Sunday, December 31, 2006

Year in review

Thanks for reading along all year. I'll have more time for the market and blogging in January 2007.

Looking over my trades for 2006, the bottom line is that I am up about 10% to 12% for the year. This underperformed the major stock indices. However, my style entails less risk than buy and hold. I closed out 103 trades for the year. The average holding period is 38 days. Exact performance numbers are difficult to ferret out because I move money in and out of my trading account. For the most part, it has been a good year.

Some of my winners include BAB British Air, GM General Motors, PDLI Protein Design Labs. Some of my losers include BBY Best Buy, AMD Adv Micro Devices, WIRE Encode Wiring.

Happy New Year. Cheers.

Thursday, December 28, 2006

Nervous

I hear a blurb on the one-minute radio stock segment from some money manager saying there is nothing to worry about, that he is extremely bullish, that there is no reason to sell now. Investor's Intelligence also shows a high percentage of bulls. I also have this thought in my mind to buy calls. Me, the call seller wanting to buy calls. All of this makes me nervous.

Now, I've written many a time about how emotions can betray a trader (or an investor), and how they have often betrayed me. I'll stick to my knitting, meaning finding stocks where I can sell the calls, staying well diversified, and ruthlessly cutting my losses. This last bit is how I have survived in the markets as long as I have, while many a smarter and many a more nimble a trader has long since given up the ghost.

Tuesday, December 26, 2006

Couldn't pull the trigger (C and MRK)

Citigroup C and Merck MRK are on my short list to buy. I could not pull the trigger today, and watched C close up half a point and MRK drift down a few cents. Tomorrow is another day.

Odds favor the bulls this holiday week. With the holidays time also seems to tick extra fast for option holder. First week of the year often brings volatility.

Friday, December 22, 2006

Buy GM General Motors

Buy GM, sell the Feb 30 calls

I forgot to mention that my EWJ Japan Fund ETF was called at the 12/15 expiration. At that time, it put me 100% in cash in my trading account. Today's GM buy is moving my big toe back into the water.

The FDX setup turned into a setup all right--for the bears. There is additional risk taking a position ahead of news. Sometimes I will do it, other times, I prefer to wait until the reaction. Both styles of trading can yield profits. Options usually cost more just ahead of news.

Wednesday, December 20, 2006

FDX Federal Express setup

FDX has a nice looking setup for their earnings report before the open Wednesday. The chart has a nice base. Resistance is at the 52-week high of 120 if there is a blow out report. Of course, earnings could also fizzle, or be a non-event.

Sunday, December 17, 2006

Dogs of the Dow (again)

This popular strategy that picks the highest yielding Dow stocks worked well in 2006. I profited from two trades in GM, a 2006 "dog" and still on the list.

Some folks like to buy these high yielders at the start of the year. As always, if a person knows someone is going to buy soon, it is often good tactics to buy in ahead of them. With that in mind here is a link the current list of highest yielding Dow stocks (link). Of these, VZ Verizon, MRK Merck, and GM General Motors look the most interesting to me.

As always, my posts are not a recommendation to buy (or sell).

Tuesday, December 12, 2006

How to start your day

Brett Steenbarger at TradingMarkets.com has an article about how he starts his trading day (article). Most successful traders have a daily/weekly/monthly routine. The discipline from keeping a schedule is often reflected in the discipline exercised buying and selling.

Thursday, December 07, 2006

Gap trading

Article with data on gaps at Trading Markets (link). The bottom line is to trade opposite the move, eg short a gap up, buy a gap down. Keep in mind that gap days are often extremely volatile and prices can move quickly and fills can be hard to get at the price a trader wants.

I often prefer to wait until the dust settles and calmly establish my long or short a day or more later.

Sunday, December 03, 2006

Best practices

A good article about best practices (link).

I did a study on my trades some years back. My most consistent winners were buy-writes (buy the stock, sell the call). Some of my worst losers were stocks that I bought on fundamental valuations. Emotion is often the enemy for traders and I am not immune. I still occasionally get that fear and go to a fight or flight response. For traders, fighting the market can be the road to the poor house. I know too many sad stories of that type. Flight often means selling at a short term low.

That said, risk control, risk management are absolutely key to staying in the game. Every position trader has bad streaks. Learning to limit the losses is a vital lesson.

Keep a journal, use it. I tell folks there are a 1000 ways to make money in the stock market. Find one that suits your personality, that you can stick with.

Big fish, little fish

Interesting article about what time of the month money managers often buy (link).

GM General Motors again under 30 after Kerkorian unloads another batch of stock. This kind of situation is akin to the little fish, with the big fish Kerkorian dictating the movement of the stock with his moves and leaks. The above article is when little fish can get in ahead of the big fish. The big fish has to come in and buy, that is their directive. What might change is that patterns become known and the big fish changes their buying patterns.

In an efficient market all information flows freely and there is no advantage. However, the real market is never quite 100% efficient and some patterns such as the monthly buying patterns, and others often persist for long periods of time.