Well, I suppose this is turning into a weekly blog. Let me start out with the bad news first. To date I have taken positions in SLV, MTW, OAS & TCK using real money and I have gotten out of each of these positions at a loss. It was strange how I got out of SLV. I thought I had put in the order to get out only if SLV went below a particular price, but I put a limit order of .25 cents on selling the call options. It appears my call options were sold with out SLV necessarily reaching the pricepoint after wished to get out. The position OAS did sell out after it reached my stop and the puts were sold for my limit price. This was after oil companies unexpectantly rose after there was an apparent cap placed on oil production. I got out of MTW without waiting for it to hit my stop because it became clear that the stock was bouncing off of longterm support. I got out of TCK after taking only a minimal loss when the order to buy this particular position was executed with the stock having risen above my centerline indicator. Interestingly, TCK has just gone below the centerline again in a very sharp manner. Looking at a chart of TCK one can see a second engujlfing bar to the downside after only a few days. Technically this may not be considered and engulfing bar because the high price recorded was a little bit less than the prior year, but still there is definite weakening pattern here. I might try to buy more puts on TCK except for the fact that I think it might be wiser to buy puts on MPC because it seems about ready to give a signal by going below the centerline. When one looks at a longterm chart of MPC the stock looks particularly good for a short because the 50 period MA is crossing below the 200 period MA and the price seems to be running into fibonnacci resistance. The only problem is that MPC is maintaining at .17 on my indicator but I am expecting a crossover this week. The fact that MPC is in Consumer cyclicals is also good for a short because I espect a continual weakening of consumer demand.
Last week I actually took a long position in AMD since AMD convincingling gave a buy signal and is now sitting at .23 on my indicator. More important is the fact that AMD broke above the 20 period MA and appears ready to complete a handle formation on the longterm chart by getting back up to 8 dollars which should give me a nice profit on only 3 options. AMD is the only long position that I now have except for GLD which is currently showing my worst loss an negative 150 dollars. However, I am not worried about this positions because GLD continually fluctuates in price between two certain points and it is about to bounce off of a lowpoint and will probably be headed higher soon. The high prices for GLD seems to be getting depressing and is starting to form a wedge pattern that I expect it will break out of to the upside so I am not really worried about GLD right now. My remaining positions in CBG, CX and XLF are all short and seemingly acting in a manner that they want to go down farther. I am expecting big profits from these positions to make up for my losses which are now standing at less than $600.
Well, I’ve finally taken the plunge and invested real money in the options market. I’m currently invested in 4 positions. I bought put options for CBG, CX, OAS and call options for SLV, which is Silver. I attempted to buy put options for DNR and TCK plus call options for GLD put none of the underlyings moved in a way to allow me to get into those positions. Let me go over how I made the decision to buy the options I did. For the positions CBG, CX & OAS I got into because my indicator crossed below the centerline for all of those positions. I am not tracking SLV using my indicator, but it is clear that Silver like Gold has to potential to benefit from continued low interest rates and possible monetary easing from the Federal Reserve and as a result getting into SLV on the long side is a no-brainer. Once I’ve determined which way to go for each of these positions then when buy put options I look at the latest high for that underlying position and divide the price by seven. Then I subtract one-seventh of the price from that high and the nearest available put option is what I go with. Then I limit my purchase to $400 or less. The options I buy are then bought in sets of 3. I buy either 3, 6, 9 or any number of options divisible by 3 and I do this for a reason.. The reason is so that I can sell a third of the options when the price rises by a third. I sell the second 3rd when the price rises to 2/3rds, and I see the rest when the price double. I also set my stops so that I do not lose more than $200 per position. This should give me a higher upside than downside for most positions; also there should be a greater likelyhood that once a crossover occurs the stock will continue in the direction of the crossover.
I should note that according to my latest charting there are some crossovers that are beginning to occur to the upside. AMD achieved crossover to the upside and AKS is threatening to crossover. MT is at the centerline sitting at zero on my indicator and MTW has acheived crossover to the upside. One thing to note about AMD and AKS is that both stocks are under the 20 period moving average. I would not want to get into either of these positions until the underlying makes its way above the 20 period moving average. Even though somehow MTW moved above the centerline, when one looks at a daily chart of MTW the stock does not look so good because it is curruntly bouncing on the downside below the 200 period moving average whele MT actually gaped upt to its 20 period moving average, it is now hovering a bit above this moving average. I will definitely look at buying calls on MT. Before I close I should mention that EXEL is almost to 2.0 on my indicator. It is currently sitting at 1.97. It is the only stock threatening to go to 2.0 and over which means that the stock may be getting over heated. When a stock rises above 2.0 we should start looking at possible indicators that the stock should be sold.
