SUCCESS STORY

Jerry,

Out in the real scary world after your fantastic Wednesday AM classes -

Just sold 5 contracts of MED Jan 30 Calls purchased 11/24 for $1.20 - I kept moving my stops to lock in profits - stopped out today at $5.70. Pretty nice for just over a month!

Thanks!!!

Mike S

SUCCESS STORY

Jerry,

Based on your recommendation on NFLX, I have bought Netflix Jan 55 call at 1.7 on Dec 17. And sold it at 3.1 on Dec 24. This has given me approximately 80% return in about 1 week time. I have also bought AAPL shares on your recommendation and holding at this point at 10% profit.

Thanks for your commentary and recommendation. Have a great holiday season and wonderful new year.

regards,

Kenneth N.

SANTA CLAUS RALLY

We had a nice Santa Claus rally this year. If you traded any of the picks I gave you over the last week, you most likely did very well. AMZN and AAPL were huge! Those that did trade those picks most likely paid for your Christmas...and then some. Other big picks included EOG, APA, APC, MAC, BUCY, RAX, SCSS, and NOG. If you did have success stories over the last two weeks, please send them to me so that I can post them. Have a very Merry Christmas and get ready for a huge money making New Year!

MERRY CHRISTMAS!!

I hope everyone has a very Merry Christmas, Happy Holidays, and a prosperous New Year! The market will often rally on these days before Christmas. When it does pull back, it usually doesn't sell off much. This creates a pretty nice reward to risk. The market didn't pull back as much as I wanted it to, so I didn't come out with a full "buy" recommendation. If you want to make some trades here at the end of the year, I would recommend the technology sector. Many stocks have pulled back. Make sure you trade the trend and look for good reward to risk entry points. I like the position of AMZN and AAPL.

SO MUCH FOR TAKING A BREAK....

With the recent sell off in the market, there is a great reward to risk situation developing. If the S&P 500 finds support at the 1086 area again, I will probably call for an aggressive buy back into the market. With the 50 day MA sitting at 1087, there is a lot of support in this area. I've told you over the last couple of weeks that this sideways trend is most likely setting up for a breakout to the upside. This means that if the market holds support at the 1086 area, it could run up to at least 1116 again...if not higher. If it finally breaks the 1086 support, you could stop out of the trades. This would create at least a 2:1 reward to risk. I would like to see another 8-10 point drop in the S&P 500. This could happen tomorrow...but with RIMM earnings being good and December option expiration, the market could take a couple more days to get there. This could lead to one heck of a Santa Claus rally!!! This might be your chance to pay for all those Christmas gifts!! Watch for a rally in technology tomorrow. RIMM was trading at $71 in after hours trading after posting a great earnings number. AAPL should also rally off of that report. AAPL is sitting near a $188 support area. Although it is below its 50 day MA, it could rally up a bit. Be careful not to chase it. It will most likely gap up along with RIMM. I personally would love to set up a credit spread if it does gap up. Maybe the 190-185 spread. Let's follow up on a few of the successful picks over the last week. AEM has moved down about $9 since I re-entered the bearish trade. Remember that I was stopped out the first time. It has worked out to be a very nice trade. It is also a good example of getting a second chance. Just because you get stopped out doesn't mean that the opportunity is gone. I was just a bit early on that first entry. HPQ up $2. CAT - flat since the recommendation, but looking really nice if that 50 day MA holds. EOG up $6. RIMM - up $3 now, but could be up $11 tomorrow. CSCO down $1. SHOO - up $3 at peak...currently up about $1. AAPL - down about $5, but that could change tomorrow. Some of these picks were credit spread recommendations. TS - up about $1. MEE - up $3. MMM - up $2. TCK - up $2. OMG - flat. DSX - flat. Some bearish trades include HANS which is up $1 (that's not a good thing for a bearish trade), BAC down $1.50, and C down $.75 (which is a big move down for Citi...almost 20%). Not bad results for a choppy market. Some of those trades were spreads which are working great in these conditions. Happy expiration friday tomorrow and have a great weekend.

RESISTANCE?

