MACD negative on monthly S&P 500

I dont always keep track of monthly closes...or monthly charts for that matter...but times like these when nobody knows if we are cheap or expensive, oversold or just gettin warmed up...I like the perspective.

I also like simplicity when it comes to monthly charts...finally...the close is really just another trade...its not different at the end of the month than at the beginning of the next...but different people place different weight on the close...in reality its just another trade that just got executed at 3:59:59:59...and so on...BUT since many people believe the close is important...I use it in many of my analyses.

I also apply my favorite moving average (which also happens to be Alexander Elder's favorite...but it was my favorite long before I read his book)...the lucky 13 period EMA.

I like 13 because its a taboo unlucky number but also, its a fibonacci number...and it's a short enough period that it tells you fairly quickly that a trend is getting going, finding support, or switching to the other side.

The other indicator is simply MACD.

Here's what happens to the good ole S&P 500 as of this month's close (also a quarter close). We closed for the 2nd month well below the 13 EMA....ah...so what...well MACD historgram went negative...

Over the last 20 years...there are very few occasions that these conditions have been in place (closing under the 13 EMA and MACD histogram going/being negative)...but whenever it did happen it spelled bad news. Just as the opposite usually spelled good news.

If the index was above the 13 EMA and MACD histogram went negative it was usually a sign that the rally was having a retest and that was a buying opportunity.

However, if the trend is compromised by 2 closes under the 13 EMA...and momentum has also been slowing to the point of a negative histogram being in place...then this could spell major disaster.

In late 1999 MACD went negative and stayed negative as the index made less and less progress to the upside. When the index closed under the EMA...bye bye good times. The index didn't see the topside of the EMA untl May of 2003.

In December of 2007 MACD went negative...the index closed the year above the EMA but January 2008 was a bad month to say the least and it pushed the index under the 13 EMA...the Index wasn't going to see the topside of that EMA until July of 2009.

Well here we are again...now we have 2 closes under the EMA this month actually tested the EMA from below and failed miserably...closing near the lows of the month and forcing the MACD into negative territory.

From a candle perspective, these last 2 months look almost exactly like January and February of 2008.

That being said...after those bad months a relief rally ensued and the EMA was tested...so we may go to 1233 in the near future...but that's a great short-able number now.

In any case, I believe that we will test last year's lows around 1000 on the S&P 500...I am also thinking that it is likely that we will go beyond that and test the March 09 lows.

That will not be pretty for the world...I am hoping that doesn't occur. Either way...ugly times ahead...unless you are short of course.

VIX Fakeout...a great lesson

One of the greatest lessons I have learned in a very long time I learned this week from Bob Lang...

When the VIX was rising ahead of the election/FOMC/NFP week...I was thinking this was warning that the rally was fizzling...

Bob put it into perspective by saying how VIX was really just like any other implied volatility measure...rising ahead of a big news event...Only to implode after the event.

While I am glad I didn't go short ahead of this news...next time I will do better and go long.

This was a great lesson learned from the opportunity I missed to really get in on the big moves of this week...

It is important to put movement in the VIX into context with the coming events...this enables better interpretation of higher (or lower) relative VIX prints.

Notice how the VIX was steadily rising the week prior to Halloween...this wasn't showing lack of rally health or a big move down...the reason was the big news events coming that the market was worried about...this increased put buying as insurance and so artificially inflated the VIX...

After the news hit (no surprises from the election or the FED) VIX imploded and we got the huge breakout rally...NFP DID surprise to the upside but the market had already gotten such a boost the day before we just managed to get follow through.

If the VIX is rising...first see if there are any major events coming up (FOMC, etc.)..if not then perhaps it is a warning of badness...but if there is news...it's likely the VIX is being artificially inflated....sell some bullish vertical put spreads...

Trade: Short BAC...winner

21-OCT-10:

I entered BAC on Tuesday based on a retest I had been waiting for since the first breakdown. I also didn't want to get in ahead of earnings on BAC...

Last Thursday BAC broke down really hard on the hourly chart...astute traders could have gotten in Friday morning as a retest occured at the open...that was the really easy money.

However, BAC was reporting on Tuesday. I wanted to be patient and wait for the indicators to line up and I was actually hoping it would happen after earnings report...well it did retest into earnings on Monday afternoon. Lucky for me it kept having a little bit of strength into Tuesday afternoon.

Post earnings enthusiasm wasn't that great as volume wasn't strong. This is a good case of interpreting multiple timeframes to my advantage. First, the overall picture on the daily and hourly charts had confirmed bearish...so any "bullish" behavior was an opportunity to get short.

The 11 AM hour showed a Doji candle...followed by a decent red bar for 12PM...Also, the DMI kiss was nearly in effect...So I watched the 15 minute chart unfold and I looked to my trusty 13 EMA on that timeframe. It closed under it right around 12:45PM I decided to take the trade figuring risk reward was decent.

I took the trade when BAC was trading at around $12.30 the top of the day was put in at $12.45...15 cents risk...not bad.

I also looked at the options chart for the Nov $14 put...it was retesting on the bullish side.

Then I picked a target figuring the recent low of $11.74 was a decent place for this baby to go if it were to go down. So I had about $0.15 risk and $0.55 reward.

This was a very easy trade to place. I emailed Bob Lang about it and he said it wasn't good for him...overcoming that comment was probably the hardest part of the trade.

Anyway I fired off 29 contracts of Nov $14 puts for $1.78 each...total outlay $5162

I took profits later that same day as my target of $11.74 was reached I sold 9 contracts for $2.30...$2070

Today I sold 8 more around the accounts for $2.60...gained another $2080

I have 12 contracts still riding the wave here.

Right I have recovered all but $1012...which means the 12 remaining contracts have a cost basis of $0.84.

Currently they are trading at around $2.65...which makes the position worth $3180..overall this is a 41% winner thus far. In only a few days.

On $14 puts that means I can watch BAC come all the way back to $13.15 with comfort knowing that I will not loose one dime...

It just so happens there is a tremendous amount of chart resistance at $13...so at the very least I think I make $180

But at the very most I make quite a bit more.

My current target for BAC is right around $11. I used Fib extensions to get me that target since no time frame is now helpful..it is outside all the bands on all the charts and there is no chart support anymore. The 13 EMA on all timeframes is at or below $12 further making these worth something like $2.

