Wednesday, April 30, 2008

Volatile Fed Day

Today was one of those days that again was very volatile, although it didn't happen until the last 1.5 hours of the day. We steadily increased into the fed announcement, dropped, then shot up then promptly sold off after hanging around highs for a while. My account was up +2000 at its peak essentially and ended up +600. I had orders in to sell my GS, didn't get filled, I had it at 19.20 and I think bid only got to 19.05 at its high then it sold off. I am highly considering selling off most of my positions before a fed announcement, but of course you never know, we could have gotten a huge rally(and did breifly).

Diversification actually saved me today, WFR sold hard on an analyst downgrade, dropping almost 10% so my puts gained 950. This actually was the sole reason I was up about 1% today when all was said and done. My other positions are still there, I thought I may have to exit VIA, which I still may because I don't like how illiquid it is, but it closed back below 39 by end of day. SLB closed above 100 but sold off into the close which is slightly concerning, although most stocks did the same. My Q's position was the biggest mover, again I considered entering a sell at 2.30, but thought I'd wait till end of day to see where we ended. The Q's broke a 2 week uptrend hard, but bounced off some horizontal support at 47. This is a scenario where I struggle with what to do, I could add to my position and tighten my stop if I think we still go up. But I don't think I want to add to my risk if we have another big move to the down side, better to play it safe.

We'll see how the rest of the week plays out, I was hoping this would be the push to get the S&P above 1400, which only happened briefly and then we finished below the 1390 level on top of that. I am hoping this was mere profit taking, because the feds language didn't seem very bad IMO, but what do I know. Of course, obviously my opinion doesn't matter its what the big money thinks. People can't argue at this point though that we are in a recession because we were flat with last quarter which was better than expected. This could be revised down later but that means we would need another 2 quarters of declining growth now to technically be in a recession.

Nothing seemed to act as expected though, commodities should have sold off, dollar should have strengthened theoretically if people were bullish on this cut but that did not occur which is why I am weary.

Bottom line, none of my trades are broken so I stay in them. My ACH is beyond my max risk barely but the trend is still there, its a matter of the spread so I am still in. May not be the case tomorrow...

Tuesday, April 29, 2008

All Eyes on Ben

Well, today's action was fairly flaccid. Although it was pretty much all bad in my account. The only thing keeping my account afloat today was GS and the Q's. I watched as AAPL hit my original target today, which would have meant another 1500 in my account. I have to live with my decision though and assume it will pull back at some point and I can get in again.

My diversification plays worked against me today, both WFR and VIA rallied back up to resistance but did not break. Seems like some traders were doing some short covering ahead of the fed meeting. SLB went against me and gave me a dilemma, it finished below 100 on lower than average volume. It finished at 99.26, then jumped afterhours but it could have been just a missed order going through so we'll see what happens.

Overall I was down less than I thought I would be, a little less than 2%. I doubt much will happen tomorrow either before 1:15 when Bernanke announces the Fed policy from the FOMC meeting. The Q's ended strong so I hope that trend continues, generally a cut is good for financials. That's assuming we get the .25% but you never know. If we get a rally tomorrow it could be the move above 1400 I have been waiting for that signals higher prices.

Let's hope whatever it is, the market likes it.

Monday, April 28, 2008

Diversified Before the Fed

So today I set out to diversify my portfolio with some different options both bullish and bearish. I figured now was a good time because we have a Fed meeting tomorrow and you never know how the market will react. Market opinion seems to be that they will cut another .25% and then hold for a while.

Because the reaction could be a rally or a sell off it's good to have different positions. I added 3 more positions to my portfolio. 2 put plays and 1 call play. I bought puts WFR and VIA, down slightly on both, but less than my 2%, they offered good entry points. Looking to sell at 60 or with a break back above resistance of 70. VIA, broke a symmetrical triangle to the downside on above average volume. I would like to see it drop to 35, however on the 3 year chart it doesn't look like it has dropped past 37.50 in over a year and a half, so we'll see. A break back above 39 will signal an exit. It's hard to find bearish plays right now, however there could be some good ones setting up in POT or FSLR.

My one bullish add was on SLB. A break below 100 or if it gets up in the 112-115 range I'll sell. These are decent risk to reward ratios, my minimum is 1:4, which all meet or are better. Ideally, if we have sell off, my put plays will sell off harder and help insulate me from losses on my bullish plays, since i got in close to my exit on SLB I am hoping I won't lose much and it will hold. If we rally hopefully my puts rally up to only resistance, or even keep going down and my bullish plays rally a lot. It was tough again to see my account up during the day and then lose quite a bit at the end. My account has been treading water lately so I hope it makes some positive advance. However, now that I said that I am sure it will be a big down day and I'll get crushed. I am still very delta positive, but its hard to not be right now it seems. I was actually going to add more bullish plays, but decided to wait and see what the Fed does.

