My trading signals have told me to get out of TRAD and WDC. Of course I want to eliminate emotions from my trading so I closed out the positions. Damn, I wanted WDC to make a run for it, but I will have to wait for some time to get back in in the future. I can't let emotions ruin my trading. I don't feel as bad letting go of TRAD. It has been spinning its wheels here for the past few weeks. It looks as if it is trying to break out of a cup and handle, but the trading volume shows a lot of selling. Remember, don't let emotions ruin your trading. I think there is going to be another opportunity to get back into TRAD within the next two months.
I am sitting on ICE and not selling a covered call as of yet. It is slowly climbing and the amount of buying is over-riding the selling when you look back over the past few weeks.
OVTI looks as if it is going to use the 50 day moving average as support so I am holding onto this one.
DXPE is making a nice move as of this posting - up 3.47% today.
ENTG is floating back to a proper buy point. If I had more $$ I would buy in.
Eventhough WCC had a drop a few days ago, big money buyers bought many more shares. This gives me the sign that WCC has hit a bottom and is heading back up.
Remember, you can go to www.stockcharts.com and type in any of these symbols and look at the charts.
Good luck trading. JD
Tuesday, October 24, 2006
Sunday, October 22, 2006
BACK TO REALISM AFTER OPTIONS EXPIRATION DAY
Well, I paid more attention to my portfolio during the past week because I had plenty of covered calls out on my stocks that are in my retirement account. Some were close to being "in the money" so there was a chance they could have been "assigned."
I know there is a lot of jargon in that first sentence so let me explain a little. In retirement accounts, a trader has the capability of selling a covered call (click on this link to learn more about covered calls). I use them when a stock has made a nice run and I expect the stock to stay neutral meaning I don't see much upside or downside movement. I will gain a lot of money if the stock trades in this neutral fashion. WHY? Well, a covered call loses value over time. WAIT, if a covered call loses value over time, how does that make me money? Simple math, two negatives make a positive right? I SOLD a covered call and the covered call will LOSE VALUE over time. Those two negatives make me positive money. It takes a little getting used to to realize that you can make money if a stock stays neutral so click on this link for covered call strategies.
I already owned 500 shares of ICE in my retirement account that I bought on September 29th at $75.40. Here is the proof:
9/29/2006 ICE BOUGHT 500 SHARES OF ICE AT $75.40
Commission ($7.00)
Cost basis: ($37,707.00)
On 10/5/2006, I then sold a covered call on ICE as follows:
.ICEJP
SOLD TO OPEN 5 CONTRACTS OF OPTION .ICEJP AT $5.50
Commission ($13.34)
Cost basis: $2,736.66 (No parentheses means I received $ in my pocket.)
The day before the options expired, I wanted to avoid having my stocks bought off of me in a process called "assignment". If I would have kept the contract and NOT BOUGHT it back, my ICE stock would have been bought off of me at $80 since that is what the covered call said I had to do. So to avoid assigment, I bought back my contract/covered call. Here is what I bought it back for:
10/19/2006 .ICEJP
BOUGHT TO CLOSE 5 CONTRACTS OF OPTION .ICEJP AT $1.75
Commission ($13.25)
Cost basis: ($888.25)
So, I made $1848.41 on that contract in 14 days AND I still hold the stock. ($2,736.66-$888.25 = $1848.41 after commissions) I expect the stock to continue a slight upward bias and not much movement so I plan on selling another covered call soon.
That $1848 amounts to a 68% return!!!! (OK, I had to do that because it just shows you how those flyers you receive in the mail proclaim 400% RETURN IN 6 MONTHS!!! are crap. I too made 68% in one month on this one trade [$5.50-$1.75 = $3.75 thus, 3.75/5.5 = 68%.] Sure I made 68%, BUT that $1848 profit was nothing compared to how much the stock is worth. It is just a little added bonus to my portfolio and I wanted to point out how statistics can be used to manipulate you and your emotions).
I am still liking OVTI so I plan on holding on and keeping a stop loss order around $14.38.
ENTG has slid back to a proper buy point. Why would I buy a stock that is retracing? Well, there is not a lot of selling as noted by the decrease in trading volume and a decreasing price. What I don't want to see is a DECREASING price with INCREASING trading volume.
TRAD is an oddity. A lot of shares traded and it is treading water. Not sure of its next movement.
ADM has had equal up weeks versus down weeks for the past 6 weeks, AND the price has held steady around the 200 day moving average. Still waiting for direction on this one.
ANDE - I am seeing more accumulation in this stock. My indicators say "buy" but since I don't have the $ to trade it, I am going to paper trade it to make sure that my indicators are still working for me.
HSR - Well, it's holding at $8 again. I still have half my shares from when I bought around this price before the last breakout. I don't think I am going to buy in again. Remember, I said this was a risky trade.
