Hey Gang:
Don't know about you, but my head has been on a swivel as a trader (not a long-term investor) with the CRAZY market swings as of late. What looks to have been solid entry points on good trending stocks with good fundamentals has been as exercise in futility. So how can you defend yourself during such volatile times? Here are some suggestions from one of my INVESTools coaches:
- Stay in cash until the market settles and SOME direction is established
- Enter in positions HALF the size as normal, and make the Stop-Loss trigger TWICE as big to give yourself some good wiggle room on wild swings
- For existing trades, leave the Stop-Loss triggers where you originally set them, DO NOT make them lower!
- For existing trades, look to take profits at resistance levels
- Finally, don't be real anxious to play downside breakouts for bearish trades. While many stocks are making "lower lows" it is too soon to say that we have actually started down-trending UNTIL we start testing old support levels as new resistance. Wait for the Lower Low AND the Lower High (and if you want to be really conservative wait for a subsequent lower low.)
- Spread strategies can be used during these times as well.
That's it. Keep your powder dry and while this market keeps falling (12,600 on the Dow would be a 10% Correction from 14,000), there could be some EXCELLENT buying opportunities on the horizon.
Until next time, Happy Trading!
Well Traders, the market swings are becoming absurd. I closed out of three positions today...VLO (for an outstanding profit though it would have been better 2 weeks ago), ESV and JOSB for reasonable losses (less than 1% of portfolio). The VLO gains FAR outweighed the losses so I was in good shape.I still have positions in BHP, CMTL, STLD and UTX.Always on my radar are ACH, AKAM, ATW, BOOM, BUCY, CAM, CCJ, CHL, CLF, CROX, CX, EXP, FCX, GRMN, JEC, LFC, MOS, NVDA, PCAR, PICO, RDC, RIO, SBUX, SNDA, STLD, STP, SU, TIE, TDW, UNT, VLO & WFT...to name a few. I have about 300 stocks I look at on a daily basis and while that may seem like a lot, I am so used to the charts that I can almost instaneously recognize if a chart warrants further investigation and analysis.Regarding PG, it looks like a Bullish Engulfing pattern today, right before earnings. Happy Trading!
Volatile markets suck, plain & simple. Today, I got sucker punched by a trade in Target (TGT). I had a Buy-Stop set up if the stock continued its bounce and headed up, which was triggered, only to have AHM CRUSH the rally today, sending TGT down heavily, hitting my Stop-Loss and creating a nice Bearish Engulfing pattern to boot (circled in blue). Here's the chart:
Oh well, such is life as a Trader.I did enter a few more trades (CMTL, ESV, JOSB, STLD, UTX) on Buy-Stops which were all doing well until the AHM news really took the steam out of a nice rally. Hopefully the market won't go too much further south, but it may. That's what Stop-Loss triggers are for! I am going to watch those trades for now and see where they run before I enter any more.Back to PG:
As was discussed yesterday, I felt that a Bear Call spread was a good play based on the position in the channel, and it was as the stock fell towards support. If you wanted to play an Iron Condor, you could Leg-Into a Bull Put Spread once the stock reached the support of the channel.Happy Trading!
PG huh...a Bull Put Spread and/or an Iron Condor. Let's take a look see shall we and see what we uncover?
Well, our first rule of thumb for any Credit spread is we want one of two things happening. First, ideally we want the stock to be trending AWAY from the credit spread, which back when the Triad Traders met, would be a Bull Put. As of today though, the credit spread to enter would be a Bear Call since we have seemingly reached the resistance level of our horizontal (neutral) channel. The second thing we would like to see is a neutral trend in the stock, showing that it has little to no real overall movement. As you can see from the chart, PG has been rangebound for months...that's good for this type of trade!As Keith pointed out in his comment, an Iron Condor on PG looks like a solid bet based on the flat, rangebound trading levels over the past few months. Certainly a 65/70 Bear Call and 60/55 Bull Put spread look to be somewhat safe based on the support and resistance levels. One caveat though, earnings are fast approaching so it may be dicey getting into any trade at this point. For argument's sake, let's "leg-in" to an Iron Condor. Right now, since the stock is at channel resistance, I'd first play a Bear Call Spread at 65/70. As of today (after hours), the September 65/70 spread would net me a $1.00 credit ($1.10/$0.10), or a 1:4 Reward/Risk ratio...typically lousy of an Iron Condor. I would then wait for the stock to move back to support before entering the Bull Put spread to close the IC. My hopes would be that the stock ended up somewhere between $60.01 and $64.99 (preferably not THAT close) on OED in September.
Of course, you would need to set up your Stop-Loss points, and/or decide to close the short side of one of the spreads if the stock began to move against you.
Happy Trading!
The TOUGH go to Tim Knight, founder of Prophet.net and my FAVORITE Bear Blog, The Slope of Hope. Tim is an Uber-Bear, so he THRIVES on down markets, so in my opinion, it is a GREAT place to find shelter (and get some awesome Bearish ideas) in turbulent times like now.I am in all cash right now, with the exception of VLO, which I have held a long time, and will continue to hold and sell Covered Calls. However, if this is the start of a correction (and there are a LOT of broken support lines today), then it could ba a time to back up the truck and wait for some excellent buying opportunities.If this seems to be a longer term Bear trend, and you don't like to short the market or buy Puts, you can always buy the Bearish ETF's: DXD (Dow), QID (NASDAQ) and SDS (S&P).This also may be a good time for some "Dead Cat Bounces," stocks which get pummeled in earnings (or get dropped for no other reason but the sector/market tide is moving out), but end up rebounding a few points a few days later.Let's get some ideas out there for the group to analyze some trades and put our collective heads together and make some MAAAAAAD MONEY! (I made a LOT of $$$ using the "Force Index" indicator which I never knew of until I attended April's meeting...so yes, we ALL can learn a little something together!)Remember....ALWAYS, ALWAYS, ALWAYS manage your risk!!!Happy Trading
Hey Gang:
For those of you that hadn't heard, my wife Sylvia gave birth to our son, Ethan on May 17th. For those of you who are parents, you know the sea change my life has taken...for the better! Now that Ethan is starting to sleep longer, and by association, his father, I'll be able to get back into the blog. So, check back here to see any updates, and be sure to make any suggestions for plays.
A Valuable Lesson Learned
Recently, I had a position in CAT which reported earnings on Friday, which was Options Expiration Day. In hindsight, I missed a GOLDEN opportunity to make a LOT of money with limited risk. How? By playing a July $85 Put on Thursday. The high on thursday was $87.00, and you could have bought an "expensive" July $85 put for $0.85. I say expensive since $0.85 seems a lot for a stock that is $2 OTM. Anyway, for a one day play, it was "cheap" in the sense 10 contracts was worth $850, but if the stock plummeted, you could make a bundle.
So what happened?
CAT tanked over $7 at the open (and was down over $8.00 at one point) and the July $85 Puts went from $0.85 to over $6.00! That is a 706% return in one day!!
What's the lesson?
Perhaps next earnings season, you may want to see which companies report on that Thursday, and see if there are some "cheap" Puts/Calls to play for October's expiration? Just an idea...I welcome yours!
As an aside, you'll note the PERFECT bounce off channel support...
Happy Trading!