I’ve figured out what sectors the stocks that I am following are. Most of these stocks are in the basic materials sector (XLB). Surprisingly, there are stocks that you would think would be in the Energy Sector (XLE) that are actually in XLB. Here is the sector list and the stocks I am looking at.
IYK: Consumer Goods: ODP
XLV: Health Care: EXEL
XLK: Technology: AMD
XLI: Industrial Goods: CX, MTW
XLF: Financials: CBG, GNW, MS
XLB: Basic Materials: AKS, CIE, DNR, FCX, MPC, MRO, MT, NBR, OAS, PBR, SDRL, TCK
Of the above Sectors XLV XLF & XLB are looking the worst on long-term charts. The best looking long-term charts are IYK, XLK & XLI. Right now all of the stocks I am following is at the following positions on my indicator starting from the highest to the lowest: GNW 1.47; MS 1.27; EXEL 1.23; ODP .73; MPC .57; PBR ..53; MRO .47; NBR .37; TCK .1; OAS .03; CBG 0; MTW -.03 (Crossover); AMD -.13; DNR -.17; CX -.27; MT -.43; CIE -.5; SDRL -.73; FCX -.83; AKS -1.07.
As seen above I had a crossover with MTW. When one looks at the MTW near-term chart one can see that this stock recently dropped below its 200 period moving average and is trying to rise a bit. It will probably rise to touch this moving average and head south again. I will certainly be buying Puts for this position.
I was hoping to post something to this blog before this, but I never found the time. I’ve been keeping up with the stocks I am following on my indicator. My paper trading account has suffered some reversals. It is now in the low $6,000.00 range. To stop the bleeding I got rid of my DNR options. I had to sell 12 such options for .15 apiece. I also sold my TCK options that were starting to lose money. TCK bounced off of its 20 period moving average to a new high. I will not get back into TCK on the short side again until it breaks below its 20 period moving average. Altogether between these two positions I must of lost between $700 to $800 dollars. I do not think that this drawdown has anything to do with disproving the usefulness of my indicator. I believe that simply at one point I was too long the market and now I believe the market is definitely taking a downwards direction. My indicator has been demonstrating this as several stock are close to giving a sell signal and one already has. The stock CX (Cemex) has just given a sell signal by moving below the centerline of my indicator to -.03. Others that are near giving a sell signal include MTW which for a second day is at .0 on my indicator. There is OAS that popped to a high of .63 on my indicator and has now fallen to .2. There is CBG that popped to .1 from .0 on my indicator due to the upday in the market yesterday but look ready to turn back down today. I plan on buying CX options today and look forward to buying puts on these other positions as they give sell signal. If the market will take a violent downturn as I am expecting having all of these short positions will prove to be very profitable and erase any drawdowns I may have taken.
This weekend I will be playing chess at a chess tournament. I will also try to do what I failed to do last weekend and associate all of the stocks that I am following with their various sectors. Hopefully I will also be able to provide full commentary on each one of my games on facebook. I also want to post to this blog again. So long for now.
In my paper trading account I just submitted an order to buy 6 November Puts for TCK after this stock produced a sell signal on my indicator with a crossover of the centerline to -.03. This is the only crossover produced by the selloff last Friday. There are other crossovers that I am looking at in the near future. First, the position CBG is approaching a negative crossover after a heavy volume down day from last Thursday. Currently it sits at only .13 above the centerline. Another possible negative crossover is CX which stands a .3 above the centerline but it has a sharp downward trajectory and on Friday this stock went down on very heavy volume. MT acheived crossover as I thought it would on Friday of -.17. It went down on heavier volume than the prior day. This will be a short post for now. I will try to post again tomorrow.
