Wednesday, September 26, 2007

Buy GM General Motors (sell puts)

Buy GM General Motors, sell Nov 30 puts
GM is up on news of strike settlement. Stock is around 36.

Long GDX, GM both hedged. GDX getting hit today. We will see if the "Long Beach curse" occurs this year. Often times the Long Beach coin show marks a short term top in precious metals. It is an anecdotal indicator.

Tuesday, September 25, 2007

Sell GLD

News of a major increase of gold reserves at one of BHP's mines hits the gold market. I take my small profit. Sell GLD. Don't let a profit turn into a loss. Recently, I let that rule slide a couple of times and it bit me. It may bite the other way now, but after a losing streak, the last thing to do is keep letting things slide.

Still long GDX hedged


Friday, September 21, 2007

Three gold price targets $750, $850, $900

Looking at the ten-year spot price chart for gold gives three intermediate price projections.

The most bullish is $950, measuring the move from $450 to $700 and projecting the same move from $700. The next would be the width of the wide triangle from $550 to $700 and adding that $150 measurement giving a target of $850. The third target would be to take the most recent trading range of about $50 to give a target of $750. Reading charts can be like reading tea leaves.
As I wrote in rock, paper, scissors, that in my experience, technical analysis and chart reading can and will be overwhelmed by external news events and fundamental news. If someone patents a device tomorrow that cheaply extracts gold from sea water, the price is going to be limit down, no matter what the charts say.

As readers know, I have been on a losing streak, so it is very tempting to cash in the most modest of profits.

Long GLD straight, long GDX hedged

Hindsight glasses

A good week for those trading with hindsight glasses. Certainly huge profits were made by a tiny percentage. Some were clever enough to out smart themselves, and may have lost money.

This was a frustrating week for me. I feel like a baseball player mired in a slump. Again, patience is the word of focus. Traders go through good times and bad times.

Thursday, September 20, 2007

Buy GDX (sell puts)

Buy GDX (sell Oct 43 puts)
Sell Oct 43 puts, this is the old high.Old resistance becomes support on the breakout. Gold is moving up today. GDX is a gold stock mining index fund.

Long GDX via short puts, long a small position in GLD

Wednesday, September 19, 2007

Rock, paper, scissors

Sometimes a big news event comes along and swamps everything else. Such is the power of the Fed at times. Earnings are next in the pecking order. Technicals can sometimes overwhelm earnings, and the market, but those tend to exceptional cases. Further down the list are other indicators such as calendar tendencies or sentiment indicators like: insider buying, option open interest, short interest.

On a day like this, that funny line comes to mind: Lord give me patience, and give it to me now. One of the few secure thoughts I can come up with is that at least I wasn't short during this rally. I am glad that sell strangle order didn't go through, because it would be underwater with this powerful rally.

Thankfully, it is the stock market, and there are always new and interesting opportunities to evaluate.

Long: GLD, which had a tepid day as it reaches resistance at the highs from a year ago.

Tuesday, September 18, 2007

Rate cut excitement

Fed rate cut of 50 basis point (half a point) surprises me. I expected 25.

The two trades I consider most, and back away from, are long EWJ (Japan fund) and long GDX (gold stock fund). Why did I back away when the news is so good? In the past, when I get all excited about getting in, is exactly when I get hammered.

I often write about letting the dust settle and trading the technicals after the news is out. Option spreads went super wide just before the Fed news, and for a half hour after the news. It made it difficult to get in or out during that time period.

Still long GLD

Friday, September 14, 2007

GLD unable to hold gains

GLD pops up early, but slips to a loss to the close (chart). Not exactly encouraging behavior, but not unusual either. Some chart readers are seeing a double top where I am seeing a breakout. I've seen this pattern before, a breakout from a flat base with minor resistance at an old high just above the base.

I placed an order to sell a strangle on IWM but didn't get filled. I still feel out of step with the market. My limited trading the past few weeks reflects that.

Tuesday, September 11, 2007

Rosh Hashanah-Yom Kippur

David Gaffen quotes Yale Hirsh on this calendar trade at MarketBeat Blog (link). A common problem with seasonality trades, is that once a pattern becomes widely known, traders jump the trade, making the signals less reliable.

>>
What’s working now is the reverse — selling on Rosh Hashanah, buying on Yom Kippur – the idea being that more people are closing out positions in advance of spending the holidays with family.

It’s not a bad strategy. On average, from 1971 to 2005, the S&P 500 has fallen 0.4% between those days, with a number of real doozies, including a 2.2% decline in 2005 and a 1.9% drop in 2004. (The data doesn’t include 2006, when the market rose 1.6%.)

“Perhaps it’s Talmudic wisdom, but selling stocks before the eight-day span of the high holidays has avoided many declines, especially during uncertain times,”
>>

Buy GLD Gold ETF

Buy GLD on the breakout from $700
It is difficult to buy when gold is overbought and has run straight up during the short term. That said, this is a small position with a plan to double up on a pullback to support.

Friday, September 07, 2007

Gold $700

Is it breakout of fake out time for gold? Jeff Kohler cites $730 as the fulcrum buy point in his blog. The "Option Addict" rarely mentions metals or commodities, so it is more interesting than the steady drumbeat of buy-buy-buy from some of the perma bulls on other sites. Kohler mentiones the five year chart, though the 2-year chart highlights a beautiful text book base. These kind of chart formations can fuel a big bull run, so stay tuned.

Elsewhere, I am tempted to sell a strangle (both a put and a call) on IWM (index fund), but have second thoughts. This would be a bet that the index would stay in a trading range.

Still 100% in cash in my main trading account. Bull? Bear? How about chicken?

Wednesday, September 05, 2007

Still on the sidelines

I still feel out of step with the market. I wanted to go long yesterday, Tuesday, but thought better of it after seeing all green plus signs on my main watch list. Usually, that is a setup for at least a short term pull back. When a trader listens to the voice saying "do something," it usually ends badly. Especially if coming off a losing streak.

SHLD, BA, AAPL are some stocks I am watching to trade. GRMN, DE shot higher after I close my longs. BA is the most interesting as long term investment. There is a decent base at 90 (stock at 95/96).