Friday, April 25, 2008

First Week Back Ends

So my first real week back trading actively has come to a close. So far I am pleased with the results, being up 15% overall for the week. The bad thing about that is that I could be up even more had I not been stupid with my GOOG trade. Although I am kind of back into the swing of things now and have the proper mind set.

Today was another interesting one, watched the account fluctuate and end up basically flat from yesterday. Apple was down to 166.xx at one point and I considered buying but did not. I partially wish I had but I didn't want to add another bullish play without anything bearish. However, I did pick up some China exposure via ACH. I bought 5 contracts of the August 50 calls. There was a better entry point at one time during the day however I think it finished slightly up from where I got in, so I am flat on those options right now. There is overhead resistance at 50 but I think if china starts moving again it will break that and head for the next level at 60, which is my target.

GS continued higher, finishing at 192, I am nearing my target. I was considering getting out but I only have 2 contracts, there may be a pull back but we did break 1390 on the S&P finally. I figured since I am so close I should see my target through and pick up those extra profits. The whole point of planning a trade is to trade that plan.

The Q's are still profitable but not as much as they were, but again the trend seems higher so it would not be logical for me to get out at this point. So I am holding for my target until I see otherwise. we didn't move like I was hoping this week.

This was a majority of the earnings this week, its lighter next week but could send stocks higher. We did not get above the 1400 level on the S&P but it was good to see the broader market making a move on its own even with MSFT weighing things down.

I would like to get back into Apple but is it really worth it for possibly 5 points of upside short term? There isn't much that would push it up besides short covering or upgrades. Big news is not likely until at least June, although 3g iphone rumors could come out in May and push it. I think there could be some better plays out there as much as I love Apple. I need to get some bearish plays, the tough thing is that everything seems to be so beaten down, I'd like to find a higher priced stock starting to show a reversal and get on board if possible. It's just a matter of finding it.

I hope I can diversify more and continue with profitability or at least flat trading for next week(and obviously in the long run).

Thursday, April 24, 2008

Pleasant Surprise

So today was odd. The volatility in my account again highlights that my bullish bias is a liability. It was nice though to see it go from about +500 at it's lowest point to +5900 at its high. My apple options were at one point losing money and then later in the day they were giving me a nice gain. This is why watching stocks all day could really be an issue for those that get very emotional. I got semi-emotional as you'll see below.

I broke my plan and sold my Apple options. The good news is I sold at the high for the day I got 16.60 for my options with the top price being 16.70. They then ended at 15.95. All of this may not matter because for all I know apple could continue its ascent tomorrow or gap up 5 dollars, meaning I missed out on a lot more money(probably about 2500 with my target of 175). However, it never hurts to take a profit and I somewhat regret not taking it on my Q position as well because I was going to sell at the high of the day again but decided to hold. I guess the only consolation is that if apple moves higher tomorrow its likely that the nasdaq will be so I will still profit off my Q's position.

Goldman Sachs FINALLY broke out and in a major way, up to 188 today. The sad thing is I am only slightly up now, of course that is much better than a loss. But it was about an $800 swing to get to that point. This is the problem with GS, had I not held I probably wouldn't be up at all because the move happened pretty much all today and if I didn't buy on the open I would have missed it. That isn't to say it won't come back down and re-test but you can see the dilemma.

I'd like to see a down day for Apple, one of the reasons I took profits is because it was hitting its head on 170 pretty hard and did not want to go above that point so I figured the short term run was done and we could see profit taking the next day.

I am having trouble deciding on what to do in general because I could have held my position(in options, I sold my 50 stock shares) and then added to my position on the next down day. Or I could wait for the pull back and buy in again. The other thing I may do, depending on how the market seems to be going is roll into a cheaper June option. This would lock in some of the profit I have made and could be used to buy into other positions.

I could use all profit to buy into some other options, this would almost be like progressive betting, if I am wrong, obviously I still only want to risk my 2% per trade, although I could get slightly more aggressive knowing that it is all profit I am losing. This would give me the advantage of more leverage while risking no original capital. However, I am obviously still way down overall so risking any more than 2% per trade is still not advisable.