So far I’ve been doing my indicator for 30 trading days and I’ve been checking my paper-trading account and it has been growing gradually as I have been making trades based on my indicator. The lat I saw my paper trading account stood at over $7,200, which is probably at least a $600 increase in my account and that is in spite of missing at least one trade based on my indicator and making a questionable trade because I was impressed how a certain stock rose on robust volume for at least 2 days in a row. That stock was AMD. My wisdom of getting out of the AMD position after only 2 weeks was recently confirmed. Not only did AMD fail to go up, it is recently tanking. I also have a sell signal on AMD on heavy volume from yesterday. I input an order today to buy AMD puts but I doubt that order will be fulfilled because of AMD’s continuing downward pressure. I am somewhat concerned that AMD may bounce upward off of its 20 period moving average. If it goes below this moving average there is good reason to believe it can go down much further. I would say there is a good chance it can go to $5.25 per share from its current $6.38 share price.
AMD is not the only position I tried to enter. I am also trying to buy 12 calls in DNR after this stock recently gave me a buy signal. I tried yesterday and was unsuccessful and am trying again today. I did manage to buy 9 calls in OAS yesterday and it seems to be working for me. I also did sell 3 NBR calls for a nice profit yesterday at $1.75 a piece. If I manage to get into all of the positions that I want to enter I will have 3 long positions and one short position.
Looking over all of my charts I am seeing that MT may be inclined to give a sell signal in the near future prompting me to buy puts. The day before yesterday this particular stock seemed to indicate heavy exhaustion bury as the signal line continues to move closer to the centerline where a signal could be generated. I will need to watch MT closely. I also need to look at all 20 of the stock I am following and determine their respective sectors. This will enable me to easily determine how the overall sector is doing so as to better know whether I should enter a particular position.. I think I will post the sector for each of these stocks on my next post.
Lastly I am continuing to regret that I did not get into MRO when I had the chance. It’s latest position on my indicator is .87 the highest ever. The latest price on the MRO chart is 16.33 which is well above about $14.90 when it first generated a buy signal. I just want anyone following this blog to know that I am deciding to fund my options trading account with $2,500 from my IRA due to the apparent success of my trading system with my paper trading account. I will try to post again this saturday and let you know if my paper trading account has made any progress.
I’ve done my charting for the last 3 trading days, beginning with last Monday. There have been no new signals generated by my indicator, but there are some intriguing possibilities. As I expected DNR retreated back below the centerline from where it had been at .03 on my indicator, but it is back up to the centerline after only 3 days a may shortly shoot above the centerline. When one looks at the chart of DNR the price action definitely seems bullish since on Friday the price ended the day barely above the 20-day moving average for the first time in a long while. If the price of DNR goes well above the 20-day moving average on Tuesday on heavy volume I could well see a nice buy signal on my indicator. If I do get into this position the options are so cheap that I may buy a dozen calls.
The way I am managing my paper trading account seems to be working. I noticed Friday that my paper trading account is now valued at more than $7,000.00. By getting out of my long position in AMD because the stock was basically doing nothing and it was posing a risk to my capital, I preserved my capital by taking a relatively small loss. I then got into a long position in NBR after a strong signal and it is already producing results. I input an order to sell 3 NBR calls at $1.75 a piece. I noted that my indicator is vindicating my decision to get out of AMD after it is clearly approaching the centerline showing a value of just .27 on my indicator. It turns out that the 2-days of high volume performance could have merely been an exhaustion event that saw the last of the buyers coming in.
I noted that the stock I am following with the symbol OAS is close to a possible crossover above the centerline on my indicator. It’s current value is at -.03. If one looks at the chart for OAS it appears that this stock is about to break out of a flag pattern to the upside and could go much higher when one takes into account the stocks last upward move. Thid is another stock to watch for an upside signal. If I buy calls for OAS this next week as well as for DNR my paper trading portfolio will be taking on a much more bullish nature. I will be needing to check the various sectors to determine what changes there are to take advantage of and whether or not these two possible longs are truly wise. I will try to put out a new post tomorrow.
A very important crossover has just occurred on my indicator. NBR (Neighbors Industries) went up on heave volume. The new bar established a higher high and higher low even though the price increased by just four cents. The volume was so heavy though that NBR appears to be readying for a breakout to the upside. When analyzing the NBR nearterm chart it is clear that this stock is forming a flag pattern and is supported by NBR’s 20 day moving average. I checked a longer term weekly chart for NBR for 900 periods. That chart shows the current price for NBR to be supported by its 50 period moving average and clear upside potential to about $14 to $14.50 per share. This is about where the 38% Fibbonacci line is as well as the 200 period moving average. I wasted no time inputing an order to my paper trading account to buy 9 October Call options. I set a limit price of $1.30 per option contract. If the trade goes through I will look forward to take my first profit on 3 NBR options contracts when the contract price rises to $1.75. I should mention that this crossover on heavy volume was from -.1 on my chart to .23. It went almost straight up.
