LONG TERM PATTERNS

These are some long term patterns that I really like: UNG, NLR, KOL, XTO, VLO, USO, APA, APC, CHK, HES, JRCC, PCX, ANR, MEE, BTU, and FCL. Notice that these are all energy related stocks. I feel like energy is absolutely the safest play in the market right now. If the economy turns around, these stocks will soar. If the economy stays where it is for the next few months, these stocks will still earn money because they have already cut supplies to keep pace with demand. If the economy deteriorates further, these stocks would most likely pull back...but that gives you a two out of three chance for these stocks to go up over the next year. There could be short term fluctuations, but I think any pull back in these patterns would represent a buying opportunity.

WHEN IN DOUBT...GET OUT!

This is an old Wall Street saying. I'm not suggesting we get out of the market, but it was one of the first thoughts that came into my head after the market close today. I told you yesterday that I was a little worried about the rally yesterday. Today I know why. We almost totally reversed the gains from yesterday. We are again watching the support level of the S&P 500 (at 880) to see if it holds. The sideways action of the market is nothing new for this time of year. The market often moves sideways or sells off in May and June. What worries me is that I am seeing a lot of bullish ABC patterns, but I am finding it hard to trust them. When I look at the reward to risk of being long in this market, it often looks like more risk than reward. I have done some things to mitigate that risk...like reduce the number of positions, buy smaller amounts, and trade shorter time frames (I have been recommending these strategies for weeks), but I feel like there is a big sell off coming...and today's movement only increased that belief. The VIX has moved back down to historically normal levels, but the market seems to be resisting any significant moves higher. Now I know that I can be a schizophrenic trader during sideways trends...that has kind of played out in some of the blog posts...but I do feel that if you just want to sit on the sidelines for a while, that might not be such a bad idea. I find that I can sometimes work twice as hard, during sideways trends, and make half as much money (or even lose money). This would be a great time to go on a vacation and get some good use out of the money that you have made. I will still continue to do some trades and I will post patterns when I feel they can make money...I just wanted some of you to know that it is okay to sit out a few weeks if you don't feel comfortable with the risk. I will try to post some longer term patterns tomorrow...possibly during the trading day. I also had a request to post my daily routine. I really don't have a well organized daily routine, but I will post some of the things I do on a regular basis. I will try to get that posted tomorrow or Friday. For those that want to keep trading...stick to those bullish patterns that I have mentioned over the last few days. Either wait for confirmation, or watch those support levels to see if they are broken. Keep an eye on UNG. I've talked a lot about natural gas lately. There has been huge volume lately on this ETF...much higher than normal. I also like XTO. UNH is a stock that I mentioned last week. There has been a lot of unusual option activity on this stock for over a week now. I love the pattern, so there might be something about to happen.

THE CONSUMER HAS CONFIDENCE

The market was up big today...in part because of an increase in the consumer confidence index. Consumer confidence is an important long term sentiment indicator. When consumer confidence is falling, the investors become more conservative and less likely to take risks. When consumer confidence is rising, investors become more confident and are more willing to take risks. It is not a great short term indicator of the market. The argument is that the latest rise in consumer confidence is due to the March to May rally in the markets...not necessarily that the economy has turned around. That is a valid argument and we need to consider that possibility. The volume has been pretty light over the last several weeks. This makes both the rallies and drops a bit suspicious. It seems to me that there is still a lot of money on the sidelines that is too scared to get in right now. The VIX gapped up (above the resistance level we were watching) before dropping back down as the market rallied. That spike above the resistance line has me concerned and caused me to be suspicious about any follow through to today's rally. On a more bullish note...there are still a lot of possible bullish ABC patterns out there and we should cautiously trade some of them. The bank stocks staged a bit of a rally today...and it could continue if the VIX continues to drop. FEED made a nice jump today on huge volume. It has already moved up pretty big over the last few days, but there is strong resistance at $8 so it could move up two more dollars before coming back a bit. This could be an example of chasing a stock, but I just feel the momentum could carry it a few dollars further in the next few days...and that's all we need sometimes. CTB had a nice move today on higher volume. Technology really had a big day. The technology patterns I like are: MRVL, RIMM, PCLN, ACM, and AAPL. Other bullish patterns I like include WRC, ACF, WDR, KEG (if it breaks above its 200 day MA), MDRX, HSP, and JOYG.

