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Monday, 31st January, 2011

Only paid members have chatting privileges, access to the daily


logs, charts, training classes and the updates.

Meanwhile, these were Jay's calls Monday (the targets are just guidelines, many traders took
more and less, timing is respective to the individual trader):

THIS PAGE UPDATES THROUGHOUT THE DAY, MAKE SURE TO REFRESH DURING MARKET AND
POST MARKET HOURS.

Intraday Trades -
__________________________________________

9:31 - SHORT BRCM 44.70, COVERED 44.40, out + .30


9:40 - SHORT SPY 127.97, STOPPED 127.08, out - .11
9:50 - SHORT SPY 127.86, STOPPED 128.03, out - .17
10:09 - SHORT ARMH 125.12, STOPPED 125.15, out - .03
10:12 - SHORT NVDA 24.16, PARED 23.96, out + .20, COVERED 24.80, out + .36
10:31 - BUY LVS 46.68, STOPPED 46.63, out - .05

*** For Swing Trades, go to www.UndergroundSwingTrades.com as this is a separate


PREMIUM service now ---

** FINALLY SHIPPING!! --- the third and FINAL BOOK in the Undergroundtrader trilogy,
"Trading Full Circle", by Jea Yu and DVD "Short Term Profit Hunter". This book is a decade in
the making and finally set to release April 2010. Click here to before they sell out!
http://www.undergroundtrader.com/handbook.html

http://www.undergroundtrader.com/jay/ 1/31/2011
Jay's Nightly Briefing Page 2 of 25

Intraday Narrative:

Choppy morning as SPY initially rejected off the daily 20 but kept holding the 127.80 support
very resiliently. Got stopped on SPY short attempts. Hit BRCM for a nice perfect storm
breakdown off the open for nice clips before it started to buyfade. We hit NVDA for a solid
short off the daily 5 period ma for a clean rejection off 48.17 to lock leans through 46.80. SPY
marching a strong comeback into deadzone but the daily 20 period ma on close is what
matters the most.

------------
Jay's Notes for Jan 31-Feb4th, 2011
----

Hi Gang,

SPY formed a nasty bearish engulfing pattern on Friday closing under the daily 20 period
moving average (128.12) for the first time in months. Even the mighty IBM couldn’t withstand
the pressure as they bled that and AAPL hard all day. The selling was relentless as panic
ensued when they cracked that impenetrable support. This is a seasonal selling period so
market just needed an excuse to sell off, be it Egypt or Amazon.com earnings… whatever. The
secondary super support weekly 5 period moving average sits at 127.66. The 127.12 was the
prior low the last time the daily 20 period ma was tested. This takes us back to the prior
126.80 trap door area which if broken can trigger more panic down to the 125.95/trendline
and daily lower bbs and 124.93/ daily 50 period ma’s areas. This sets up the key bumpers to
watch this week. As significant as the daily 20s are, the weekly 5 period ma break would
negate and peak out the weekly mini pups which would entail a channel tightening ultimately
towards the 123.65 area which is the weekly 15 period ma.
With the aforementioned bumpers in place, what happens next? Consider it a game of pinball.
SPY likely attempts a retest of that daily 20 period ma. If they fail to successfully capture that
on a daily close, then we have the lower targets. If they manage to hold above the daily 20,
then the next real test will be that daily 5 period ma’s currently at 129.13, but expect them to
gap down lower. This will set up another make or break. Since we have held up so long above
the daily 20 period ma, we can expect a rejection to be met with accelerated selling. The
question on everyone’s mind will be whether this is a pullback or a reversal. Keep in mind, one
day’s sell-off, does not a trend make. We’ve seen the exact opposite of Friday’s move happen
literally the next day. That is why Tuesday/Wednesday will be the real tell. SPY is starting to
reflect what the rest of the underlying market has already been doing… getting back to reality.

<> Stocks to Watch <> : A lot of these are contingent on the SPY. If SPY forms daily mini inv
pups, then scratch the longs. To be safe, make sure that the 60 min stochastics peaks out
before taking short positions and short the RETEST FAILURES of the short area bumpers
listed. DO NOT SHORT RIGHT INTO THE FIRST TEST if the 60 min is in a mini pup grind up.

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Jay's Nightly Briefing Page 3 of 25

Get the 15/5 min to slip and 60 min to STALL at least on the stochastics and then position
with a good 1 min stochs reversal down. Remember all stocks are anchored by the action of
the SPY (or noodles) and contingent on the SPY movement unless there is a strong fade effect
in place. This list is composed of prior weekly/monthly mini pup perfect storms that were the
strongest stocks on the way up, now seeing laggard selling on the way down.

*** Since market context is critical, play only those that align with the SPY resulting actions.
If SPY bounces then LONGS. If SPY breaks down through the daily 20 period ma then focus on
the SHORTS.

SBAC SHORT on DAILY DOJI – This one is not a huge mover. The daily doji sits at 41.01.
Shorts trigger at 40.90 with a tight trail at 41.15 for the various bumper targets 40.77 (daily
5), 40.30s (daily 20), 40.12 (daily 15).

BRCM SHORT – BRCM leaned hard through the weekly 5 period ma and daily 50 at 44.77. The
daily formed a mini inverse pup with lower bbs at 43.09 and weekly 15 as 43.69. Shorts
trigger at the 44.75-44.95 area with a trail stop at 45.35 (just above monthly 5 period ma) for
the weekly 15/daily lower bb targets in the 43.80 and 43.30 targets. **BRCM earnings
Tuesday postmarket, so only play before if it triggers! **

V SHORT on BOUNCE– V forming a daily inverse pup breakdown. It’s already trading at lower
daily bbs, so wait for an oscillation bounce back towards the daily 5 and weekly 5 resistance
70.80 area rejection to trigger. Trail stop at 71.25 for a selloff back down towards the 69.20
daily lower bbs. ** Earnings out Wednesday postmarket **

HANS SHORT – HANS is one of the laggard stocks yet to selloff. The daily stochastics slipped
the 80 bands with desistance at the daily 5 at 55.40. Shorts trigger at the 55.30-55.50 range
with a trail stop at 55.80 for a daily tightening selloff to the daily 15 and weekly 5 at 54.65-
54.25 target level.

MOS SHORT on DAILY DOJI – MOS line in the sand daily doji sits at 79.75. Shorts trigger
under 79.40 for a tightening back to the daily 15 and 60 min 20 area at 78.35-77.85 target
range. Trail the 80.20.

PCS LONG – PCS has a daily mini pup and weekly pup above 13.33 and 12.90. A breakout
back through the 13.35 triggers the daily pup/mini pup with upside targets to 13.90-14.10.
Trail 13.

FAZ LONG – FAZ triggers longs on a breakout through the monthly 5 resistance at 8.85. Trail
8.65 with a target near daily upper bbs at 9.20-9.35.

-*- Swing Trades -*- : These are Swing/Portfolio past trades that will ONLY BE AVAILABLE TO
SWINGTRADE SUBSCRIBERS at http://www.undergroundswingtrades.com/ . This is a
premium highly targeted and filtered service catering to investors who do not have the time to
watch minute-to-minute market movement every day.

http://www.undergroundtrader.com/jay/ 1/31/2011
Jay's Nightly Briefing Page 4 of 25

Keep track of the swingtrade results here:


http://www.undergroundswingtrades.com/Performance.pdf
For membership details: call 1-888-233-1431

<> PORTFOLIO WISH LIST <> : This is a running list of accumulation swings for longer term
situation trades. These will be added to the current swing trades if triggered for
UndergroundSwingTrade.com members only.

AKAM 38-40 accumulation. Lead content delivery network.

CSCO 19-17 accumulation. Pure internet bandwidth play.

LDK 6.60 x 6 accumulation.

VHC accumulation long only on pullbacks: We had a great swing on this one. I am looking to
accumulate on pullbacks lower this time to the 9.50 level and accumulate in .50 increments to
7.50.

