April 2008 Archives

I'm typing this as I head off to a meeting. I sold my May 45 puts at a loss. I was in at $0.54 and out at $0.31 which represents a 42% loss. The markets are strong this morning and the indicators now point to us heading higher on the short term.

The market wants to head higher and is providing some additional lessons learned. Right now the futures are pointing to a positive open.

S&P 500 (JUN) +8.75  | Nasdaq (JUN) +10.50  | Dow (JUN) +72 

The Q's are currently trading up 0.21% pre-market and my puts are now down 25% and will be down more at the open. I could have gotten out of the puts a couple of days ago with a nice 30-40% gain, or I could have gotten out yesterday morning at break even. I'm now faced with the decision of, do I take the loss now, or do I wait to see if my indicators are correct? I know that the gaps down below will be filled. The question is, will that fill happen in the next couple of days, or could it be months or years from now? The basic tenant of gaps is they are always filled, but there is never an indication of when that fill will happen.

All of my indicators say we are overbought short term and I think I just need to trust those indicators. Another part of me is also conflicted because I do believe that the general market direction is now pointing higher for the next couple of months and maybe playing these counter trend moves is trying to be too aggressive. Ahh the joys of trading the market.

The futures for NQ and ES just turned around on better than expected Jobless claims and also durable goods reports. The futures are close to turning green before the open. The market looks likes it just wants to head higher today despite the poor earnings.

I may get out of my puts on the open with a small loss. I will see how the market opens and decide then.

Last night we had an earnings palooza with Starbucks, Amazon, and Apple reporting. SBUX missed and is currently down 11% pre-market, AMZN warned about future earnings and they are down 5%, and Apple didn't beat by a wide margin and they are down 1%. So it looks like we are going to be seeing a rough patch over the next couple of trading days. FFIV did beat and they are currently trading up over 8% so it is not all gloom and doom. The volatility and earnings fund will continue with Microsoft reporting after the market closes today.

I'm still holding my puts on the Q's and I'm currently at break even. I should see some green today on this position at the open.

I still feel the general overall trend of the current market is UP and we will see the Q's at or above $50 by the middle of May.

Premarket the futures are pointing to a lower open and the Q's are currently trading down 0.85% in pre-market.

S&P 500 (JUN) -7.25  | Nasdaq (JUN) -12.50  | Dow (JUN) -61 

The pivots for the Q's today are as follows and it looks like we will open up today right at S1 and I wouldn't be surprised if we see S2 sometime today filling the gap from Monday.

R2	R1	Pivot	S1	S2
47.52	47.19	46.73	46.40	45.94

The pre-market futures are pointing to a mixed open this morning. The Q's are currently trading up half a percent in pre-market trading.

S&P 500 (JUN) -1.00  | Nasdaq (JUN) +5.25  | Dow (JUN) -1 

Everyone seems to be anxiously awaiting the earnings for Apple today after the close and the options buyers are betting for a positive earnings release with open interest on the calls twice as big as the puts.

The Q's went down nicely yesterday and my puts were up about 40%. I almost pulled the trigger and sold them but didn't. As I look at it now, I probably should have. I'm now only up about 10% and will probably go negative on the open. I will see how the market reacts on the open to determine my next move. We still have not filled the gap but it looks like the bulls are currently in control of the day and playing these counter trend moves can be tricky.

Here are the pivots for the Q's today.

R2	R1	Pivot	S1	S2
47.19	46.77	46.35	45.93	45.51

I just added 20 additional contracts to my current May 45 puts on the Q's at a price of $0.49. I now have a total of 40 contracts with a cost basis of $0.54.

The Q's went up and reach a high of the day and went above $47. They have now retreated a bit from that high and all of my signals are flashing over bought conditions. In theory they can stay overbought for sometime, but eventually they will have to go down.

I just bought 20 contracts of the May 45 puts on the Q's (QQQQS) at a cost basis of $0.59. As I mentioned this morning we have two big gaps below that need to be filled and I expect we will be doing that over the next couple of trading days.

We are also at the top of my trend channel and the Stochastic just crossed over, so all signs for me say we are going to be heading down to the mid-44 level soon before we start heading back up.

Bank of America reported earnings earlier this morning and profits were down due to trading losses and problem loans. The market seems to be taking the news in stride. BAC is trading flat to slightly up this morning in pre-market.

The futures this morning are down a little bit.

