SUCCESS STORY

Hi Jerry,

Happy new year. I have taken advice from you multiple times, but never wrote a success story. I hope to write it now..

I took your course in 2009 and immediately could capitalize the learning to make 16,500$ by the end of the year netting me a ~100% appreciation. However, in early 2010 I disbanded most of your lessons like keeping only 10% of your capital in any option, buying options with only 2 months into expiration, buying around earning etc..All the things you asked me to avoid and I lost 22,000$.. I took a hard look at my portfolio and decided that I lost because I forgot Jerry's lessons. So, in november 2010 I used your simple lessons and thanks to the coaching you provided, I made back 19,000$ in 2 months.

People might ask what did I do well.. I picked some tech stocks who benefit from the shift to cloud computing (F5, APKT) and some stocks around traditional manufacturing (DE) and some good retail stocks (FOSL, IMAX).

But the most important thing was I followed your lessons, I never allocated more than 10% of my capital, bought the options 3-4 months before expiration, not around earnings season etc..

My biggest failure was to buy GOOG and buying a lot expecting it to multiply my fortunes overnight.. That was wrong and I intend to follow your lessons for a safe and exciting investing for life.

Regds

Vinay

I'M BACK!!

I was on a cruise last week which is why there weren't any postings. It was a great trip and it's been an adjustment getting back to the normal grind...and the colder weather! I will have a posting as soon as I can get up to speed on what the market has done since I've been gone.

SILVER AND GOLD UPDATE

This post is from Chaz...a commodities trader that writes a monthly newsletter on the precious metals market. He has given me permission to post it on my blog. As a disclaimer...I (and Option Magic) are not responsible for the content or recommendations in this newsletter. Thanks Chaz.

Good evening traders. This update is intended primarily for the new traders in our group. I've received many questions about what is going on in this market and since I have quite a few new members , I'm going to try to bring you up to speed. So lets get started. There are two primary rules to investing. Rule #1. DO NOT lose principal. Rule #2. Reread rule # 1. Last month I gave you barrier numbers for gold. They are 1278, 1369,1444, 1521, 1600, 1650, 1681, 1764, 1849, 1936, and 2025. Tonight we are going to talk about 1369 and 1444. As I explained before, these barriers act as resistance until they are clearly broken and then act as support. I also said that it usually takes ABOUT 3 assaults on a barrier to break it. When the market is trading in between barriers, ANYTHING GOES. Often , anything and everything can, will, and usually does. So what just happened ? Pull up a current gold chart and lets take a look. A second assault was occurring on the 1444 ( resistance ) area and the short sellers stepped in and sold tons of unbacked paper contracts into the market to try to force the price down, which they did. But look what happened. They were stopped at about the 1369 ( support ) area. When a market makes a move that carries it from one barrier to another, that is A MAJOR WARNING that extreme volatility is very near. I believe we will see swings as high as $100 in gold and possibly as high as $5 in silver very soon. What just occurred was what I refer to as a RAID by the short sellers. This has been going on for years. This is why we DON'T TRADE CONTRACTS. We trade options ONLY. If you were long on a gold contract, you would have just lost a LOT of principal and possibly been forced to liquidate if you didn't have enough capital to maintain your margin. If you were sitting on a gold call option, the value of your option would have dropped but YOU WOULD STILL HAVE YOUR OPTION and you would be in position to ride the next wave up. This next wave will likely break the 1444 area and quickly run up to the 1521 area and possibly BLOW THROUGH it on to the 1600 area. Remember, barriers are not exact numbers, they are approximate numbers. Also remember that every time we get near a barrier that it is highly probable that a correction is about to occur. Such as we just witnessed. If you do not trade contracts or options and hold physical metals only, then you don't even need to concern yourself with what this market is doing unless you buy and sell daily as I do. I was asked if I was worried about this move. No, I am not. I did lose potential profits to the tune of tens of thousands of dollars but I still have ALL of my position and am certain that I will profit very well as this market resumes upward in the next few days. To an experienced trader, a correction like this is a GIFT. It is an open invitation to increase your position to make even larger profits. Now, on to silver. Last month, I said that it was almost impossible to give you barriers on silver. Last week I had a conversation with my good friend J.B. Slear at Fort Wealth Trading and we were discussing silver barriers. If you recall, I said $35 was very likely but that I felt like $40 was a little too optimistic. Guess what? We identified two barriers in that range. The first is at $37.25 and the second is at $39.70. There are never any guaranties but I am very comfortable that we will see $37.50 soon. We may even go to $39.70 but I think it is highly likely that a violent correction will occur once we top out. The higher these markets go, the more volatile they are going to be. Within another year or two, you will probably see swings that will put some contract traders into cardiac arrest. Try not to be one of them. Happy trades....Chaz