DTV accumulation long only on pullbacks: This sucker has been strong. Any dumpage to the
30s would be great area to accumulate in 1.5 pt increments to 27 area.

TIBX accumulation swing long only on pullbacks: I am looking for an accumulation position
15.50 x 15 range, accumulate in .50 increments.

LAVA accumulation swing long only on pullbacks: LAVA on pullbacks to the 3 area to 2.75 area
accumulate in .25 increments is a great swing long.

Econ Reports This Week:


estimates/consensus/prior
Jan 31 08:30 Personal Income Dec
0.8% 0.5% 0.3%
Jan 31 08:30 Personal Spending Dec
0.7% 0.6% 0.4%
Jan 31 08:30 PCE Prices - Core Dec
0.1% 0.1% 0.1%
Jan 31 09:45 Chicago PMI Jan
65.0 65.0 66.8 68.6
Feb 01 10:00 Construction Spending Dec
-0.5% -0.5% 0.4%
Feb 01 10:00 ISM Index Jan
57.5 58.2 58.5 57.0
Feb 01 15:00 Auto Sales Feb
NA NA 3.90M

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Feb 01 15:00 Truck Sales Feb


NA NA 5.56M
Feb 02 07:00 MBA Mortgage Purchase Index 01/28
NA NA -12.9%
Feb 02 07:30 Challenger Job Cuts Jan
NA NA -29.0%
Feb 02 08:15 ADP Employment Change Jan
150K 150K 297K
Feb 02 10:30 Crude Inventories 01/29
NA NA 4.84M
Feb 03 08:30 Productivity-Prel Q4
2.0% 2.2% 2.3%
Feb 03 08:30 Unit Labor Costs Q4
0.0% 0.0% -0.1%
Feb 03 08:30 Initial Claims 01/29
410K 425K 454K
Feb 03 08:30 Continuing Claims 01/29
3900K 3925K 3991K
Feb 03 10:00 Factory Orders Dec
-0.5% -0.7% 0.7%
Feb 03 10:00 ISM Services Jan
57.5 57.0 57.1
Feb 04 08:30 Nonfarm Payrolls Jan
125K 150K 103k
Feb 04 08:30 Nonfarm Private Payrolls Jan
140K 163K 113k
Feb 04 08:30 Unemployment Rate Jan
9.6% 9.6% 9.4%
Feb 04 08:30 Average Workweek Jan
34.3 34.3 34.3
Feb 04 08:30 Hourly Earnings Jan
0.1% 0.2% 0.1%

Earnings Reports This Week:


Mon: premarket: CHKP, SOHU, CRNT, XOM, ASIA: postmarket: ICUI, BIDU, IDTI, NVLS,
CAVM, APC, EXTR, HOLX, IRF, PRXL
Tues: premarket: WWW, ARMH, BIIB, ENTG, AMSC, BP, MPEL, PRGO, KLIC, DANG:
postmarket: BSX, MANH, VASC, AFL, BRCM, CHRW, FORM, MEE, WBSN, APKT, PWAV, CCUR,
ERTS, BBOX, UIS
Wed: premarket: MAT, IACI, LVLT, LZ, ALVR, AOL, TWX, NJR: postmarket: NCTY, YUM, ISIL,
CYMI, NEWP, V, BMC, RNOW, CUTR, NDN, PNG, VMC, CELL, VLNC, INSP, SOLR, CNQR, GMCR,
CCG, SFLY
Thursday: premarket: DO, GR, PENN, TZOO, BEAV, RDWR, MRK, PTEN, SNE, MA, CVS, ONNN,
ABMD, ATK, RSTI: postmarket: XXIA, ZRAN, FISV, SIMG, AFFX, LVS, BEZ, SRCL, POWI, CSTR,
CTCT, HLIT, OPWV, PWER, QSFT, BBBB, TRMB, MPWR, ALKS, JDSU, MFLX, DQ, UTI
Friday: premarket: YRCW, BPOP, AVID, GHM, AET

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Jay's Nightly Briefing Page 6 of 25

This should be a wild week with the markets starting to tip over in addition to the global
unrest and not to mention all the earnings due out. Filter tightly and allocation accordingly,
good trading this week.

Cya in the Pit!

Ok gang, check out my latest interview http://www.traderinterviews.com/links/JeaYu and also


latest DVD is out called Short Term Profit Hunter which can be purchased at
http://www.undergroundtrader.com/handbook.html
and also the my latest interview with Tim Burquoin is up on the Free Articles page at
http://www.undergroundtrader.com/freetradingmaterials/

Please NOTE that swing trades are not part of a premium service at
www.undergroundswingtrades.com. They will not be given in the Trading Pit chatroom moving
forward. This service caters to those who want to reap the rewards of the tools without having
to spend the time and energy to track market movements intra day. As a courtesy, one swing
trade was given last week which was a sympathy trade to AKAM. This stock was LLNW at $4
for a breakout move with a $5-7 target level and more if AKAM happens to get acquired.
AKAM cracked through $5, up over 25%. More to come, but ONLY through the new service
which provide the analysis, the entry, multiple targets, stops and ALLOCATION emailed
directly to subscribers as soon as they trigger. LLNW was closed out at $5.94 for a 50% gain!
Nuff said!

-- Special Announcement ---

It can be confusing as to what steps to take to further proceed with learning the methods at
UndergroundTrader.com. I have outlined the options for you to proceed based on time, costs,
experience and desire to learn.

If you purchased my book Trading Full Circle and DVD Short Tern Profit Hunter
http://www.invest-store.com/undergroundtrader/item.php?8006857
It’s a good idea to read through and get the concept of mini pups down. The methods all
revolve around that simple pattern set up on the stochastics.

Here is a link for some more free articles and interview videos you might find useful
http://www.undergroundtrader.com/freetradingmaterials/

This is a link to the daily chalkboard, which updates one of our alerts and outlines the chart
setup http://www.undergroundtrader.com/graphics/jay/ along with the intraday alerts given in
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Jay's Nightly Briefing Page 7 of 25

You can take a free 5 day trial to the live trading chatroom
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For options 2 and 3, just drop an email to jay@undergroundtrader.com. For option 4, go to

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Jay's Nightly Briefing Page 8 of 25

www.undergroundswingtrades.com for details on membership.

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----

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* If you are interested in a leveraged intraday trading account with $5k minimum setup and
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*** Jea Yu is available for speaking engagements through


the world renowned International Speakers Bureau, click link for details
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Jay's Nightly Briefing Page 9 of 25

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-----

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------

--- this is just a recap of How to Play Earnings Gapper/Dumpers ---

PLAYING EARNINGS GAPPERS/DUMPERS THE NEXT MORNING-

First of all, research is needed ahead of time. You will need to pull up the
daily/weekly/monthly charts and note any OVERLAPPING moving averages (5/15/50/200
period simple moving averages and bollinger bands and jot those down- just the
OVERLAPPING LEVELS). Also, note if there is an existing mini pup on the daily/weekly/monthly

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stochastics. If so, then jot down the 5 period ma, as that is the important level on mini pups.

Once you have this information, then watch the PREMARKET from 8am est on. You need to
have premarket charting, cobratrading.com is the one I use and has been the most reliable.

Premarket:

1) Watch to see if the stock is trading anywhere NEAR or AT those overlapping


support/resistance levels in the premarket (5/1 min chart with stochastics 5/15/20 period
ma's and BBs is all you need).

2) Filter on 5 minute trends with mini pups in place. The 5 min 5 period ma MUST have held at
least 3 pullback attempts and sloping + a mini pup.

3) Trigger entry on 1 minute stochastics mini pups off the 5 min 5 period ma's and target the
1/5 min bbs (the 1 min will usually be closer).