There was another crossover I should discuss, but this crossover was not nearly as exciting. DNR (Denbury Resources crossed in a shallow way from -.07 to ,03 on onlymoderatley high volume. On the shortterm chart DNR is caught between the 20 period moving average and the 50 period moving average. The last bar was much closer to the 20 period moving average than the 50 period moving average. Its high price touched the 20 period. Now if only DNA can break above the 20 period moving average that would be a clear signal that DNR is headed higher. On the long term chart it appears that DNR is struggling to launch off of its 50 period moving average to meet resistance quite a bit away at the 200 period moving average.
The only other news tha I have to report is that OAS moved to the cenerline but not above it and that MT moved from .3 on my indicator to .2. It will give a signal to buy puts if it moves below the center line especially on heavy volume. My current position in AMD is at a small loss. I will monitor it through the end of the week to see if it improves. If not, in keeping with my 2 week rule I think I will exit the position.
I forgot to mention that I just had another sale of FCX options yesterday. 3 more options sold out at a price of $1.70. This gives me $70 of profit per option contract. I put in an order to sell the last 3 options contracts for $2.10. So long for now!
I just completed my charting for today. So far there are no new buy or sell signals. Of the current positions that I have open, which includes AKS on the short-side, AMD on the long-side and FCX on the short-side I am merely getting confirmation to keep my positions open. In my last post I think I mentioned that I sold 3 FCX puts for a solid profit of $35 a-piece. I am looking to sell 3 more for $1.75 a-piece which give me a profit of $70 per option sold. I think my chance to sell 3 more puts for this price is excellent. I also have an order in place to sell 3 AKS call options for .55 cents a-piece. So far AKS is moving in the right direction.
While I have no outright buy or sell signal several stock a showing the potential to give such a signal. First there is CBG which briefly dipped below the centerline at -.03 and then came back strong to a .23 reading. Should it dip below the centerline again on high volume and surpass -.03 this could be considered a sell signal and puts should be purchased. The stock DNR is currently sitting at -.13 on my indicator and pointing upwards to the centerline. If this goes above the centerline on high volume this is definitely a signal that I should buy calls. Next MT is holding above the centerline at .3 for 3 days straight. It is at the lowest its been on my indicator. I am aticipating a breakthrough below the centerline then I buy puts. Then we have NBR, which is virtually on the centerline. It went to .03 above the centerline not it is at -.03 below the centerline. I am looking for a push above the centerline at more than .03 on heavy volume to buy Calls. We have OAS which is at -.2 and pointing at the centerline. It has been on a constant upward drift since I started following it. If it can get above the centerline on heavy volume it will be time to buy Calls. Lastly we have TCK which touched the centerline and shot up to .17. It needs to go below the centerline on heavy volume to signal me to buy Puts.
I just wanted to mention that I am noticing definite growth in my paper trading account since I started this experiment. I think I started out at about $6,500+ to $6,600+ and now I am noticing my account at $6,900+. So long for now.
Well, yesterday I took my first profit in my paper trading account. FCX went down substantially yesterday and 3 of the options that I bought for $1.05 sold off for $1.40 a-piece. The number of options that I hold for FCX went from 9 to 6. I put in an order to sell 3 more options for $1.75. Also I have 9 AKS put options that I bought for $.40 cents a-piece is starting to show a profit. I put in an order to sell 3 of these options for $.55. If this is accomplished my next order will be to sell 3 AKS put options for $.70. My 6 AMD options are showing a loss but not much of a loss.
I did my charting today and there is no buy or sell signals to report. I can say however, that NBR is very close to producing a buy signal. It is now at -.03 on my chart. Should it break above the centerline especially on strong volume that will be a buy signal. When one looks at a chart of NBR the stock is clearly acting like it wants to bounce off of its 20 period moving average to the upside. The only stock I am following that shows a large volume increase is GNW. While it is not showing a buy signal GNW is very much in an uptrend. Actually it is in too much of an uptrend. I do not want to consider getting into GNW until the price recedes and the stock bounces off of its 20 period moving average, which is still below its 50 period moving average.