PACR may float around its 200 day moving average for a while. I played this stock too by selling covered calls on them about 7 days before the options expired. Here are the details:
10/13/2006 .QZTJF SOLD TO OPEN 5 CONTRACTS OF OPTION .QZTJF AT $0.85 Commission ($13.34) Cost basis: $411.66
Here is an example of the covered call "expiring worthless" meaning that I sold the contract so someone could buy the stock off of me for $30 last Friday (options contracts expire in the third Friday of every month) Since the stock closed below $30, I got to keep the whole premium of $425 minus commissions. Don't think that is a lot of money? Try doing that 12 times a year. That's an extra $5,000 in your retirement account just on this stock alone. Add in the covered call from ICE and this month put an extra $2,200 into my account for this month alone.
BTW, watch DXPE. I believe it is bottoming out. I am ditching DEIX for DXPE.
I am also waiting for TSCM to pop. I believe it is creating a bull pennant.
Good luck trading. JD
I know there is a lot of jargon in that first sentence so let me explain a little. In retirement accounts, a trader has the capability of selling a covered call (click on this link to learn more about covered calls). I use them when a stock has made a nice run and I expect the stock to stay neutral meaning I don't see much upside or downside movement. I will gain a lot of money if the stock trades in this neutral fashion. WHY? Well, a covered call loses value over time. WAIT, if a covered call loses value over time, how does that make me money? Simple math, two negatives make a positive right? I SOLD a covered call and the covered call will LOSE VALUE over time. Those two negatives make me positive money. It takes a little getting used to to realize that you can make money if a stock stays neutral so click on this link for covered call strategies.
I already owned 500 shares of ICE in my retirement account that I bought on September 29th at $75.40. Here is the proof:
9/29/2006 ICE BOUGHT 500 SHARES OF ICE AT $75.40
Commission ($7.00)
Cost basis: ($37,707.00)
On 10/5/2006, I then sold a covered call on ICE as follows:
.ICEJP
SOLD TO OPEN 5 CONTRACTS OF OPTION .ICEJP AT $5.50
Commission ($13.34)
Cost basis: $2,736.66 (No parentheses means I received $ in my pocket.)
The day before the options expired, I wanted to avoid having my stocks bought off of me in a process called "assignment". If I would have kept the contract and NOT BOUGHT it back, my ICE stock would have been bought off of me at $80 since that is what the covered call said I had to do. So to avoid assigment, I bought back my contract/covered call. Here is what I bought it back for:
10/19/2006 .ICEJP
BOUGHT TO CLOSE 5 CONTRACTS OF OPTION .ICEJP AT $1.75
Commission ($13.25)
Cost basis: ($888.25)
So, I made $1848.41 on that contract in 14 days AND I still hold the stock. ($2,736.66-$888.25 = $1848.41 after commissions) I expect the stock to continue a slight upward bias and not much movement so I plan on selling another covered call soon.
That $1848 amounts to a 68% return!!!! (OK, I had to do that because it just shows you how those flyers you receive in the mail proclaim 400% RETURN IN 6 MONTHS!!! are crap. I too made 68% in one month on this one trade [$5.50-$1.75 = $3.75 thus, 3.75/5.5 = 68%.] Sure I made 68%, BUT that $1848 profit was nothing compared to how much the stock is worth. It is just a little added bonus to my portfolio and I wanted to point out how statistics can be used to manipulate you and your emotions).
I am still liking OVTI so I plan on holding on and keeping a stop loss order around $14.38.
ENTG has slid back to a proper buy point. Why would I buy a stock that is retracing? Well, there is not a lot of selling as noted by the decrease in trading volume and a decreasing price. What I don't want to see is a DECREASING price with INCREASING trading volume.
TRAD is an oddity. A lot of shares traded and it is treading water. Not sure of its next movement.
ADM has had equal up weeks versus down weeks for the past 6 weeks, AND the price has held steady around the 200 day moving average. Still waiting for direction on this one.
ANDE - I am seeing more accumulation in this stock. My indicators say "buy" but since I don't have the $ to trade it, I am going to paper trade it to make sure that my indicators are still working for me.
HSR - Well, it's holding at $8 again. I still have half my shares from when I bought around this price before the last breakout. I don't think I am going to buy in again. Remember, I said this was a risky trade.
PACR may float around its 200 day moving average for a while. I played this stock too by selling covered calls on them about 7 days before the options expired. Here are the details:
10/13/2006 .QZTJF SOLD TO OPEN 5 CONTRACTS OF OPTION .QZTJF AT $0.85 Commission ($13.34) Cost basis: $411.66
Here is an example of the covered call "expiring worthless" meaning that I sold the contract so someone could buy the stock off of me for $30 last Friday (options contracts expire in the third Friday of every month) Since the stock closed below $30, I got to keep the whole premium of $425 minus commissions. Don't think that is a lot of money? Try doing that 12 times a year. That's an extra $5,000 in your retirement account just on this stock alone. Add in the covered call from ICE and this month put an extra $2,200 into my account for this month alone.