4) Watch the TIME. The premarket is MUCH MORE ORDERLY than regular market hours. The 5
min candles and ma's update at each 5 minute increment so try to get entries right before the
candle close and expect reactions around that 4min and 30 second mark.

5) Once in a trade, watch the noodles to make sure they are moving in your direction and look
to scalp into the volume on 1 minute climaxes AND BE VERY AWARE OF THE OVERLAPPING
SUPPORT/RESISTANCE LEVELS-- EXIT AHEAD OF THOSE LEVELS AS WELL AS STINKY 2.50's
AND STINKY 5's levels--- better to exit too early with a profit than too late with a loss!

6) Be very careful holding past 9:20am as sudden volume can come in quickly as panic can
set in from either direction.

MARKET HOURS/OPENING

1) Give the open some time for 3 min 5 period ma's to catch up or down to the stock.

a) More experienced traders can play 1 minute HIGH or LOW band mini pups for an extended
panic move within the first 5 minutes, as well as 1/3 minute stars or hammers + 1 min mini
pups for tightenings. SCALPS ONLY! ** anything prior to the 3 min 5 period ma catching up to
stock is RISKY **

2) Once the 3 minute 5 period ma gets close, the stock will either break and base the 5 period
ma and 3 min stochastics will mini pup for a tightening attempt to the 15 period ma. Use the 1
minute stochastics for entry on this and trail the 3 minute 5 and be sure to scalp profits based
on 1 min climax hi/lo band mini pup leans/ramps into coil resistance/supports/overlapping
support/resistance levels.

3) If you get chopped twice, then step away and wait 30 minutes or so for the 8/13 min 5
period ma's to catch up to the stock and watch for pup/mini pups. The wider time frames are

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more stable and look for PERFECT STORMS where you get 3 or more mini pups. Even better if
the 1 minute trigger forms a mini pup as well.

DEADZONE leave it alone 12-2pm (+/- 30 mins)

LAST HOUR

1) Watch the 60 minute 5 period moving averages. By this time the stock will have gotten
near or have tested it. The last hour will usually trigger a mini pup off that 60 minute 5 much
like it did in the 3 min chart off the open. You want to play entries near there and then trail off
there BUT MAKE SURE that the other times frames are in your favor. You don't want to SHORT
the 60 min 5 for a mini inverse pup is the 8/13 min stochastics are in a MINI PUP up
formation---- at the very least get the 1/3/5 min DOWN before shorting.

------

Swings/Options/Overnights 2010/2009/2008/2007---

Current:

7/07 - BUY TIBX 12.23, 07/08- PARED 12.80, out + .57, 7/13- PARED 13.05, out + .82, 07/14
- PARED 13.30, out + 1.07, 7/23 - PARED 13.90, out + 1.67, 7/27- SOLD 14.23, out + 2
7/07 - BUY BBI .12, 7/26- pared .20, out + .08
6/11 - BUY BBI .29,
6/14 - BUY BBI .18add, pared .22, out + .04, PARED .27, out + .09, 6/16- pared .29, out
+ .11

Closed:
7/20 - SHORT GS 149.35, overnight on core swing shares from 141.35, (to avg 145.35 on
original core shares), PARED 148.05, out + 1.30, PARED 147, out + 2.35, STOPPED out - 1.65

7/07 - BUY SNDK 43.15, PARED 43.45, out + .30, SOLD 43.60, out + .45, overnight SOLD
44.25, out + 1.10
6/14 - BUY BBI .18add, pared 22, out + .04, PARED .27, out + .09, 6/16- pared .29, out
+ .11
6/1 - BUY SPY JUNE 109 PUTS at 3.10, PARED 3.85, out + .75, SOLD 4, out + .90
6/1 - SHORT SPY 108.84, PARED 107.84, out + 1, COVERED 107.50, out + 1.34
6/1 - SHORT SPY 109.20add, PARED 107.70, out + 1.70, STOPPED 110.10, out - .90
6/1 - SHORT SPY 109.68add, PARED 107.68, out + 2, 6/2- STOPPED 110.10, out - .42
6/1 - BUY SPY JUNE 109 PUTSadd at 2.75, PARED 3.45, out + .70, PARED 3.75, out + 1, 6/2-
STOPPED 2.30, out - .45
5/27 - BUY SPY 110.45, 5/28 - pared 110.85, out + .40, SOLD 110.54, out + .10
5/12 - BUY VHC 5.52, PARED 6.39, out + .87, 5/17- SOLD 7.55, out + 2.03 (+36%)
4/30 - BUY SPY JUNE 120 PUTS 3.45, PARED 4, out + .55, 5/4 - PARED 4.70, out + 1.25,

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PARED 5.15, out + 1.70, 5/5 - PARED 5.90, out + 2.75, SOLD 6.30, out + 2.85 (80% gain)
4/30 - SHORT SPY 119.62, PARED 119.22, out + .40, swing, 5/4 - PARED 117.80, out + 1.82,
PARED 117.30, out + 2.32, 5/5 - COVERED 116.20, out + 3.42

4/29 - BUY POT 110.30, PARED 110.85, out + .55, 4/30- SOLD 112.30, out + 2
4/29 - BUY POT 110.01add, PARED 110.26, out + .25, PARED 110.85, out + .84, ,4/30- SOLD
112.30, out + 2.29
4/19 - SHORT GS 160.50 avg, STOPPED 165.25, out - 4.75
3/12 - SHORT SPY 119.99, PARED 119.83, out + .16, PARED 119.67,- overnight- out + .32,
PARED 119.19, out + .80, COVERED 119.05, out + .94
2/23 - SHORT SPYWRA 19.18, PARED 18.80, out + .38
2/2- BUY AAPL 194.60 overnight gapper, 2/3- sold 195.80, out + 1.20
11/11- SHORT DIA 103.56, PARED 102.96, out + .60, PARED 102.66, out + .90, 11/12-
PARED 102.40, out + 1.16, COVERED 102.20, out + 1.36
11/10- BUY SPY 109.83, 11/11- SOLD 110.53, out + .60
11/10- BUY SPY 109.40, 11/11- SOLD 110.50, out + 1.10
10/7/09 - BUY SWGVA (SPY Oct 105 puts) at 1.35, SOLD 1.75, out + .40
9/30/09 - BUY SWGVA (SPY Oct 105 puts) at 1.89, PARED 2.70, out + .81, 10/02- COVERED
3.90, out + 2.01
9/23 - BUY SWVGC 2.29 (SPY Oct 107 puts, 9/24- SOLD SWVGC 3.40, + 1.11
4/29 - BOT SPWRA 25.50 postmarket on FSLR sympathy for gapper, 4/30 - Pared 26.75, out
+ 1.25, SOLD 28.50, out + 3
2/5/09- 4:03 - BUY AAPL 96.50, OVERNIGHT, Pared 97.40, out + .90, SOLD 98, out + 1.50

1/13 - BUY SEED 11 avg,1/16- STOPPED 9, out - 2


1/13 - BUY CAGC 3.25, STOPPED 2.60, out - .65
1/04 - BUY TIVO 7.43 add, avg 7.93, 1/08- STOPPED 7, out - .93
12/26 - BUY TIVO 8.43 avg,
12/17 - BUY WCG 42.70, overnight very LIGHT, 12/18- SOLD 44.50 premarket, out + 1.80
12/10 - BUY WCG 45 SWING/ADD, PARED 47, out + 2, PARED 48, out + 3
12/11- BUY WCG 47.30, add 46.30, avg 46.80 overnight, PARED 47.80, out + 1, PARED
48.80, out + 2, SOLD 49.20, out + 2.40
12/7- SOLD ZIXI SWING LONGS avg $3.20, SOLD $5.50, out + 2.30
12/4- BUY WCG 40.50 SWING, PARED 43.50, out + 3
12/4- CFC Jan12.50 puts, SOLD 3.40, out + .40
ZIXI pared 4.30, out + 1.30
11/9 - BUY ZIXI 2.75 add, avg 3.10, SOLD 5.50, out + 2.40
10/22/07 - BUY YHOO 30.20, PARED 30.60, out + .40, swing, 10/25- PARED 30.90, out + .70,
PARED 31.50, out + 1.30, 10/26- YHOO PARED 32.70, out + 1.50, 10/29 - SOLD 34.20, out +
4