SUCCESS STORY

Hi Jerry:

You were looking for some successes in gold. On April 27 I purchased 3 Aug 22.5 calls for Seabridge Gold (SA) at 1.95 per contract. I chose to buy gold options because the market was a little unpredictable and the Gold Bugs index had reclaimed its 50 day moving average and seemed to be going in a stair step fashion upwards. Moreover, SA was completing a downwards ABC pattern and was hitting the Fibonacci 61.8% retracement. SA 22.5 contracts were slightly out of the money, had a good delta (>0.4) and were undervalued at the time. SA began to climb and I sold the first 2 contracts for 3.45 when SA had retraced close to 100% of its ABC pattern. Given that I wasn't going to lose money on SA, I placed a 5% trailing stop on the last contract of SA and rode it all the way until I was stopped out today at 6.80.

I really enjoy your blog and think that it provides a wealth of information to your students and newcomers alike. I would urge other successful students to not only report their successes, but to also outline their thought processes and strategies during their successful trades. I think that we should all try to help each other out and open each others eyes to different approaches when trading.

--
Cheers,

Roland S.

Ontario CANADA

NO BIG CHANGE

There was really no big surprise today. We were up a bit before fading into the close. Normally this would look more bearish, but we are going into a three day weekend and it is understandable that traders would look to take some profits or exit some positions prior to a holiday weekend. The VIX spiked up a bit more today, but all support levels are still holding so I will keep the outlook I had in yesterdays blog post. Financials were a bit weak today, but I still like those possible bullish ABC patterns. Gold moved up a bit higher today, but that gave you a chance to exit those positions at an even higher price. Have a great weekend!

SUCCESS STORY

Jerry,

Love your blog and perspective. Your skills and intuition are shining through well. I must say that i am more cautious than I think you are, and more cautious than I thought I was

I believe that the market has gone way too far in such a relatively short time. I am finding more and more bearish trade opportunities, where the risk is low and the reward can be quite large. I am definitely trading solid ABC patterns with declining trends. Frankly, I do not mind losing small $$'s on being stopped out. If I am right 25% of the time, I believe I will still be ahead.

Recent trades have come in quite well

SA - bought Jun20Calls at $2.05 and just sold at $8.00

On the long side, I have positions in CHK, HMY, CBK, FST - all look promising

On the short side, I am in CPB, GILD, OSIP.

I am evaluating opportunities several times daily but find entry points elusive from a risk/reward perspective. Likely too cautious.

Frank

DÉJÀ VU

It seems like we were just talking about the 880 support level on the S&P 500. We are back there again and we are watching to see if it holds...again. Two things that were very bearish about today was the fact that the VIX spiked up and there was a continued movement to gold. We could possibly break support right here, but I see another possibility. This possibility ties into what I have been talking about lately...namely the big picture (bearish) verses the smaller picture (bullish). The markets seem to be in a bullish ABC pattern that began on May 8th. If this is true, then we should continue the uptrend...whether this support level holds, or we dip a bit below it before moving higher. If we do end up moving higher, I don't see us going much higher...at least for now. I think we could hit the 940 or 950 level in the S&P 500 and then sell off to possibly the 750 area (not in one day of course). This would create an almost perfect textbook inverse head and shoulders pattern (see chart). If that looks "too good to be true"...it might be. Based on my experience, chart patterns normally don't play out exactly how we expect them to...but at least it gives us a possible template to help us manage our trades. I would still urge caution in both bullish trades and bearish trades right now. Don't get caught with large portions of your capital in the market right now...but don't stay out completely. The sharp rise in the VIX over the past two days tells us that the market is expecting a possibility that volatility can rise. If the market breaks support right here and the VIX breaks out above the 34 resistance...look out! For bullish opportunities, look at financials tomorrow (FAS or XLF). They have very similar bullish ABC patterns compared to the market. Some of them are also at key support levels. If we do rally into the weekend, they could lead the way. If we break support and sell off, try puts on the market (SPY, DIA, QQQQ) or just sit out and wait. The bearish trading opportunity would really depend on how bad the sell off was...and how much volume was behind it. I still like energy (particularly natural gas), so keep watching that sector. Make sure they are "done falling" before looking at any new positions. With the big move in gold after the last few days, I would look to take profits...especially if the market starts to move up tomorrow. Hopefully you have taken at least some profits already. NFLX might still be a nice put option pattern, but the stock could rally back up to resistance if the market moves up. If you missed the move today, wait to see if a rally gives you another chance. If you got in today, be patient and don't panic unless it breaks above that resistance.