I am looking at getting into some of the high flying names like FSLR and POT, they have had large pull backs, I will have to look into why that may be before I jump in because they did not participate in this rally at all but do seem to be still in an uptrend.

The bigger thing to do will be to look for bearish plays to offset my current and future bullish positions. I'd rather be less delta positive, because I would see less fluctuation that way. I need to get diversified. That's what Wu-Tang financial recommends. :-D

Microsoft's earnings guidance seems to have disappointed and it is off 3.5% afterhours which doesn't bode well for the markets tomorrow. We rallied today due to apparent better economic news, a surprise drop in jobless claims and a nice durable goods number. I don't think there will be much to lift us tomorrow, but you never know.

Wednesday, April 23, 2008

The Main Event

So Apple released earnings. Very good earnings. However, their guidance was below the estimates of wall street so we have no rally. It could be worse but the stock only sold off something like 68 cents. With IV collapsing it is likely the options will suffer and I will lose money on top of whatever happens tomorrow. I was hoping Amazon would add to the rally in tech but it failed to impress as well so it looks like my QQQQ play is out.

I left before market close but apparently I should have stayed, it seemeded fairly bullish with GS above 180 but it finished below with a loss of just over 2%, which means I should have exited.

It's hard to say what will happen tomorrow but with weak guidance it doesn't seem like a reason for a rally. I guess we will see.

Tuesday, April 22, 2008

Easy Come, Easy Go


The title pretty much says it all. Today's action erased all of yesterdays paper profits. It's always fun to see the account go from +4900 to +1400...NOT. This highlights a few things. One, the market does not act in a rational and expected manner. Two, I am not properly diversified. Three, Shaw Wu wanted Apple shares cheaper for himself(clients).

On a day where nearly all the big names reporting earnings were beating with good increases and guidance, one may assume we would rally. Nope. The exact opposite happened. I am not sure if people just wanted to take profits, or if the concern was that all the profits were being helped by international markets.

The tougher thing here are my positions. None of them are technically broken. AAPL just erased a lot of paper profits, I am still up 20% on my calls. And it held 160. GS finished barely below 180 on a decent down day, plus I am still below(albiet slightly) my maximum loss tolerance I said I would sell at. QQQQ's also are not broken and below my max loss limit. So, by my rules, I stay in the trades.

This highlights that my complete bullish bias is possibly a liability. If I had some put positions mixed in, I would likely not have had as large a loss today. It is always smart to have both bullish and bearish plays, for situations like this. I will start looking for some bearish plays.

Obviously majority of my loss came from AAPL. It reacted to a downgrade just like it reacted to an upgrade the day before that. Shaw Wu, an analyst cut it to Neutral from Buy based on valuation. Which I find humorous because I never heard him talking about that concern last year when it was up at 200 trading at 39 times earnings. He voices decent concerns but I think AAPL was unreasonably punished in the original sell off. Not to mention it is well insulated to US slow down due to overseas sales. Bottom line, exit is not signaled, so I am still in the trade. The only thing I could possibly do if I wanted to do here is add to my position. However, since it is before earnings and I am already down in general I am not going to take on more risk.

Tomorrow is also an unknown(as with every day). Even with Yahoo beating earnings estimates and reaffirming guidance and raising short term, the stock did not respond in after hours. In fact, it favored the opposite reaction, Yahoo declined and Microsoft went up, generally signaling that in an arbitrage situation people are thinking it wasn't good enough to make microsoft up its bid for Yahoo and could in fact still have them make a hostile bid for the company. That's good for MSFT and bad for YHOO. Tomorrow will be interesting. Apple releases earnings after the bell and we'll see if it is what the street is looking for, it could be extremely good and still have something that disappoints(like iphone or ipod sales) so we have a sell off.

Rules will be followed, hopefully it is for profits and not losses. Stay tuned...

Monday, April 21, 2008

Trading Plan or Waiting Plan...(I'm Back)



I'm Back! The rumors of my death have been highly exaggerated. I can't believe it's been nearly 5 months since I last wrote an entry, damn! I am sure by now I have essentially no readers(so that would be exactly 2 less than before I took a break).

Anyways, after about 3 straight months of not doing anything just waiting out the market, I am now back in the game. I was at a level in my account I really did not want to go below, in fact even after re-capitalizing with some money I got from selling some things(I sure will miss my left testicle) I am still at a dizmal level, but I am much more comfortable.

So, with that out of the way, it appears we are headed higher, I was waiting for a break of 12,750 to signal the next leg up, and we got that friday and it held today. The only semi concerning thing is the S&P has not broken significant resistance of 1390 yet. I feel this is coming shortly though.

