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Posted by Martin November 22, 2011
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ACE in a bullish trade setup

ACE in a bullish trade setup

ACE Ltd is now creating a new bullish trade setup. After nice run up in previous month the stock created new 52-day year high price and now is pulling back to 50 day and 200 day moving averages. It is in 50% retracement zone and it would be expected that the stock bounces back up.

There are two potential scenarios:

1) the stock will bounce back from those two moving averages or support line at 64 and it will continue back up, at least to a resistance at $70 level, which was shortly broken at the end of October and the beginning of November.

2) the stock will not sustain its levels on 50 day MA or support at 64 and continues lower.

 

ACE Ltd

 

If the scenario #2 occurs, I will discard this stock and will not trade it.

If the scenario #1 occurs and the stock closes above 50 day MA and shows reversal in a couple of upcoming days I can consider this stock as a good bullish trade and I will most likely open this trade. If so, I will be buying call options with a potential of later adjustment into a spread.

Another similar bullish setups:
ONB
PII
WAB
KLAC

I do not have any bearish potential trades at this time.

Happy Trading!




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Posted by Martin November 19, 2011
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Is Mercadolibre (MELI) breaking down? Let’s protect it!

Is Mercadolibre (MELI) breaking down? Let's protect it!

I have a long stock position in Mercadolibre. Last Friday the stock seemed to break down from a narrow consolidation sideway range trend which occurred after a large runaway gap. Normally this would be a healthy move, but at the market environment like these days, the market can drag this stock down.

Mercadolibre

This break was on a low volume, so it may be a fake head, but I would like to protect this position in case this is a signal telling me that the stock is heading down.

Why down?

At this point the stock can consolidate by a pull back to 200 SMA (since it was quite overextended when I was buying it). If that happens, my stock position will be sold on a stop loss (set at 82.63 per share), but my protective puts will live on and increase in volume and make up the loss on stock and actually may turn this trade profitable.

If this break is a fake head and the stock returns back up and continues growing, I will sell my protective put (realize a loss on puts) and leave the stock to live on. If the stock continues running up it should make up the loss.

Thus on Monday I am buying the following:

BTO 1 MELI Dec17 2011 82.5 puts

Happy Trading!




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Posted by Martin November 18, 2011
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Autonation (AN) range trade

Autonation (AN) range trade

Autonation is a stock trading in a range. Today it rebounded from the support line (see green horizontal line) and it seems it may go up to the upper resistance line (see higher green horizontal line) to complete another wave of range trending.

Autonation (AN)
Click to enlarge

However, there are two obstacles on the way. The stock is trading below 200 day SMA (see lower red line). The stock may recover and re-test this line as it is now a resistance, or it can break thru as it did at the beginning of October.

well, right now I am buying one call contract and later (maybe next week) I will be looking at adjustment of this trade.

Here is the order:

BTO 1 AN Dec17 2011 33 strike call

Happy Trading!




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Posted by Martin November 18, 2011
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SPY put adjusted into Diagonal Put Spread


I decided to adjust my original SPY put trade into a diagonal put spread. That will bring some income and reduce the original put cost.

I have:

1 SPY Dec17 2011 124 strike put

and I adjusted this trade into a diagonal put spread, so the final holding will be:

1 SPY Dec17 2011 124 strike put
-1 SPY Nov25 (weekly) 2011 118 put

The ideal landing spot will be slightly above $118 per share next week, when weeklies expire. In that case I will keep the whole credit I received and I can repeat this again the following week or liquidate the entire position for max. profit, since my longer term puts will gain a lot as well and short term puts will expire worthless.

Happy Trading!




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Posted by Martin November 18, 2011
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Options expiration Friday – November 2011


Today is an options expiration day. That means I had to take care about some of my holdings:

SLV

I hold long term SLV January 2012 Put contract. Against this contract I was selling covered calls and this month I sold one SLV Bear put Spread contract. This contract was as follows:

-2 SLV Nov19 2011 31 Put
1 SLV Nov19 2011 33 Put

Looking at this contract it landed at the ideal spot (well at the time of this writing it is still traded and it could change a lot, but I decided to take profits now). The ideal spot would be that the stock price lands slightly above $31 strike price. It happened today several times and if the market runs sharply down by the end of the day the stock may drop lower below 31 and I would be giving my gain back.

So I decided to close SLV bear put spread and take profit $1.48 (or $148) per contract. With my original cost 0.23 per the contract I collected 1.25 (or $125) per contract.

