Thursday, August 31, 2006

A top in oil?

Two commentators at Trading Markets select the same topic, about a possible top in oil stocks. Here are the links to the Deron Wagner article and the Gary Kaltbaum article.

In the sector, Holly Corp, HOC has an ominous looking and clean head-and-shoulders top. It shows up best with the six-month chart. HOC options are priced with an implied volatily of 43% for the October strike. Today's price action of a gap lower and a rally, are not the best setup for buying options. Time decay is going to be a factor with the long weekend eating up several days. Another hurricane could spike oil higher, so there is significant risk of shorting vs. buying put options. Looks like a decent short play in terms of sector, and the chart, but now may not be the best time to initiate a position.

Wednesday, August 30, 2006

Buy Gold Eagle 20th anniversary set

Another quiet day in the stock market. Cross currents and a few minor stories, including one about my stock AU, Anglogold possibly facing power shortages because of lower hydro power in the region.

I did buy something today. The 20th Anniversary gold eagle set from the U. S. Mint (link).

Tuesday, August 29, 2006

XAU holds on

Another weird day, the XAU holds on to a gain, finding some buyers as spot gold takes another hit (5-day-chart XAU).

The broad market dips, and then rallies back to a positive close. The Russell 2000 has a good day (IWM chart).

Again, all this is happening on low, low volume, so while up is good for the bulls, it is not reason to get too excited.

Monday, August 28, 2006

Caught off guard

I am surprised by the strength and depth of today's rally. The non-event of Ernesto as a would-be hurricane has been the catalyst. The week before Labor Day is usually one of the lowest volume trading weeks of the year.

Friday, August 25, 2006

When in doubt stay out

Interesting article by Mark Boucher over at Trading Markets (link).

This week the market has drifted slightly lower with several of the my stocks getting hit hard enough for me to get out. Again, that is a difference between long term investing and trading. Traders that are stubborn and refuse to get out when the market turns against them, tend not to have long market lives. Value investors in particular can and do wait out times when their investments move lower.

Thursday, August 24, 2006

Sell GM, Roll down AU call

Buy back the Oct 50, sell the Oct 45 call
Phooey. AU AngloGold drifts lower and I roll down the call so I am at less risk.

Sell GM, same deal as JWN, getting out before I have a loss.

Sell JWN Nordstroms

Sell JWN for a breakeven profit
CHS Chico's Fas and WSM Williams Sonoma out with disappointing numbers and high end retails get hit. I get out at before the gain turns into a loss. Last time this type of event happened to me was BBY Best Buy on a day when Brunswick had bad news. The stock, BBY fell hard and became a loser. Better safe than sorry.

Wednesday, August 23, 2006

1 for the bears, also MauiTrader

Bears score a moral victory today on a modest orderly decline. Schaeffer's reports (link) most sectors down, and unusually high put active in GM which generally is bullish for the stock. I own GM and it was down today, along with most everything else.

I found another blog posting real trades (instead of paper trades or analysis) at MauiTrader.

Tuesday, August 22, 2006

Buy AU AngloGold Ashanti Ltd

Buy AU AngloGold Ashanti Ltd
Sell the Oct 50 call
AU is one of the few gold stocks down right now. Spot gold is down a bit. I think AU will move back in line and get to break even for the day. As I wrote in a previous entry, gold looks neutral to me. Seasonally, the holiday season is when jewelry demand is highest.

Saturday, August 19, 2006

A test for gold

Clive Maund on Kitco commentary called this week's drop in spot gold in his Monday 8/14 article with charts. The XAU chart is a Rorschach test of sentiment. Some might see an ominous head and shoulders top forming. Some see the pennant that Maund writes about. Some see the uptrend intact and connect the dots on the lows. The first interpretation is bearish, the second neutral, the third bullish. Depending on which camp a person leans towards each has its merits.

As always price action is where the rubber meets the road. Pennants tend to be boring for most traders as the price swings get smaller and smaller as the point is formed. However, this is exactly the kind of a price action that buy/write strategies work well. Option premiums do reflect that diminished volatility so profit potential is limited.

KGC Kinross has held up well considering the decline in gold prices (chart). My purchase of a couple of physical gold coins could definitely have been timed better. The price went up for a couple of days but is now a good $25 an ounce lower than my buy times.

Friday, August 18, 2006

Buy RAI Reynolds American

Buy RAI Reynolds American
Sell the Sep 62.5 call (in-the-money)
Dividend plus option premium play on news.

Positions: BAB, EWJ, GM, JPM, MCD, RAI
All hedged, long stock, short calls, JPM to be called away today

Thursday, August 17, 2006

HPQ pop and then fizz

HPQ Hewlett Packard/Compaq pops higher at the open. It traded as high as 37.25 premarket. It dips below 35 before finding some trader support (5-day-chart). I had this stock earlier, but got spooked and sold out, leaving a lot of money on the table.

A buy/write strategy will leave a lot of profits out there if a stock rockets higher. However, over time they do as well as buy and hold with less risk. It is not so easy to buy and have a stock immediately go up. If it were, everyone would do it ;).

Last month's option expiration week had a bearish bias. This week, so far has favored the bulls. It is often like that as traders get conditioned to expect something, and then the market does the opposite.

Wednesday, August 16, 2006

Breakout or Fakeout?

Dave Landry at TradingMarkets presents some evidence in his article. Here is another chart (3 month SPY candlestick).