9/28 - BUY UNTD 15.03 SWING, 10/1- BUY UNTD 15.45add, avg 15.28, 10/26- SOLD 17.68,
out + 2.40

10/26- BUY ZIXI 3.45 SWING,10/29- BUY 4 add (avg 3.65)

http://www.undergroundtrader.com/jay/ 1/31/2011
Jay's Nightly Briefing Page 13 of 25

10/18 - BUY YHOO 29.60, SOLD 29.85, out + .25


9/28 - BUY UNTD 15.03 SWING, 10/1- BUY UNTD 15.45add, avg 15.28
10/8 - BUY AAOJI .35, STOPPED .09, out - .31
10/8 - BUY AAOKV 2.07, 10/12- STOPPED 1/2 1.57, out - .50 (swing the other 1/2)
9/23 - BUY ICOC 14.90, 9/26 - BUY ICOC 14.30, BUY ICOC 13.75, AVG 14.30, STOPPED
12.90, out - 1.50
9/20 - BUY AAPL 141.20, BUY AAPL 140.60 avg 140.90, PARED 142.20, out + 1.20, SOLD
143, out + 1.80
8/31- LONG BIDZ 8.75 SWING, 9/24 - SOLD 12.30, out + 3.55
9/4 - BUY OSTK 23.45, OVERNIGHT STOPED 22.80, out - .65
8/21 - BUY OSTK 21.42, 8/23- SOLD 22.50, out + 1.08
3:49 - BUY AAPL 136.25, OVERNIGHT, STOPPED 135.25, out - 1
7/23 - BUY TTPY 26, 7/27- PARED 26.50, out + .50, 7/31- SOLD 27.40, out + 1.40
7/12- BUY VRSN 32.80, 7/13- SOLD 34.10, out + 1.30
6/28 - BUY LOCM 6.87, 7/2- pared 7.40, out + .53, PARED 8.50, out + 1.47, SOLD 9, out +
2.13
6/6 - BUY STEM 2.44, overnight, SOLD 2.64, out + .20
6/5 - BUY MED 8.86, PARED 9, out + .14, 6/6- PARED 9.16, out + .30
6/5 - BUY AGEN 2.92, PARED 3.12, out + .20, 6/6- SOLD 2.37, out + .45
6/4 - BUY AMZN 70.45, overnight, 6/5- SOLD 71, out + .55
5/23 - BUY MCHX 14.05, 5/24- PARED MCHX 14.85, out + .80, SOLD 15.20, out + 1.15
4/2 - BUY JSDA 22.15, SOLD 22.35, out + .20, overnight, SOLD 23, out + .85
3/20/07 - BUY ARTG 2.34,
3/6 - BUY NVTL 13.90, 3/7- SOLD 14.40, out + .50
12/7 - BUY CHINA 9.41, STOPPED 8.25, out - 1.16
11/21 - BUY SHLD 172.55, 11/22 - SOLD SHLD 179.55, out + 7
11/20 - BUY PALM 16.07, 11/27 - STOPPED 14.27, out - 1.80
11/20 - BUY SOFO 4.04, 12/21 - SOLD 4.54, out + .50
10/26 - BUY RHAT 14.65, PARED 14.95, out + .30, 10/27 - SOLD 15.65, out + 1
10/09 - BUY PALM 14.85, RANGE/SWING, 10/11- SOLD 15.45, out + .60
9/11 - 3:33 - BUY ANGN 8.35, PARED 8.73, out + .38, 9/12- SOLD 9.90, out + 1.55
8/23 - BUY RMBS 13.22, 8/24 - SOLD 13.92, out + .60
8/14 - SHORT OIH 134.72, overnight, pared 134.42 ,out + .30
8/15 - SHORT OIH 136.10, pared 135.50, out + .60, pared 134.90, out + 1.10, out 134.50,
out + 1.60
8/7- SHORT NTRI 49.20overnight, 8/8- COVERED 47.20, out + 2
6/23 - LONG QCOM 39.80avg, 6/24- PARED 40, out + .20, SOLD 40.20, out + .40
6/23 - LONG ERUSL (SEPR july 60 puts) 3.70, 6/24 - SOLD 4.60, out + .90
6/20 - BUY AAPL 57.93, 6/21- SOLD 58.53, out + .60
4/25 - 1:27 - BUY QUUQU $3.20 (aapl may 67.50 puts), STOPPED 2.10, out - 1.10
4/24 - BUY PEIX 32.80, 4/25- PARED 33.50 premarket, out + .70, PARED 34, out + 1.20,
SOLD 34.50, out + 1.70
4/10 - BUY PEIX 31.25, 4/11 - SOLD 33, out + 1.75
2/13 - BUY TASR 10.62, OVERNIGHT, 2/14- SOLD 11.25, out + .63
2/8- BUY CTDC 11.67 GAPPER, STOPPED 2/9- STOPPED 11.30, out - .37
2/3 - SHORT SNDK 64.35, PARED 62.35, out + 2, 2/4- COVERED 61.50, out + 2.85

http://www.undergroundtrader.com/jay/ 1/31/2011
Jay's Nightly Briefing Page 14 of 25

2/2- BUY TWPG 20.05, overnight, 2/3 - STOPPED 19.35, out - .70
2/2- BUY CTDC 11.28, PARED 11.98 , out + .70, PARED 12.38, out + 1.10, 2/3- SOLD 14.28,
out + 3

Swings/Overnights 2005---

12/9 - BUY SIFY 8.15, PARED 9.40, out + 1.25, 12/13- SOLD 10, out + 1.85
11/16 - BUY GOOG 397.80, 11/17- PARED 401.80, out + 4, SOLD 403.30, out + 5.70
11/16 - BUY GOPTK 2.50 (goog nov 400 calls), PARED 4, out + 1.50, SOLD, out + 2.50
11/16 - BUY ADBE 33.18, SOLD 33.58, out + .40
11/16 - BUY SNDK 57.10, PARED 57.38, out + .28, PARED 57.60, out + .50, 11/17- SOLD 58,
out + .90

10/25 - SHORT PLAY 21.50, PARED 21.28, out + .22, PARED 20.70, out + .80, 10/26 - PARED
20.25, out + 1.25
10/25 - BUY PQPWX 2.15 (nov 2.50 puts on Play), PARED 2.70, out + .55, 10/26 - PARED
3.70, out + 1.55
10/20 - BUY LEXR 7.35 OVERNIGHT, PARED 7.61, out + .26, PARED 7.80, out + .45, SOLD
7.90, out + .55
9/7 - BUY MSO 33.17, 9/8- SOLD 33.47, out + .30
9/7 - BUY ERTS 56.55, 9/8- PARED 56.77, out + .22, PARED 57.15, out + .60, SOLD 57.35,
out + .80
8/4 - 10:26 - BUY AMGN 83.10, PARED 83.60, out + .50, SOLD 83.90, out + .80
8/3 - BUY AMGN 82.75, OVERNIGHT, STOPPED 82.50, out -.25
8/3 - BUY WFMI 136.35, PARED 136.70, out + .35, SOLD 136.85, out + .50, OVERNIGHT,
8/5- SOLD 138.80, out + 1.45
8/1- BUY EBAY 43.84, PARED 44.24, out + .40, PARED 44.50, out + .66, SOLD 44.60, out
+ .76
7/12 - BUY NDAQ 20.65, overnight, 7/18 - SOLD 21.15, out + .50
7/11 - BUY DIA 104.90, PARED 105.30, out + .40, OVERNIGHT,7/12 - PARED 105.60, out
+ .70, 7/13 - SOLD 106.15, out + 1.25
6/7 - SHORT KLAC 45.33, OVERNIGHT, 6/8- STOPPED 45.46, out - .13
5/31 - BUY IMAX 9.44, PARED 9.60, out + .16, PARED 9.95, out + .51, 6/2- SOLD 10.15, out
+ .71
5/31 - SHORT BRCM 35.77, COVERED 35.51, out + .26
5/27 - SHORT BRCM 35.86avg, 5/31- STOPPED 35.96, out - .10
5/17 - BUY DIA 103.39, overnight, 5/18- PARED 103.90, out + .51, PARED 104.39, out + 1,
PARED 104.80, out + 1.41, SOLD 105, out + 1.61
5/5 - BUY LGF 10.20, PARED 10.28, out + .08, 5/9 - PARED 10.48, out + .28
4/27 - SHORT AAPL 35.88, overnight on daily and 60 min inverse pups, 4/28 -PARED 35.58,
out + .30, COVERED 35.28, out + .60
4/26 - 3:44 - SHORT CTSH 40.95, overnight swing daily inv pup, 4/27 - PARED 39.75, out +
1.20, COVERED 38.75, out + 2.20 weeee
4/26 - SHORT EBAY 30.90 and 31.29, avg price (31.11) overnight on daily inverse pup, 4/27 -