This trade along with my previous covered calls lowers the cost of my original long term SLV position from 2.78 to 0.78 per contract.

DIS

This trade was a disaster and all options will expire worthless (most likely) I am not going to take any action and take 100% loss or $38 per contract. Before the end of the trading I may close the trade to recover some of the money back.

GDX

This Bull Put Spread acted well over last few days, but today (at expiration day) turned bad. I owned:

-1 GDX Nov19 2011 58 put
1 GDX Nov19 2011 55 put

I closed my short 58 strike put, paid 0.23 per contract and let 55 strike put expire worthless. The profit is 0.57 per contract.

APA

This put butterfly ended upside down (well, not that bad) so I had to close it. I had

1 APA Nov19 2011 100 puts
-2 APA Nov19 2011 95 puts
1 APA Nov19 2011 90 puts

The 100 strike puts were jumping around 100 dollar level, so I tried to sell the whole contract when the 100 strike put was In-the-Money to collect the most out of this position and recover as much as possible. I was able to do so and limit my loss to 5% only.

Overall, this month was quite successful. Let’s see what the next month will bring.

Happy Trading!




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Posted by Martin November 17, 2011
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PG trade adjustment, SPY & POT puts new trade

PG trade adjustment, SPY & POT puts new trade

I am trying to trade longer term options trades. One of the trade I opened recently was long (April 2012) puts on Procter & Gamble (PG). Now I want to be opening short term trades against this trade to produce income. Same thing I am doing with my SLV long term holding and the same thing I will be doing with my Potash (POT) holding which has opened this morning.

Therefore I am opening the following new trade on PG: for each 1 long put contract I sold this morning the following:
STO 1 PG Dec17 2011 60 put @ 0.38

This trade executed this morning.

Based on the market move today I also decided to get back into shorting the market. Recently the market was forming a triangle and the question was which side the market breaks out. Most of the time, the market should break in the direction of the preceding trend, so in this case it should break upwards. However, the market is breaking down. If it closes below the lower support line of the triangle, we may expect further drop, which equals the height of the triangle. That means we should go all the way down to $115-ish level. However, we have two major supports on the way: 50 day SMA (brown line on the chart) and long term major support at 118 level. So this trade may be short lived.

SPY trend

However, I decided to open a new trade on SPY:
BTO 1 SPY Dec17 2011 124 put @ market

The trade opened this morning at 5.71 per contract.

I also opened my POT trade this morning.

Happy Trading!




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Posted by Martin November 11, 2011
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Consolidating market in Rally atempt


Today the market jumped up forming a triangle consolidation pattern after nice rally. We bounced off of the lows in October and had very wild and extended rally. Although I didn’t believe in this rally due to fundamental underlying data, this consolidation may change everything and we are truly forming a new bull trend. Every time news from Europe hit the market, buyers step in and hold the key levels at 1,220-1,230 zone buying back in.

So what can we expect now? After an extended rally like in October this consolidation pattern is a good sign that this rally is healthy. Most likely we will break up. For me that would be changing my strategy from bearish into bullish, looking for trades moving up. I will also be adding SPY calls to my portfolio.

I must admit, that this last quarter wasn’t much successful to me. I missed the rally and my bearish trades hurt my account. I hope the next quarter will be much better.

For this new development in the market, I am changing the market status to Rally Attempt. However, in the market everything is possible and we still may see drop if Europe fails to handle their debt crisis.

Happy Trading!




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Posted by Martin November 09, 2011
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DIS trade adjusted


I adjusted my entry limit on Disney (DIS) trade due to gap down this morning.

The trade executed short after.

Happy Trading!




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Posted by Martin November 09, 2011
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Stocks plunge on Italian worries – it’s happening


Here we go. What economists were saying all the time and the markets were successfully ignoring has happened this morning. As I wrote in my previous posts, the Italian bonds raised at 7.4% rate which is not sustainable for Italian economy to pay (Italy’s budget can afford paying a rate around 4.6% only). Italy at this point is a hot candidate for a bailout from EU. That will sink stocks even deeper.




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Posted by Martin November 08, 2011
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DIS Put Butterfly


Here is another trade I am going to take tomorrow. It is a butterfly on Disney (DIS) and the ideal landing spot to profit will be at or around $32 per share, so expecting Disney to drop in price.

I entered the trade today night and it should open (if it meets my entry price) tomorrow morning.

Happy Trading!




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