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$SPX once again fails to break the resistance. Another fall down is likely, read why!


Bear beats bullLast week the market broke the descending resistance (the top of the falling triangle) which gave hope to many investors turning bullish. I myself was also fooled by this market (again) into believing that we finally see a break out. Friday’s trading moved the markets into the new all-time-highs and I decided to reverse my weekly SPX trade from bearish into bullish.

But, last 10 minutes trading on Friday the market crashed again and sold off hard setting the trend to the downfall. Have I stayed tight and did nothing with my bearish trade on Friday, I would be out of the trade with a nice profit. Now I have a break even trade on moved two weeks away from now hoping nothing serious happens and I will be able to get out break even a few weeks from now.

I think more traders were convinced about the market finally moving out of the range and start finally trending. These violent moves up or down are quite frustrating making my weekly SPX trading strategy difficult to handle.

But I am persistent and want to move on and go on and improve my trading strategy and create gains.

Today’s trading was a disaster to all bulls. And it can be a game changer again. Let’s review the chart below why I think this can be a major problem for bulls.

SPX struggles again

As you can see a price action inside the circle, the market broke the falling resistance (the red line) of a falling triangle on Thursday last week. On Friday it continued up well. But today although the market moved up in the morning it crashed at around noon and wasn’t able to recover.

What’s important on this is that the crash happened at the all-time high resistance at 2120 level! The market moved higher above it, created a new high at 2125, but then crashed hard. See the daily crash action:

SPX crashing down

Although the intraday chart looks sinister we still may see a bounce tomorrow and trend continuation. There are two catalysts for a move of this market: one is AAPL earnings reported today after the market close, the second is the FOMC meeting on Wednesday if auntie Yellen makes positive remarks (positive for Wall Street) about FED stance on economy and rising interest rates.

As of now AAPL doesn’t seem to be moving SPX futures as it is still sliding down (/ES is at 2108.9 down -0.03). But as of this writing, futures are not as important as they will be tomorrow morning. And of course, Yellen may have remarks accepted wrong by Wall Street and this market can go to abyss.

I am still bullish, but caution is needed. If this market bounces tomorrow and moves higher (and it still is very well possible), the trade I have put on can be moved away to save it or even make money.

Happy trading and investing!






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Where is $SPX heading next? I expect down and here is why.


I was wrong many times in predicting the direction of this market. For about five months the market headed nowhere. We are range bound between 2000 and 2100 level with a few over shots which are immediately sold off.

Although the overall long term bullish trend is intact, we are undergoing either a huge consolidation or a standard distribution.

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What happens if we are in a consolidation pattern? Well, in this case I mean a bullish consolidation pattern. We got into this pattern from a bullish rally, now consolidating heavily (meaning going nowhere) and once we break up thru this pattern we will see a new strong rally.

If we are in a distribution pattern then the bull trend is in trouble. If this really is a distribution pattern then we are at its very beginning and we may see some more up or down trading, but overall this may reverse the market and send it down.

Every rally occurred on a missing volume and was sold off on a heavy volume hard every time so far. Even today’s rebound from Friday’s selling was accompanied by absent volume. So I think, we may see more selling this week.

I try to set up my trending software so I can see the trend more clearly (short term trend since I trade weekly options against $SPX) and here is what I can see so far:

SPX trend 200 ticks

As you can see I have the charting software set to show swings based on ticks and Heiken Ashi candles. This set up helps me to see the trend more clearly. And what I see now is that we swung up and basically exhausted any momentum in that swing.

The pivots indicate a sell signal, the trend shows red candles, and the MACD is in the extreme, pointing down, and fading. I do not see anything in that chart which would point to more upward buying. But, I may be wrong. Tomorrow will show what is about to happen. My expectation is DOWN however. And if not tomorrow, then later on this week.

Here is another view which makes me think we are not done with selling:

SPX expected move

As you can see, although we had nice strong rally today, it didn’t have enough power to reverse the short term bearish outlook – the candle in Heiken Ashi chart is still red (although weak), the PPS is still with a sell signal and we are on a downtrend slope. The only slightly positive is MACD which started pointing up again and changed into solid green histogram. That is the only light in the tunnel which may tell us that we may see a reversal and upward trend continuation.