JOIN THE "FOLLOWERS" SECTION

If you are a new follower to the blog, please add yourself to the followers section so that I can see if the followers list is growing or not. Also, feel free to look back at past postings to get caught up with some of the things I am looking at and focusing on. All success stories or feedback should be directed to my e-mail address at jerry@myoptionmagic.com.

TURNING POINT?

The markets sold off in the last couple of hours after moving higher at the open. When selling pressure increases at the end of the trading day, we need to look at the possibility that there could be continued downside movement the following day. It wasn't just the sell off that concerned me, it was where the money was going. We saw gold stocks make big moves up on huge volume. This could be that safety move I mentioned last week. By the way...I do expect some success stories from those gold stock recommendations I made last week...it took a few more days that I expected, but the moves today really paid off. The VIX moved up after gapping down at the market open. These are all signs that there could be more selling. The uptrend is still in tact so I am not calling for an all out downtrend yet...but there could be at least another brief pullback. Look for confirmation before entering any bullish (or bearish for that matter) trades. I still like the energy stocks but they might pull back a bit before moving higher. Keep and eye on them and put them in a watchlist. For a possible put option pattern...look at NFLX. We had a nice move down last week when I pointed out this bearish pattern. It has since rallied up over the last few days. It is now hitting the previous support level. This previous support level might now act as resistance. It is also near the underside of the 50 day moving average and the 50 day moving average is starting to move sideways. The candlestick pattern today looks like a reversal pattern. Look to see if it starts to move down...particularly if the whole market is moving downward. Confirmation is important because we could easily break back above resistance and move higher. I will look to add some other patterns tonight when I run my scans.

FOCUS ON THE SMALL PICTURE...BUT BE AWARE OF THE BIG PICTURE!!

I scan a lot of websites and read a lot of headlines during the course of a trading day. Often I could care less about the details of those articles (no offense to the authors). What I look for is the sentiment...in other words, what is the mood of the market. Is the crowd too bullish or bearish...or is it equally mixed? I understand that when the "crowd" shifts too far to one side, the opposite move often happens. This is where my great dilemma comes in. A true trend trader only looks at the trend. They try to ignore any other factors but price. They don't try to predict anything...but rather trade in whatever direction the trend is taking them. I really can't call myself a pure trend trader. I want to be one, but I can't seem to ditch the need to predict. I think the reason why this hybrid approach still seems to work for me is that I understand my strengths and weaknesses. I trust my predictions...until they break the trend. You have probably heard the phrase that bullish trends often climb a "wall of worry". In other words, the market can go up sometimes in the face of economic uncertainty. That really does describe the position we are in right now in the markets. Economic reports come out almost daily it seems. We anxiously turn on CNBC to have them tell us what the reports mean. Some say they're bullish, some say they're bearish, some even say they're irrelevant. One thing you will have to master to become a successful trader is the ability to make your own decisions...to decide which trade and what trade direction is best for you. You will need to master the ability to get into trades when you don't feel totally confident of the outcome. You see...by the time you feel comfortable about the direction of the stock, the direction might be about to change. This might be why it always seems like the trend changes once you decide to get in it. It's like walking into a party and everyone leaves. They probably all left because you arrived at 1:00am and it was already time for the party to end...but you will probably feel like they left because they somehow didn't like you. We can get that way in the market sometimes as well. The mood I have seen in the market lately is a mix of doom and gloom and cautious optimism. I would like to say that the doom and gloomers are just short sellers that are betting the market will go down...and they are just trying to help that cause...but I feel that the market will eventually retrace...possibly a lot...like maybe DOW 7500 or 750 on the S&P 500. On the other hand, I see a lot of bullish ABC patterns from this last pull back in the market. We have had some nice moves on energy related stocks as well as some of the financials. We seem to be continually climbing this "wall of worry". So my advice to you is to trust what you see right now...the bullish ABC patterns...the bullish trends...the new highs...but be aware of the bigger picture which could be a large drop...out there in the future. We can climb the "wall" as long as we are aware of what could be on the other side. I've just managed to combine all the sentiment out there into this one headline. Now that I think about it...when it comes down to these conflicting articles and authors...maybe they are all right.

