UPDATE Trade: ETP Short via Puts...Winner!

23-AUG-10:
I decided to take my ETP short position off today based on the fact that after 2 days of trading since the gap down...no follow through had occurred (of course as soon as I was out of my position...down it went). On the gap down the other day it also failed to make a new low...which doesn't inspire confidence. I have also seen lots of gap downs based on new offerings turn rapidly higher.

Also, I had seen good profits go bad twice with this position...Besides that I was looking at the hourly chart and it had violated on CCI (this is a new indicator I am looking at based on Headley's Options Sniper program).

In any case, ETP has been good to me and I exited at $3.10 per contract..60 cents...and I generally had 6 contracts accross the accounts...$360 profit...not earth shattering...but good none the less.

Headley also presses the idea of time based stops...so that you can rotate your capital to the next trade that is in the early stages of rallying. So I am starting to exercise this a little more with things that are getting stale. Also left BVF today because of that.

I will say one thing. ETP has NOT flashed an exit based on the 4hr or Daily chart...so arguably this is a premature exit.

Charts:
Daily:

4HR:

10-AUG-10:
I desperately needed short exposure because I was net long and all the retirement accounts can't actually short stocks...problem is, because of liquidity, there are few options out there to suit the needs of these accounts.

Yesterday I was running my scans to see what had retested the day before or what was breaking out. In this case ETP was breaking out but not quite on the daily chart...so I checked the 4 hr chart...breakout had been confirmed...and towards the end of the day it looked like it was retesting...It reached like 19 and change on %R...I figured this was good enough for me as these options are very liquid and had decent bid-ask spreads.

Picked up the September $50 Puts for $2.50 per contract...stop is $2.00. The ask was $2.85 when my order got filled, so I figure to set the trigger at a bid of $1.80...I should get filled at $2.00

Charts:

Daily:

4hr:

New website

I found this while trolling the internet yesterday...Trade Ideas.

Neato scans.

Outside the Bands

Retests outside the bands today:

Longs: None
Inside the bands:
LSTZA, FBT

Shorts:
LANC

The System...

Update on the ECP trading system. Paper trading of the 2nd exit strategy based on an actual entry trigger in the opposite direction has yielded interesting results.

First the results and then I will get into the interesting part:

	Based on IWM		1000 shares		Trade costs
	Monthly total	Weekly avg	Net with IB	Net with TD	Total trades
Jan	$40.00	$10.00	$705.00	$1,938.10	190
Feb	$490.00	$122.50	$210.00	$1,508.00	200
Mar	$1,280.00	$320.00	$440.00	$1,117.60	240
Apr	$810.00	$122.50	$26.00	$1,427.76	224
May	$2,450.00	$612.50	$1,715.00	$352.10	210
Jun	$720.00	$144.00	$162.00	$1,797.48	252
Totals	$5,710.00	$218.58	$1,104.00	$7,436.84	1316
Max Profit	$1,970.00	Best Day	$2,220.00	Average Profit	$0.34
Max Loss	$1,080.00	Worse Day	$2,010.00	Average Loss	$0.15
Ratio	182%	Ratio	110%	Ratio	227%
% Winners	33%	Best Week	$2,090.00	Total Wins	217
% Losers	66%	Worse Week	$1,300.00	Total Losers	436
Ratio	50%	Ratio	161%

So...unfortunately this exit strategy doesn't minimize the number of loosing trades....this is the same as the previous exit strategy.

But the winners still out pace loosers by enough to get you a profitable system over the long run...in this case 6 months worth of data.

Now for the interesting part...lucky for me, the months of January through June offer a period of low and high volatility, this is what gives me confidence in the system itself as well as the paper trading results it has provided. Plus with a total of 600 plus round trip trades, you have some pretty good statistics to back your ideas up.

So now I will post the results of the first exit strategy vs. the second exit strategy:

	First Exit
	Monthly total	Weekly avg
Jan	$1,350.00	$337.50
Feb	$760.00	$190.00
Mar	$2,260.00	$647.50
Apr	$380.00	$142.00
May	$1,460.00	$365.00
Jun	$70.00	$47.50
Totals	$5,520.00	$240.92

	Second Exit
	Monthly total	Weekly avg
Jan	$40.00	$10.00
Feb	$490.00	$122.50
Mar	$1,280.00	$320.00
Apr	$810.00	$122.50
May	$2,450.00	$612.50
Jun	$720.00	$144.00
Totals	$5,710.00	$218.58

Ironically, Exit Strategy 1 outperformed Exit Strategy 2 during the low volatility days of January through March, then from April through June Exit Strategy 2 outperformed Exit Strategy 1.

