The Morrisian Indicator

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.

 

EC Morris

The Morrisian Indicator

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.

 

EC Morris

The Morrisian Indicator

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.

EC Morris

The Morrisian Indicator

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.

 

EC Morris

The Morrisian Indicator

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.

 

EC Morris

The Morrisian Indicator

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.

 

EC Morris