You should be taking some profits on some of your energy trades. MOS, POT, TRA, AGU, CF, IPI, and SQM have already made some big moves. You might want to hold on to one or two contracts if you can...but try to lock in a lot of the gains you have already made. This would not be a safe entry point into these trades. You might want to wait for a pullback to get a second chance. For current opportunities, I still like the patterns in natural gas...CHK, APA, NGS, and UNG. Coal is on the move again with JRCC, BTU, ANR, MEE, FCL, or KOL. Other energy related stocks include CLR (I really like this one), RIG, HES, DNR, DVN, EOG, and BP. There could be a pullback tomorrow in a lot of these stocks so watch them at the open...and again near the close...to see if opportunities arise. Another stock to watch is HMA. I like the pattern and the volume was higher than normal today. Also watch UNH...it might still be a bit early...but we have still done okay lately with a few early entries...just look at how well the chip stocks are doing lately.

HERE WE GO AGAIN

The 880 support on the S&P 500 held last week and we had a nice rally today. The volume was on the lighter side but the breadth was nice. In other words, there were a lot of stock participating. It was hard not to have a winning trade on a day like this, but I do want to recap some of the winners from last week. MOS, POT, TRA, AGU, CF, IPI, and SQM were all big winners. GS, MVSN, PALM, and CPWR also made nice moves. JRCC, PCX, BTU, ANR, MEE, FCL, FLR, RIG, CHK, APA, DNR, and COST also look like they could continue to move up. Many of these stocks could still move higher. The VIX broke through another support which is also a bullish indicator.

SUCCESS STORY

Jerry,

I really look forward to your blog, it is very informative and helpful.

Since I last emailed you I have made a few mistakes with KO; GM; HAS, GM. I then turned to gold stocks in March. I have since purchased 9 different options in ABX, IAG, DGL.

I have sold 6 of those options for a 163.7% return. So it has been looking better lately.

I really enjoyed your class and continue to look forward to the options market.

Thank you,

Tommy T.

FEEDBACK

Jerry,

I wanted to take a moment to say again how much I appreciate your BLOG. It is the flesh and bones of the courses I have taken through you. So often I have hit a wall of simply not understanding things and your BLOG helps tremendously with putting it all together. Much of what you said during the conference calls, but did not have time to elaborate, you are now fleshing out.

Would you believe that I am a former Investment Advisor? It is amazing to me just how much training I received on sales, but how incredibly little I received on understanding the market. Almost criminal. I hated the business of sales and thus exited, but loved the world of the markets. Hence taking your courses.

Anyway, please do not end your BLOG. It is an essential companion to the courses.

Steve B.

WAIT AND SEE...

The only thing we really got from today's session was that we didn't break below the 880 level on the S&P 500. Volume was on the light side so it is hard to tell if today's move up was the start of a new rally...or a rally before another move down. Remember what I said yesterday...we wanted stocks to be done falling and start to move up, but on higher volume. The good news for the bullish argument is that the VIX dropped significantly today, even though the market wasn't up today as much as it was down yesterday. The big drop in the VIX doesn't necessarily mean that the market will go up over the next few days. It just means that traders don't anticipate any wild swings ahead (up or down). Yesterday I told you to watch the agricultural chemical stocks. They had a big day today. POT, MOS, AGU, CF, TRA, IPI, and SQM all moved up nicely on higher than normal volume. There are a lot of nice bullish patterns in the energy sector. If the market moves higher tomorrow look at coal stocks...JRCC, PCX, BTU, ANR, MEE, FCL, or play the whole sector with KOL. You could also look at natural gas stocks (see previous posting for natural gas stocks). Technology stocks could also rebound if we start a new rally off of this support. Look at BRCD, LEAP, MVSN, PALM, CPWR, and AMZN (although it needs to get back up above its 50 day moving average. I also like CCK and GS.