http://www.undergroundtrader.com/jay/ 1/31/2011
Jay's Nightly Briefing Page 15 of 25

STOPPED 31.40, out - .29


3/31 - SHORT NUE 57.72, PARED 57.42, out + .30, 4/1- STOPPED 57.85, out - .13

3/28 - BUY SYNA 24.05, overnight, 3/19 - STOPPED 23.90, out - .15
3/28 - SHORT LEXR 5.59, PARED 5.43, out + .16, PARED 5.20, out + .39, overnight, 3/29 -
COVERED 5.02, out + .57
2:35 - BUY SYNA 24.05, overnight, STOPPED 23.90, out - .15

3/23 - BUY CHKP 20.75, OVERNIGHT TOPS and daily hammer, 3/24 - SOLD 20.98, out + .23
3/21 - BUY SYNC 3.27, GAPPER, 3/22 -STOPPED 3.25, out - .02
3/9 - SHORT PLMO 22.50, overnight, 3/10 -PARED 22.35, out + .15, COVERED 22.10, out
+ .40
3/8 - SHORT QLGC 42.21, overnight, 3/9- STOPPED 42.71, out - .50
3/4 - BUY SMH 34.10, overnight, 3/7 - SOLD 34.50, out + .40
3/4 - BUY QQQQ 37.62, overnight, 3/7 - STOPPED 37.58, out - .04
3/3 - BUY QQQQ 37.45, PARED BUY 37.15 (avg 37.30), 3/4 - PARED QQQQ 37.57, out + .27,
SOLD 37.62, out + .32
3/3 - BUY DIA 107.77 (avg 108.05), 3/4 - PARED 108.80, out + .75, PARED 108.96, + .81,
SOLD 109.10, out + 1.05
3/1 - BUY DIA 108.40, 3/2- PARED BUY LONG 108.03,
2/25 - BUY AAPL 45.57, GAPPER, 2/28 - STOPPED 45.40, out - .17
2/18 - SHORT QQQQ 37.37, 2/22- PARED 37.05, out + .32, COVERED 37.10, out + .27
2/17 - SHORT AAPL 88.40, PARED 88.20, out + .20, PARED 87.90, out + .50, overnight
gapper down, 2/18 - COVERED 88, out + .40
2/16 - BUY AAPL 89.95, PARED 90.15, out + .20 overnight gapper, 2/17- SOLD 90.70, out
+ .75
2/14 - BUY BRCM 33.15, gapper, STOPPED 33.09, out - .06
2/14 - BUY AAPL 84.70, gapper, 2/15- PARED 86.10, out + 1.40, PARED 86.50, out + 1.70,
SOLD 86.80, out + 2.10
2/11 - BUY AAPL 81.40, OVERNIGHT, 2/14- PARED 82.25, out + .85, SOLD 82.60, out + 1.20
2/9 - SHORT ATVI 20.28, overnight, COVERED 19.70, out + .58
2/8 - SHORT GOOG 197.60 avg., STOPP 200, out - 2.40
2/7 - SHORT QCOM 36.07, PARED 36.90, out + .17, OVERNIGHT, COVERED 35.47, out + .60
1/19 - SHORT QQQQ 38.10, overnight, PARED 37.90, out + .20, COVERED 37.65, out + .45
(postmarket)
1/18 - BUY ASTM 3.19, PARED 3.27, out + .08, PARED 3.33, out + .14, 1/19- SOLD 3.60, out
+ .41
1/10 - BUY GOOG 198, BUY 196.50, BUY GOOG 195.20, avg 196.20, 1/11 - PARED 197.40,
out + 1.30, 1/11 - STOPPED 194, out - 2.20

Swings/Overnights 2004---

12/16 - BUY TASR 27.67, STOPPED 27, out - .67


12/13 - BUY MSO 26.62, PARED 26.85, out + .23, 12/14- PARED 27.20, out + .58, PARED
27.62, out + 1, SOLD 28.12, out + 1.50

http://www.undergroundtrader.com/jay/ 1/31/2011
Jay's Nightly Briefing Page 16 of 25

12/7 - BUY WIND 14, PARED 14.50, out + .50, SOLD 14.20, out + .20
12/2 - PARED ROXI 10.10, out + .85, SOLD 10.25, out + 1
11/24 - BUY EBAY 112, 11/29- PARED 112.70, out + .70, PARTIAL STOP 111.65, out - .35,
11/30 - PARED 113.25, out + 1.25, STOPPED 112
11/22 - BUY ROXI 9.25, 11/29 - PARED 9.65, out + .40
10/19 - SHORT SBUX 50.17 avg, 10/20- STOPPED 50.25, out - . 08
10/14 - BUY TTWO 34.73, 10/19 - PARED 35.46, out + .73, SOLD 34.95, out + .22
9/30 - BOT ROXI 5.04, 10/21- PARED 5.84, out + .80, 10/22 - SOLD ROXI 6.05, out + 1.01
8/30 - BOT NQ 1382 (rehedge), SOLD 1381, out - 1, BOT 1376, STOPPED 1374, out - 2
8/27 - PARED DIA short 102.06/102.18, avg (101.26), PARED QQQ 34.56 (avg 33.79), SOLD
NQ 1388.50, out + 32.50, STOPPED DIA, QQQ, YHOO, VZ
8/19 - BOT NQ 1356 (hedge)
8/18 - SHORT DIA 100.58 avg, SHORT YHOO 28.14 avg, SHORT QQQ 33.55, SHORT VZ 38.75

7/29 - BOT AMZN 38.83, 8/2- STOPPED 38.15, out - .68


6/29 - STOPPED CNET 10.97, out - .14, SOLD CMVT 19.55, out + .25, STOPPED BORL 8.48,
out - .27
6/28 - BUY BORL 8.75, BUY CMVT 19.30, BUY CNET 11.11
5/24 - STOPPED REST OF DIA SHORT 100.15, out - .08
5/18 - COVERED QCOM 63.23, out + .20 (locked), PARE COVERED DIA 99.85, out + .22,
COVERED ERTS 50.33, out + .29, COVERED ERTS 49.91, out + .68
5/17 - PARE COVERED QCOM 62.01, out + 1.42
5/14 - SHOT DIA 100.81 (avg 100.07), PARED COVER JNPR 21.18, out + .80, 21.01, out
+ .97, COVERED 20.89, out + 1.09
5/12 - SHORT JNPR 21.98, ERTS 50.62, QCOM 63.43, SHORT DIA 99.89
5/4 - PARED YHOO SHORT 53.80 (avg 52.70), PARED DIA SHORT 103.90 (avg 103.40)- 5/12
- COVERED DIA 100.40, out + 3, COVERED YHOO 52.20, out + .40
5/3 - SHORT YHOO 51.60, COVERED out pared shorts ^^
4/30 - SHORT DIA 103.13, pared 102.61, out + .52