BTW, watch DXPE. I believe it is bottoming out. I am ditching DEIX for DXPE.
I am also waiting for TSCM to pop. I believe it is creating a bull pennant.
Good luck trading. JD
Tuesday, October 17, 2006
WATCH OVTI
Last night, I snooped out this stock based upon the software program that I utilize. Here are the trades I executed today to prove that I did buy in:
OVTI BOUGHT 100 shares CASH @ $15.89 Cost basis - $1589.00
OVTI BOUGHT 100 shares CASH @ $15.89 Cost basis - $1589.00
OVTI BOUGHT 135 shares CASH @ $15.89 Cost basis - $2152.15
OVTI BOUGHT 365 shares CASH @ $15.90 Cost basis - $5803.50BOUGHT
OVTI BOUGHT 500 shares CASH @ $16.27 Cost basis - $8142.00
OVTI BOUGHT 100 shares CASH @ $16.27 Cost basis - $1627.00
Total 1300 shares. The stock closed at $16.67 so it was a good purchase. The stock is still in a good buy range as it has just passed its 50 day moving average on higher-than-average trading volume. Buying much higher than this is stretching it and making it a riskier move.
I am only going to mention stocks that appear to be near a buy point or topping out. So here it goes:
ICE made an amazing rebound and this was on the news that the Chicago Board of Trade (BOT) and the Chicago Mercantile Exchange (CME) are merging. Have to wait and see what is going to happen to the covered calls that were sold and whether or not I need to buy them back before the contract comes due this Saturday.
ENTG may be retracing back down to a proper buying point near $11.27. If the stock retreats on lower-than-average trading volume, buying around $11.27 would be feasible.
TRAD is starting to slip. This still is questionable as to where it is going to go.
ADM - still waiting to see what it is going to do around its 200 day moving average.
ANDE - if it pops back above its 200 day moving average, it should be a good buy.
HSR - looks as if it may hold at its 200 day moving average but I dislike the high volume sell-off.
PACR may retreat based upon today's price action, but I wouldn't quite sell it of yet.
Remember, you can go to www.stockcharts.com to get to the stock charting and type in the symbols noted above.
Good luck trading. JD
OVTI BOUGHT 100 shares CASH @ $15.89 Cost basis - $1589.00
OVTI BOUGHT 100 shares CASH @ $15.89 Cost basis - $1589.00
OVTI BOUGHT 135 shares CASH @ $15.89 Cost basis - $2152.15
OVTI BOUGHT 365 shares CASH @ $15.90 Cost basis - $5803.50BOUGHT
OVTI BOUGHT 500 shares CASH @ $16.27 Cost basis - $8142.00
OVTI BOUGHT 100 shares CASH @ $16.27 Cost basis - $1627.00
Total 1300 shares. The stock closed at $16.67 so it was a good purchase. The stock is still in a good buy range as it has just passed its 50 day moving average on higher-than-average trading volume. Buying much higher than this is stretching it and making it a riskier move.
I am only going to mention stocks that appear to be near a buy point or topping out. So here it goes:
ICE made an amazing rebound and this was on the news that the Chicago Board of Trade (BOT) and the Chicago Mercantile Exchange (CME) are merging. Have to wait and see what is going to happen to the covered calls that were sold and whether or not I need to buy them back before the contract comes due this Saturday.
ENTG may be retracing back down to a proper buying point near $11.27. If the stock retreats on lower-than-average trading volume, buying around $11.27 would be feasible.
TRAD is starting to slip. This still is questionable as to where it is going to go.
ADM - still waiting to see what it is going to do around its 200 day moving average.
ANDE - if it pops back above its 200 day moving average, it should be a good buy.
HSR - looks as if it may hold at its 200 day moving average but I dislike the high volume sell-off.
PACR may retreat based upon today's price action, but I wouldn't quite sell it of yet.
Remember, you can go to www.stockcharts.com to get to the stock charting and type in the symbols noted above.
Good luck trading. JD
Monday, October 16, 2006
EARNINGS SEASON WARNING
There are a couple of stocks that I have been following that are expected to report earnings later this week. This means one of two things - the stock will rise or the stock will fall. Looks kinda dumb when I write it, but the rise or fall can be big. If a stock misses its earnings, get ready for a big fall.