SHAKY GROUND

The support levels I was looking at on the DOW and Nasdaq were broken today, but the S&P 500 support at 880 is still holding. There are other possible support levels for the DOW and Nasdaq nearby, so my focus has turned to the S&P 500. The VIX moved up a little, but it has already hit some resistance from a previous support level. Admittedly, this is a tough market to read right now. I can see about 4-5 different scenarios playing out in the next few weeks...some bullish and some bearish. The trades I have been getting into lately have been more short term and I have been stopped out a few times. It is wise to look for confirmation on your trades...bullish or bearish. On the possible bullish ABC patterns I am seeing, I am looking for the stocks to get done falling and start upward moves with some increasing volume. For bearish trades, I would like to see a break of 880 on the S&P 500 with a continued move up on the VIX. I've seen some unusual option activity on AET and UNH...huge contracts being bought on bullish positions. One trader has apparently bet about 1.5 million dollars that UNH is going higher...both by buying the calls and selling the puts. Now I don't know if somebody knows something that we don't. I've been burned on my share of these unusual option activity trades...but both these stocks have "buy" signals from the Market Trend Signal software (www.orbisadvisors.com) and the short term trend is up. Here are other possible bullish patterns if they get some confirmation: JRCC, PCX, BTU, MEE, FCX, MFE, COST, MOS, RIG, FLR, CHK, TRA, APA, and DNR. One comment on the gold patterns I talked about yesterday...if the market goes up instead of down in the near future, those stocks could sell off. I often look at gold as a defensive move if I think that volatility can increase in the market. Watch those 50 day moving averages. SMG moved above its 50 day moving average today, making it a less likely bearish trade. Since it gapped up at the open and started moving higher throughout the day, I never got into a put option trade. I never received the confirmation I was looking for. Make sure you look at the charts and plan out your trades when you use this blog. I try to throw out several patterns that I like so that hopefully I can show you some of the things that I am looking at. It doesn't mean that I am trading every one of the patterns. I will look to see how the stock opens the day. I will wait for confirmation...the same confirmation techniques I teach in the mentoring courses. I use stops...some tight...some loose...and sometimes I don't use a stop...but I always quantify my risk. There isn't a lot of new buying in the market right now so it is difficult to see where the smart money is going. I still think it is going into energy...but in certain areas. Lately is seems to be coal, natural gas, and the oil services/drillers. Today it seemed to move into the agricultural stocks like POT, MOS, MON, AGU, TRA, CF, IPI, and SQM.

WATCH YOUR STEP!

Is this floor (support) we are falling to...solid?...or is it rotted? Keep an eye on some key indicators tomorrow. First, look at the futures in the morning. You can find them on CNBC's website (www.cnbc.com) under the "Markets" tab (then "Pre-Markets"). Look for a large up (or down) number. This might give an early indication of where we are headed for the day. Next, look at the support levels. If the DOW breaks below 8350 or the Nasdaq breaks below 1665, the trend could be in the early stages of reversing. The S&P 500 can fall a bit further...to around 880. If it breaks below that, the uptrend would definitely be in danger. There are a lot of stocks at key support levels right now. The patterns are either bullish ABC patterns or they are about to become impulsive moves down. I'm looking for key characteristics of a trend. If the uptrend is intact, then the support will hold and we will be off to break above more resistance. If we break support here, then that is an early characteristic of a downtrend. Lastly, keep an eye on the VIX. The VIX keeps moving down, even though the market has moved down a bit. This tells me that there hasn't been much fear in the selling. Until there is a little panic, we can't move down in any significant way. If we do get a big spike up on a break of support, we want to be able to start turning bearish pretty quickly. The big key tommorrow is not only how we open, but also how we close. You could diversify a bit by looking at these bearish patterns: AAP, NFLX, SMG, NTRS, AZO, ARE, OSIP, GILD, CELG, BIIB, and MYL. Now some of these are riskier bearish patterns because the 50 day moving average has not yet turned downward. The problem is that there aren't many stocks out there that are below their 50 day moving average and their 50 day moving average is turning downward. As with any current bullish patterns, you might also want to look for some confirmation on any bearish patterns. The chip sector sold off today. Tomorrow will probably tell if I was just a bit early in my prediction...or if it was just a bad call. Remember what I wrote yesterday. I don't care about trends that change because I will change with them and keep making money. For bullish opportunities...keep an eye on the gold sector. My guess is that if the market does sell off and break this support, there might be a flight to gold. There was a nice rally today in that sector. Some stocks I like are SA, AUY, EGO, NEM, AEM, ABX, RGLD, HMY, and IVN. For gold ETF's look at GOLD, GDX, GFI, or GLD.

