Not much of a day

As I type today's post I am sitting in the park on a beautiful, sunny day. There is a little breeze and it's 80 degrees out. Wonderful! But the glare is making it hard to see my screen.

Not a lot really happened today until the end of the day. It was a pretty good sized sell off going into the close. CROX came out with earnings and while it gapped up it closed well off of its highs. Maybe some of the uber bullishness is subsiding. Looking thru my watch list today I realized that I have a lot of work to do. Here are a couple promising charts going into next week. I'm pretty much looking for a close above today's high for entries.

We'll have to see how the market acts to this support here but I might be waning on my bullishness. When I turned on the TV to give my son his daily dose of Cars, there was a commentator on Good Morning America saying "Yesterday's pull back isn't a lot to worry about and the market should continue on it's way just like it has the last couple times this year. The important thing to remember is that we're still up 20% from last year." It just felt like the mentality of the late 90's, a nice sign of bearish things to come. In truth, I can reasonably see the Dow pulling back to the mid 12k's for the long term bullish trend. That could be a nice bear market on the way down there. (I also can't help but think that this looks like a pretty clear end to wave five, referring to the S&P chart I posted yesterday.)

I'm heading to Chicago this weekend so the next post will be from there. Have a good weekend.

Dropping

THE SKY IS FALLING! THE SKY IS FALLING!!!

What a day! At one point the Dow was down more than 400. In fact, I called the absolute bottom, told everyone in the class to buy calls on the Diamonds, of course I didn't have the guts to pull the trigger and I don't think anyone there did either. Oh well.

Needless to say my buy stops didn't fill this morning. I love using them because they keep me out of days like today but get me in on the momentum up.

Believe it or not, I'm still overall bullish. I think it'll take a couple weeks to shake everything out but check out this 2 year chart of the S&P 500.


Towards the end of the day I realized that it was coming back and testing this trendline. It just happens to be the lows of the two corrections we've seen over the last year. 3 touches will make this a confirmed trendline. This was happening as the VIX hit 2 year high levels.


Many stocks retraced back to some good support levels, maintaining their trends. This is keeping me bullish on the market. I say it looks quite toppy, and I'm not sure how much longer the stock market will ignore the economic conditions we are in. But I've always said it's more important to trade what you see rather than what you think or feel.

As for my positions today, I got stopped out of a few and gave up most of my profit on the others. Earnings on POT and COL were disappointing at best. COL got really exciting for the first hour or so. The options weren't trading at first, not surprising when it went from 71 to 61 and back to 71 in the first 20 mins of trading. When they finally did open the ask was 5 and the bid was 0. Once it settled down I got lucky and closed near the high for the day and broke even.

My AAPL spread is almost at max gain. I tried to exit this morning for a 5 cent debit but hit the wrong contracts and entered a bear put on some different strikes instead. As I unrolled my mistake I picked up $15, that covers all my commissions and then some. How's that for a silver lining?

The Jungle

Well I guess that's what you call an earnings surprise. AMZN up 25% on the news. The chart says all I have to say about it.


It also looks like AAPL is up after hours on its earnings news. I have a 115/120 put spread, I imagine with the volatility crush that should happen tomorrow I'll be able to close it out for most of my max gain.

I sold half of my COL and POT calls per my rules prior to earnings. Both of them were offset with put spreads that expired last week.

Tomorrow I've got my eye on a couple stocks. APA is looking like a textbook bounce entry, earnings are tonite so I've got a buy stop in for tomorrow 20 cents above today's high.



AZC is getting close to an entry as well. This stock has fairly low volume so I'm not going to take a full position in it, probably just a couple hundred shares.


Yet another potential bounce setting is RIMM, nice thing here is that earnings have already been released and the expectation is that this trend should continue until the next earnings. This has me thinking more of a trend trade than just a swing.


That's the beauty of general market pull backs in a strong uptrend, lots of bounce entries. You could even call them bull flags if you want. All I see are entries. Have a good time with them!