Swings 2003---

12/27 - BUY NANX 7.04, 12/29 - PARED 8.60, out + 1.56, PARED 9.04, out + 2, 1/6- SOLD
11.50, out + 4.46
12/5 - BUY NGEN 6.16, 12/27 - PARED 7.25, out + 1.05, 12/29 - pared 8.20, out + 2.04,
PARED 9.16, pared + 3, PARED 10.16, out + 4, 1/02 - PARED NGEN 10.90, out + 4.86, PARED
11.70, out + 5.54
12/1 - BUY NVLS 43.35, 12/3 - PARED 43.92, out + .57, STOPPED 41, ouT - 2.35
12/1 - BUY DIA 99, 12/3 - PARED 99.53, out + .53, 12/9 - PARED 99.80, out + .80. 12/10 -
SOLD 100, out + 1
11/17 - SHORT EBAY 53.85, PARED SHORT 54.35 (avg 54.10), PARED profits 52.70, out +
1.40, 11/18- PARED 52.20, out + 1.90, PARED 51.65, out + 2.45, COVERED 51.20, out +
2.90
8/4 - BUY MUSE 8.51, 8.5 - PARED 8.83, out + .32, 8/9 - SOLD 9.05, out + .54
8/4 - BUY EBAY 102.80, 103.80, 104.40 and 105.10, 8/5- SOLD 104.10, out + 1.30, + 30, out

http://www.undergroundtrader.com/jay/ 1/31/2011
Jay's Nightly Briefing Page 17 of 25

-.03 and - 1
7/14 - BUY LOOK 3.95, pared 4.25, out + .30, 7/28 - pared out 4.60, out + .65
7/11 - SHORT DIA avg pared 91.20, 7/14 SHORT DIA 92.65, avg cost 91.90, 7/15- PARED
91.15, out + .5, 7/16 - PARED 90.70, out + 1.20
7/9 - BUY QAVTF 1.15, 7/10 - PARED 1.50, out + .35
6/23 - BUY DAVTJ 1.50 (dia aug 88 puts), 7/1 - PARED $2, out + .50
6/18 - BUY LOOK 2.73, 6/19 - PARED 3.13, out + .40, 7/2 - SOLD 3.90, out + 1.17
6/6 - BUY ATYT 8.35, SOLD 8.75, out + .40
6/6 - BUY BRCD 7.64, 6/10 - STOPPED 6.90, out - .74
6/6 - BUY SSTI 5, 6/13 - STOPPED 4.30, out - .70
6/2 - BUY CSCO 16.89, PARED 17.19, out + .30, 6/4 - SOLD 17.45, out + .66
5/30 - BUY MSFT 24.78, 6/4 - PARED 25.20, out + .42
5/29 - BUY DIA june 90 calls .60, 6/2 - pared 1.25, out + .65, 6/4 - pared 1.80, out + 1.20,
6/6- Pared $3, out + 2.40 (+350%)
5/27 - BUY TECD june 30 calls .20, BUY TECD june 22.50 puts .15, straddle for earnings,
5/29= SOLD TECD puts at .40, out + .20
5/15 - BUY DAVGG 4.20 (dow july 85 call, 5/27 - STOPPED 2.60, out - 1.80
5/12 - BUY MSFT 26.22, 5/28 - STOPPED 24.60, out - 1.62
4/29 - BUY DIA 85.10 (avg cost), 5/6- SOLD 86.50, out + 1.40, 5/12 - SOLD 87.50, out +
2.40
4/21 - BUY UBET 3.25, 7/29 - PARED 4.40, out + 1.25
3/31 - BUY HNZ 29.30, 4/15 - sold 30, out + .70
3/31 - BUY OEX 430 (april 430 calls), target hit 447, out + 17
3/29 - SHORT MSFT 24,85, COVERED 24.10, out + .75
3/29 - SHORT QQQ 26.29, 3/31 - COVERRED 25.29, out + 1
3/29 - SHORT DIA 81.90 (avg cost), 3/31 - COVERED 79.50, out + 2.40
3/26 - BUY DAVPE 2.70, 3/27- PARED 3.20, out + .50, 3/31- COVERED 4, out + 1.30
3/13 - BUY CSCO 13.17, SOLD april 12.50 calls + 1.25, 4/21 - out covered calls + .58 on
spread premium
3/12 - BUY DAVDW 3.40, 3/13- SOLD 4.70, out + 1.30
3/12 - BUY SMH 22.32, 3/13 - SOLD 24.20, out 1.88
2/26 - SHORT VRTS 16.93, 3/3- PARED 16.48, out + .45, 3/4- PARED 16, out + .93, 3/5
COVERED 15.70, out + 1.23
2/25 - BUY NQ 978, SOLD 1001, out + 23
2/11 - BUY LVLT 5.34, target $6-6.50 range, STOPPED 4.94, out - .40
2/11 - BUY ASKJ 6.15, target $9.50-12 range, 2/19- SOLD PARTIAL June 7.50 calls @ .90,
2/20 - PARED 7, out + .85, 2/21- PARED 7.35, out + 1.20
1/27 - SHORT IBM 79.05 pared, pared 77.70, out + 1.35, 1/31 COVERED 77.10, out + 1.95
1/9/03 - BUY SYQBI 3 (symc feb 45 calls), SYMC 45, target 50-52 range, 1/10/03 - PARED 4,
out + 1, PARED SYMC 46.70, out + 1.70 1/13- PARED 4.30 out + 1.30, PARED 47.30, out +
2.30 1/15- postmarket, SOLD 48, out + 3

We are now posting illustrations throughout the DAY of setups, these update automatically
and can be seen here click here make sure to hit the refresh button

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Jay's Nightly Briefing Page 18 of 25

*** be SURE to check out Luke's e-minis futures alerts and updates off the briefing section
***

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Underground Manifesto:

We want to graciously thank our members for their support throughout the years as
undergroundtrader.com kicks off its 8th year of service. Last years resolution for every
member was to stick to the basket method of trading. This year, we hope more and more
traders will come to see the light and embrace this method. The advent of decimalization
poured salt on the wound as stock prices deflated with the volume providing the toughest
trading terrain possible in 2001 as stocks seemed to float in a range on light volume only to
panic and then resume ranges. Throughout this period, the theme "that which does not kill
you makes you stronger seemed to emanate daily". As much as clean victories with the least
amount of resistance is what every trader wants to attain following in the lines of Sun Tzu,
these conditions are not always present and thus a different type of battle emerges, one that
can best be summed up as a war of attrition. Throughout this year, we have learned that one
trade nor one day nor one drawdown week is not the end. It is but a blip in your trading
career. We learned to grow a tougher and thicker skin and to reach down inside and pick
ourselves back up when a probable setup does the improbable because in the end, it is all a
numbers game... a game of probability. The GOAL of the game is to recognize and ACT on the
TRANSPARENCY before it becomes TOO TRANSPARENT at which point the window of
profitability shrinks. We learned to play the lightest volume with windows of opportunity that
were the size of keyholes in an effort to train ourselves to to be better than the next trader. To
be able to count the stitches on a fastball. While others whined and moaned, we sat and
watched and watched and watched 8 hours a day in front of those monitors making ourselves
better, more aware, able to anticipate, REACT and give us the EDGE. What may seem like a
dead market at time is a test of discipline and patience to us. We learned to ease up on the
gas pedal and tap the brakes to adapt to the rhythm as volume slows down. We learned that
the best liquidity is to sell into the buyers and cover from the sellers and that PANIC is a gift in

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any situation so long as we are not on the tail end of it. Early entries, sweet spots and late
entries make up your trades and we learned in light volume the late entry is a mistake. The
early entries imply more risk but is proportionate to the reward. The sweet spot is the ideal
entry to get in just in time for the panic pump and be out into the buyers or sellers.