BAC could very well be a shitstorm given the foreclosure/trustee loan documentation bullshit. During their conference call they said all was hunky dory with their foreclosure process. Then later that afternoon PIMCO, the NY Fed, Blackrock, and a few other decided to call their bluff and sue their asses for $47 billion in toilet paper they claim BAC has screwed the pooch on.

That is really why I have made some money on this...BAC is like BP during the early days of the oil spill...I think the easy money has been made but more money may still be there for the taking...

Those who have not yet gotten on board...tread carefully and pick decent strikes...and be patient for a retest.

Charts:

1hr:

15 min:

Nov $14 Put Hourly chart:

4Hr BAC chart (Look at the volume here):

Trades: Long ABT loser... and Short CTXS

21-OCT-10:
OK so ABT did not work out as a winner. Despite some technical breakdowns, I hadn't hit my risk tolerance level in this so I wanted to see the earnings reaction.

The day of earnings announcement it opened down really big and so I held. This turned out to be the right thing to do because it was an overreaction to a decent report. In any case, this is one position where I didn't have autostops on and I actually have ceased to have those in place since I am on top of things most of the time anyway.

Then again my account access also prevented me from panicking on this position. Never transfer brokers with open positions on and not having the usernames and passwords to all the accounts you manages...that's the lesson of the day.

Anyway, I couldn't get into most the accounts to even get rid of this if I wanted to. I spent most of the day recovering passwords and having a shared office is really starting to fuck things up with me...as I can't just pick up the phone and yell at TD Ameritrade when this type of shit hits the fan.

In any case I got rid of the ABT in most of the accounts (still holding in the taxable as this is the one that is being transfered at this juncture).

Sold 16 contracts today for about $1.00. Sold 12 yesterday for 0.90.
$2,200 loss...SHIZEN

And I still haven't got rid of the ones in the taxable account.

13-OCT-10:
So as part of my scans and needing a short I decided to work on CTXS as a short today. And ABT retested early this morning from yesterday's breakout...so I decided that was a good long to put on.

Unfortunately, I was a bit overzealous on both these plays. I chased ABT and was early on CTXS.

Across all accounts I have the following:

CTXS
8 contracts of Nov $65 Puts for $9 each.

This is twice the normal position size but it is the only short I have on vs the other longs...and I am quite confident in CTXS going down down down...In the daily chart there is a gap back in July post earnings that should get filled on this fresh new downtrend. I see it going to $49 but I don't know if that happens tomorrow or the next day (or at all really).

These are 70 delta, plenty of time for that to go higher. I also chose these due to the high open interest.

ABT
38 contracts of Nov $52.50 Calls for $1.75 each...

I chased these a bit as I tried to get filled at 1.60 then at 1.65 and it kept going...until of course a little pull back happened...but nonetheless I see ABT going to $55ish and we should get a good 60% gain on these calls if that happens.
These are a 60 delta but we have lots of time so I decided it was worth the risk. I also chose these due to the high open interest.

Charts:
CTXS

Daily:

HR:

ABT
Daily:

HR:

Applause for the NDX...New High Going back to end of 2007

Amazingly enough, nobody on the blogosphere has pointed out that yesterday the NDX (a.k.a. the Nasdaq 100) made a new high not just for this year...but going back all the way to the 1st day of trading of 2008.
The high yesterday of 2067.06 is the highest the NDX has traded at since January 2nd 2008. Also the close was the highest close since then as well.

That means the buy and holders in the NDX can safely say that they have been made whole again since the crash....(I hate it when those guys have a data point they can hang their hats on..)

This is a remarkable achievement for any stock let alone an entire index of stocks.

Given the pastel colored recovery that we have been having, it is hard to fathom the 100 companies that make up the NDX are better off today than they were at any time in 2008. Those were the salad days...sure the peak had been put just a few months prior but still...Salad days none-the-less.

I noticed this yesterday when I was drawn to look at a multi-year chart to double check that we had made a new 52 week high in the NDX (stupid hobby looking to see if there was a 104 week high made). I was really thinking that today I would wake up to a barrage of headlines about this amazing accomplishment by this index.

Yet...nothing is out there exclaiming this milestone...Crickets.

In any case...here is an annotated weekly chart to help you all along...

Trade: Long ATPG

14-OCT-10
Took advantage of the DMI kiss/CCI/%R retest all on the hourly chart...The daily also has %R retest going on.

Decided to pick up ATPG...this came onto the radar recently as it broke out big time over the last few days on big volume.

Anyway, I am a bit hesitant on longs now since many indicators are showing up as overbought/overly bullish...However this is a strong trend and I am hoping to be proven right here.

Got into 21 Nov $14 calls at a price of $2.75 each.

Charts later..

Batting Average...

So...an astute reader asked me what my batting average is for trades I come up with on my own without the direct help of Bob Lang and Price Headley.

Well...its a good thing I tag posts winner and loser.

Anyway thus far (since I started chronicling things on this blog) I have 14 wins and 17 losers. So that's something like batting 0.451 (31 at bats).

Not too shabby I guess...Not too shabby at all. My goal is to get better (had I taken profits on just a few more trades the balance would have tipped in favor of the W column).

I didn't go back and calculate the total $$$$ here...but I am guessing I am barely at a profit or I am at break even...reason is because I can see the accounts and I know that it has been the Big Trends gains that have juiced the accounts thus far.

In any case, I am learning to get out when the going is good and that will improve the batting average...or I guess the Slugging percentage or whatever (not a baseball fan).

Things I might Trade

Longs:
DECK, ADSK, CSX, ABT, ATPG, WYNN, WCRX, ESV, MYGN, PLCE, ANSS, SNP

Shorts:
FFIV, VMW, GPN, FAST, TCB, CCI, MELI, CTXS, RE

More exits from Headley

So some winners were exited today...though not without watching an ensuing rally which left some money on the table...such is life.

Anyway exited FCX for $9.30 on each contract over 9 contracts that's a $2,385 profit.

Exited ICE at $7.10 each so again over 9 contracts $450 profit...

Overall a great day in the books...not much to complain about...but both these issues rallied higher after the fill came through...that's alright.

