Chasing a deer (DE)

I am late to the game on DE Deere. The chart shows a textbook base and breakout. The fundamentals also look quite decent (stats). A pullback towards the base at 90 would be the desired entry point. Another decent entry would be the 50-day-moving average (the red line in the chart link).

More ETF: PHO, PBW, FXE

Some interesting ETFs:
PHO small cap water resource ETF
PBW clean energy ETF
FXE Euro currency ETF

As always this is not a recommendation to buy or sell. In this case, it is something showing up on my radar, perhaps for action at a later time.

Lots of movers

Lots of movers on news including MDT, DE, GOOG. BA at a new all time high. GDX gold ETF moving up.

Me, almost all in cash, only position is a small one in EWJ. This doesn't mean I am bearish. My current schedule doesn't allow much time for research or execution. Given that it is often safer to sit. It is frustrating to sit, when there are so many good movers.

TM Toyota has pulled back to its breakout point. Now it is a $196 billion dollar company, so it can only grow so much. However, it is extremely well positioned vs. its main competitors.

Sell DVN Devon Energy-called away

DVN Devon is called away for a small profit.

With the DJIA at record highs it is easy to say that I would have done better sticking with my most of my recent longs. However, hindsight isn't readily available in the present. Some traders make the mistake of learning yesterday's lesson and applying it to today. If someone knows the market will advance another 3% next month, of course it will pay to be bullish and refuse to be shaken out on any dips.

The most recent example is housing stocks that gapped down at the open on Friday, but recovered most of the losses by the close. Again, the hindsight glasses always work, but are not available at the time of decision. Just when a trader becomes complacent and stops taking small losses, the market will hand out a big loss just to remind them that complacency can be dangerous.

A Riddle

Here is a little puzzle that may stymie many a professional trader. Suppose a certain stock exhibits a true (geometric) random walk, by which I mean there is a 50-50 chance that the stock is going up 1% or down 1% every minute. If you buy this stock, are you most likely, in the long run, to make money, lose money, or be flat?

Answer at the link.

HD Home Depot?

A volatile day for HD Home Depot (3-month-chart). The stock opens lower on earnings, and then rallies, closing with a big gain for the day. Is it possible that the bottom is in for housing related stocks? I've written it many times, that picking bottoms is a dangerous and not so rewarding pasttime. Reaction to news can be a useful indicator. When seemingly bad news comes out and the stock still moves up, a lot of people have already sold, and not that many are likely to sell in the near future.

Sectors topping out?

Gary Kaltbaum at TradingMarkets writes about several sectors that he believes are topping out (link). Brokerage, housing, retail are all mentioned in the article.

Again, this is one of the strongest seasons for being long stocks. However, retail stocks often stall until Christmas results come in, and are positive.

Bears skewered, also a look at TM

Democratic party gains do little for the bears. The market opens weaker, however, even groups that are expected to do much worse under Democrat rule such as tobacco and defense have a relatively strong day.

I will say that I missed the boat, thinking that the election would lead to a tradeable selloff.

TM Toyota up on good earnings, also has a pretty chart.

Gold back to $750? BA and Airbus

Clive Maund likes the gold chart (Kitco article). Of the analysts writing on the Kitco site, Maund has been as right as anyone the past several months.

I have been surprised at the two day rally. What I wrote about months ago concerning Boeing and Airbus seems to be unfolding. Federal Express cancelled their orders for the new Airbus jumbo jet and BA stock jumps.

A study on the buy/write strategy

A study by Callan Associates examines the buy/write strategy, link to PDF (need Acrobat reader).

I'll cut to the chase, the bottom line is that the basic buy/write strategy, for the study period of 1988 to present has equaled the returns of the SP500 with much less volatility. The confirms my basic belief that buy/write offers market returns with less risk.

Of course during market advances, buy/write will underperform. During flat periods and down markets, buy/writes will outperform. In down markets, yes, buy/writers will take their lumps, but if a trader continually updates their hedge, about half the loss can be mitigated. During trendless flat periods, buy/writes are one of the best performing strategies.

As for the market, I have been looking for an election related sell off. I remain almost all in cash, with two hedged positions in DVN and EWJ. I have had little time for patient market analysis, so the cliche is when in doubt, get out.

The four year cycle presidential stock market cycle points up from here. However, like I said, in my opinion, cycle work is one of the least dependable indicators. Especially when the cycle is widely known, and widely quoted like the four-year presidential cycle.

Cheers.

WFMI crash and burn

WFMI Whole Foods Markets disappoints on earnings and sales and the stock is down 16% in the after hours. (two year chart)

This is a richly valued growth stock, that has now lost it growth status. When that happens look out below. For position traders the day of news can be a difficult time to establish positions. Option premiums tend to be extra high. 50 is round number support, but people really have to grind through the fundamental numbers to see if that level is worth buying at.