I haven't gone back to do the academic exercise as to why this is, in a way i would think that exit 2 would do worse in higher volatility given that it keeps you in longer...but in higher volatility environments you get stronger moves so the profitable trades get more profitable.

In fact, the average profit was 0.28 for exit 1, vs 0.34 for exit 2 (21% delta) , whereas the avg loser was 0.13 for exit 1 vs. 0.15 for exit 2 (15% delta). So volatility benefits the exit 2 to the extent in that it keeps you in profitable trades longer than in loser trades...

Anyway when you combine the two you did better than using either one on its own. You would be up $8350 and not have had a loosing month, this is a 51% improvement over exit 1, and a 46% improvement over exit 2.

Now all I need is something to tell me when to switch exit strategies. Perhaps use some indicator with the VIX?

Outside the Bands

Retests outside the bands today:

Longs:
LFL

Shorts:
CPLA, LOPE, MDAS

Breakouts:

Longs:
SYT, PKI, MOO, PTY

Shorts:
WFC

Trade: EBAY and CFL Long...Winners!

UPDATE:
18-AUG-10
Got the following exit orders today:

Lock Down These Profits Today...

Place a Day Limit order To Sell (To Close)
all of existing position in eBay Inc. (EBAY)
August 20 Call (EBAY 100821C20) at 2.80 or better.

Place a Day Limit order To Sell (To Close)
all of existing position in Cliffs Natural Resources (CLF)
August 55 Call (CLF 100821C55) at 9.00 or better.

And so I did...this time...I got worse fills than suggested (though I tried for their recommendations...the market was working against me a bit).

CLF...filled at $8.90 per contract...this was a total of $680 profit

EBAY...filled at $2.79 per contract...total profit $235

I wont post charts because these options are expiring Friday...so it makes sense to take the money off the table now.

So far I paid $14 to make $915...this is probably the best "trade" I have made all my life. I may have to subscribe to this service.

Here's looking forward to the next trades!

17-AUG-10
I learned that the CLF trade was based on the 15 minute chart and that the signal was triggerd on CCI, %R and "the bands".

The chart follows...I don't see the band signal...but the others are all flashing...also it is important to note that the daily chart had demonstrated a %R retest on CLF...so that was also working for it.

The Option chosen also had a great chart.

CLF 15 min Chart:

CLF $55 Aug Call chart:

16-AUG-10:
Signed up for a 2 week special of Bob Lang's Extreme Options last week when they offered the service for $14 for the next 2 weeks.

Today's trades came in at 11 AM as follows:

Place a Day Limit order To Buy (To Open)
a HALF position in eBay Inc. (EBAY)
August 20 Call (EBAY 100821C20) at 2.37 or better.

Place a Day Limit order To Buy (To Open)
a HALF position in Cliffs Natural Resources (CLF)
August 55 Call (CLF 100821C55) at 5.50 or better.

And so I did.

I got filled at better prices.

The EBAY calls I got filled at $2.32 each (5 contracts total), the CLF calls I got filled at for $5.10 each (2 contracts total).

My small understanding of the trades are that these are based on hourly chart signals...my hourly chart settings must be different because I remember seeing the CLF trade as simply not there...ironically this is what did best today.

Anyway I will investigate the settings they use to see if I can make heads of this.

But I will attach their charts that they send in the nightly (or seminightly) update:

Now my charts:
EBAY

CLF

UPDATE: Trade: Short FIS Sep $28 Puts - Loser

18-AUG-10:
Got filled on the others at $1.50...of course it is going down now.

17-AUG-10:

Another loser here. Unfortunately, my stop got taken out on the 4hr chart and I had to exit this trade. The problem was that I was unable to get my $1.50 offer and wasn't able to exit entirely from the trade in all the accounts. Currently, the taxable and my sister's IRA are still holding this issue, the other accounts I unloaded for $1.42 or $1.43.

I had purchased some of these in these accounts yesterday using a retest as an opportunity...So the Cost Basis was $1.78 on these still, not a good loss to take 36 cents per contract and I was holding quite a few.

Trade triggers were fired as the Bid hit 1.45...my offer was $1.50 and it didn't even come close to getting filled at that price...I was battling for bids at the $1.42...got a partial fill on my sister's account at $1.43....good for TD...bad for me...gotta get the rest filled tomorrow...probably into a shitty tape.

In fairness, this did violate %R on the 4hr chart by a penny but this violation occured outside the bands...and most other indicators were still in sell terroir...So I held thinking this wasn't a good enough reason to sell and my risk hadn't been even close to being reached.

