Option Magic: November 2010

Tuesday, November 30, 2010

ASIA TRADER AND INVESTOR CONVENTION

If you find yourself in China this weekend, stop by the Asia Trader and Investor Convention (ATIC) in Shenzhen, China. Jesse Webb will be doing a couple of seminars on his Market Trend Signal software. The conference website link is http://www.theatic.net/?cdid=30&lang=en

For more information on the Market Trend Signal software, go to www.markettrendsignal.com.

BE READY FOR THE ROLLER COASTER

I hope everyone had a nice Thanksgiving weekend. I tried to get away from trading for most of last week which is why I didn't post anything. I don't like to make many trades during the week of Thanksgiving due to the big decrease in trading volume that usually accompanies a holiday weekend. The market will likely whipsaw back and forth over the next few days. We could see some wild swings like we did today. This creates some nice short term swing trading opportunities for those that can take advantage of them. Financials (particularly GS and AXP) could provide some shorter term bullish opportunities. Technology stocks should continue to rally over the next few days as well. One stock I like in the technology sector is CRUS. CRUS looks like it could be done with its correction and ready to make another bullish run. The range I am looking at in the S&P 500 is between 1172 and 1228. I think the market could fluctuate back and forth within this range for the next several days.

Friday, November 19, 2010

INTERESTING ARTICLE

Here is an interesting article on Natural Gas: http://www.tradervibes.com/blog/professor/long-term-look-nat-gas

I've know Jeff for several years. He's a very good trader. I totally agree with his analysis. Jeff mentioned UNG as a way to play natural gas. I also like APA, APC, and CHK. These are some of the larger natural gas companies.

Thursday, November 18, 2010

VIX DROPS

The volatility index (VIX) dropped considerably today. It ended up closing on its lows. This could indicate that the buying might continue for the next few days. Today's move was not the rally that I was expecting. I was expecting a rally over the next few days that would look more like a "B" wave...choppy and sideways looking. Instead we wiped out Tuesday's drop in one day. That price action is more bullish than bearish. I would hold off on buying put options until we can see if there is a strong follow through to today's rally. If we do rally higher over the next few days, I like the bullish pattern on Visa (V). I'd like to get the confirmation of a close above the 10 day MA. The commodity stocks also rallied pretty strong today...especially silver.

Wednesday, November 17, 2010

MARKET RALLY TOMORROW?

Today's news was dominated by the GM IPO which is scheduled for tomorrow. The market could rally tomorrow based on the anticipation that the GM IPO will go well. The overall market still looks weak. Any rally should be looked at as an opportunity to buy puts for the expected next move down. A rally back up to the 1200 area on the S&P 500 would represent a 50% retracement of the recent move down. This could be the target area if the market rallies for the next few days. I'm not touching GM tomorrow. I don't see many patterns that I like right now...at least none that are in good entry positions. We'll see if anything changes tomorrow.

Tuesday, November 16, 2010

TECH STOCKS SHOWING WEAKNESS

Gold, Silver, and now Tech. The market is showing more weakness since last Friday's break of the 10 day MA. I think that any rally that we see this week should be used to buy put options. The GM IPO (now officially slated for Thursday) might not be enough to boost the market higher. I still like VMW to drop to around $70 to $71. NFLX should drop and fill the 10/20/10 to 10/21/10 gap up. A drop to $153 would fill that gap. AMZN could make a big move lower, but wait for it to rally back up a bit to set up that next move down. I do like the bullish recommendation on CIT...if this market can somehow rally. If you entered into that trade, consider a tight stop below today's low. If we reverse today's move in the next day or two, it might not be ready yet to rally.

Monday, November 15, 2010

IS THIS THE CONFIRMATION WE ARE LOOKING FOR?

All three indexes closed below their 10 day MA last Friday. This was one of the signals I was telling you to look out for. I'm still waiting for the other two signals. We did get a little spike in the VIX, but not enough to signal any sort of panic setting in. We also closed up off the lows on Friday which also gives me a little concern. There were some buyers that came in at the end of the day. I think there is a chance the market could rally up a bit next week as we approach the GM IPO (initial public offering) on Wednesday. After that, I don't see anything that will hold up the market...except for Ben Bernanke. That is why I'll still go into this week a bit cautious. I know the Fed is trying everything it can to prop up the market. It will probably take some panic selling in order to offset what he is trying to do. This is why I'd like to see a close at the lows and a bigger spike in the VIX. The dollar is continuing its rise which should put pressure on all those commodity stocks that have gone straight up. If you have gold or silver bullish trades, I suggest you take some profits or tighten up stops. This would go for energy trades as well.

Friday, November 12, 2010

SUCCESS STORY

Jerry,

I think I have it finally. Table one includes only closed trades after commissions. Table two is one stock the system identified and I have had these positions only since yesterday. NFLX will be good for quite a bit more gain before I close it out. I am averaging about 18% gain per trade and average hold time is 7 or 8 days. Things finally fell in place after a year. This must be old hat to you but to me it is a near miracle. I made back the cost of your course today with a couple grand to spare. See table two for substantiation. I keep my own records on an Excel worksheet as the trades are made.

A belated but sincere thank you. You have my permission to publish this, but use my first name only, please.

Best,

Larry

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