TREND FOLLOWING

I want to take some time and remind readers what trend following is all about. We are hearing a lot of opinions lately about the market whether it is on CNBC or on financial websites. There are a lot of smart successful commentators saying that the market will continue to go up...and there a a lot of smart successful commentators saying that the market will go down. This can be very confusing for the experienced trader let alone the novice trader that's just starting out. The great thing about trend following is that we don't care about the predictions...we only care about the trend. If you have been in one of my classes, you have heard me say that the "price is always right". Now my name isn't Bob Barker and I don't run a game show...but I do understand a thing or two about trends. Right now the trend is up (even after today's sell off). I don't care what people are saying...bullish or bearish...that is the current trend. That is what the price is telling us. We are all fearful that the market will open one day and wipe out our profits, but this should not keep us from missing out on the potential profits we could accumulate if the market keeps going up. In other words, we might miss out on making $5,000 because we are afraid of losing $500. As a trend trader, we know that we will lose money when the trend finally changes direction. That is inevitable. We also know that once the trend changes direction, we will change direction and begin to make that money back on the reversal of the trend. So how to we deal with a market like this one? I would suggest creating a plan...that's always the best start, right? Your plans should all be different in some way. In other words, your plans should match your trading personality. Maybe you have made 50% on your money during the last two months and you would rather just get out and wait to see if we get a big pull back before getting back in. Maybe you use a shorter term moving average to possibly see the early stages of a trend reversal...this could include moving average crossovers. Maybe you diversify your trades into different sectors. Maybe you make it a point to have some Call options on some bullish trends and some Put options on some bearish trends. I can't tell you what the perfect plan is because there isn't a perfect plan. What I can say is spend your time on your plan and less time on listening to others' opinions...and that could include me at times. Trust the trend. Trust the characteristics of the trend. You could lighten up on your risk, but keep trading this trend until it changes. For nice bullish patterns look at STAR, RVBD, HMY, and VCLK. I still really like BBY, DRI, KSS, and especially AMZN (look at that nice ABC pattern). For sectors, keep an eye on technology...specifically chip stocks. They have pulled back recently and they are either going to continue their uptrend...or break that uptrend. I like these areas on the chart because either I capture the whole next move up...or I lose a small amount if the trend is broken. I like that reward to risk. You could also use the Market Trend Signal (www.orbisadvisors.com) and wait for a "buy" signal. I would even suggest you keep looking at AAPL until it finally reverses its trend. This recent pullback could provide a nice opportunity. Watch financials. They pulled back today on light volume. Most had big "up" volume on Friday. Stay with GS, MS, JPM, BAC, AXP, and WFC...or play all of them with the FAS or XLF. Avoid COF...it had huge selling volume today. I still like the energy sector...but more specifically natural gas. Look at APA, CHK, and NGS to possibly make big moves (APA has already moved very nicely)...or you could play all of them with the UNG. This could all change if the economic outlook changes...but for now we will trust the trend.

SUCCESS STORY

Jerry

Thanks for the teaching and mentor that you have been to me. I have been a trader for a long time first in commodities and a commodities broker for Merrill Lynch and then I tried trading stocks sometimes with success and other times with no success. I had what I thought was a good background in options knowing well all the Greek and selling at one time an option analysis software package to brokers and market makers in New York and Chicago.

I want to thank you for sharing your experience and expertise. I know that we are in what I think is the beginning of a new bull market and this is the time to make money in the markets but with my limited capital I have never experienced anything like the last couple of weeks. I have traded more options than I have ever traded and when you make a decision based on an ABC pattern it is great. My first successful option trade since I started with your help and instruction was with a little stock STAR. I purchased a call option for 1.60 and sold it for 5.10.