Pull backs

Some great action in the market today. I got stopped out of a couple trades this afternoon. Supports were holding up well and then there was a huge sell off at the end of the day that triggered a couple trades. The Dow gave up 226 today, bringing it to the previous resistance level. The S&P and particularly the Russell showed a lot more weakness.

I got stopped out of a couple of trades today. CKP and part of my AMZN earnings speculation both hit stops. However, I do still have a couple of the calls I bought on AMZN yesterday and as of now it is up $12 in after hours trading.

I bought ACH yesterday on the breakout, not huge volume but it wasn't a really strong resistance. OK day today, still within parameters. I'm not big on trading China stocks but I thought I'd venture into their world. at 52.50 I'm tightening my stop. I should either get a great run or a quick profit.


COL and POT pulled back some today, gave up some of the unrealized gains but still following my rules. Earnings here we come!

Oh yeah, I jumped into ZMH on the bounce yesterday going into earnings.

Max Gain

It's a wonderful phrase, really, and the goal amongst all spread traders. Max gain. The illustrious mystical place where all the stars align and your short strike expires worthless. That's what I live for with my spreads. That happy realization of all of my gains. And it can happen every month! Life is good.

I met a man at the airport coming back from Chicago last week who trades spreads, debit mostly. He told me about a couple of his trades, they sounded fine and said that he should be loving life when today arrived. It was then that he told me they were Jan 08's. In the nicest possible way I could I told him he was crazy and to run the numbers for the front month next time, reassuring him multiple times that the return would be almost the same with the ability to do it monthly instead. Silly mortals.

AZO gave me max gain today, as did POT. AMZN gave me the less fun "break even". Bearishness took over and pulled most stocks down today. In a conversation with a friend the following exchange occurred:

Andy says:

I feel that things are going good today even though the markets down a little

Beej says:

That's cuz you're following rules

Beej says:

Good feeling, isn't it?

Andy says:

It's great

I love pull backs, lots of stocks setting up for bounces with our huge earnings week coming next week. My bullish watch list includes ACH & AZC (thanks to the great momentum in mining), CROX, ICE, ONAV, RIMM, TASR, and for the first time in a long time ISRG - what a breakout.

Enjoy your weekend!

A record day

The Dow closed at 14,000.41 and that is a record. It only closed over 14k by .41 but it is still a close over 14k. I'm sure CNBC has a banner across the bottom of its screen with flashing lights and exploding fireworks that says "BREAKING NEWS" announcing the dawn of a new age with commentators going on and on about how we'll be at Dow 15k by year's end. I'm not saying this to proclaim a bearish posture on the market. That would be silly. I'm quite bullish at the moment, I just think the channel is overrated and should be done away with.

This momentous event has prompted me to finally create my trading blog. This will simply be a place for me to talk about what trades I'm looking at or am already in and maybe give somebody an idea for their own trading account. It will also be a place to hold myself accountable to my rules by stating publicly exactly what I'm doing in a given trade. I hope it will be therapeutic on some levels.

Today was good to my account, given my bullish posture, but I'm getting a little nervous for tomorrow. As options expire I've got a couple spreads that are dangerously close to my short strike prices. AMZN has been driving me nuts. I'm short the 72.50 puts. At this point I'm just hoping Google's earnings drop won't affect me too much. After hours trading is just a penny above my strike, gives that fun queezy sensation to just think about it.


AZO and ICE are the other two I'm watching closely as they expire tomorrow.

My trend trades are going great. CKP is showing some weakness prior to earnings next week, but it did that last earnings too. I'm out 3% below the trend line right now.


COL is going very well right now. These now ITM calls are up 100% as of today. I'm going to sell one the day before earnings and let the other ride.


Finally, my proudest trade. With earnings coming out options around the market are hugely over valued. This makes going long a call really hard. I wanted to get in POT and ride it until earnings. So, to help offset the cost of the over priced calls I sold a put spread ATM. I got in on the bounce with both the spread and the calls. Looks like I'm going to keep the spread and be able to ride the calls until earnings.