Trade: Long CHKP...winner

12-OCT-10:
Get out of CHKP calls at a price of $3.50...it continues to rally but I employed the discipline of getting out at at least 30% gain...I need to do this more often.

Since I picked these up for $2.35 each and we had 22 accross the accounts..that's a cool $2,530 in profits.

Today I am looking at TSL and it is rallying hard and I would have once more been green on that trade...but the key is that I was already green on that trade and I didn't do what I did today with CHKP...just get out...move onto another opportunity...There is no shortage of opportunities...and that's the key to the trader's mindset.

Get out when the going is good.

Then find another party to join.

Here is hoping that CHKP is the first in a long string of a new mindset for me.

7-OCT-10:
First off...Got orders to enter FCX today from Headley in the Sniper service.

BOT 9 contracts of OCT $85 calls for $6.65 each..this was a good entry point as it was retesting.

Some would say going long today would be a silly thing to do...with NFP coming out tomorrow and all that risk out there...and all the overbought conditions and resistance overhead etc.

Speaking of which...After NFP comes out tomorrow morning...I will have my own persepective on the jobs situation and I can truly say that it is unique in that nobody else talks about jobs like I will tomorrow.

I said fuck you there are really strong trends out there and many of them are worth a few points and that's all I am looking for now.

New philosophy is that I want only about 30% gains on these options...most of the time that is a very small move in the stocks like 3% or maybe 5%...depending on delta etc.

Anyway last night I was back onto the scans (hadn't done that in a while)...so in scanning I now go over a few scans...I still go over the daily scans for breakout and retest candidates based on accel bands and %R...then I do a few high volume scans as well.

Anyway, in digging I then look at things that are jiving on daily and hourly time horizons.

Enter CHKP...I liked the chart in that it had broken out was in a strong uptrend...and had a decent retest on the hourly chart already...(DMI kiss was in effect).

So this Am I waited to see the action on the 15 minute chart and my final arbiter is the 13 EMA...I like to see a close over the EMA then a confirmation close above that bar's high. We sort of got that with the last bar of yesterday closing right on the EMA...then confirmation this morning at the open. I waited for that fat green bar to pull the trigger.

BOT 22 contracts of NOV $36 Calls for $2.35...looking to exit at $3.05 ish

Charts:

Hourly:

15 Minute:

Daily:

Things I might Trade

Longs:
MOS, LULU, LFC, JCP, DE, MMR, PWE, AGU

Shorts:
TSN, BGC, GMCR, WRLD

Trade: Long TSL...loser

8-OCT-10:
A fat finger and a little help from the market reduced the overall loss on this trade. I was placing limit orders in to sell at $4 thinking the morning gap would sustain itself into a rally where I can make a decent buck on this...well it triggered a market order at $3.60...In any case I got out of some at $2.70 and some others at $2.80...

Overall total loss was $750...this doesn't sound so bad except when you think that I at one time was looking at $2250 in profits....

This was a shitty trade in only the fact that I did not get out when the going was good...

I keep saying that I learn this lesson, but it is clear that I have not yet learned this lesson.

Getting out of a good trade is an extremely difficult thing to do I have to unlearn the "let your profits run" shit that is in my head.

That discipline is something I will be employing moving forward by simply taking the profit at 30%....if you think about it most of my positions wind up being about $6000 in size (accross all the accounts)...a 30% profit is $1800...that is well within my realm of happiness...If I can keep my losses to 15% this puts me at a nice 2 for 1 risk/reward scenario on every trade...I can make that better by taking 10% losses...but volatility would create many more loosers for me with such a tight loss point.

In any case, regardless of the situation (except when its Headley and Lang calling the shots)...I will be taking 30% profits on my trades.

I must do this. I simply MUST DO THIS.

30-SEP-10:
Yesterday TSL took another step towards the sun and broke out pretty heftily. It then proceeded to fade into the close. The last hour presented a %R retest. Now on the hourly this can cut both ways. You can get lucky and %R retest holds, or you can watch as CCI painfully gets retested...or DMI or whatever.

MCP was one of those situations. I got in on CCI retest thinking I was high and mighty and boom got pasted.

Anyway enough MCP. TSL is a better trade already...in good TSL fashion it promptly gaped up this morning and has been hovering at these heights since.

The retest on %R has held ($28.84), this actually happened outside the hourly bands...a good trait for any retest. Today it retested again towards the 13 hour EMA...That green line just keep supporting or dissing stocks I love it.

Across all accounts I have 18 contracts of the October $26 calls for $3.20 each.

Let's hope this works out better than MCP..I can make up for MCP with a $2 appreciation in this one...that's like cheesecake for TSL.

Charts:
4hr

1hr

Some more exits today

So we exited NVDA and QLGC from Grand Slam today...perhaps the first looser we have had in this service in a long time.

NVDA...BOT for $3.05 sold for $1.98...across 17 contracts that's a $1819 loss.

QLGC...BOT for $4.60 sold for $4.40...across 15 contracts that's a $300 loss.

Now I am really feeling like a stooge for not taking that profit on TSL.

I am still holding TSL...today it went down again and found again support...this could become another NVDA type situation but I am thinking it wont.

The charts show some key resistance and support levels in this range it has been tackling since it retraced the breakout.

On the daily chart the %R retest low continues to hold.

So based on this information I think the supports will hold. The one thing that I don't like is that TSL didn't do much during Tuesday's festivities. Energy and oil are doing quite well lately and TSL should be following oil.

Anyway those are concerns.

The other thing is the time stop. I still have until the end of the week to see if the time-stop, my money management stop, or some of these technical stops get taken out. Next week is expy and theta will start to take its toll. So Friday is my day to get out of TSL unless something else forces me out prior to that.

One thing is clear. I should have gotten out on day 2 and called it a day. I wouldn't have to be writing all this bullshit...and I know that this already looks like me justifying staying in a looser...one that was once a winner...but I haven't broken any rules yet and trading based on shorter time aggregations has taught me that at times you need patience.

PS..I see that head and shoulders top looking thing in the hourly chart...today I thought that we were retesting the neckline and going back down...then the key support 28.20 held...so this is probably a minor consolidation and I think the daily chart prevails...But Friday is the drop dead day...so it better prevail soon.

Charts:

Hourly:

Daily:

Il Mercato...

First off.. today we had some quick trades from Grand Slam..