Looking back in your own career as a daytrader. Remember when you first got into this game.
Remember when you owned shares in your 'investment' account of a stock perhaps it was
AMAT. You were always told that stocks are the company and fundamentals drive stock prices
up and down. However, there was a fallacy with that explanation. If AMAT some material
news? Then why did AMAT trade in a 2pt range from 42.50 to 44.50 ? Was there some news
that I didn't hear? What makes AMAT move like it does throughout the day? Surely, it can't
only move on news and fundamentals... and what if I could just buy AMAT at 42.70 and dump
it above 43.50?? Wouldn't that be more prudent than sitting through all these moves up and
down?

Remember, asking your broker "why is AMAT up and down throughout the day?" and getting
some response like "well, we are only thinking long term here so don't sweat it". This is when
the hunger for knowledge started to grow as your curiousity is not only piqued but now
becomes an obsession. The circle of knowledge was incomplete and you set out to LEARN
what makes stocks move intraday if it isn't news or fundamentals. This is the first step to
daytrading.

Throughout your quest, you asked yourself how can anyone know when someone is going to
put in a buy or a sell order. It seems completely random? How on earth can anyone track the
buys and sells and anticipate when they will happen? This is pure gambling. There is just no
way to know what each shareholder is doing at any point in time.

You read books. You visited many websites. You got a browser based broker account. You got
realtime quotes. But there were many MISSING pieces and you struggled to get a clear
answer. Perhaps, you got your feet wet and dipped your toes in this game early on and lost a
leg. Perhaps you made money piling into a novelty stock or a internet stock in 2000 and
thought that THIS is DAYTRADING, I love it and then got clawed by the bear only to resume
your search to find out WHY?

One reason or another, your path lead you to the undergroundtrader.com trading pit. Your
first day in the Pit, you were overwhelmed with the terminology "noodles" "pups" "cranks"
"overshoots", what language are they speaking?!? But interestingly, stocks seemed to move
as they were called and in most instances they foreshadowed a lot of the moves and from that
point on... your eyes were opened. Finally, it starts to make sense. Every day it gets
hammered into your head:

STOCKS ARE NOT THE COMPANY. Stocks are a 4 letter word that move according to the
futures. As the futures rise, stocks will bid up and as they fall stocks will bid down. As stocks
move higher in price, their floats get thinner and stocks tend to move faster. As stocks get
cheaper in price, their floats grow and they move slower. The market moves top down from
the futures then the tier 1 generals in each sector and then the tier 2's and tier 3's and so

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forth. It's MAKING SENSE! If AMAT moves up, then NVLS and KLAC follow. Wow. Tier synergy!
Eventually for each need, you learn another tool to follow.

At first you just start with Nasdaq level 2 and see those large sizes on the bid pop a stock for
a few seconds and then see the stock panic back down and vice versa. You spot one market
maker but can't read his motives. Its very confusing. The need arises where you ask yourself,
how can i make sense of these sporadic Nasdaq Level 2 movements. You learn a tool called a
stochastics chart. This chart is composed of a grid from 0 to 100 and two lines called
stochastics oscillators %d and %dslow. You learn that this chart measures overbought and
oversold conditions. When the stochastics lines are under 20 band they are oversold, when
they are above the 80 band the stoch is overbought. Makes sense and as you watch nothing
but Level 2 and the 1 min stochastics chart, it fills in a piece of the puzzle. Basicaly buy signals
are when the %d cross the %dslow up through the 20 band and vice versa down through the
80 band on short signals. All this makes sense.... until you see that the 1 min stochastics
sitting under the 20 band cross back up and slip again. You start to lose faith in the tool as it
is not 100%. You ask yourself why is it that sometimes AMAT will be trading at 43.05 near its
highs and wiggle to 42.90 as the 1 minute stochastics slips under the 90 band ready to cross
the 80 band and then AMAT pops to 43.20 as the 1 min stochastics resumes to bounce back
up through the 90 band?!? Stochastics ain't telling me enough here. Why is it sometimes
stocks will sit near its highs and the stochastics doesnt drop for like 30 minutes? Or stock will
hold near its highs and the stochastics will make a full oscillation? You quest continues to fill in
the pieces of the puzzle.

Enter the 3 minute simple moving averages chart. This chart composed of a simple 5 period
moving average and a 15 period moving average. They paint the direction of the TREND as
well as proving supports and resistance levels. You learn firsthand the power of a consolidation
breakout and a PUP breakout. Interestingly, you also learn that most breakouts start at a high
band 1 minute stochastics reading because they all start off as minor short squeezes. Market
makers are heding constantly in a stock with the noodles and if the noodles or the stock
maintains a high band stochastics long enough, they are forced to hedge back to the longside
thereby forcing a short squeeze. It then trigger real buyers and traders to step in and a
snowball effect happens. Wow. Makes sense once again. You notice an uncanny phenomenon.
When you click the 5 and 15 period lines, you notice how well the stock tends to coil off the 5
period when its breaking out. This is an ACTIVE uptrend making higher highs (ala 5 period)
and higher lows (ala 15 period). This is an uptrend and an active uptrend will always trade
higher than the 5 period simple moving average and thereby allows you to keep a profit stop
when that 5 period breaks. You learn what a PUP breakout out is as Jay explains that the 5
period acts as a resistance by the shorts/sellers yet the 15 period is a the quiet buyers slowing
lifting their bid prices, the classic immovable object versus the unstoppable force situation.
When the 5 period gets penetrated, the buyers charge and the barabarians break down the
gates as market makers trampled over each other to hedge long and a dynamic breakout or
breakdown can occur. You see this happen in REAL time and you are amazed.

Finally, you ask yourself, how can I get a heads up on the movemets of the stochastics or a
potential breakout? Simple. You chart the nasdaq 100 futures (aka noodles) on a 1 and 3
minute stochastics chart. The 1 minute noodles is the lead indicator that triggers the 3 minute

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noodles and all your other tools. Truly a synergistic effect.

"I can see!" said the blind man. Everyday you learn something. You learn that inidividual buy
and sell trades don't affect the market. The big boys which are the institutions and funds move
the markets. Stock can move without a single share being traded because market makers
adjust spreads to the futures. YOu learn that the game is to REACT and not predict. However,
we used the charts to track the footprints of the big boys. YOu learn what a buyside and
sellside fade is and the effects of cranks and crosslocks. You learn about the rhythm of your
stocks, the tier synergy effects the nuances. The no brainer setups like a low of the day at a
high band 3 min noodles inv pup formation as a short and vice versa for a long. You learn to
put a lot of emphasis on the futures as they are the HAND THAT holds the puppet strings to
your stocks. You learn about the ovetrshoot panics and the 2.50 support/resistance lines and
about adapting everything into the context of the noodles.

You learned the rules to the GAME. No one can predict WHERE stock prices will go. However,
knowing the trend, the support and resistance levels from different time periods, you can
gauge where a stocks resistance will be and be prepared to sell into those buyers and vice
versa on shorts. In essence, you learn what the true probabilities are... and the real game is
to react not to predict... to take ACTION on TRANSPARENCY BEFORE it BECOMES
TRANSPARENT. You learned the GAME.