MELT UP CONTINUES

Many of the picks I made on Tuesday (actually late Monday night) are making decent moves. Most of the other ones are flat. This is a critical area in the market right here. There are a lot of signals that a correction is imminent...but the market has ignored some of these signals in the late year/new year melt up. I still like a lot of those bullish patterns that I listed a couple of days ago. I could see the market making one last push though the end of the month as earnings season kicks off this Monday, but I could also see it selling off through this period. As a hedge on your bullish (call option) positions, consider buying some calls on the VIX (or VXX) as a hedge on these positions. I don't see much downside potential on the VIX over the next few weeks, but I do see potential for a spike up in the VIX during this period. This is starting to feel a lot like April of 2010. If the S&P 500 closes below its 10 day MA, I think that a larger correction could be underway. I don't normally use trailing stops on my option trades...but if your bullish trades have already made a decent move up, consider moving your stop up to your entry price (breakeven). This way, if the market suddenly reverses, you will get out near breakeven. Meanwhile, your VIX trade could then possibly make you a nice profit. If the market continues higher over the next few days, the bullish trades should continue to move higher. The VIX trade would probably lose some money initially, but it could end up breaking even or making money later on in the month if a bigger correction comes after earnings season. The pattern on the dollar index looks very bullish. You can trade the dollar using UUP. The dollar often (not always) trades inversely to the market. If the dollar goes up, it often means the market will go down. This relationship isn't always exact...at least not on a day to day comparison. Today the market was up and the dollar was up. I think that buying calls on the UUP could also be a good hedge against a market sell off. MU looks like it is bumping into some resistance around $8.78. It could pull back to around $8 before busting through that resistance. If you are in that trade, you might want to consider taking some profits or tightening up a stop (if you are using a trailing stop). SLW had some fairly bullish price action today. If it can get above its 10 day MA, it might be a good bullish trade. This is a critical area for gold and silver. They looked like they could be starting a larger correction, but buyers came in at the end of the day. This could lead to one more possible move higher. If that happens, it could be sudden and spectacular. Many commodity traders predict possible $80 to $100 dollar swings in gold within the next few weeks. If the GLD can build on today's late session buying, I could easily see the bullish crowd coming back for one last rally. I will be out of town next week, so this might be my last posting until Monday the 17th. Keep an eye on the earnings. Alcoa (AA) kicks off earnings season on Monday the 10th. I've already told you of a possible bearish trade on that stock going into earnings. Have a great week.

UPDATE

I like put options on AA if you can get in before the close. The stock is over extended to the upside and the price action over the last 2 days has been very bearish. Bearish in that it looks like an exhaustion gap. Earnings are next Monday (January 10th) and I think it will sell off when the numbers come out. Place a stop a bit above today's high. If I'm right, we shouldn't go above that high.

UPDATE

News just came out on ATHR that QCOM is going to acquire it for around $45 per share. This would be a great candidate for an Iron Condor trade if it is set up within the next few days. This stock should stay right around $45 until the acquisition is complete. You can profit from the price not moving for the next few weeks. If you don't know how to do this trade, contact me about taking the Advanced Option Strategies course (Course 2). You can reach me at jerry@myoptionmagic.com. Unless the agreement falls through, this trade should be easy money. I'm looking at the January 39, 40, 50, and 55 strikes for a return of around 6% for just over 2 weeks. Not a huge return, but a high probability return.

CORRECTION COMING?

We could start to get a correction soon, but I also think that the market could run up a bit more. There are some nice bullish ABC patterns out there. I think that today did show weakness in a few sectors. The agricultural chemical stocks (MOS, POT, MON, AGU, CF) could start to roll over and sell off soon. Lock in some of those profits if you haven't already done so. Coal stocks look a bit bearish. GS and MS look very bullish and the financials might be getting ready to break out to the upside. LVS (needs a bit of confirmation) and WYNN also look pretty bullish. SLW look bullish. GDXJ looks bullish with some confirmation. AAPL looks to be breaking out again. For the rest of the tech sector, I like bullish trades on AMZN and YHOO. I really like the bullish patterns on MRVL and MU. AA has earnings coming up in a few days, but today's price action was bery bearish. You could buy puts on AA and place a stop above today's high. BA looks bearish (with confirmation). DIS, HPQ, IBM look very bullish. I like JBLU and LCC for bullish trades in the airline sector. SINA and CRM both look very bullish. CMG looks very bullish if the stock can get back above its 10 day ma. I think the market will move higher this week...and possibly though this next earnings season that starts in about a week. I'll be watching the price action very closely. If I see anything major about to take place, I will let you know.