Yesterday got long JNPR calls, today sold'em for a 30% gain...bot'em for $3.95...sold'em for $5.45...across 14 contracts $1,800 this is in one day....sexy

Also got out of RIG calls for a small but decent profit...bought them for $6.10 sold'em for $6.65...across 9 contracts that's $495...not shabby for about 1 week holding

I am still holding TSL...though at some point I had similar action as that JNPR trade. It is currently at a minor loss...but I have limited confidence in it unless something major heats up on solar...nonetheless I have a few more weeks and theta isn't a factor yet...so I hold... Some technical breakdowns have occurred, but not the money management breaks...so I hold.

I know I just said "so I hold" twice...but this is important. I have seen many positions get better if I hold through one of the 2 loss prevention programs...some I have sold prior to money management stops being violated (i.e. my defined max risk not being triggered) due to technical breaks...others i have sold due to money management but without technical breaks...in this case I should have managed position size better...

In any case, TSL is a hold right now it has found some support at $28ish and my money management rules have not been triggered yet...its just painful knowing I could have taken a nice profit on this just last week...I was hoping TSL was going to make up for MCP...

Anyway TSL has retested on the daily time frame and it is back above the 13hr EMA...also found support at the 20 period SMA for the 4 hr chart...

As for the market. Bullish day, bullish internals, volume. Slight uptrend in VIX was crushed today with lower low and lower closing low...However, caution is warranted as a major short squeeze is on...witness the commercial hedger on the NDX....Also it appears that rallying in the off season (vis-a-vis earnings) means the on-season will fizzle.

Regardless, a breakout like today has to be respected. So near-term...mooo...at least until earnings season or even election day.

chart of the day

Go Here then read his explanation here

a few things worth reading

First is the Matt Taibi piece about the Tea Party and its shortcommings. One key sentence (and I am only through the first page)...is about how every grass roots movement gets coopted by the big duopoly. Nothing can be truer. I used to have a political blog, and it was my avenue for countering the Bush criminal regime. You can go read some of my stupid shit here. Anyway back in those days Daily kos and Atrios rules the blogosphere if you were a leftist crazy commie. Like me. But godforsake whothefuck would have possibly mentioned the words Ralph Nader...nigh..as far as thes partisans were concerned that mother fuker caused the whole Iraq Afghansitan, and every war that we will get into from here on in. He also caused the TARP and financial crisis.. Because had it not been for that motherfucker and his stupid commie bastard followers, Al Gore would have been president and the twin towers would still be standing and we would all have solar panels on our roofs and cars...but noooooo...Ralph fucking Nader had to get his nose up in a bunch and try to start a 3rd party...you know left of Democrats since he saw them as beholden to the same interests as the republicans...go figure...

Anyway...I digress. Nader was right. Had Al decided to count all the votes in Florida instead of cherry picking certain counties...We would have all had solar panels on our roofs and would have all been driving electric vehicles...but alas Uncle Al decided only some votes were worth recounting...

Anyway...the point is...every grass roots movement in this country is backed by big money...and in the end they dont want a third party. They want the same party system but they want to mobilize voters and vote getters to go out there and get people to vote for their candidates.  Same thing happened with certain primaries when "bloggers" had control of the democratic party. Honestly they never had control of anything, and I remember disticntly being told that political rallys were a waste of everyone's time because the media didn't cover it and there was no effect from it...Obvioulsy Glenn Beck's bullshit rally didn't count.

Lefty Bloggers thought they could have a virtual revolution where everyone would simply read their blogs and get excited and vote Bush out of office. Then John Kerry came along...and we all know how that turned out...anyway


Now were are dealing with the tea party and the same interests are involved but they are basically batting for the republicans...regardless of wether or not those republicans emobdy their ideals..because most of them dont but the tea party is so entrenched in changing the world as we knjow it that they dont know any better...

poor bastards...


and while the main reason i stopped my political blog was because of my job blocking most blogs and sources of my content....another thing that really woke me up was Katrina and the fact that everyone failed at every level...that turned me into a serios cinic and to this day I remain that way...

one thing I have learned is that you cannot start a revolution from your couch...despite what Markos asshat Moulitas says...real live body demonstrations are very much a key part of any revolution.

Anyway the key take home here is that the Tea Party is operating under the same auspices as the blogger left was working under when Bush was in office....There isn't much to say except if they are succesfull I expect Markos to write  a new book. If they are not then lets just all give up our voting cards and jump off a cliff.

Fact is this country's duopoly will continue to make the rich richer and the poor poorer...so call whatever party you want a party....but for now there isn't anyone really stopping this shit from happening.

A few recent trades

OK. So Bob Lang got us out of ADBE for a decent 40% win just before they released earnings and took a nose dive...Thanks Bob.

So far in the Month of September every single trade Bob Lang has posted as part of the Grand Slam service has been a winner however slight or large....He hasn't posted many new trades and currently we are holding some HAL, QLGC, and NVDA calls.

Headley's Sniper service hasn't been as lucky with a few loser like SNDK but overall these services have pumped the accounts decently.

Just 2 days ago I fired off a trade on some MCP calls based on a retest...well the retest kept going. It caused some serious pain as it broke through some major technical stops (CCI 0 test was about the only thing that held on the hourly)...on the daily thought it was a bend don't break scenario....well my money management stops had also been triggered and I was in meetings all day so I took a loss bigger than my normal loss...this was hard because that bottom level held and of course it has been rallying ever since.

So big loss was taken and there isn't much to say about it except it was a tough trade, I almost toughed it out and at the very least I didn't panic at the bottom.

I put my order in for a higher price waiting for a rebound in the selling...bought them at $5.50 sold'em for $3...this sucks...but that's the way it is. I had to exit based on my rules...

In this case I should have put some trade triggers in but that would still result in a sizable loss....anyway the accounts all suffered about 2.5% losses on this one...or grand total of $2250 loss.

Trade: Long F...winner

30-SEP-10:
I put in a trade trigger during my time in Paris for this to get out at $1.70...this was because these were weeklies and I didn't want to be in them for a long time and the market has been choppy.

Across all the accounts this was about $1,000 winner as the trigger was fired on the 21st of September...not bad for 5 days.

Not much per account but overall it was a good trade.