If I am wrong and the market moves up tomorrow, this may be the point to go bullish again. But even if this happens, there are a few strong resistances, one at 2115 and the second one at 2120 which must be broken before we can call this a bull’s victory. Two attempts in the past already failed. Will the third be the charm?

Happy Trading tomorrow!
 






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Posted by Martin April 20, 2015
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Legacy Reserves (LGCY) cuts dividend


LGCYLegacy reserves cuts its quarterly dividend today to 0.35 down from 0.61 cents. The company originally planned to sustain the dividend as it did in 2008, however, at the end of the day they gave up and reduced the dividend.

However, it is apparent that the market expected this cut months ago and already priced the cut in when the stock traded at $10 or even $8 a share. This price reduction was probably inspired by cuts made by LINE and BBEP previously. Thus now the stock price already reflected that.

As cutting the dividend was expected, then both outcomes were possible – no cut, the price would jump, – cut of the dividend, the price would jump too.

And that’s exactly what happened. Amid the dividend cut, the stock rallied by 9.15% today as it was appreciated that this cut would improve the company’s balance sheet ahead of oil recovery.

Thus this move helps our put options we hold in our account, but hurts our dividend income.

Hopefully, this trend will continue and as oil continues recovering the stock recovers in price, recovers its dividend and our options trades keep expiring worthless for full premium profit.

LGCY trend

When you click on the picture above you will see today’s trading with a large bullish uptrend. Even after hours the stock continued spiking up high. If this continues this way up, our trades will end up very well with very nice profits. I am even planning on selling more puts against this stock.

The put selling against this company also helps offset my loss on the stock. As you can see below, if I held a stock only, I would be losing $477.72 on my 36 shares I own. However, my put options I sold earlier are now helping me offsetting the loss. I am losing $235.72 only as of now.

But, if I add all dividends I already received from this stock in my TD trading account, my loss would only be $106.13 in lieu of $235.72!

LGCY positions

Granted, those trades are not over yet. One positions is set to expire in June 2015 and the second spread is set to expire in September, and many things may happen in the meantime. My expectation is however that this stock will go up as oil will be recovering so I believe that these trades are no brainer.

It still can be a bumpy way up, so if you mirror my trades (via our free newsletter where we publish our trades), you need to be prepared for the bumpy road. But, in my opinion, it will be a rewarding one if you hold tight.

This is one reason, why I like selling put options against dividend (or even non-dividend) stocks since the options would allow you to collect premiums which may be considered an additional dividend.

Happy trading!






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Posted by Martin April 15, 2015
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Kinder Morgan (KMI) increases its dividend


KMICurrently, this cutie (KMI) is paying 1.8 bucks per share annually. That translates it into nice income of 4.30% on invested dollar. Where else can you get such nice interest? No bank would pay you this. Not even bonds (they actually pay a negative interest). So unless you start your own consumer credit loans business where you will be legally allowed charging a usury interest of 20% or more you won’t get any better return on investment anywhere else.

KMI announced today after close that it is increasing its quarterly dividend to 48 cents a share, up from 45 cents in the fourth quarter of last year. The company plans to pay a full year dividend of $2 a share! And they are on track to meet this goal so far. Basically KMI plans increasing dividend by 50 cents every quarter.

The stock slipped about 1% in afterhours trading as the company announced revenue and earnings for the first quarter that were a bit light of analyst expectations. The stock closed Wednesday at $43.43. (Source Barron’s)

What can I say to this?

Yes baby, go down on all those anal-yst expectations so I can buy more!

Currently, I own 98 shares of KMI in my dividend growth portfolio and I am definitely LONG on this stock.

 






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Posted by Martin April 13, 2015
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$SPX selling today didn’t change my bullish outlook


I thought that today’s selling would mark an end to the bullish trend making it yet another sold off attempt of new highs. But when I looked at the chart later at the end of the trading session to my surprise it didn’t change the bullish trend at all and we are still in an uptrend.

Although an intraday trading didn’t look like that at all:

SPX intraday trend

Early in the morning stock market was moving up, but then, suddenly out of blue a selling started. Media say, it was because of Greece and worries about earnings.

I think it is a nonsense. All this still looks like that we are dealing with a distribution phase.