So the solutions:
1. Get out of the stock and look away.
2. Stay in on the stock and play.
You could also modify staying in on the stock by buying puts. When you buy a put, you are protecting your stock from a severe loss. If the stock drops the day after reporting earnings, sell off the stock and keep the put in your portfolio for a while. Of course, this sounds a lot easier than actually performing this kind of trade so before you even attempt this type of manuever educate yourself on how to do it. i.e. if you are new to investing just get out of the stock because it is gut wrenching to lose a lot of money. Remember, we are trying to take emotion out of investing.
So, the stocks reporting earnings later this week include: TRAD and WCC
So the solutions:
1. Get out of the stock and look away.
2. Stay in on the stock and play.
You could also modify staying in on the stock by buying puts. When you buy a put, you are protecting your stock from a severe loss. If the stock drops the day after reporting earnings, sell off the stock and keep the put in your portfolio for a while. Of course, this sounds a lot easier than actually performing this kind of trade so before you even attempt this type of manuever educate yourself on how to do it. i.e. if you are new to investing just get out of the stock because it is gut wrenching to lose a lot of money. Remember, we are trying to take emotion out of investing.
So, the stocks reporting earnings later this week include: TRAD and WCC
Be prepared. Good luck trading. JD
Saturday, October 14, 2006
ENTG LOOKS GOOD
I have been watching a few more stocks. ENTG just broke out of a cup and handle so I would buy in on this one. It will meet resistance around $11.79 as that was a previous high around 6 months ago.
Another low priced stock that appears to be etching the right side of a cup and handle is TSCM. The stock may rest near this area of $12 to $13 for a few days and putting in a buy limit order of $11.58 will probably allow one to pick up some shares. What you can also do is buy a few shares now and if the stock retreats to $11.58 buy more shares. If the stock rises, you already have a position and could add more shares after it passes the resistance point of $13.28.
TRAD is still sitting around the buy point. I don't know where this one will go in the next few days. Bank of America came out with a plan to allow free stock trades for customers with $25K or more in their account. Since TRAD (Tradestation) focuses on traders in the higher income bracket, this may present some competition. Personally, I don't see it that way since people who use Tradestation are much more sophisticated in trading than someone who uses a bank to trade stocks.
If ADM breaks down below it's 200 day moving average (MA), this would be one to avoid. For now, it is holding at the 200 day MA. I do not hold any shares as I see better opportunities in rising stocks.
ANDE is picking up a little more steam again, but not a lot of trading volume has gone into the stock lately. We'll have to see how this one works out, too. I do not have a position (i.e. hold shares)
HSR had a huge reversal the past two days. I bought in a $8.90 and took a few off the board at $12. Glad I did, but I still do hold positions in the stock. HSR is a perfect candidate to explain a trailing stop so here is a link to how to pull it off.
http://www.optionsxpress.com/educate/xguides/trailing.aspx
http://www.investopedia.com/articles/trading/03/080603.asp
WCC is doing very well and it is meeting its resistance around $70 as I mentioned before.
LTM is floating around the original buy point, but this is going to be a new support area after the stock climbs past $48.
DEIX has bounced of its 50 day moving average and hopefully head higher. I added more shares at $14.20.
ICE has also had a little bit of selling off just like TRAD due to the same reasons. I sold some covered calls with this one that expire next Friday. I put my strike price at $80 since my purchase price was $75.4140 for 500 shares. In fact, here is my report from my Scottrade account.
INTERCONTINENTAL EXCHANGE (ICE)
SHARES:500
COST/SHARE: 75.4140
TOTAL COST: 37,707.00
CLOSING PRICE: 87.80
CLOSING MKT. VALUE: 43,900.00
SHORT TERM GAIN/LOSS: 6,193.00
% CHANGE: 16.42
Here's the covered call
CALL-INTERCONTINENTALEX OCT (ICEJP)
SHARES: 500
COST/SHARE: 5.4733
TOTAL COST: 2,736.66
CLOSING PRICE: 4.40
CLOSING MKT. VALUE: 2,200.00
SHORT TERM GAIN/LOSS: 536.66
% CHANGE: 19.6%
PACR is has continued it run up and is now 12% past my buy point of $28.79.
Good luck trading. JD
Monday, October 09, 2006
GONNA BUY IN
TradeStation going by the symbol TRAD just popped out of a "handle" in a cup and handle. Buying up to $16.85 is OK, but beyond that is a little risky. This follows the rules of Investors Business Daily. click on the education tab which is free on the website.
Keep a watch out on ADM and ANDE. My software spitted out a buy signal on both of these and I believe these would be good long-term trades. There is a link to the software going by the name of Metastock on the right hand side of this blog. For some reason, it is clear at the bottom of the blog and not next to the latest blog. Don't know exactly why, but at least you know where to find it.
Good luck trading.
JD
Keep a watch out on ADM and ANDE. My software spitted out a buy signal on both of these and I believe these would be good long-term trades. There is a link to the software going by the name of Metastock on the right hand side of this blog. For some reason, it is clear at the bottom of the blog and not next to the latest blog. Don't know exactly why, but at least you know where to find it.