Chart:
Hourly

16-SEP-10:
In my scans today I picked up a high volume rise in F...The uniqueness of this move is seen on the hourly (and even the daily) chart. The volume was big today in Ford and the bollingers on the hourly chart had gotten really tight and in sinc with the accel bands etc...so I watched the 15 minute chart after the breakout to see if I could get a retest to get in. I watched it come towards the 13 EMA and bounce and while there wasn't a true retest at that stage, I figured it was decent enough to get in at that point.

So I played the weekly options expiring next week (issued today). Picked up the Sep 24th $11 calls for $1.50 each.

Unfortunately I had a meeting and couldn't wait for a true retest...which did happen just after I left my desk...(of course) so I probably missed out on a dime here...but that's the breaks when you have a stupid day job.

A decent target for this is the 80 period daily upper bollinger band...if it is launching it could hit that by next week...that stands at 13.40...So from my purchase price it will probably net me $1 per contract...66% winner wouldn't be bad at all.

Charts:

Hourly:

15minute:

Daily:

Trades: Short EEP and PCG...both losers

30 SEP-10:
OK enough laziness..I need to update this blog not just for y'all but for myself.

I gotta say that since I turned over most of the trading to the good people at Big Trends...I have gotten lazier about this blog...

Anyway EEP was a looser. my stop was triggered on September 20th for $2.00 per contract. This was an $0.80 per contract loss. Fairly painful. But EEP kept going higher and higher...so I was right to put that trade trigger in during my travels.

Both of these had tripped technical stop points well before I got out of them. In EEP's case I got out soon after the technical stop was

PCG I just got out of today for $4.60 each. For a minor loss of 0.90 per contract (fewer contracts than EEP that's what makes it minor). Across all accounts this was a $630 loss. Easy to bear.

Now I held PCG because when it broke the technical stops on the intraday charts...it never closed the gap on the daily chart, and it never confirmed closing over the 13 day EMA...Also there was a big dividend coming so I knew that once that came through we would have a drop...so patience led me to hold on until the loss was really miniscule.

Charts:
EEP Daily

PCG Daily

14-SEP-10:
I have been trolling for shorts in case the 1130 area holds on the SPX as the top of the range (again). Also being net long is a bit nerve racking, especially as we are headed into resistance and we are a bit overbought.

Anyway EEP and PCG both fit the bill, both had heavy volume downside moves recently, and today both were retesting on %R at the hourly level.

I picked up October $55 puts in EEP for $2.80 each.

I picked up October $50 puts in PCG for $5.50 each.

Both had decent open interest and good bid/ask spreads...not super duper great...but good enough to trade for sure.

Charts:

EEP
4hr:

Hourly:

PCG
4hr:

Hourly:

Back from Paris

Ok so Paris went well...I had one really long day of walking around and taking pictures (you can view them here). I accomplished most of the goals with the exception of Monte Martre and finishing the books. I got a little headway in Think and Get Rich...but alas, Babies, Iron Man 2, The Departed and sleeping all took precedent on the plane.

Anyway...I had a decently successful week trading...I got stopped out of EEP, but took profits on F, NOV, ADBE. Also entered some new positions that came through the pipe from Big Trends...anyway not bad and in this case being 6 hours ahead of the market was helpful since I could actually concentrate on work and still put trades in the early afternoon.

What I am saying is that it would be great to move to Europe and trade the US markets...

Anyway I will try to update some of the trades posts that I have done last week but its a busy weekend and I am also getting over a cold that I caught in Paris. C'est la vie.

Off to Paris

So...Thanks to my real job I am going to Paris for the week...I have a lot of open positions on and I am hoping that I can manage them all from my Blackberry in Paris.

Nonetheless...I think I will be placing emergency stops and profit taking triggers to let the computers take over the trading while I am there...being 6 hours ahead of NYSE time doesn't really help if you wind up working through most of the morning's action...I experienced this once before when I went to Lisbon for work...and had open positions...I made stupid maneuvers on a RIG spread back then...

Anyway...this is my first time in Paris and I am excited about that. What I want to accomplish is fairly simple, take some great photos and see the Eifel Tower, Notre Dame, the Louvre, Montmartre, and le Quartier Latin...I also want to eat like 5 Croissant's per day and drink massive quantities of wine, not to mention eat eat eat every single meal I can until my belly explodes.

I also plan on finishing 2 books on the plane ride (unless I am tempted by the movies on board)...Think and Grow Rich by Napoleon Hill and Flow by some God awful name impossible to reproduce.

Wanted to share the following link regarding the market...I hope Moby Waller is right...but apparently there was a tremendous amount of open interest in Sep 113, 114, 115 SPY calls...he claims that all this worthless paper frees up the market to actually break through the 1130 mark...I hope he's right...but Friday was awful volume for an S&P rebalancing/Quad witching end of Quarter day....we didn't even trade 2 Bil shares...in fact...it was on track to be the worse quad witching volume day ever...

Anyway also...this has been making its way through the internets...but go read Micheal Lewis' Greek thing in Vanity Fair...its a gem and it will unfortunately enlighten you that Greece will end in tragedy..

Trade: Long OPEN...winner

15-SEP-10:
Update...in true trader mentality I decided it was time to get rid of OPEN and take my profits...Sold the contracts today for $9.00 a piece...a profit of $250 per contract....accross all the accounts (9 contracts) that's a profit of $2250..that's more than my wife makes in a month so I am happy with that...I think that's probably a new goal of mine...to make enough on one trade to cover my wife's salary.

This wasn't a homerun but it was a good double... but I have very little faith in this rally at this stage and traders take their profits when they can...OPEN may very well keep running but I am at peace with that. I am trying to think more like a trader and less like an investor...there are multiple opportunities just like OPEN that happen everyday...So I will get on board those and get off board just as quickly.

13-SEP-10:
Decided to enter into a long today despite the market being near the top of its recent range. Some stocks are simply not giving up the goose or (as in OPEN's case) looking like giving up the goose then finding support at key levels and demonstrating retests.

OPEN has been on my side radar for a while because it consistently appears on IBD's Stocks on the Move. While I have missed the ride until this point, today's gap and subsequent sell-off offered a nice opportunity for entry on a very short term basis today.