Meanwhile GLD is tightening its range (chart). Yesterday's up day for mining stocks while the spot price went down telegraphed today's firmness in the spot price.

Tuesday, August 15, 2006

Buy GM General Motors

Buy GM General Motors
sell the Sep 30 call

Today's morning rally has almost all stocks on my list green.

Monday, August 14, 2006

Peace Rally

Stock markets all over the world rally after a ceasefire in Lebanon (link). The U.S. rally fades by the close, so traders are still nervous in what is a trendless treacherous market.

GM gets a downgrade, F an upgrade. GM under 30 looks very interesting.

Friday, August 11, 2006

The bearish case

Gary Kaltbaum makes his bearish case at the Trading Markets site (article).

The market continues in its whipsaw ways, the latest being gold. Yesterday, on the bomb arrest news, gold fell, and today's gold rally failed (5-day-chart). It is harder to make a bullish case when gold can not go up when there is news.

Personally, I have that radioactive feeling at the present and remain in the bunker.
I have been overtrading the past few weeks and while that is good for the broker, it is not so good for me. For every trade, the spread and commission is a little nick and over the course of time, a trader can bleed that proverbial death of a thousand cuts.

Positions: BAB, EWJ, JWN, JPM, MCD
all long stock, short calls, also have lots of cash

Wednesday, August 09, 2006

Nasty selloff

A rather nasty sell off in the blue chips. Good earnings from DIS Disney and CSCO Cisco Systems give the market a morning lift, but sellers move in and send the DJIA to a triple digit closing loss. The market has to be frustrating for many, as some bears probably covered into the morning strength, and some bulls bought, then they got whipsawed.

There is an old cliche: "Don't argue with the market." No one person or firm is bigger than the market. The corollary might be "The market is always right." Traders try to add liquidity to profit off short term fluctuations or imbalances, but overall these are sound words to live by. The market continues in an overall sideways pattern.

I'm keeping my powder dry for now, but that can change in a moment, if I see a low risk entry point (long or short).

Tuesday, August 08, 2006

hop, skip and jump on Fed news

The market drifts lower into the event, then rallies for two minutes before falling off. The news is about as expected. Schaefer's (link) reported high call activity in QQQQ prior to the news. This kind of sentiment lowers the odds of any significant rally.

Friday, August 04, 2006

The Bear got me today

Market close--looks like I got owned today. Much of my selling was near the lows and I took some losses that would be back to gains by the close. Some days the bear gets me. Today was one of these days. My winning percentage took a hit with three losers and one winner for closed trades.

Tomorrow is another day, and next week another week of trading. Good luck to all those reading.

Sell HPQ, IWM, XLE, PGR

I don't like the way the market is acting. I sell HPQ, IWM, XLE, PGR

Right now it looks like I hit the local low. Sigh. Such is life. PGR Progressive sold for a big loss. HPQ a small profit. IWM a break even loss. XLE for a small loss.

Roll down BAB call

Roll down BAB call British Airways

Buy the Sep 75, Sell the Sep 70
BAB out with earnings and has disappointing comments about the rest of the year. Stock takes a 7% hit in London. Phooey. There is always this chance going into an earnings release.

PGR Progressive also out with earnings and stock drifts higher.

Positions, all long stock, short calls
BAB EWJ HPQ IWM JPM JWN MCD PGR XLE

Thursday, August 03, 2006

Buy JWN Nordstrom, Buy BAB British Air

Buy JWN Nordstrom's
Sell the Sep 35 call

JWN higher as retailers report monthly sales results. Earnings due out Aug 17th. Decent option premium out to September.

Buy BAB British Air
Sell the Sep 75 call

Airlines moving higher as oil prices dip.

Sell ADM Archer Daniels Midland

Sell ADM Archer Daniels Midland
Buy the Aug 40 call
Stock acting poorly after earnings two days ago (3-month-chart). A retest of 40 looks possible and that would take away almost the profit from my buy/write. Again, this market is so difficult, I am taking my profit while it is here.

Also in the news, SBUX Starbucks is the big name bombshell of the day with disappointing same store sales.

Wednesday, August 02, 2006

Low VIX (Volatility index)

The VIX is almost back to serene levels (chart). For beginners, VIX is the volatility index for CBOE options. Volatility means how fast stocks are moving, though generally a high VIX occurs during steep market declines, while quiet markets or steep rallies usually produce a decline in VIX.

Some folks call VIX a fear indicator. Conventional wisdom is that a low VIX is a sign of complacency and dangerous for bulls. Low volatility translates into lower option premiums. Used in isolation by itself, VIX is a poor timing tool. A low VIX may persist for some time before a decline begins. A high VIX may go much higher before a bottom is in place. I see it as a confirming indicator, and a quick sentiment gauge. Right now, VIX is telling me to continue to be cautious.

Some pundits are predicting a fall low for the stock market. Seasonally, August has been one of the worst months for the stock market. Like the VIX, seasonal factors are not enough to trade on by themselves, but one more thing to consider.

Tuesday, August 01, 2006

WFMI Whole Foods Markets lower

Whole Foods Markets down on earnings (chart). Even with the decline, it remains richly valued. There is a shift towards the type of food WFMI sells, however, competition from other stores stiffens as they start to stock the same or similar products. If anything WFMI looks like a chart. However, with a steep decline and a gap open lower, it is quite oversold. A rally back up to the gap would be a place to buy puts or short.

Gold and silver rally today. I bought a couple of gold coins during the past week.