Good luck trading.
JD
EARNINGS SEASON IS UPON US.
Well, we have entered earnings season and this is when the stocks begin reporting the last quarter's earnings and if you are not prepared, you can take a beating. I will have to fill you in on the details of that problem in the near future and how to protect yourself. As for the stocks that I have been following in the past few weeks, let's look at what has happened:
It was a good thing, I got out of FMCN on Friday as the stock dropped another 2.66% today. The benefit is that it was on lower-than-average trading volume which still begs for the stock to rise if it can muster some more buying as has been seen in the past few weeks. What I am saying is that there is more buying than selling. I am basically playing the little whipsaws in this stock and buying on the dips and selling on the tops. Heck, if I can get 2-5% every couple of weeks in this stock, I'll continue to do it. It is just up to you if you wish to play this fast or not.
Now I get to brag about HSR. I have been watching this stock for the past 6 months waiting for it to bottom out. I made the suggestion that buying up to $9.50 is OK and if you have, kudos to you. I got in at $8.90 and it closed today at $11.50. A 29% move in 4 days is not too bad (sarcasm), but remember this was a "risky" trade and not for the light hearted.
Here's another bragger - WCC. It is up 10% from my buy point and I am expecting the $70 mark to be a barrier to resistance for a while. If another opportunity pops up on when to buy, it'll be in this blog. I believe it is etching the right side of a cup and handle. Just think, the Dow Jones has risen 12% each year for the past 100 years on average. If you were to immediately cash out of this position and put your $$$ into a money market account for the rest of the year you could match what the market has done on average, but still be beating this years return of only 7.5%.
ICE is my third bragging point since it has been up 10% in 4 days. I see $70 as a resistance point, but I also think it is building the right side of a cup and handle.
WDC has retraced back down to below my original buy point, but it has done so on low trading volume. I am sitting tight, but I give this a 50-50 shot of breaking out and forming a cup and handle.
LTM is still believe is in a "handle" of a cup and handle. I would buy up to $48, but no higher.
DEIX may see it's 50 day moving average as support. I am still holding onto this one as I think it also is in a cup and handle.
PACR is still floating between its 50 day and 200 day moving average. Watch any penetration of the 50 day moving average as a positive sign and this is a long term signal to buy back in to the stock.
You can check out any of these stocks by clicking on this link:
www.stockcharts.com and typing in the symbol. Also clicking on the light blue lettering will link you automatically with a definition of the word.
It was a good thing, I got out of FMCN on Friday as the stock dropped another 2.66% today. The benefit is that it was on lower-than-average trading volume which still begs for the stock to rise if it can muster some more buying as has been seen in the past few weeks. What I am saying is that there is more buying than selling. I am basically playing the little whipsaws in this stock and buying on the dips and selling on the tops. Heck, if I can get 2-5% every couple of weeks in this stock, I'll continue to do it. It is just up to you if you wish to play this fast or not.
Now I get to brag about HSR. I have been watching this stock for the past 6 months waiting for it to bottom out. I made the suggestion that buying up to $9.50 is OK and if you have, kudos to you. I got in at $8.90 and it closed today at $11.50. A 29% move in 4 days is not too bad (sarcasm), but remember this was a "risky" trade and not for the light hearted.
Here's another bragger - WCC. It is up 10% from my buy point and I am expecting the $70 mark to be a barrier to resistance for a while. If another opportunity pops up on when to buy, it'll be in this blog. I believe it is etching the right side of a cup and handle. Just think, the Dow Jones has risen 12% each year for the past 100 years on average. If you were to immediately cash out of this position and put your $$$ into a money market account for the rest of the year you could match what the market has done on average, but still be beating this years return of only 7.5%.
ICE is my third bragging point since it has been up 10% in 4 days. I see $70 as a resistance point, but I also think it is building the right side of a cup and handle.
WDC has retraced back down to below my original buy point, but it has done so on low trading volume. I am sitting tight, but I give this a 50-50 shot of breaking out and forming a cup and handle.
LTM is still believe is in a "handle" of a cup and handle. I would buy up to $48, but no higher.
DEIX may see it's 50 day moving average as support. I am still holding onto this one as I think it also is in a cup and handle.
PACR is still floating between its 50 day and 200 day moving average. Watch any penetration of the 50 day moving average as a positive sign and this is a long term signal to buy back in to the stock.
You can check out any of these stocks by clicking on this link:
www.stockcharts.com and typing in the symbol. Also clicking on the light blue lettering will link you automatically with a definition of the word.
Friday, October 06, 2006
FMCN is out due to quick drop
I have gotten out of FMCN. The overall trend was negative and I was trying to make a quick 5%. Out at $59.20 for a 2% gain.