What is a distribution phase?

A distribution phase is a major market topping phase. It means that the markets are about to reverse from a bullish trend into a bearish one. But do not worry. This phase takes a long time to complete. It doesn’t mean that the reversal happens overnight.

This phase can take from a couple of months to a year or longer before the market reverses and heads down. In 2008, this phase took almost two years. It started in early 2007 and ended late in 2008 before the market dropped hard.

How do you know that we are in this phase?

One of the signs is that markets struggle to move higher and whenever it moves higher, it does so on a low volume and it is followed by a violent sell off on a high volume. Every time the market tries to make a new high, it is sold off. Sometimes markets make new highs, but they are weak and immediately sold.

It means that big players are getting rid of their stocks and raising cash. And who is buying? Uninformed investors.

How does this affect my trading? As of now it doesn’t. I trade too short term positions to be worried. All I need to do is to assess correctly where is the market heading for the next week and position my trade that way.

Where is SPX going tomorrow?

My outlook for tomorrow is still bullish. I plan on opening a new trade tomorrow, but to do so I need to wait for tomorrow opening to see whether today’s selling was really a reversal (which it doesn’t look like that at all) or just a short ease off before new uptrend continuation.

SPX expected move

As you can see above the candle for today is still green and that is a good sign that the trend really hasn’t changed yet. It is also a way above 21 day EMA and the slope of EMA is upwards and actually strengthening. MACD is also pointing up. Although this still may change on a dime, the trend for tomorrow is still up.

Happy Trading!
 






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Posted by Martin April 13, 2015
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$SPX selling another rally attempt today!


$SPX more and more the market tries new highs it is sold off – distribution phase. Big boys selling off to retails. Bearish






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Posted by Martin April 12, 2015
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Is $SPX finally going higher or is more volatility coming?


Last couple of months it was really difficult to say what the market wants to do. It went up a few days, then reversed and fell hard next few days just to reverse again. Trading in this environment was extremely difficult for me.

But at least it was a great opportunity for me to look for shaping my chart reading and improve it in such way that I would feel more comfortable predicting the market move.

What is a typical prediction accuracy? It is 50%. You have 50% chance to be right and 50% chance to be wrong.

What if there is a way to increase a chance to be 70% correct and 30% wrong? Wouldn’t that be awesome?

I still do not have a crystal ball to predict the market, but still working on it. That means that I still do not know for sure whether the market really would do what I am about to predict or not.

SPX expected move

For Monday April 13th I expect the market to move up. The reason is that the candles are green and above 21 day MA. Also MACD is pointing up. Of course, tomorrow we may see a red day and that would mean a reversal of this trend. However, earnings season and economic data may be a catalyst for upward move. We are in an environment where “bad news is good news”. Weak economic data assume postponing interest rates hike from FED and that’s what may push the markets higher.

So I expect an up day. If the day ends up down, then on Tuesday I will open a bearish trade. Monday and Tuesday trading will show the direction for the entire week.

Happy trading!
 

 






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Posted by Martin April 11, 2015
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New purchase in ROTH IRA – ConocoPhillips (COP) for 4.60% dividend yield


UPDATE: (04/14/2015) Yesterday, ConocoPhillips price dropped a bit. That allowed me to lower my limit price lower to $67.55. Today, the trigger order fired and executed my limit order. I bought 16 shares of COP today!
 

In my ROTH IRA account I use a commission free ETF to save money for my next purchase. Because of free purchases of the ETF I can buy one share and sell one share and pay nothing. This allows me to save all dividends and my small contributions into the ETF and once I have saved enough I sell the shares in ETF and buy a dividend paying stock.

Last Friday, I saved my minimum amount for purchasing a stock – $1,000 so I could sell the ETF (without paying any commission or trade fee) with 4% profit, release the cash, and now I am placing a purchase order for Monday to buy ConnocoPhillips (COP) stock.

Conditional order

On Monday I will initiate my first position in COP. But I will use my trigger order strategy to buy this stock. That means, that I will place a conditional order to purchase this stock only if it moves higher. If it starts moving down from the current levels, I will not buy and my limit order will be lowered to a lower price. That means that I will be able to track the price down and buy into a position only when the stock reverses (or continues higher from the current price.