Anyway...charts:

Daily:

4hr:

12-AUG-10:
Despite being at some level of support, I feel that somethings have technical damage sufficient enough to trade to the downside. This is true in all markets...there are stocks that are rallying today (e.g. BVF). There are also of course things that deteriorate.

FIS seems to be one of those stocks at this point in time. I am much more apt to trade these higher volume names now with respect to trading options. In this case the September $28 puts are attractive from both a delta, price and liquidity perspective.

Cost basis is $1.80.

Charts:
Daily:

4hr:

TED "I can't believe its not butter" Spread

Just a quick update on the TED...its now crossed under the 200 day avg again.

Interesting how the RSI indicator never confirmed a bullish trend in TED..that should have been our first indicator for the rally in July

UPDATED Trade: Long ACOM via Equity

UPDATE
13-AUG-10: I tried to exit half the position in the morning but ACOM simply ran away to the stop. So, this indeed became a break even.

Charts:
Daily:

4hr:

12-AUG-10:
OK, so again I am in a dilemma that I have been in before. ACOM is now inside the bands, and violated on a %R basis on the daily chart. The same is true for shorter term charts like the 4hr. However, the 13 day EMA is still very much intact and my stop of $19.38 is well below the 13 day EMA which currently stands at $19.91. If it get out tomorrow morning I lock in a minimal profit, but a profit none-the-less. If I wait and see what happens at the 13 EMA (and this market) then I get a chance to increase my profits.

However, if I do wait to get stopped out, then I loose no money...but have also kissed a small gain goodbye.

I think I will be HOLDING on this one. If the market does fall apart (and I am not yet convinced it is doing that)...then I will get stopped out and I learned a lesson in discipline and following my original plan. However, the 13 EMA is really becoming a big part of my decision making process...So maybe ACOM will be the thing that tells me to finally make the 13 EMA part of my trading plan moving forward.

Let's see what happens.

9-AUG-10:
The 2 for 1 rule fired my trade trigger. So half the position has been taken off and it is now a free trade. Meaning I will not loose money on it. Yeay!
This reduces the cost basis to $19.38 per share instead of the original $20.

4-AUG-10:
Picked up a bunch of shares of ACOM this morning for $20 each due to the Retest outside of the bands yesterday. For those following along I apologize for not publishing the Outside the bands post yesterday I was very busy with other endeavors.

I went with shares because of recent experiences with illiquid options...ACOM is one of those things that trade just about 250k shares per day, so their options aren't very liquid. So equity it is. Position sizer gave me all these different sizes for all the different accounts.

Stop in all accounts is $19.38...Now don't you bastards take it there just to shake me out please.

The thing I like about ACOM is that it is a highly rated IBD stock, reported a great quarter, and it posted a 52 week high yesterday (the day it reversed for the retest). So to me this is a nice retest and the reversal yesterday probably took out some guys who jumped in on the breakout...nonetheless, I have a good stop and I hope this thing takes me to good places. The traditional technicals also look good, its a nice cup (with maybe a handle being formed with this retest...anyway fingers crossed.

Charts:

Daily:

4hr:

Outside the Bands

Retests outside the bands:

Longs:
None outside.

Inside the band longs:
AGP, ECLP, GENZ, ERY, VOD, TITN, KMB

Shorts:
PVA, XLNX (not really because it never confirmed..but intraday could be a trade)
(lots of retests inside the bands today...not going to go through them)

Breakout Longs:
CHL, DCM, PAR

Breakout Shorts:
GLW

Outside the Bands

Retests outside the bands from Friday:

Longs:
LFL

Shorts:CHT, ASR

Breakout Longs:
AEE

Breakout Shorts:
LSTR, RRGB,CACI

Outside the Bands

Retests outside the bands from Friday:

Longs...None outside.
Inside the band Longs:
NJR, LCAPA, UFS, BG, FOSL, CELG, DTV, BIIB, PFE, KMB, ABT, AMZN, HANS, CXW, CHL, AMP, AGNC, CAGC, EWH

I bolded a few that are of interest and potentially tradeable.

Shorts:
FIS, ETP (but these didn't really confirm on the daily chart...but its nice to see my positions come up on this screen)

Inside the band shorts:
HSP, WMS, XEC, VXX, CLH, TSN

Breakout Longs:
CHSI (retested a few days ago), ASCA (fresh), NFLX, AEM, IT,

Breakout Shorts:
NXY, SAP, TDC, TRN, RSG, BRCM, PLXS, NTAP, CSCO

note some of the ones listed above are not confirmed on %R, but I included them because of other endearing qualities.