The overall market looks as if it is going to head lower today. It might be a good day to place covered calls on your stocks that are in your retirement portfolio.
The overall market looks as if it is going to head lower today. It might be a good day to place covered calls on your stocks that are in your retirement portfolio.
Thursday, October 05, 2006
KNOW WHEN TO HOLD 'EM. KNOW WHEN TO FOLD 'EM.
Prior to entering any trade, a trader should have a goal in mind. That goal is - when to exit a trade. If you enter a store you had better be sure on how to get out in case of a fire, right?
I mentioned in a previous post that I use an 8% stop loss rule and take profits at 16% giving you a 2:1 win/loss ratio. Why? I cannot predict how far a stock will rise, but studies have shown that stocks that move out of an area of consolidation called a base and rise 20% to 25% and then consolidate again. This usually takes 4 to 6 weeks to move the 20-25%. So plan on holding onto a stock for at least one month after it breaks out of a base such as a cup and handle, double bottom base, or a pullback to the 50 day moving average. (Note that in the IBD article "Pullbacks To 10-Week Line Offer 2nd Chance", the 10-week line is the same thing as the 50 day moving average since there are 5 trading days per week for 10 weeks [5 x 10 = 50]). I could handle 20% per month. That would mean an annual return of 240%! Too bad all trades don't go as planned.
LTM is breaking out of a base as we speak. This base is called a cup and handle. IBD says that during consolidation, a stock "corrects" itself usually 20% to 30%. LTM corrected 19% from its $48.92 peak in May, 2006. It has now carved out the right side of the cup and is leaving its "handle". Notice how the cup and handle is outlined by the blue line. The previous resistance was $47 and that has now been surpassed. IBD says it is still OK to buy 5% past the previous resistance, thus making the top limit of buying as $49.35 ($47 x 1.05 = $49.35) So now set your price target of 20% above $47 which is $56.40 ($47 x 1.2 = $56.40).
I am having problems downloading the picture. Blogger just doesn't seem to want to place it so I will have to download it at another time. sorry. Best thing to do is to go to www.stockcharts.com and type in LTM in the symbol box.
I mentioned in a previous post that I use an 8% stop loss rule and take profits at 16% giving you a 2:1 win/loss ratio. Why? I cannot predict how far a stock will rise, but studies have shown that stocks that move out of an area of consolidation called a base and rise 20% to 25% and then consolidate again. This usually takes 4 to 6 weeks to move the 20-25%. So plan on holding onto a stock for at least one month after it breaks out of a base such as a cup and handle, double bottom base, or a pullback to the 50 day moving average. (Note that in the IBD article "Pullbacks To 10-Week Line Offer 2nd Chance", the 10-week line is the same thing as the 50 day moving average since there are 5 trading days per week for 10 weeks [5 x 10 = 50]). I could handle 20% per month. That would mean an annual return of 240%! Too bad all trades don't go as planned.
LTM is breaking out of a base as we speak. This base is called a cup and handle. IBD says that during consolidation, a stock "corrects" itself usually 20% to 30%. LTM corrected 19% from its $48.92 peak in May, 2006. It has now carved out the right side of the cup and is leaving its "handle". Notice how the cup and handle is outlined by the blue line. The previous resistance was $47 and that has now been surpassed. IBD says it is still OK to buy 5% past the previous resistance, thus making the top limit of buying as $49.35 ($47 x 1.05 = $49.35) So now set your price target of 20% above $47 which is $56.40 ($47 x 1.2 = $56.40).
I am having problems downloading the picture. Blogger just doesn't seem to want to place it so I will have to download it at another time. sorry. Best thing to do is to go to www.stockcharts.com and type in LTM in the symbol box.
Wednesday, October 04, 2006
Breakouts everywhere!!!
Well, the stock market really took off in the early afternoon. Pretty much any stock that you owned probably went up toady. The reason for the positive response is that the economy seems to be cooling off meaning the Federal Reserve may not raise interest rates any more and the economy may be heading for a soft landing rather than a crash. Good news for investors.
Let's look at the stocks that we have been watching. Last night, ICE was mentioned as being in a potential buy point. In fact, it roared out of the beginning and didn't look back all day long. If one were to have bought in today, the stock rose more than 5.75% on huge trading volume. It is too late if you didn't buy in today. It is well extended past a proper buy point.
The same exact thing could be said about WCC. (Remember, this is different than WDC) WCC took off and also didn't look back closing up nearly 7% from yesterday's close. Too far extended to buy now if you didn't get in today.
FMCN is showing good signs of a revival with increased trading volume today and a gain of 0.32%. Keep the target of $61 in mind.
HSR bobbled and weaved not knowing which way to go. Remember that this is a risky trade as it is bottom-fishing. Trading volume was higher than the past couple of days for HSR, but the stock closed near its high for the day. This is still a positive sign.