S&P 500 (JUN) -2.25  | Nasdaq (JUN) -3.25  | Dow (JUN) -19 

The market looks like it needs a rest and I think we need to fill the two large gaps from recent trading. For the Q's we have gaps at $45.27 and also at $44.14. I feel like we need to fill those gaps before we can head higher on this current up trend. I still think we will be at $50 in the Q's before the middle of May, but I think my short term trades will be to the downside for now.

It sure is nice out there today and I'm looking forward to a nice weekend. So I decided to sell the rest of my Jun 50 Calls and cash out on this nice up day today.

So I just sold 50 contracts of QQQFX at $0.53 with a cost basis of $0.23. That gave me a nice 130% gain on that trade.

We should probably see some consolidation on Monday and I may look at going long again then.

I just sold half of my June 50 calls on the QQQQ with a 100% gain. I was thinking I would be able to close out half of my contracts on the open, but the market didn't gap up as much as I expected. So it took a little time to get to my price targets.

So for a recap I was in 100 contracts of QQQFX at an average price of $0.23. I just sold 50 of the contracts at $0.47 for a better than 100% gain on the trade.

The Q's are now trading near the high of the day and are showing some decent strength. The charts are now telling me that we are way over bought and we should start to see some downside over the next couple of days to consolidate some of these big gains. I was thinking of holding the rest of my Jun contracts for a little while, but may just close them as well depending on the state of the market over the next couple of days.

Last night Google reported better than expected earnings and most tech stocks are up in pre-market trading. The Q's are currently trading up over a dollar (almost 2.5%) pre-market.

Futures are currently trading:

S&P 500 (JUN) +16.50  | Nasdaq (JUN) +22.75  | Dow (JUN) +128 

My Jun 50 calls on the Q's are looking very good now. I was planning on holding these a little longer, but will be very tempted to take some profits on the open. I will certainly sell half if I open up with a 100% gain on these calls.

I haven't shown the pivots on the Q's in a while, but maybe I should do this more often. We should already open up above R2 on the floor pivot and are quickly heading to R3.

     Floor 
R4    
R3     46.46
R2     46.1
R1     45.69
Pivot     45.33
S1     44.92
S2     44.56
S3     44.15
S4    

I sold my May 46 calls as we finished out a strong close in the markets today. If we had a slower up move today I would have held for the rest of the week. We had a big gap up today that needs to be filled and we are getting towards a short term over bought condition.

So for a recap, I was in 20 contracts of QQQET at a price of $0.75 and out at $1.01 for a gain of 34%.

We may continue to power higher, but one lesson I have learned is to take your profits while you can. You may leave some additional money on the table, but I would rather hit singles and doubles than always swing for the fences. I still hold my longer term Jun calls on the Q's that can take advantage of any additional up move and if we see some short term downside, these will not be hurt as much.

I had a reader of this blog recently ask me why I'm doing such small positions. Well when I started out this site I picked an account and funded it with $10,000 to track my trades. With an account of this size I don't want to go into trades that are much more than $1000-2000 or 10-20% of the portfolio. Position sizing is a very important tool when you are trading. I have been bitten hard by putting on too big of a position and losses can quickly deplete your capital if you are on the wrong side of a trade. As the account grows I can up my position sizes accordingly to maintain that 10-20% mix.

Last night Intel announced better than expected earnings and is currently trading up over 7% in pre-market. This morning the futures are pointing to a positive open and the Q's are currently trading up over 1% pre-market.

S&P 500 (JUN) +6.50  | Nasdaq (JUN) +23.25  | Dow (JUN) +50 

I should open with gains on both of my call positions this morning. Hopefully we can continue this up move the rest of the day rather than just the same pop and drop action we saw yesterday.

I just added 60 contracts to my long Jun 50 calls (QQQFX) at a cost of $0.19. My stochastic just crossed over again and it is pointing towards the upside. I now have 100 contracts at a cost basis of $0.24. I'm planning on holding these contracts for the next couple of weeks.

I also still hold my May 46 calls (QQQET) and they are currently down about 25%. I think I will be out of these by the end of this week.

S&P 500 (JUN) +6.50  | Nasdaq (JUN) +9.75  | Dow (JUN) +55 

The futures are up this morning and I have to spend the first half of a day in a meeting. So I will not be able to watch the open. I'm currently still long in my calls on the Q's. The open should put me into the green.