So my first two trades back are not examples to go by, but bring up the age old question. Plan or Conviction? In my early days(and a great bull market mind you) I made quite a bit of money going with conviction based on what I thought would logically happen. Such as, if Apple had say 2 big announcements coming up and they would be positive, I could expect a 10 point move in a month, so I'd buy options accordingly, without any regard to the chart. Sometimes I could be at a large loss and still end up making out very well by sticking it out and keeping my timeline. Of course I then lost even more money following this same line of thinking.

The first two trades started out strategic, they were trades on AAPL(Apple) and GS(Goldman Sachs). AAPL was in a short term uptrend for the past month and the pull back it had was a perfect entry at 155. I entered this in the beginning of the day. Same with GS, the stock has seen significant resistance at the 180 level, which at that point it was above, I entered early.

This is an example of why it is always good to wait till the end of the day to see a confirming break out or support hold. Both AAPL and GS, failed, with former finishing at 153 and the latter falling back down to 178 by close. Had I waited till the end of the day I would not have entered these trades.

The "correct" thing to do in terms of consistency and rules would have been to get back out of the trades right before close for a small loss. In both cases, it would have been a good move because AAPL fell down to 145 and GS down to 168. At those levels both of my call positions were much greater than the 2% riskI want to be taking per trade, in fact one was nearly 50% of the original investment.

In this instance I had bought July dated calls, 165 for Apple and 185's for GS, simply because I knew earnings were approaching for Apple and they would likely announce the 3G iphone in June if nothing else, so 165 in 3 months seems very reasonable and decently conservative. GS seemed to be forming an ascending triangle about 20 points in size, so again 185's seemed good and it had no subprime exposure and market opinions seemed less bearish on the financials(and GS in general) lately so I thought it would be a break out.

So, all these trades were taken before the break out of the Dow and Nasdaq indices. As of tonight I am luckily sitting at a 56%(of investment) gain on my AAPL calls and only a small loss(a little over 1% of my total account) on GS. This was the WRONG way to do it, the market could have kept going against me however I lucked out this time. The problem with these relapses is it can be a big issue in the future because it will draw me down again. I had my reasons to stay in obviously and wait out the loss but, no reason should trump rules because in the long run the rules will keep you profitable, not conviction. I will give you an example of how a recent GOOG day trade proved this point. I took a position, should have immediately closed it when it broke the other way. I held assuming at some point I would be in the money and lost my entire investment, so instead of losing 1-2% I lost over 6%. That all adds up in the long run.

I entered into a new trade today as well on the Q's(Nasdaq tracking ETF), some June 47 calls. With the break out of the Nasdaq. My thinking for these was that this was going to be a fairly heavy tech earnings week and in general most of the names are not leveraged to the US for their business, so they should do fairly well. I would like to see a 4 or 5% move up in the next couple weeks. My price target is 49. I am risking 2% of my account to hopefully make 10%. A 1:5 risk reward ratio is always something to take. I am currently up a little over 12% on the trade. I will exit if I get past my maximum risk of 2% total account.

As for AAPL and GS. My price target on AAPL is 175. on GS it is 195. GS is still an unconfirmed breakout, it finished over 180 today finally but on below average volume. If I hit my 2% loss I will exit and wait for full confirmation. Cutting your losses and letting the winners run sounds so simple, and it is when there is no human involved. ;-) Apple releases earnings on Weds after the bell so depending on if I have hit my target or not I will hold over earnings. If I have hit my target I will leave 1 contract on the table over earnings.

As an aside, oddly enough the one place that actually confirmed how important rules are was Las Vegas. Blackjack is a game of streaks, you get on winning streaks and you get on losing streaks. You want to minimize your loss on your losing streaks and you want to make as much as possible on your winning streaks. This is done through progressive betting. When you win, you stack your bet by your minimum, when you lose you only bet your mininum. So 3 consecutive wins will greatly outweigh 3 consecutive losses.

The point of rules in trading is the same, you minimize your losses knowing that the longer you last the more winners you will have to outweigh your losses. If I have a streak of 5 losses, I have lost 10% of my total capital. I could then have a good trade that makes me 20%. Even though I am smart enough to realize this and trade this way most of the time, I would love to be able to set all my targets and just leave it once I enter a trade so I am taken out of the equation entirely. :-)

Whew, that was a long one, sorry it's been a while I had a lot to get out, haha. We'll see what tomorrow brings.