WDC looks as if it is going to use its 50 day moving average as support for now.
LTM has now resumed its uptrend with a gain of 1.8%. Along with a rise in price and higher trading volume, a rise in the stock is again on its way. It is still OK to buy up to $49.00.
Be wary; however, when things look optomistic and sometimes the time to be pessimistic. Expect the market to make a few more days of gains, but then watch out for another pullback. Having a price target in mind is always a good idea. Treat every trade like a business plan. Before you enter a trade, make sure you know when and how to exit. One doesn't walk into a mall and then forget on how to get back to their car so don't just sit in the mall and spend all of your money. Get it?
Also a note on entries and exits. Stocks have shown over and over that after reaching a low, they tend to rise about 25%. If you can't exactly pick out a low, set a price target of 16% above your purchase price. Why? Well, if you take your wins at 16% and stop your losses at 8% you have a 2 to 1 win to loss ratio and for every win you can have two losses and still break even.
Go to http://www.stockcharts.com/ and type in the symbols to look at what these charts look like. There is also a link to the website to the right of this blog under "Stock Charts." Remember the map that you need to get to your final destination. Well, a stock chart is your road map to wealth so learn how to read them.
DEIX is a stock that appears to be forming its "handle" of a cup and handle. (Note: you can click on the light blue words in the sentence and it will take you to a website to give you a definition of words you may not know. You can also click on the chart to enlarge it.) If you wish to be aggressive on DEIX, buying at the low portion of the handle at $15.30 to $15.50 would be OK, but a more conservative move would be to buy at $0.10 above the latest high which is a buy point of $16.20.
I am going to add another "bottom feeder" where it seems as if the stock is rising and I am trying to buy near the bottom creating a longer-term trade. PACR has crossed back above its 50 day moving average and has recently gained a lot of support near $26.
Let's look at the stocks that we have been watching. Last night, ICE was mentioned as being in a potential buy point. In fact, it roared out of the beginning and didn't look back all day long. If one were to have bought in today, the stock rose more than 5.75% on huge trading volume. It is too late if you didn't buy in today. It is well extended past a proper buy point.
The same exact thing could be said about WCC. (Remember, this is different than WDC) WCC took off and also didn't look back closing up nearly 7% from yesterday's close. Too far extended to buy now if you didn't get in today.
FMCN is showing good signs of a revival with increased trading volume today and a gain of 0.32%. Keep the target of $61 in mind.
HSR bobbled and weaved not knowing which way to go. Remember that this is a risky trade as it is bottom-fishing. Trading volume was higher than the past couple of days for HSR, but the stock closed near its high for the day. This is still a positive sign.
WDC looks as if it is going to use its 50 day moving average as support for now.
LTM has now resumed its uptrend with a gain of 1.8%. Along with a rise in price and higher trading volume, a rise in the stock is again on its way. It is still OK to buy up to $49.00.
Be wary; however, when things look optomistic and sometimes the time to be pessimistic. Expect the market to make a few more days of gains, but then watch out for another pullback. Having a price target in mind is always a good idea. Treat every trade like a business plan. Before you enter a trade, make sure you know when and how to exit. One doesn't walk into a mall and then forget on how to get back to their car so don't just sit in the mall and spend all of your money. Get it?
Also a note on entries and exits. Stocks have shown over and over that after reaching a low, they tend to rise about 25%. If you can't exactly pick out a low, set a price target of 16% above your purchase price. Why? Well, if you take your wins at 16% and stop your losses at 8% you have a 2 to 1 win to loss ratio and for every win you can have two losses and still break even.
Go to http://www.stockcharts.com/ and type in the symbols to look at what these charts look like. There is also a link to the website to the right of this blog under "Stock Charts." Remember the map that you need to get to your final destination. Well, a stock chart is your road map to wealth so learn how to read them.
DEIX is a stock that appears to be forming its "handle" of a cup and handle. (Note: you can click on the light blue words in the sentence and it will take you to a website to give you a definition of words you may not know. You can also click on the chart to enlarge it.) If you wish to be aggressive on DEIX, buying at the low portion of the handle at $15.30 to $15.50 would be OK, but a more conservative move would be to buy at $0.10 above the latest high which is a buy point of $16.20.
I am going to add another "bottom feeder" where it seems as if the stock is rising and I am trying to buy near the bottom creating a longer-term trade. PACR has crossed back above its 50 day moving average and has recently gained a lot of support near $26.
Tuesday, October 03, 2006
ICE, WCC with new volume and buy point
Let me start this out by saying that this information is nothing but educational. Since I am not a registered investment advisor, I cannot claim this to be any offer to buy or sell a stock and any information that is conveyed is merely educational. Now that I got the legal &%$ out of the way, here let's learn how to make money.