What seemed like an ocean of confusion in the beginning has now to shrunk to a few 20inch
monitors on your desk, your terrain... your opportunity to make or lose money. People from
across the globe all focused at any given moment in time at one point... in an effort to take
your money or you to take their money. It's beautiful. Poetry in motion. Welcome to the
greatest speculator sport in the world and you are a player... a trader. You have arrived. :)

The journey doesnt end there. Once you have the tools and the basket stocks, you battle with
consistency. But you grow with each new battle. The markets constantly shift paradigms. You
learn to adapt, anticipate and pull the trigger. You grow.... with us... together. Many of us
spend more time in the Pit than our own family and in a sense we are a FAMILY. We share in
triumphs and the greatest highs and also the defeats and the greatest lows from 8:30am to
4:30pm every trading day. We sit in the trenches as snipers and wait for the next trade
patiently, methodically and decisively. The journey is the reward.

Respectfully,

Jay

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Basket Trading Methodology:

The dart throwing BULL market came to an end and those traders and investors who were
simply lucky... fell through the cracks. This year was one of major contrast and truly was the
best training environment to any trader who really wants to learn this game from the
trenches. If you survived this market, you can survive and excel in any market. If you didn't
survive this market, chin up. A hiatus is the best medicine to regain clarity.

We learned many things this year as clarity and FOCUS was the theme. The lack of these two
qualities lead most traders to failure.

As we have preached daily about the importance of trading basket stocks, many have listened
and exceled in the worst market conditions. These BASKET STOCKS are your source of
income, bread and butter, personal ATM machine. If you have not picked out BASKET stocks,
we ask that you take this pledge for the new year 2001:

I WILL PICK ONE BASKET STOCK AND FOLLOW IT ALL DAY, EVERYDAY WITH THE TOOLS. I
WOULD RATHER BE BORED THAN BROKE.

^--- Post that on a sticky note and tape it to your MONITOR and read that everyday to
yourself.

Now that we have that straight, let's get deeper. As is our style, substance is what you need...
not just fancy cliches and textbook metaphors. Please print these steps out and tape them to
your Monitor-- follow these steps daily until you turn blue in the face from boredom.

1) PICK A BASKET STOCK


These are some good candidates:

1) MSFT - Moves with the noodles and dow. Good volume, good volatility and oscillations,
channels can get tight in lighter volume so be careful not to overtrade light volume.

2) KLAC - leader of the semi makers and thus sox.x. moves with the noodles. the naz can't
move much in a direction without the support of the semi makers. therefore when noodles are
rising but klac is sell fading likely, the noodles will give and reverse ....

3) QLGC - fast mover, leads the sans sector. good oscillator moves well with the 1 min
stochastics, be careful on the open as they love to crank and lean this one.

4) INTC/CSCO/ORCL - very thick former tier 1's. look more for the trending moves rather than
scalps since they move so slow.
2) WATCH YOUR BASKET STOCK WITH YOUR INDICATORS
a) Watch how stock MOVES with the 1 and 3 min noodles
b) Watch 3 min ma trend- 5pd resistance, 15 pd support
c) Watch the BEAUTIFUL synergy with 1 min stoch, the 1 min stochastics chart is only useful

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for the extreme overbought and oversold reversals that means under 20 band oversold
reversal back through 20 band for longs and over 80 band reversal back under for shorts
d) note the wider time frames for foreshadowing effects 8/13/60 min on noodles and stocks
e) Put it all together and see the synergies--- NEWS means nada. Stocks move in ranges
because market makers adjust prices to the futures thereby the noodles are your lead
indicator! When futures move UP and stock doesnt, then it may be FADING into the buying
aka a SELLSIDE BIAS and vice versa on a buyside bias.

3) PLAY ONLY 1 MINUTE STOCHASTICS REVERSALS ON PAPER!


a) Best long setups for scalps? 1 minute stochastics reversal through 20 band back up coupled
with 1 minute noodles stochastics-- and 3 minute noodles uptrend emergence. Vice versa 80
band reversals for the short.
b) On a PANIC or MOMENTUM breakout, the shorts can be measured to the 5 period and 15
period for full 3 min noodles oscillations down.
c) On a PANIC or MOMENTUM breakdown, the upside on the long reversal can be measured to
the 5 period and 15 period. Eg: CIEN panics down from 93 to 90-1/4 as noodles take a
pullback. 1 min stochastics tries to reverse back UP and 1 min noodles turning back up
through the 20 band 3 min noodles stall. CIEN 3 min ma chart shows 5 period at 92-1/4 and
15 period at 92-3/4, so a stochastics bounce entry here at 90-1/4 x 90-1/2 tells me my upside
is 92 x 92-1/2 range so that is the proverbial MEAT between the bones.

*** important! Be patient and papertrade or use a simulator. Dont worry about gains, worry
about clips. 1/4 to 1/2 is ALL you need in the beginning, never kickyouself for getting out too
soon *** Stochastics WORKS! You don't believe me? Pull up any stock on a 1 minute
stochastics chart with an adjoining tick price chart and see how 7 out of 10 times the
oscillations proved to be effective in the PRICE of the stock-- the proof is before your eyes.

4) GET YOUR SCALPS PROFITABLE 7 OUT OF 10 TIMES ON PAPER


a) This will be boring waiting for formations to emerge, but you should be hitting 70-80%
success rate on your entries for scalps. The amount of the scalp DOESNT matter at first, only
that you got a good entry with little wiggle and got an exit. This is your foothold and
foundation you need in the beginning with a Basket stock.

5) TRADE CASH FOR ONLY 100 SHARES OF YOUR BASKET STOCK


a) 100 shares is NOT TO MAKE MONEY. it is to try to DUPLICATE your paper results to real life.
This means you take 1/4 to 1/2 scalps with 100 shares to hone skills in real life WITHOUT
sweating the Money, this allows you to focus on TECHNIQUE. The money will come later. DO
NOT FOR A SECOND DELAY TAKING PROFITS BECAUSE YOU ARE ONLY PLAYING 100 shares.
YOU ARE NOT LOOKING TO MAKE $$. YOU ARE LOOKING TO PERFECT TECHNIQUE!!
b) Once you can duplicate paper results to cash, hitting 70-80% success rate, then you are
ready to increase your share load-- now you are ready to make $.

6) INCREASE SHARELOAD INCREMENTALLY


a) from 100, to 200, to 300, to 400, to 500, etc..
b) You should go SLOWLY so that you dont shake your equilibrium as far as your comfort level
when in the trade. start with 100/200 shares and EARN the right to play more shares. only

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after 4 of 5 days green up shars by 100 shares evry 2 weeks. if you slip to 2/3 days green
drop down by 100 shares for a week.
c) You will KNOW when you are taking too many shares because you will FEEL ANXIETY <--
NOT GOOD. Drop share load back DOWN when this happens.

7) DON'T OVERTRADE WEAK SIGNALS!


a) Deadzone and consolidations on light volume a no no

8) LEARN TO PARE SHARES INTO 3 MIN NOODLES UPTRENDS


a) This is the highest level when you have got scalps down pat, now you are playing larger
shares to be able to PARE into sellers on rising 3 minute noodles even though 1 minute
noodles may stall. The reason behind paring is to take some money off the table to give you
cushion on the wiggles prior to a greater move.

9) BE CONSISTENT!
a) You should be hitting green on a daily basis-- understand oscillation days are best for
stochastics moves and trend days are best for 3 min ma breakout/down patterns. Do not
overtrade light volume

10) PICK ANOTHER BASKET STOCK (GO BACK TO STEP 1)

Phew! Thats a mouthful for you to swallow, BUT IT WORKS! Ask anyone in the Pit who is
making steady consistent GREEN daily and they will tell you, the basket stock trading method
is the ONLY way to go! We just touched on the basics here but START with these steps. You
need a FOOTHOLD before you can climb a mountain. The above takes FOCUS and discipline to
implement. It works. The question is do you have the CONTROL to implement the above?

Undergroundtrader.com

ps: if you have not gotten a copy of the NEW undergroundtrader handbook from mcgraw hill,
here is a link to order

click here

Respectfully,

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Jay Yu
Head trader
The UndergroundTrader

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