that during the wintertime, actually when it seems like people would be using even more natural gas, it seems like it goes down in value.
Rob Booker: Oh, really, yeah.
Jason Pyles: Yeah, now I mean that seems like some kind of a weird scheme. Could you explain that, Rob, or do you have any ideas on why that might be? It is just really bizarre.
Rob Booker: So, you’re saying that when the temperature goes down, you have less gas.
Jason Pyles: No, no. I’m not saying that.
Rob Booker: Did I summarize that correctly?
Jason Pyles: That was great.
Rob Booker: Hold on. You can just leave this recording but I’m going to turn my air conditioning off. Hold on. I’m in Arizona now. My air conditioning is running at 7 o’clock in the morning. For all of those that live in the cold weather and are listening to the podcast, I know that makes you hate me. I got home from New York and the inside of my house was 81 degrees.
Jason Pyles: Wow, that’s insane.
Rob Booker: Yeah, when the cold weather came, you noticed that the price of natural gas had actually fallen.
Jason Pyles: Yeah, yeah. Well, I guess when it seems like it should be in more demand or more valuable because more people are needing it and using it, it actually becomes less valuable.
Rob Booker: That is totally awesome and I have absolutely zero information for you about that and we should ask our listeners to help us out on this.
Jason Pyles: Okay, awesome, thanks.
Rob Booker: Seriously, that is interesting and I don’t know. I was looking up on the charts. There are all kinds of financial instruments to follow when it comes to natural gas and I would love to know if you are out there and you trade natural gas, what are you looking at? I see HH is a symbol and is that the one or HP, is that the one that most people trade? If I look at HP on the daily chart, no, there is no volume there so that’s dumb. That can’t be the one. It looks like natural gas is rising if it is HH but let’s hear what the listeners have to say on that as well and then, last of all, Jason, I heard someone talk about doing any analysis on the futures market.
During a live trading challenge, Rob Hoffman talked about. He put up four charts on the screen. He put up the S&P E-Minis, the Dow Minis, the Russell Index Minis, and the NASDAQ Mini contracts, and they are all markets that you can trade in the futures market and a lot of short-term futures traders like to scalp those markets and the NASDAQ can move really nicely and a lot of traders will trade the NASDAQ or the Dow because the price to get into that trade is smaller and they like the movement that you can get.
NEXT PAGE: How to Pick Which Market to Trade on a Given Day|pagebreak|
Rob Booker: Rob put all four of them on the screen and we watched as the S&P went up, the NASDAQ went up, and the Russell 2000 went up. We were looking at a daily chart or either a 15-minute chart, and it doesn’t really matter, but all of them simultaneously were moving up in the morning at the open but the Dow wasn’t moving.
Rob gave this description of something that he looks for, and I thought it was fascinating, and I want to pass it on to everybody here. He put all four of those up on the screen and he said do you notice that the Dow isn’t moving along with the rest of them. He said what I would really like to see is all four of them moving in the same direction and when one of them isn’t moving in the same direction or two of them aren’t moving in the same direction, so two are moving up and two are going sideways or two are moving up and two are going down or three are moving up and one is going sideways or down, he said those are days when I can see just from that that there is some indecision in the market and that indecision is enough to keep me on the sidelines or force me into a different trade on a different financial instrument but possibly not on the index as I like to see everything moving and if everything is moving in the same direction, everything is printing bullish or bearish bars, what I like to see is which one of those four is moving the most.
He said most people will get caught up in trading whatever they like the most and whatever they have always traded. Oh, I love the Dow Mini because it is cheap or the NASDAQ Mini because it is whatever, and they forget that today, that might not be the one that is really moving and if you put them all side-by-side and today, you want to trade the indexes, you then look after you confirm that they are all moving in the same direction, you confirm which one of them is moving the most, which one of them is the strongest, and it would have been, during the live trading challenge, it would have been the NASDAQ. The technology stocks are really doing well and that was the one that was clearly and obviously and visually moving the most and he said that would have been the one that I was going to trade and I would have simply waited for a pullback on a very short-term chart, like a two-minute chart, and then I would have bought that NASDAQ contract on the pullback knowing that all of the indexes were up and this one was the strongest for the day. I would have been able to believe in a pullback that it would have been safe to enter on that pullback because the rest of the market was really strong that day. I thought that was a really fascinating lesson. I don’t trade futures and so I thought that was a completely awesome way to look at picking the one you want to trade.
Jason Pyles: That is awesome. That sounds like Rob Hoffman to me.
Rob Booker: Yeah, right, exactly. I didn’t know if that would sound like Rob Hoffman to you or not.
Jason Pyles: Well, it does, it really does.
Rob Booker: That’s awesome. So, if you don’t go to the Expo and you are listening to the podcast or they are too far out of your way, they also have an online registration option and the next time around, when the next one comes up, if I’m going to be there, we should set up a listener dinner or a listener meeting. We should all get together. That would be fantastic. I would really love to meet those of you that are listening to the podcast.
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