Today OPEN popped out of the bollinger bands and followed through by confirming in the 2nd hour of trading. Then the fade began and that took us until about 2PM. The hourly chart was showing a %R retest and the 15 minute chart was showing a DMI kiss in the making along with a CCI retest.

I checked this out with more scrutiny because I noticed that the options in the 50-60 strike range had high open interest and the bid/asks were decently tight...also the chart of the option itself was showing a retest on %R as well...

I then watched the action in the underlying itself as it neared the bottom of the day's action...the bid/ask spread was very wide and no business was transacting...within a few minutes they came together and the stock put in a fat green bar on the 15 minute chart.

I pulled the trigger at that point on the October $55 calls for $6.50 each...

A decent target is around $8.80 which is where these options traded earlier today prior to pulling back.

Charts:

1hr:

15 minute:

4hr:

October $55 Call 1hr chart:

General update

So I signed up for some Big Trends services including the Grand Slam Options and the Options Sniper. GS is handled by Bob Lang, and OS is handled by Price Headley. They take different approaches. I am still figuring out Bob Lang's approach but he is incredibly basic in his approach. He uses RSI, MACD, Volume, %R, Bollinger Bands and MAs...Most on standard settings...but he does fire a lot of trades off...so much so that I can't keep up with it all on the blog if I am to trade all these things.

The Sniper service takes an approach based on multiple time frames but mainly the hourly chart to come up with signals etc. However, I have noticed that he deviates from his own "plan" relatively often. I see many stops that simply get ignored, or I see stops not get violated and then him putting out exit orders anyway.

I guess I should blog on these trades if I can because in the end I have a subscription to these services for 3 months. If I decide to go for the whole year they will have to pay for it with trades. So far Bob is doing a better job in this rally than Price...but it's just a matter of luck, they can't both be trading the same stuff and some trades are going to work out some are not...Price has just been on the not working out side. C'est la vie.

Nonetheless I wanted to explain the lack of blog entries lately, I have been trading a lot with these guys just not documenting the trades all on the blog.

I am going to try to get better at that, but because these guys provide nightly emails with the summary of their thinking and include charts most of the time...its a bit superfluous to blog about it.

This is my journal to document trades first and foremost, so if that is done in emails from Bob and Price then I don't need to do it here.

Perhaps the approach I will take is to post when I think they have deviated from the plan. This is easier to do with Price than with Bob because Price is straight forward about what his plan is based on, but I will get to the bottom of Bob's brain as well.

Anyway that's it. I also decided that I am reading a lot of shitty economics lately so get ready for some economic jibberish from me in between all this trading.

Mahalo

UPDATE Trade: Short CVD Equity...winner

UPDATE 9-SEP-10:
Exited this position fully today just based on time in trade, and the need to free up capital for other opportunities, this thing hasn't moved much up or down but the 4hr has started to perk up on the 13 EMA...so that's good enough for me. Covered the 100 shares I had left for $39.

So let's see that's a total profit of $450...not a bad trade for a 1 month holding...still too long for such a "small" profit.

4hr chart:

UPDATE 12-AUG-10:
Trade trigger fired this morning with the rapid drop in CVD. This is now a free trade! Covered 100 shares for $39.68 this morning. Current Cost Basis is now $40.63. It is nice to not worry about loosing money anymore and to also have more buying power free.

6-AUG-10:
Went short 200 shares of CVD in the taxable account. Got filled at $41.59 per share. Stop is $43.41.

This has a massive move down already but it is officially an outside the band retest as of today.

I needed some short exposure and there isn't very much these days that isn't beat up to a pulp. CVD has terrible ratings and is in a terrible group. So I figure despite the move down, there may be further to fall for this puppy.

As always, I hope I am right. But I expect to be wrong.

Charts:

Daily:

4hr:

Trade: Long ARST...loser

7-SEP-10:
I actually exited this position on Friday. After beating earnings ARST didn't go anywhere and got taken down a bit. In any case, my stop was taken out right at the beginning of the day and I had to leave the position. $200 loss.

1hr chart:

2-SEP-10:
I put on a really small position (1 contract Sep $32.5 call for $6.10) in ARST yesterday afternoon...This was based on the recent spike in ARST which came on massive volume. Also all hourly signals fired that fabled day.

ARST reports today after the close which they will divulge details of them putting themselves on the auction block. I am not happy with the open interest in the options at this strike but the delta etc lead me to choose this one.

Anyway it was near the CCI retest low when I picked it up and it is holding that low...

Let's see what happens:

Daily:

1hr:

Update Trade: BKC Long Calls...loser

3-SEP-10:
I wanted to put down my thoughts on this one more time. You may or may not have looked at this chart since I left this trade (but I will post it after this update anyway).

Remember, I entered this trade for various reasons, but the primary reason was that there had been a massive spike in options volume in the October $20 strike that continued over a few days as the underlying got faded. It had matched technical indicators on the hourly chart.

My main mistake on this was probably my choice of trade. The technicals deteriorated rather quickly and i followed my discipline and exited for a small loss. This was prudent for the next few days...and discipline is discipline.

However, what I should have done is go right along with the whale that was picking up these options in the first place. I shoudl have simply defined my risk differently. Instead of getting a higher delta position and stopping myself out if it reached my risk comfort level. I should have simply picked up the out of the money strike calls and put up money I was willing to loose and then just forget about it.

So instead of buying 10 contracts in the 90 delta strike for $1.15...I could have 1. waited for CCI retest, 2. gone with the October $20 strikes paid about 0.60 each contract and bought only 3 or 4 contracts as a "lottery ticket." Simply said..if this whale is right...then I get to ride with him. If he is wrong...then I loose what I would have lost anyway...

I for one will start looking for these types of scenarios a little more closely...the setup here was fairly clear...very high volume in the underlying accompanied by very high volume in the out of the money options.

Anyway here is a chart to enable me to make a shitload of money the next time I see a similar situation...or at the very least...loose the same amount of money.

There are few things more painful than watching a great call fullfill its prophecy WITHOUT being on board and imagining the money you would have made if you were...this is an incredible lesson in matching strategy to the situation and matching risk to reward...but just matching the risk is important enough..