I’m now in a couple of energy options that have really appreciated but have not quite yet reached my objective. I have never in my trading experience had a day when my portfolio and account has grown by more than 10% in a single day. Today has been such a day.

Thanks again, I look forward to continued success. I must close out these positions to be successful but it’s looking good so far.

John

JOBS...JOBS...JOBS...

Everyone was talking about the bank's stress test today. I think this was really a non factor...and I'm not alone in thinking that. I feel like the big news story is coming out tomorrow with the employment report. If that number is better than expected...or if it shows a faster recovery in the economy is taking place, I think the markets could explode ...up. The sell off today is testing the previous resistance in the DOW and Nasdaq. If this holds, I think the buyers will become more aggressive. The move down today did create some possible buying opportunities, but let's see what the news is first.

UPDATE

Just a quick post...I like the longer term pattern on GLW. Its been moving a bit sideways for the last month but has been up pretty strong over the last three days on some rising volume. Since it has moved up three days in a row, it could be ready to pull back a bit so keep an eye on that. With the 50 day moving average now crossing above the 200 day moving average, this stock could be well positioned to continue the uptrend. I also like HIMX for some of the same reasons. No options available on this one...but its only a $3 stock. This a longer term pattern.

SUCCESS STORY

Jerry,

Thanks I bought .SFD on the 4/28 at $2.70 and sold it on 5/05 for $5.20.Keep up the good work on your Blog.I check it out every night and first thing in the morning.

Thanks Again

Mark W.

REFERRALS

If you have any friends or relatives that are interested in the markets, please refer them to this blog. Tell them to join the "followers" section if they plan on using the blog on a regular basis. You could also give them my e-mail address (jerry@myoptionmagic.com) in case they have any questions.

WE LOVE PULLBACKS!!!!!!!!!!

Yes we do...as long as they don't break the trend. Today's move caused a lot of stocks to pull back but the good news is that yesterday's breakout is still holding. This gives us hope that we can move up further despite the extremely overbought conditions of the market. The stock I want to brag about tonight is SFD. I told you about this one last week when it sold off on the "swine flu" fears. They are one of the largest producers of pork. I told you that I liked the pattern because it sold off right to its 50 day moving average in almost a textbook bullish ABC pattern. I also said that there was really no rational reason for the selling. That support level held and in 6 days it has gone from $9 to as high as $12.84 (today's high). That's 42% in less than a week. The June $10 calls were up 154% on just today's move. I hope you are learning how to play this game. We never know which stocks will make these types of big moves. If you look back on all the patterns I have posted, some have made big moves, some have made small moves, some have moved sideways, and some have failed miserably. If you bet your entire account on just one of the patterns, you were either really lucky (and really happy) or you are totally broke (and really angry)...depending on which pattern you chose. Since we don't have a crystal ball, we need to spread out the risk on several different patterns. Now I don't think you should spread out the risk too far...10 to 15 positions is about the max...but this will allow you to get into some great trends and spread the risk over different sectors as well. If you define and protect the risk, you only need a few of the stocks to make just decent moves in order to see big gains in your overall account...some will make huge moves. Having said all that...I don't think this is an area in the market to suddenly become an aggressive buyer. I won't repeat all my previous warnings. Take on 3 to 5 positions instead of 10 to 15. Don't get into all of your positions in the same day. That way if the market tanks the next day, you don't suffer a huge draw down in a short period of time. The patterns I am going to post tonight are pretty diversified...and I like most of the patterns. I haven't checked any recent news or earnings release dates so you might want to do that if you are interested in trading one of the patterns. They are ASIA, AMZN, BBY, DRI, KMX, and PWR. I like the pullbacks that they have made recently and the strength of their trends. Because some of them have been correcting for a few days, they might still correct a bit more...remember how long HANS moved sideways before it made that big move. Make sure you have patience and define your risk.

FEEDBACK

Jerry,

I use your blog all the time and think it is great. It is very useful to get your thoughts and insights on an almost daily basis. This is much easier for us and for you as opposed to communicating individually with each person. Thanks for a great idea and keep up the good work!

Keith H.