I just bought 20 contracts of the QQQQ May 46 calls (QQQET) at a price of $0.75. This purchase order was done about 2 minutes before the close of the market. I expect to close this trade on Monday or maybe as late as Tuesday of next week. I think we will have a bounce off the oversold condition from todays trading.

I also just bought 40 contracts of the QQQQ June 50 calls (QQQFX) at a price of $0.25 as an initial open to some longer term trades (i.e. several weeks.) I will be holding these (and maybe adding to them on weakness) for the next couple of weeks to play the change in market trends I'm starting to see develop.

The Q's traded down all day and I was never able to get in on the short ride yesterday. They never filled the gap from this morning, so that is the next target on the upside move I see for Monday. Today they did ride down to the low $44's and it would have been a sweet ride in the puts, but you can't win them all. The good news is that it was nice to get confirmation that what I saw at market close yesterday played out correctly today. The more I study, it seems the more I'm able to get a feeling about future direction. It is all a learning process, and I'm glad that I'm making progress in the right direction.

General Electric reported lower than expected earnings and have revised their outlook going forward. GE shares are currently trading down over 11% pre-market.

With this news the markets are starting the day with a downside bias. The futures are showing a negative start this morning and the Q's are currently trading down over 1%.

S&P 500 (JUN) -14.25  | Nasdaq (JUN) -20.50  | Dow (JUN) -124 

I returned from my meeting yesterday about 5 minutes before the close of the market. The $45.75 level on the Q's were still showing a strong resistance point and I tried to get into some puts at the close. The order never filled, so I don't get a chance to play this move.

We should gap down this morning and we may float up to fill that gap in the first couple of hours of trading today. If that happens then I will probably get short for another ride down to the mid $44 level.

Yesterday I was feeling the pain of getting in early on my call position. I was very close to selling at a near 50% loss yesterday, but the chart kept telling me the Q's were going to head higher. I guess this is where patience pays off. The buy of additional shares to lower my cost basis helped and I was able to close out before lunch today with a 25% gain on my position. The $45.75 level on the Q's are showing some resistance and I wanted to get out while I could with a profit. So with this trade I was in with 70 contracts of QQQQ Apr 46 Calls at a cost basis of $0.40 and out at $0.50 for a 25% gain.

I think my next move will be for a down move over the next couple of days.

One thing I need to work on is setting up better stops. I have been finding that the stops I set are too close and I usually have to ride out past them to let the trade run for a bit.

Need to run to a meeting, but I just sold my calls at $0.50 for a profit. I will post details later.

I'm going against my better judgment and rather than selling my open QQQQ call positions with a stop loss, I just added more.

I just purchased 50 additional contracts on the QQQQ Apr 46 calls at a price of $0.35. I now have a total of 70 contracts at a cost basis of $0.40.

My rationale for this move is the chart just looks too good on a short term basis. As I look at things now, my initial buy a couple of days ago was probably too early. The Q's are currently down about 0.8% in the first hour of trading but the chart is telling me we will be in the green sometime today. I will still exit this trade sometime today, my goal as always is to exit with profits. Next week is options expiration so I need to be out soon.

The markets have been seemed dull the past couple of days. We have been trading in this sideways pattern for the last couple of weeks and it has been difficult to make any amount of money with my swings. My methodology works best with volitility, and we just haven't had much of it.

The futures this morning are showing a slightly lower to flat open today.

S&P 500 (JUN) -3.50  | Nasdaq (JUN) -0.50  | Dow (JUN) -25 

I still have my open calls on the Q's but plan on getting out of them sometime today or maybe tomorrow.

I just went long the Q's for a quick 1-2 day max trade. I'm in with 20 contracts of the QQQQ Apr 45 Calls at a price of $0.52. My stop on this trade will be $0.40. I expect this trade to be quick and may even be closed out before the end of the day.

Several of the long term trend systems I follow have just recently signaled a change in the trend. Since the November timeframe we have been trending down and in the past couple of weeks 3 of the 4 signals I follow just signaled a change in the trend.

The 4th signal is very close to switching as well and should be confirmed once the SPY closes above $140.

These long term trends don't matter in my Q swing trading methodology since I'm really only looking at 10-15 day trading timelines. But I do follow these signals for the rest of my portfolio. Last week my total portfolio holdings were at about an 80% cash position. I recently started to put that money to work and I still hold about 40% cash. I plan on going to a 100% invested position once this 4th signal confirms.

There is a chance I may get whipsawed on these movements, but I have found that when all 4 signals are confirmed the chances of getting whipsawed are very small.

