COIN FLIP

After yesterday's long entry, today's will be very short. I didn't like the sell off in the last 20 minutes of the market today. The volume was a bit higher today, but that day-end sell off creates more of a murky outlook. We need confirmation for any new bullish or bearish trades. I will sit on the sidelines until things become a bit clearer. Watch the previously mentioned market support levels to see if they hold. Make sure you have stops on your trades (bullish or bearish).

NOT TIME TO PANIC...YET

The volatility index (VIX) closed today at 45.54 with an intraday high of 46.28. It gapped up at the open as the market sold off hard. This definitely signaled some panic in the move down this morning. That is the bad news (unless you are very bearish on the market...if so, just invert these remarks). The good news is that the volume behind today's move was about average, indicating that the move might not be as significant as it appears. These two indicators might appear to be contradicting each other (a spike up in the VIX on average volume). A closer look at the VIX shows that today's gap up moved the VIX to its 50 day moving average. This 50 day moving average could act as resistance and the VIX could start to move back down (which would be bullish). I told you to watch the financials as they seem to be leading this market. Almost all the financial stocks sold off today, but on average to less than average volume. They all appear to be completing possible bullish ABC patterns on their intraday charts. There has been a lot of recent talk about the huge short interest on some of these financial stocks. If these stocks rally again, they could be propelled even higher by all these short positions being covered at the same time. This is referred to as a "short squeeze". On the other hand, there is still some room for them to fall. If the short sellers are successful, they might be able to drive down the financial stocks enough to retest or even break their recent lows. There are key support areas around 7,450 on the DOW and 770 on the S&P 500. If we are bullish in the market, we want these support areas to hold. For bullish trades, there is no reason to guess or hurry. Wait for the market to start to recover. Remember the old Wall Street saying, "You never want to catch a falling knife". Don't get caught up so much in the point move up or even the percentage move. We want to see higher and increasing volume on any market rally. We also want to pay attention to any increasing volume if the market continues to sell off tomorrow. If these support levels don't hold, look for bearish trades on the DIA, SPY or any stock in a clear downtrend. I still like HANS for a possible bullish move but any new trades should wait for it to get back above the 3/26/09 high. I also still like AAPL, but wait to see if it closes up tomorrow (pay attention to the last 15 minutes of the market if you can). It is sitting on a great support area, but it needs some confirmation. I also like the bullish patterns on NFLX and AMZN. Hold off on the Energy stocks. Their recent breakout now appears to be a false breakout and many of these stocks have moved back into their sideways channels.

SUCCESS STORY

Jerry,

I have certainly had some learning experiences during the first few months of trading, but things seem to be improving for me.

I had my first multiple 100% gain this week. I bought 2 MYGN calls at 6.10 and sold them yesterday for 27.70 in about 2 weeks time. Hopefully I'm starting to get the hang of things.

Mike B.

SHOULD WE JUMP IN AND BUY??

We got a bit of a pullback today. There were several signals yesterday so this wasn't too much of a surprise. Should we have bought puts this morning? You could have but that would have been a risky trade. You won't last too long betting against the trend unless you can get some confirmation that could increase your probabilities. In the big picture, this was not a big selloff. It is hard to tell right now if the selling will continue or if we will rocket to new highs. One thing that I will keep a close eye on this Monday is the VIX or the Volatility Index. You should be able to just type in VIX on your charting service to pull up the chart. This is a measure of fear in the marketplace. It has an inverse relationship to the market which means if it goes down, the market usually goes up (and visa versa). If you are like me, this will mix you up all the time. I always have to stop and think...if this goes up, the market should go down. Anyway, there is a really nice bullish pattern on the intraday chart of the VIX. This means that the VIX could go up...and the market could continue to go down a bit (look for the VIX to move above 42.50). However, this support level might not hold. If the VIX moves down below support (around 40.20), the bull run could really take off. Watch for this confirmation next week. These are short term signals not long term signals. A bullish pattern I like is HANS (I drink enough of their Monster energy drinks to keep them in business...so it must be a safe bet!). If we break higher on the VIX, you could look for a bearish short term move on the DIA or SPY. Have a great weekend!

SUCCESS STORY

Bought MMM Apr puts and just made $500 profit....short term trade at resistance, looked good to me.

Thanks

Steve A.

SUCCESS STORY

Hi Jerry, well after the last class I looked at charts for a hour. liked BIDU,,,bought at market(just wanted in) ,,,put in my stop loss,,,,sold today for $800. good start! take care, thanks again Rich R.

SUCCESS STORY

I wrote you last week about a purchase of HK options in my real money account. I bought the April 15 options. It think I fell victim to amateur hour. I saw that I had a $850 profit for the day and took it.
- Steve A.