SUCCESS STORY

Jerry,

thanks for mentioning SFD on your blog recently. I bought the July contracts on 4/28 for 1.20 and sold them today for 2.45.

Mike B.

PS pleeeeeease keep doing your blog. You have no idea how much it helps

UPDATE

One pattern I really like is BRCM. Its 50 day moving average recently crossed above its 200 day moving average. It has also had a recent pullback (ABC pattern) and a strong up day today. ***Also, check out the recommendations on the Virtual Investing Club website (www.virtualinvestingclub.com). In the options section you will find FAS (up 140%) and FCL (up 128%). In the stock section you will find ICO (up 71%), RDN (up 30%), RSH (up 91%), PHK (up 48%), STX (up 136%), EJ (up 127%), GPS (up 44%), and SA (up 101%). If you have let your subscription lapse...renew it today at support@virtualinvestingclub.com.

SUCCESS STORY

Jerry,

Just an update for you. Love your blog, please keep it going. The information is very interesting and informative, let alone timely.

I took positions in:

EJ bought at 6.35, recently closed at 12.90. Have a tight stop
FCX bought Aug 40C Apr 22 at 6.10, closed today at 11.80. Again, a tight stop

Have long positions in SA and CBK, short positions in GENZ, KG, BIIB. All are doing OK, will monitor closely.

Frank C.

BREAKOUT!!!

We broke out today in both the S&P 500 and the DOW (on average volume). The next resistance target is about 940 in the S&P 500 and around 9000 in the DOW. I will continue to be cautious, but this breakout is a sign that the uptrend might have a bit further to go. The VIX failed to break support so I will watch it over the next few days as another indicator of the strength (or weakness) of today's move. Coal stocks were one of the big winners today. JRCC and PCX have nearly doubled in value over the last two trading sessions. BTU, ANR, MEE, and FCL have also made big moves. I missed the big move on these because I got stopped out a few weeks earlier while they were still moving sideways. That will happen sometimes...but it doesn't mean the opportunity is gone. We should get another chance. An entry at these levels would probably not be very wise...but if we get any pullback, we could capture the next move up. Just like most energy stocks, the coal stocks have dropped significantly over the last year. If this breakout holds, they have a lot of room to run. If you happened to be in these stocks over the last few days, you might want to think about tightening your stops or selling some of your contracts. That was a pretty big move...don't get too greedy. Of the stocks I mentioned last night, CLR, DNR, FCX, and MS made nice moves today. CF was okay but SOHU was terrible. SOHU gapped up but then sold off on high volume. This was my fault. I didn't know they were reporting earnings before the market opened. It will most likely pull back a bit over the next few days. The earnings were great so it could also continue the trend. Stocks posted earlier that are still moving up include: AAPL, CREE, WDC, GS, CLF, FSLR, MFE, HANS, MU, ATML, IBM, BP, RIG, APA, and SFD. Stocks that have pulled back a bit and could make another move up include: NFLX, TXT, DLTR, GLW, KSS, and ORCL. These are just from past postings. I will look to add some new patterns when I find them.

I NEED SOME ENERGY!!

I really do need some energy... I was sick most of last week. The energy I am referring to is the Energy sector. A lot of energy stocks made big moves on Friday despite the overall market being a bit quiet. These stocks have moved sideways for a few months, but now they seem to be breaking out. Not just any energy stock will work. Some patterns look pretty bad. The ones I like are CLR, FCX, CF, and DNR. I am cautious to recommend anything right now because of the overbought market conditions (see previous blog postings). Look to see if the market can break this resistance or if these stocks continue to move up despite the market moving down. I like MS...but not really any other financial stocks right now. I also like SOHU (which could move up because of the high short interest), but it would be a riskier pattern since it has moved up pretty strong over the last two days.

JOIN THE "FOLLOWERS" SECTION

Please join the "followers" section if you haven't already done so. I will look at the number of followers in determining if it is worth my time to keep it going. Please include your picture if you know how to post it. If not, join anyway. Thanks for your participation and for sending the success stories.

SUCCESS STORY

Jerry,

I bought 40 July NETL contracts at 4.30 on 4/23 and sold them today for 10.60. Not too bad for an amateur!

Mike B