On another note there are 88 stocks outside the lower bands...so...there should be lots of short opportunities in the days to come.

Ominous Hindenberg is now present

Go read EW Trends for the explanation.

Market musings...

Not that my opinion matters, markets got killed today and the low volume saviors didn't show up.

I will say that on the way home today I was listening to Pimm Fox and his "taking stock" show and wouldn't cha know it...Bob Prechter was on spewing his usual shit and how he just called this top last week...(hat tip pennyman for the link)

Pimm of course didn't ask him about all the million other erroneous top calls Prechter has made in the past.

Last night I attended a not so useful discussion where Sam Stovall of S&P gave a talk about whether or not diversification failed. He says no, if you had a 60/40 mix of equities and bonds...you would have only lost 13% or something at worse in the big bear of 2008.

But more of his talk was nice to hear. He mentioned statistics about the number of 2% days in market history...I forget the exact numbers but up until 1996 or so these events were rare...extremely rare.

Sam Stovall last night said that since 2000 we now have more than 2 times the number of 2% days on average per year.

Yesterday I got lucky and found an opportunity in ETP to go short something decent since I was totally exposed to the long side. This was a bit of luck, but also took guts...I can't remember the last time I put on a counter trend trade at a level close to resistance. I feel like this was one of my best trades this year...not so much because of the money involved, but because I acted on a good setup and knew to ignore new longs and put on a short.

In any case, after hearing those stats from Stovall last night, its good to remember that days like today are now becoming commonplace thanks to the computer trading and the Hal 2000s. Volatility seems like it is here to stay and this is the new normal. If anything is for certain this is it.

And for Sam Stovall to be preaching buying and holding last night...with this piece of knowledge in his head just made me less inclined to believe his philosophy.

I say this. Buying and holding is fine if you are a multimillionaire and have a small piece of your fortune in the market just to help pay for the servicing of your yacht and summer homes.

For everyone else, you best consider shortening your holding periods and using options to help cushion falls.

But today isn't that rare of an event anymore and we are now at a crucial support level, right now I am with Alphahorn...this is probably just another buy-able dip.

But tomorrow will tell us for sure.

Outside the Bands

Retests outside the bands today:

Longs:
RGS, PKI, CHSI

Shorts:
None outside the bands today.
Inside the bands:
MATK, PSQ, SKF, DUG, SQQQ, EEV, EUO, EPV, EDZ, SDS, RSW, DXD, QID, VXZ, SMN, UUP, SPXU, SH, DOG, MZZ

Breakouts:
Longs:
IT is the only fresh one...the following are still outside the bands after some time:
PTRY, CTXS, TTM, CNK, SXCI, WTW, SWSI, TIP, MGLN, WCRX, APL, FOSL, ACF, PCY, PCLN, FDO, VZ, IEF, PGF

Shorts:
NILE, JCP, MR...these are fresh

Not so fresh:
PWR, MDAS, UVV, OCR, NTRI, PBI, OSTK, BIG, ARO, BEC, ESI, VPRT, VMC, TSN, SAFM, APEI, CEG, CBOE, VLTR, HPQ, PEGA, BHI, LANC, DV, CSL, LOPE, WY, CECO, MLNX, WDC, UTI, CAG

The not so fresh include anything that has closed consecutively outside the bands in at least the last 2 days and have also had consecutive closes in overbought/oversold of %R.

These are good to watch for retests.

Outside the bands

Retests outside the bands today:

Longs:
TSU...incredibly juicy setup..I may have to take this.

Shorts:
None outside

The TOS hamsters are on strike and this is as far as I am going to get tonight. So sorry..no inside the band retest list tonight...I did see early in the day CBD was retesting just inside the bands...again juicy enough to trade.

China...must read

Over at TBP, in between making me green with envy about some annual fishing trip Hedge fund managers convened at in Maine this weekend...John Maudlin gives us a long piece about 2 shitstorms...one involving state pensions, and the other shitstorm brewin' in China...

All we read about is how wonderful and powerful China is...but John relays something from Simon Hunt...apparently an expert in all things China.

In short, just as we screwed shit up (ala Grande Depression) directly after our Industrial Revolution (the one in the 1920s)...China is on the verge of the same challenges, according to Hunt, they are knee deep in some of the same difficulties we had in our Industrial revolution.

Anyway...go read it, its a doozy, but not everyone talks about shit like how little water there is in China and how much of a problem that is to real growth over there.

Outside the bands

Outside the band %R retests today: NONE
Inside the bands

Longs:
102 charts to sift through...fuck...