It appears we are bumping up against the resistance around 1115. It looks like we could move back down to the 1087 area in the next few days. We could possibly break out of this range and start another move up, but the price action over the last three days doesn't look like that will happen. If we do end up finally breaking out, there are a few stocks that I want you to keep an eye on. I like VCI, BUCY, NFLX, VPRT, RAX, SCSS, NOG, and MAC. For lower priced stocks, I like IVAN and CSUN. I know that CSUN has been moving a bit flat lately, but it looks like it could be ready to run up to that $6 area. This would be a stock trade, not an option trade (there are no options on this stock, but it costs as much as an option...$4.45) which is why I'm considering it with a flat to slightly down sloping 50 day MA. For a credit spread, I like HGSI (Jan 27 and 26 puts for the spread). If we continue to move down in the next few days, be patient and start planning your trades. If the market pulls back down to the 1087 area, we want to be ready to set up our bullish trades. The longer the markets move sideways (and don't break that 1087 support), the higher the probability for a breakout to the upside in the near future.

HOW DO YOU PLAY THE XOM/XTO NEWS?

The big story today was the news that Exxon Mobile (XOM) is going to acquire XTO Energy (XTO). This caused a big move today in the natural gas stocks like APA, CHK, APC, and EOG. I received a few e-mails asking "Is it too late to get in?" I don't think it's too late to get in, but I do think that you need to be very smart in how you play it. I don't think a directional option trade (buying a call or buying a put) will work very well for this situation. Not only is the market expected to chop around a bit, but history says that these stocks will probably move sideways for a few weeks. For a more current example, look at the railroad stocks. Warren Buffett announced his purchase of BNI stock on 11/3/09 and the stock gapped up $20. Since then, the stock has flatlined. Some of the other stocks in that sector moved up a bit on that announcement (like GWR, CSX, UNP, NSC, and KSU), but for the most part they have been moving sideways since then. The way I am going to play the news is through the use of Credit Spreads. On CHK, APA, and APC, I would set it up under the 12/9 low. On EOG, under the 50 day MA. On XTO, somewhere below the 10/21/09 high. There is no guarantee that these stocks won't come crashing back down, but the probability is pretty high that they will stay above these levels until the January expiration. If you place these trades, make sure you understand the risk and know how to make the necessary adjustments if it goes against you. If you want to learn the details on these spread trades, make plans to take the Advanced Option Strategies course. As for the market...we are nearing that 1115 resistance area. We might break above it this time, but we could also pull back a bit and continue this sideways trend. By the way....I have been having some trouble with my Option Magic and Virtual Investing Club e-mail accounts. Some of you might still be waiting for replies on your e-mails or invitations to a class. If you have not received an invitation to a class this week, keep in mind that you can use a previous invitation to enter the class. You can also call into the conference call number at the start of class and I can give you the login information over the phone. Please try using a previous invitation first as it could take a long time to start class if I am having to help everyone get logged in. I have also set up a temporary e-mail account at myoptionmagic@yahoo.com. If you feel you have unanswered questions, please resend the question to this e-mail account.

SUCCESS STORY

Bought 20 contracts of WY December 1/09. @ $2.15

Sold December 3/09. @ $4.00

$3700.00 Gross Profit

Thanks for all your help Jerry!

Craig B.

VERY IMPORTANT!!! PLEASE READ

I want everyone to do me a big favor. Please go to http://www.growthstockwire.com/ and read the article titled "The Government is About to Destroy the Market". In my 6 years of coaching, I have always been careful not to bring politics into my discussions. There are always two (or more) views to almost every issue out there, and a trading class is no place to try to sway political opinion. However....this bill will affect everyone who trades...no matter what your political views! It will be especially difficult on those of you that are starting out with smaller trading accounts. Please read this article and sign the petition. If you feel as strongly as I do, please contact your congressman and stop this ridiculous bill. If you have friends that trade, get this link to them and ask them to sign the petition and contact their congressman. Please understand that I would never ask you to do this if it wasn't so important. Thanks!

SUCCESS STORY

Jerry, I am in your Wed. night, 7 pm CST class. I made my first option trades last Thursday. Before beginning this class, I didn't understand anything, but after the first class and listening to the assignments, I jumped in. I invested $2078 and sold them today for a $1076 profit! I am now understanding all the examples in Jesse's marketing info. This is awesome, can't wait till each class to continue my learning. Thanks for all your explanations and demos, so far I am very impressed with the program. Bill A.

WE GOT A BOUNCE!

We did get a bounce today. It looks like the trading range is still alive and well. Expect more choppiness in the markets through the end of the month...unless we break out of this range. Spreads are working best in this environment. I know that many of you haven't taken Course 2 yet and don't know how to use the spreads. That's okay, just be patient right here and try to limit your directional trades. Part of good trading is learning when so sit tight and wait for the probabilities to move into your favor. You could try using some shorter term trades if you have the ability to watch them throughout the day. Make sure you calculate your reward to risk and make sure that the reward to risk ratio is in line with your winning percentage. Until this range is broken, try to enter your bullish trades near the support of this range (about 1086) and your bearish trades near the resistance (about 1115). Below is my response to an e-mail from a student. I thought my commentary might be of some worth...maybe just a little. Many of these stocks would be great picks because the reward to risk is great. That doesn't mean they will necessarily go up, just that they have the potential to give twice as much if they do...compared to what you could lose if they don't. These were all bullish trade patterns. Thanks JJ.