Every trade should begin with the same statement "I am willing to loose X on this trade" I have various ways of making this loss occur and you should always find the way that matches the risk and maximizes the reward at the same time as leaving you in the trade....stay with the trade in this case was more important than the technical breakdown in the stock....because the whales were telegraphing the potential of a takeover...and they were giving you the basic price...If the whale was willing to spend a shitload of money on a strike that was way out of the money...even if it came close to $20 he would profit handsomely.

Anyway its a wonder that the SEC doesn't investigate these types of shenanigans...this was blatantly obvious that someone knew something about this LBO. 

Painful Chart:

27-AUG-10:
This morning BKC violated a retest on CCI. I exited for 0.95 per contract or a loss of 20 cents...$200...I am being very aggressive on defense here on a long that will probably work out...but the market is not really happy looking right now and longs are really hard to justify being in. BKC has a long term down trend in place and fighting that is tough to do.

Anyway I should have waited a little longer to get into this in the first place. Instead of %R retest...I should have waited for a CCI retest. One flaw on this was that DMI difference never went above 30 so that move on Tuesday wasn't confirmed on DMI Diff...so that may have been the thing that should have kept me away. I let the news about the high options volume cloud my judgment on this one...that whale buying calls in October has a longer term time horizon and a lot more money than me...so he wins...

17.25 was support now it is resistance so that's that...had i waited until this morning to enter I would probably still be in this trade and that is a lesson I will probably end up learning with this one...patience and waiting for that CCI retest is the lesson here...when trading the hourly that's what I needed to do.

Chart:

26-AUG-10:
As per last night's post, I noticed that BKC had triggered a buy signal on the hourly...I didn't really look at the news until this morning...from flyonthewall:

Burger King is recently up 44c to $17.33 . BKC October 20 calls have traded 234 times on contract volume of 20,620 contracts, above its open interest of 15,300 contracts. October calls are trading at 50c above its theoretical value of 18c according to Track Data , suggesting traders paying expensive prices on the expectations of an upside move.

Indeed, and the action continues this morning...this time in the September $20 strikes.

Anyway...I waited for a %R retest and got in to the October $17.5 for $1.15 each 10 contracts...Let's see what this whale wants to do with this company.

I am busy with work...post charts later.

Trade: Long XOM...winner

1-SEP-10:
Got the order to get rid of XOM this morning prior to the open and set an order for selling at $2.75...that turned out to be premature as it traded much higher...the order to sell from Extreme was based on yesterdays crappy action in the 15 minute chart...but in hindsight...not sure i want to be placing orders like this right at the open...silly....anyway nothing to write home about 15 cents per contract total $75 profit...

30-AUG-10:
In Extreme today got the signal to open a long position in XOM with the September $27.50 calls. Got in at a cost basis of $2.60 each. For the most part I have 5 contracts...However, I messed up the IRA amount and I wound up with 15 contracts...I may have to cut out on this one before receiving the exit instructions as it is too much of a position to have on...and even the boys at Big Trends are wrong on a few trades.

This is a weak trade already XOM sold off the rest of the day. The only bright spot is that it is barely holding 50 on the hourly %R, and volume was weak today.

Charts:

Daily:

1Hr:

Briefing reads

So two things worth reading for not obvious reasons.

First go read Robert Green's take on the impact of Financial Reform (HA!) on hedge funds.

Bottom line, could mean less volume moving forward as Hedgies now have to report shorts...

Also, yield chasing has to start soon sez Patrick O'Hare.

Are we Turning Japanese?

So I had a thought yesterday about yields on the 10 year dipping to under 2.5% and all this talk about Japan. So I thought...why not try to figure out if bonds are really in a bubble or if we are turning Japanese...
My buddy GX has access to a bloomberg so I asked him to send me a chart of Japanese 10 year yield during the lost decade and I asked him to overlay Japan's GDP:

Yields are in Orange, GDP in White...the little spikes at the top of the GDP curve are at around the 2.5% area.

So then I was like...well where the hell are we on this chart? If we are turning Japanese we need to figure out where we are on this chart to really decide if Bonds are in a bubble of if we will go below 2% and reside there for a decade or so...

The instructive part of this exercise is to look at the ranges..Japan's deflationary spiral started in the early 90's then really took flight after a little double dip followed by a bigger double dip...but they never got over 3%ish on GDP growth during much of the 90's....that's when yields really took off to the downside and stayed well below 2% for the decade to come.

As the old addage goes..."OK the world is going to end...so what's the trade"...well that's of course why I go forth on these stupid academic exercises...and bug my friend's with bloombergs to make stupid charts for me...

GX...overlay the Nikkei:

Green is the Nikkei.

Given our GDP growth rate (sub 2%) and the current yield on our 10 year Treasuries (2.5%) I would say we are either in 1994 or 1997 in Japanese years. Which definitely means we are looking at a deflationary spiral and our rates are going lower and they probably will stay there for a long long time.

All of this being said...Bonds have more room to run if we are indeed turning Japanese, also, Stocks will be fairly choppy for the next few years trading in a range that continues to decline overall...however at the bottoms and tops of these ranges vast quantities of money can be made...you just gotta go long and short.

For now...I guess you can still chase treasuries...

UPDATE Trade: BAC short...Winner

26-AUG-10: Exited the rest of the position at $1.43...total profit on 10 contracts $435...not too shabby.

25-AUG-10:
They said to take half off at $1.50...Order triggered. So new Cost Basis is 0.56 on the remaining position.


23-AUG-10:
Got another alert today from Extreme regarding BAC.

So I am short BAC via the Aug (weeklys) $14 puts.

Entered 10 Contracts for $1.03 each.

This was entered based on the hourly chart showing a retest.

Chart:

Sniper trades

Potential longs using the skills acquired from Options Sniper:
PAY, COST, BKC, PCG, SLV, LO...and a few others

Potential shorts:
STI, ACI, DVN, MEE

there are others but the market is at major support and the bottom of the range...so I dont really like shorts here.

Trade: NFLX Long Calls...Loser

24-AUG-10:
Update Looser trade and it was a big one sold for $8 for a loss of $1040. I didn't follow the signal that was saying to exit yesterday and this cost me about $600.

Stupid stupid. Bad Bad. In any case, while I almost made up for it with GOOG, this is unacceptable and I simply should not have traded this given the system was giving only daily signal and the hourly was very range bound.

Lesson learned and this is the first time in a long time that I didn't have the discipline to cut a loss properly.

