Friday, January 16, 2009

Some New Ideas

First off, review of my charts from last week...

LDK: Last week was looking for a breakout to the upside, but apparently it was a fakeout. Everything looked good for a move up but I guess it wasn't the time. From failed moves come fast moves (as indicated by the highlighted area)- the next day you see one big long red candle. Really don't know where to go with this one as the chart looks broken now. It seems to be just trading in this 12.50-15.50 range for the past months, so perhaps playing the channel would be okay until it breaks down or breaks out.

RL: Dropped below that support I had indicated previously, and I entered APR 35 Puts today for $3.00. A nice doji for today and a bounce off the prior support. A tight stop would be right above the 41.74 line, and that will likely be my stop. Although they are April puts, I could probably reload if it gets to the prior high and stalls there.

BBY: Dropped below the resistance line as planned, but today had a very good up day relative to other stocks. I will stay away from shorting here, and will see how it responds to the descending line at 30.5-31.

WLP: The biggest mover of the ones I mentioned last week. I missed the opportunity on this one as I was waiting for a better entry. But, it just sold off hard from the start of the week. A failed backtest of 43.84 could be a great short.

Some new shorts:

GES - Guess Inc. - Highlighted is where I would try out an early short, but it may proceed to ride the line upwards if the general markets continue higher next week. Obama hype? :) Pretty defendable position just above that area.

PALM - Palm Inc. - The ones who make the palm pilots, handsets, etc. This chart is incredibly run-up in a short time. Really no news on it, so I'm guessing just a short squeeze. I bought Feb 7.5 Puts on this today for 0.80, we should know pretty fast next week whether it will continue higher through this resistance, or retrace a good amount. The end of day on PALM showed some weakness, so my position is already ITM. Target is probably 5.2 for a first possible profit taking level, followed by the gap fill level of 4.50.

MYL - Mylan Inc. - It looks like it's coming into critical area as it's been riding the lower trendline since the October lows and now meeting resistance at around 11. I would wait on this one until it breaks eitherway.

DV - Devry - This one could be real interesting. It's entering the area where it's found resistance since late 2007. This area is also it's all-time highs. Not sure why the education stocks are so strong, maybe because a gloomy economy results in people going for cheap and quick technical colleges? Anyways, I only mention this because I've noticed ESI, also on my watchlist, being relatively strong. This seems like an easy short- enter short when it gets close to the resistance above, set stop above all-time highs. You could also say that there's a inverted H&S in there, but that will have to be confirmed. From the looks of the chart, it looks like one of those stocks that just never gets down, so I'd be careful with this one.

One long:

GLW - Corning Inc. - Target is 11 on the upside. It could be a decent buy on Tuesday if it doesn't gap up hard or anything. Safer would be to just wait for a pullback again, but may miss it altogether. Also of notice is that it's catching some support off the flattening 50DMA.

That's all folks. If I have time before I leave, I really want to do a post on today's /NQ futures trading that I did as it was extremely profitable and what I was thinking when I made the trades. Today was likely my last full day in front of the computer for the trading hours for the next couple weeks as I am headed out of the country (Taiwan). As I will have no computer access for the first couple weeks, I believe I will be limited to i-Cafe's. So, I'm going to have to do some careful advanced orders to position my portfolio for not-much-hurt while I'm away. Will need to place some carefully chosen OCO orders on most of the positions I opened today, with a stop and a target limit price to cover/sell at. Lord help me. :)

Edit: Alrite, /NQ trades today. I caught 27.5 points I believe, if my calculations are correct. That would be 27.5 x $20 per point (also known as handles in futures jargon). So that came out to around $550 today just from trading the /NQ. But, gotta take out the comissions, so that leaves $550 - 28 = $522.

See below for short entries and where I covered:

I think the biggest two things to take away from this are:
1) When we're trending, just let it trend until the trend changes! If I had kept my first short of the day and let it go until the downward channel broke (about when I covered one of my later shorts at 1173), I would have caught 24 handles on that one move. Add in the long trade, and it would have given me 40+ handles for today, you do the math! As you can see, instead I got in and out of shorts all throughout the morning. For the most part, it was because I was anticipating a, rip-your-face-off rally due to OpEx all day, and so I set in tight stops. So on every retracement, I'd get stopped out... which gets me to my second point...
2) Trade price action, not your emotions! Setting looser stops today would have been my friend today. Although this is all hindset, it did not really make any sense for me to set really tight stops. As I mentioned, it was because of my anticipation of future price action that caused me to do so. Resultingly, that let me ride the reversal all the way pretty much. But, had I got rid of that notion of, rip-your-face-off OpEx rally, I may have been more inclined to just set a stop above the previous highs, and tighten them just above every following lower high (which is what I did on the way up- raising the stop to just under the next higher low).

To my surprise, trading /NQ has been the most profitable for me since the start of this year. My other option trades have been 50/50, and I've left a lot of profit on the tables, as well as making a stupid mistake (again based on emotions) by buying OTM Jan 87 SPY calls earlier this week. They expired worthless. :)

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