SWM - I wouldn't chase it here. It's gotten too far away from the 50 day MA. It could move up a bit more due to the volume of today's move, but I don't like the reward to risk from right here. 11/27 to 12/1 would have been the ideal days to enter. Even 12/4 was good.

SHOO - This would be a good one.

AAPL - I'd use a Bull Put Spread or Bull Call Spread on AAPL. I think it could chop a bit sideways over the next few weeks.

TS - This one is nice. I might use the 10 day MA as extra confirmation. I do like the reward to risk.

MEE - I'd definitely want confirmation on any energy related stock right now. If the dollar continues to rally, there will be more pressure for these stocks to go down. The rest of the coal sector has struggled. This one could lead a new rally in coal. The reward to risk isn't too bad if you place the stop below the 10/20/09 high. I do like the ABC pattern and the Fib retracement levels.

MMM - I like this one for a Bull Put Spread, placed below the 50 day MA if possible.

MT - I don't like this one. Too close to overhead resistance. If it does break out above the 10/15/09 high, you could use a Bull Put Spread.

TCK - I like this one.

OMG - I like this one. Very nice reward to risk.

DSX - This one is okay if it can get above yesterday's high (12/8/09) for confirmation.

WILL WE GET A BOUNCE?

The S&P 500 has found support and rallied the last three times it has hit 1087. I would expect a little bounce here tomorrow. It might just be an intraday bounce, but see if the market starts to rally a bit at the open. If it is below 1087 near the close tomorrow, we might start to get some heavy selling that could break us out of this sideways trend we have been in over the last few weeks. I feel that we will probably continue to chop around for the next few weeks, but I am prepared if the selling starts to increase. If we rally a bit tomorrow, look at the 1099 or 1100 area as a target.

HOW TO TRADE A SIDEWAYS TREND

With the market chopping sideways over the last few weeks, it can get frustrating when you buy call or puts and the stock doesn't move very much. One way to deal with a sideways trend is to use spreads. I teach several spread trades in the Advanced Options Strategies course (Course 2). A bullish credit spread (set up below a support area) would allow you to be profitable if the stock went up, moved sideways, or even moved down a little. That is a 2.5 out of 3 chance of making money! You do need to be careful since the reward to risk can be negative. You need to know how to make adjustments if the trade goes against you. My favorite credit spread is the Bull Put Spread. I really like this spread in these current market conditions. If we do chop sideways or move up a bit in the next few weeks, these trades should work very well. The profit percentage is lower than a directional option trade (about 20% to 30%), but with a sideways trend it can give you a better chance to make money. Some stocks I like for Bull Put Spreads include HPQ, CSCO, CAT, RIMM, and EOG. For Bear Call Spreads, I like HANS, BAC, and C. More than 42,000 January $23 Call options were purchased today on the UUP. This suggests that there is speculation that the dollar could continue to rise through January. There is no way to tell for sure if these call options were bought or sold. Shorting that many calls would be very dangerous. It is more likely that they have been purchased on a directional bet that the dollar will go up...or that they have been bought to protect a short position. Either way, it signals a bullish view on the dollar. This could cause gold and other commodities (like oil) to continue to sell off over the next few weeks. However...today's price action on gold (gap down followed by a rally) suggests that it could rally a bit in the next day or two. If it does, it would allow you to set up your put option trades on some of the gold stocks or ETF's.

WHAT'S UP FOR MONDAY?

I jumped back into one my gold trades last Friday (puts on AEM). I took a smaller position and I'm not using a stop this time. I think that gold is starting a pullback. I still think that gold will probably end up going higher after it corrects so keep a nice watchlist. I liked the pattern on AAPL until it broke its 50 day MA on Friday. If it can get back above it soon, it might still be a nice short term bullish trade. I like HPQ (call option) in this current position. EOG has a nice symmetrical triangle pattern. If it breaks to the upside, it would be a nice bullish trade. If it breaks to the downside, I don't like it as much since the trend is still considered up. CAT is also looking nice for a bullish trade. Having said all that, I'm still having trouble being bullish on the whole market right now. Like I said in earlier postings...we might find a way to inch higher until the end of the year which is only a few weeks away. I don't see much to be bullish about beyond that...not yet anyway.