21-AUG-10:
I was looking at NFLX on Thursday as it had retested on Wednesday and rebounded nicely on Thursday.

Then Friday Headley came across with an alert not to trade but some picks for the coming week (they included long BIDU and Short RIMM). Anyway that gave me the confidence to pull the trigger (silly as that sounds).

Picked up a couple of Sep $120 Calls for $13.20 each (2 contracts). Only in the taxable account. I had chased this a little bit but that's OK. Price's target is $140 on NFLX.

I am thinking that I should have picked these up across all the accounts but I didn't...oh well.

Anyway let's hope for the best here.

Charts:

Daily:

4hr:

Trade: Short GOOG...Winner!

24-AUG-10:
Update...Sold for a cool $1,000 at $24.50...my target for this option was the lower bollinger on the daily chart (I figure this was a decent level of resistance). This level resided at around $255 level in GOOG.

The hourly chart however, says to hold on...but I hit my target and am happy with the results.

23-AUG-10:
I noticed that one thing that Headley and company focus on is liquid stocks with liquid options. They are now moving on the weekly options. This drastically reduces their universe of stocks and, I think it also increases their odds of success with every trade. Its easier to get out at the price you want if price discovery isn't a problem for the instrument...this has been a problem for me...but looking at shorter time frames you get many more opportunities....so its OK to have a limited universe because there are more bars showing opportunities.

Over the weekend, I viewed two videos that came with my options sniper subscription, which are basically coaching videos (without the sales pitch). In the videos Headley discusses the use of CCI as a primary indicator in these volatile markets, particularly its use when it comes to the hourly chart aggregation period.

Anyway the process is the same as with %R, you get a retest and that bar's high is a stop...etc you know the drill.

Looking through the small universe of stocks that have weekly options, I noticed GOOG had set up nicely last week for a fast move down, and today (right now at the 2PM hour)...we have a retest forming on CCI (and a few other indicators) ADX is still green and strong and %R is also retesting.

Anyway its a pretty good actionable trade if you ask me. Now Headley doesn't like these higher priced stocks because it reduces the # of options you have and also the bid/ask spreads are wider...so he probably wont send an alert about this one...but I am putting what I have learned to practice here.

I pulled the trigger on one GOOG Aug 27 $480 put for $14.50 taxable account only.

Chart:

Duh...

So TOS only allows scans based on End of Day data or current day's data.

So I think one way to circumvent this if you need to follow hourly signals is to break things down by how many days your signal is.

For example, a 30 bar %R period on an hourly chart is basically 30/7(bars per day)...or 4 days...

For CCI...60 bar setting...8 days

80 bar setting (bollingers)..11 days...this is rounded down (to compensate)

This could be a crude way of dealing with TOS's shortcomings with respect to scanning for hourly signals.

UPDATE Trade: BVF long calls... Winner!

23-AUG-10:
BVF has been good to me, but the profit/loss on this thing hasn't done anything since earnings...the stock has flat lined, and I have held this puppy for over 1 month and a half. I realize that this will move on the imminent FDA approval of VRX, however, I want to free up capital for the rapid moves in the Headley Sniper and Grand Slam services that I have signed up for for the next few months.

BVF has not flashed a true sell on the Daily chart, though it has done so arguably on the 4hr chart. Regardless, I want to take profits on this properly and move on...it has stalled up here and it is at dangerous heights, volume has dried up at these levels...so it can go crashing down just as well...

Cost basis was now $5.95 per contract (thanks to some profit taking previously)...I sold for $10... anyway total profit was in the neighborhood of $1,200...this was a really great trade...and all the option-able accounts benefited.

Charts:
Daily:

4HR:

6-JUL-10:
Short:

Bought 3 CRI Aug 21 2010 35.0 Put @ 8.4

This is one that popped on the scan a few days ago and due to the 4hr chart I thought I was getting in at a good price. Then I checked the market for these puts and there was no open interest. This scared me and I proceeded to try and cancel the orders I had put in...Lucky for me TOS was in a special mood today and it wasn't taking cancellation orders (this type of shenanigans also were present during the May 6th crash by the way)...SO...the orders stayed on and got filled in all but my taxable account...GOOD THING TOO...This is one of those trades where it was almost instantly profitable. The 4 hr chart doesn't really do it justice, but in the beginning of the day this was above my 13 period EMA...this was also scaring me...the volume was light though so I though it was a good short....the liquidity is a concern, but I still think I can turn a profit on these.

Nonetheless. The psychological factor here really upsets me because my taxable account isn't having any fun with this trade. I should not chicken out of trades like this anymore. When I decide to take action I should be satisfied. If anything I should have checked the liquidity previous to entering the orders, but still I would have missed this trade based on that.

One factor is that I had read 2 market forecasts (Big Trends and Noshee?) saying that the bottom may have been put in last week. This skewed my thinking for sure.

Stop is 27.17.

Short:
Bought 5 HS Aug 21 2010 20.0 Put @ 4.7

I picked this up in my taxable account today. This was something that popped on my scan on Friday. A short retest outside the bands. This is my favorite setup. I did this only in the taxable account because in this account I had missed the CRI trade in this account due to my phsycological crapping out...so I went for the next best thing which is shorting HS. I noticed Friday that this was not the only health care insurer that had this retest phenomenon, AET, UNH, also exhibited this behavior. So the sector is in trouble. However, my psychological issues right now are that we are long in the tooth with the downtrend and I fear these moves are nearer to their end than to the beginning. No matter, I am trading based on the setups.

Stop is 15.55. 

Long:
Bought 4 BVF Oct 16 2010 12.5 Call @ 6.8

This was done accross accounts as a hedge against the net Shorts I am in now (besides the above I am short DCTH and CSTR (taxable account only) I have taken big profits on both positions already...so I am holding those for a while longer).

Back to the BVF trade. This thing popped big time and again showed up as a retest outside the bands on the daily chart. The 4hr chart is a bit weaker, however, still strong. If the market has found a bottom, then this is a decent hedge it is a strong stock in a weak market bucking the trend and has successfully retested and is outside the bands...The 4hr has broken the 13 EMA but regained it. This was a tough trade today and I took it because it was near enough to the retest low in price. I didn't get the best price but not too shabby either.

Stop is 18.47