HCP, EQR, RSG, BEXP, EPI, CRZO, NNN, PPL, SLE, CRUS, CREE, NE, TS, TDC, DCI, ATW, TDW, TM, RYN, UIS, FNSR, CPX, INFY, ACOR, ANSS, ECLP, ACC, LOPE, LINE, ADTN, OGE, RYAAY, BUD, HSNI, SNA, BMRN, MKC, FIRE, CLP, IWO, HR, BBEP, SKM, BF/B, SWSI, NPO, TAM, ENP, HTLD, ROP, MINI, MKSI, FFBC

Shorts:
CTRN, MLM, CRK, MPWR

Breakouts:

Longs:
DBA, TSU, LEA, SNI

Shorts:
PBI, HSP

Fed action?

Over at briefing...a multiple-time-per-day read for me...cuz the guy who writes it is just too funny. The bond market got this:

10:52 ET 10-Yr: -09/32..2.941%.. USD/JPY: 86.35.. EUR/USD: 1.3139
Fed Up: The Fed purchased $0.180 bln in tri-party reverse repo as part of the operational readiness program announced on Tues in the small scale tests. They will continue to conduct "similar series of small-scale, real-value reverse repurchase transactions with primary dealers using all eligible collateral types, including, for the first time, agency mortgage-backed securities (MBS) from the SOMA portfolio"...BUT "Like the earlier operational readiness exercises, this work is a matter of prudent advance planning by the Federal Reserve. It does not represent any change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future." Got that?

I have no idea what reverse repo's do or are...I just know this seems to be written with a bit of snark and stuff...hopefully someone like Boockvar will take notice and explain it to us stock idiots.

From Wikipedia:

A Repurchase agreement (also known as a repo or Sale and Repurchase Agreement) allows a borrower to use a financial security as collateral for a cash loan at a fixed rate of interest. In a repo, the borrower agrees to sell immediately a security to a lender and also agrees to buy the same security from the lender at a fixed price at some later date. A repo is equivalent to a cash transaction combined with a forward contract. The cash transaction results in transfer of money to the borrower in exchange for legal transfer of the security to the lender, while the forward contract ensures repayment of the loan to the lender and return of the collateral of the borrower. The difference between the forward price and the spot price is the interest on the loan while the settlement date of the forward contract is the maturity date of the loan.

I don't know if this clears it up for any of you...but since they are using MBS as collateral, this is an exit strategy....I confirmed it with my buddy GX...here's his take:

"...It sounds like they are taking money out of the system by selling securities from their SOMA holdings (system open market account) with the agreement to buy them back at a predetermined date (maybe as short as overnight) at a pre-determined rate.
So, as a bank, if i want a place to park some cash i can do so by lending money to the fed in the form of a repurchase aggreement (i sell and agree to rebuy). it would be a good alternative to leaving my cash in Fed Funds, assuming that the rate is higher.
It's interesting to hear about them draining liquidity at a time when pundits want more quantitative easing....probably the reason for the long explanation, second half... "this does not change our stance on monetary policy"
makes sense (i buy it) with such a tiny amount.

I sware I can't figure some of this crazy banking juditsu out...I thought this would be welcomed with a big badonkadonk over in bond-land but I guess since it's such a small amount...nobody cares....kind of like when that test of the emergency broadcast system happens to your TV...

UPDATE Trade: ARMH long via Calls - Loser

UPDATE: 3-AUG-10 thanks to a gap down yesterday, ARMH triggered my sell order. I got lucky with an intraday rebound that hit my target exit price. I got filled at 2.70, 2.75, and 2.80 depending on the account.
Loss ranged from $177, $378, $440 depending on the account. Stops are stops. Luckily this gap got semi-filled and allowed my order to fill..otherwise the losses would have been bigger.

Nonetheless, the only warning sign this gave was a %R violation...but that violation occured outside the Accel bands, since I need 2 signals to fire, I didn't panic over that. Also yesterday's gap was based on a Market Perform initiation by William Blair. 13 day EMA was held at the end of the day.

Charts:

Daily:

4hr:

28-JUL-10: So a nice leader of the IBD 100 retested outside the bands yesterday and I decided that it was worthy going long ARMH.

Went with Oct $12.50 calls at a cost of $3.29 (yeah I somehow got filled at that price with a limit of $3.30)...all my options trades of late have been as close to 90 delta as possible so that my ATR position sizing formula works to some extent even with options...so I dont get stopped out prior to the actual stop on the stock like UL...(PS I re-entered UL in the taxable account today since it retested...the retest was inside the bands but it demonstrated support at the 13 EMA)

In any case charts follow.

Daily

4hr