See the white board below:

Conditional orders

As you can see, I place my initial limit order slightly above the current price (P1). It is a conditional order, basically saying “if the price is equal or greater than P1 then enter a limit order to buy at P1 price.“.

So if the price of the stock goes higher, hits the P1 limit, the conditional order gets hit and it activates a limit buy order. The stock gets purchased.

If however, the stock goes lower, I will lower my limit price to P2, and then to P3, and P4, etc. If at the bottom the stock reverses and hits my target (P5), the stock gets purchased and I will ride it up.

Of course, this is not a 100% bulletproof strategy, but works most of the time to capture a better price.

Sometimes you will get filled and short after the fill the stock reverses back down and continues in a selloff. That’s a reality of the market. It happens and you cannot do much about it. But at least we tried to get the best price, right?

To eliminate a negative impact of this, I never use an all-in purchase but buy a small portion of the entire position. So if the stock reverses and continues lower I can repeat the process to add to my position.

Trade detail

On Monday, I will have the following conditional order out:

If COP last is equal or greater than 67.71 then
Buy 16 COP at 67.71 LIMIT GTC

Total shares holding after the purchase: 16
Estimated annual dividend: $46.72
Consecutive Dividend Increase: 2 years
Dividend yield today: 4.60%
Dividend 5yr Growth: 8.45%
Dividend paid since: 1934

This stock may also provide a nice capital appreciation when oil price returns back up. This stock may also move back up to ~$80 level and make a nice ~$12.30 capital gain per share. In the meantime, I will be collecting a nice dividend, which I will be saving into a commission free ETF, saving money for my next purchase.

What do you think? Would you agree with COP stock or do you prefer a different energy stock?

Happy trading and investing!
 






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Posted by Martin April 05, 2015
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Selling Seadrill (SDLP) & LGCY puts to add stock into my portfolio amid all negative sentiment


It is hard to be buying when everybody is negative on a stock, predicting its further collapse or struggle. These days we see oil exploring companies out of favor. Many had to cut on employment, investment and even vut the dividends.

When reading what other investors think about oil companies, you get scary stories, gloomy predictions, and stay away outlook.

I admit, that take a trade and buy a stock in such review and expectations needs a lot of courage. It is a gut wrenching approach sometimes to be a contrarian.

I recently took a position in Legacy (LGCY) for this same reason. Everybody was busting this stock and predicting its gloom and doom. I believe, this stock offers a great opportunity and it is worth to dedicate some cash to it. Lately I even opened a bull put spread against this stock expecting profits when oil goes up and the stock with it.

Today, I plan on taking yet another gut wrenching opportunity and initiate a position against Seadrill (SDLP) stock. It is another oil involved company making money shore drilling. Recently the stock tanked as many others in this industry and investor have only a scary stories and expectations. Only a few of them out there are posting articles having something nice to say. And whe they do, they are immediatelly attacked by others who invested in the stock when it was at $30 a share and now they are at a huge loss.

 

But with companies like this, you need to define an investing style (or strategy) you want to apply:

1) Either hold and collect dividends and go thru the thin or thick of the stock.
2) Or trade the stock and when there is a sell off coming, sell it and buy back at the bottom (well, if you are good at market timing).

If you decide to hold on and go thru bad times, you can do a few things – hold the stock, collect dividends, and sell puts or put spreads. That’s exactly what I am doing with LGCY stock while waiting for it to go up. I collect the dividend and I collect premiums from options.

So I am going to do the same with Seadrill (SDLP) and LGCY (adding to my existing LGCY position). I will sell put options against these stocks to collect premium if the stock goes up and stays above the put strike price. If not, I am OK to accept the stock, actually I will be happy to buy those stocks at those prices.

There will be two outcomes:

1) the stock stays above the strike price, the option expires worthless and I will keep the premium
2) the stock drops below the strike price and stays there at expiration, then I will be assigned the stock and buy it at the strike price plus I will keep the premium.

Since the price of the stocks are so low I am very comfortable to buy stocks at those level.

If you want to see these trades details, strikes and expiration I am going to take, you need to become a subscriber to my free newsletter where I publish my trades.

Good luck and happy trading!
 
 






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