FINANCIAL DOUBLE DIP?

The market continues to find resistance at the 1112 area on the S&P 500. Although I think we will eventually breakout and move up to around 1120, I'm not currently feeling like we will go much higher than that. Having said that, the trend over the last 9 months has been to avoid shorting the market at all cost. A result of that trend has been that many of my bearish predictions have not worked very well. I'm not discouraged because my job is not to predict the future...it is to trade the current trend...whether up or down. My experience tells me that I'll still get my big trades. I was shorting the market late in the summer of 2008. I was a bit frustrated because I was expecting a decline but the market kept chopping back and forth...even breaking above and below the 50 day MA. I suffered a draw down in my account as I was stopped out of many trades. Then came September. I made most of my money that year during those last few months as the markets collapsed. What caused me to remain bearish that year (besides the trend) was the collapse of Bear Stearns that happened in March of 2008. I knew it was probably the first domino to fall, but I didn't know when the others would start to go (I had been predicting a financial collapse as early as 2005). Now we are nearing the end of 2009. We've fully recovered from the financial collapse and the economy is back to normal...right? (I hope you caught the sarcasm in that statement). I say that sarcastically because that is what many would have you believe. I've felt very strongly since March that there are deeper problems with the financial institutions that we just don't know about. My nature is to ask questions about market news and commentary. I'm always asking myself "why". Why is this happening? Why are they telling me this news? Why is the news different from what the chart is telling me? Last year they talked about the credit markets freezing up...about banks not wanting to lend money. This didn't make sense to me. Banks are in the business of lending money...that is what they do! That is how they make more money. Why don't they want to lend more money? Well obviously, they don't want to lend money if they feel they won't get it back...especially if their reserves are not high enough to endure a run on the bank. In other words, they are a "house of cards" that is trying to look like a fortified castle until the economy turns around and bails them out...or in this case the U.S. government bailed them out. I found it very interesting that the banks didn't rally until the government eased the "marked to market" accounting rules. This allowed them to play with their numbers a bit and possibly make their current condition look better than it actually was. I was also suspicious when the government wouldn't let some banks pay back the TARP money early. When banks came out and said they wanted to pay back the TARP money early, I questioned whether they were saying that because they really could pay it back...or because they knew the government wouldn't let them pay it back early anyway so why not say it and make it appear that they were in good shape. Most of the rally in the financial stocks was due to the government assuring us that they were "too big to fail". So in a nutshell, I've had this lingering doubt about the recovery of the financial sector and thus the economy...especially since it has been fueled by borrowed money. Now the Dubai meltdown hits. Is this just an isolated case, or possibly the first domino of the second wave. We know that the banks will probably get hit with another wave of foreclosures starting around the second quarter of next year. As the S&P 500 reaches the 50% retracement of the 2007-2009 drop, the XLF (financial ETF) has barely retraced 30% of its drop. Some may look at that as an opportunity for more upside. I look at it as a divergence. Many financial stocks have moved below their 50 day moving averages and are starting to trend downward. I don't know what the market is going to do over the next few months. I hope it goes up...I love it when it goes up. But if it trends down, look at the financial sector as a starting point to buy puts. I love the current reward to risk positions on many of these financial stocks. JPM, C, BAC, and WFC. Even MS and GS are starting to roll over. Keep an eye on the price action. If you see days when good news comes out, but the stock goes down or is flat on heavier than normal volume...look out!

GOING HIGHER?

The sideways movement over the last two weeks is looking more and more like a bullish ABC pattern correcting the move up from 11/2 to 11/16. I think if we move back up above the 10 day MA tomorrow, we could rally up to the 1120 area in the S&P 500.

A very successful trader friend of mine posted these 5 steps in his newsletter. Although it may seem too simplistic on the surface, it actually nails the key steps you need to be working on in your personal trading. It is also a good summary of what I taught you in Course 1.

We have found that traders who find success do the following very well.

• They Have a method. Simplicity is a good thing. They learn a trading method and master it.
• They control emotion. They do not let fear or greed rule their decision making
• They understand that all trades do not work. As predictable as we try to make the market, it can be very unpredictable.
• They manage risk. The market place is risky. Managing that risk is essential. They don't allow one trade to make or break them. They have a level where they will exit if the trade moves against them and they avoid justifying themselves for remaining in the trade longer.
• The are honest with themselves. They recognize and learn from their mistakes. They are able to say they were wrong. Being right is not the important thing, making money is.