The futures this morning are pointing to a negative open. The Q's are currently trading down 0.8% in pre-market.

S&P 500 (JUN) -5.75  | Nasdaq (JUN) -9.50  | Dow (JUN) -46 

I may look at going long with some April calls near the open this morning for a quick 1-2 day trade.

I recently noticed an interesting pattern in spending in our office that may show signs that we are starting to see a bottom in tech hardware spending (at least on the consumer level.)

Here is a little background information. I currently work at a publishing company as the VP of IT. I tend to be the go to person when people want to purchase new technology. We also spend a great deal at Dell for computer equipment so we tend to get a decent discount on new equipment that we can pass onto our employees.

Our company has about 110 employees and in the last month I have had 5 people come to me to ask about purchasing a new PC for the home. On average I get about 1-2 of these types of requests per quarter. I do see big jumps for requests in the Fall time frame (i.e. back to school and holiday spending) but nothing like the past couple of weeks.

Here are some of the recent purchases that have been bought over the last couple of weeks.

A mother for her son's birthday (who also just returned from a tour of duty from Iraq) purchased a top of the line $5000 Dell XPS gaming system.

An executive just purchased a laptop for his family to use at home for about $1200.

A mother looking to purchase a laptop for her daughters birthday for about $1500.

A wife looking to get a desktop for multimedia for her husband's birthday for about $2200.

A father who purchased a Macbook laptop for his son's birthday for about $1200.

I just received an email from another employee today that is looking to buy a birthday present for her husband as well.

This type of spending flies in the face of other surveys I have access to and is maybe an interesting counter point to all the fear about the state of the economy?

This maybe also just a sign that all the current promotions the various computer companies are using to stimulate sales is start to pay off?

Maybe this is also a sign of spending from tax refunds and the economic stimulus check being applied to technology?

Lots of questions but no answers yet. It's just some interesting data points.

I was stopped out of my Q puts today with a loss of about 29%. In at $0.44 and out at $0.31. I had a stop at $0.35 and I watched it trade near that area since the open this morning. I let it run a little more and decided to pull the trigger before the trade got away from me.

Yesterday Ben Bernanke spoke with congress and officially came out saying that the US economy could be heading into a recession.

"Our estimates are that we're slightly growing at the moment, but we think that there's a chance that for the first half as a whole there might be a slight contraction."

The markets seemed to shrug off this news and most traders I know seemed more interested in the RIMM earnings yesterday. RIMM reported better than expected earnings and is currently trading up over 2% pre-market this morning. Many traders are hopeful that this is a nice sign for tech to continue the recent climb in stock prices.

This morning the futures are trading down slightly and Q's are currently trading flat in pre-market.

S&P 500 (JUN) -2.75  | Nasdaq (JUN) -6.00  | Dow (JUN) -13 

I still hold my puts on the Q's and I have a small gain. I'm going to give this trade a couple of more days to play out but plan to be out by Friday.

Another one of my short term bearish indicators went off and I just added another 30 contracts to my existing holdings. I now have 50 contracts of the QQQQ Apr 44 puts (QQQPR) at a cost basis of $0.44. I'm leaving my stop at the current level of $0.35. In today's trading these options got as low as $0.36 today so I may be a little loose on executing that stop to let the trade play out for the day.

With the Q's up almost 4% today in trading all indicators are showing that they are now overbought on a short term time frame. In addition my 15 min chart is now showing that we are at a near term top today (along with the 5 and 30 mins still showing a top.)

So with that bit of information I decided to purchase 20 contracts of the 44 puts (QQQPR) at a price of $0.50. My stop on this trade will be $0.35. I expect to be out of this trade before the end of the week (maybe even as early as the open tomorrow if we get a gap down open.)

I'm back from vacation, but not necessarily back to trading. Most of yesterday was spent trying to catch up on a week of missed work. As I look at the state of the markets, I still need to get caught up and back into the groove before I start to make some portfolio decisions.

The futures this morning are pointing to a positive open and the Q's are already trading up over 1% pre-market.

S&P 500 (JUN) +10.50  | Nasdaq (JUN) +16.50  | Dow (JUN) +82 

I typically trade the Q's using a 15 day chart and it is telling me that the next move is up. However, both my 5 day and 30 day charts are pointing to a down move. Right now I'm not certain what direction the market will be going over the next week, so I may just have to stay out until I can get back into sync with the market movements.