So what do you think of the Dow Jones closing above the highest level in 5 years? Not bad, eh? Just when I said yesterday to watch out because the market looks overbought. Proves that even I cannot predict the direction of the market just like those big "investment gurus." I believe the impetus for the rise was oil's drop below $70/barrel. It fell over $2.50 to $68.50-something. If that is so true, why the hell isn't Bush receiving kudos for bringing the price of oil down. Ought to be the opposite of the Donkeys bashing him for the high price of fuel earlier this year. Hmmm, laws of supply and demand do play a role in the price of oil. Of course, I'm waiting for the typical whining from the Donkeys to claim that he's forcing the price of oil down right before the elections. Well look at a chart, Donkeys. It has been dropping since May. The drop couldn't also be from the fact that the US supply is at an all time high and people have curtailed driving. Nah!
OK, OK. Political diatribe over. Let's look at what happened to the suggestions:
LTM got filled at $46.36 and closed at $46.87.
WDC got filled after a gap down. Trading volume was slightly above normal so this is still OK, but kind of puts a damper on the potential for the stock to rise.
HSR missed the fill and closed up more than 8%. I would still put in a buy range of 8.50 to 9.50
FMCN closed down on weaker volume. That is still OK so keep the price target of $61 with the Sell Limit order.
Now be careful with this next one. I have my eye on WCC (note this is different than the WDC stock that got filled today) WCC had a jump today in trading volume way above average. It also closed above both the 50 day and 200 day moving averages. This makes this trade a long-term trade. I would trade this up to $64. This one is a bottom-feeder just like HSR. The constant bounce of $56 in the past four months makes $56 support. clicking on the image to the left enlarges it.
ICE has just popped out what is called a cup and handle. The handle is being completed right now and it has worked through all of the resistance to rise to new highs. Buy range of $77 to $80 is feasible.
Good luck in learning. Learn Democrat, Earn Republican as my friend once told me.
So what do you think of the Dow Jones closing above the highest level in 5 years? Not bad, eh? Just when I said yesterday to watch out because the market looks overbought. Proves that even I cannot predict the direction of the market just like those big "investment gurus." I believe the impetus for the rise was oil's drop below $70/barrel. It fell over $2.50 to $68.50-something. If that is so true, why the hell isn't Bush receiving kudos for bringing the price of oil down. Ought to be the opposite of the Donkeys bashing him for the high price of fuel earlier this year. Hmmm, laws of supply and demand do play a role in the price of oil. Of course, I'm waiting for the typical whining from the Donkeys to claim that he's forcing the price of oil down right before the elections. Well look at a chart, Donkeys. It has been dropping since May. The drop couldn't also be from the fact that the US supply is at an all time high and people have curtailed driving. Nah!
OK, OK. Political diatribe over. Let's look at what happened to the suggestions:
LTM got filled at $46.36 and closed at $46.87.
WDC got filled after a gap down. Trading volume was slightly above normal so this is still OK, but kind of puts a damper on the potential for the stock to rise.
HSR missed the fill and closed up more than 8%. I would still put in a buy range of 8.50 to 9.50
FMCN closed down on weaker volume. That is still OK so keep the price target of $61 with the Sell Limit order.
Now be careful with this next one. I have my eye on WCC (note this is different than the WDC stock that got filled today) WCC had a jump today in trading volume way above average. It also closed above both the 50 day and 200 day moving averages. This makes this trade a long-term trade. I would trade this up to $64. This one is a bottom-feeder just like HSR. The constant bounce of $56 in the past four months makes $56 support. clicking on the image to the left enlarges it.
ICE has just popped out what is called a cup and handle. The handle is being completed right now and it has worked through all of the resistance to rise to new highs. Buy range of $77 to $80 is feasible.
Good luck in learning. Learn Democrat, Earn Republican as my friend once told me.
Monday, October 02, 2006
LTM, WDC & HSR in buy range
Well FMCN made a nice move today (1.74%), but there was not a lot of trading volume that went into the stock. (click on the image to make it larger) This means that "weak hands" were playing the stock today. "Weak hands" are small investors like you and me who are only pitching in only a few thousand dollars. What one would really like to see is high trading volume with a rise in price. This shows big investors are pumping money into the stock. Still keeping the price target of $61.00. Another factor is playing into this that is making me nervous - the overall market is overbought meaning that a lot of stocks are extended from proper buy points. When this happens the market can "correct" itself and decline in value taking 3 out of 4 stocks with it.
Despite the overbought market, some stocks are still in buy ranges but trade them with caution. I see one stock, LifeTime fitness (LTM) in a buy range and this would be more of a longer-term trade versus FMCN. I presume we are looking at least a month to 3 month trade. Here is how I would set up the trade.
Buy LTM 46.36.
Stop loss order of $43.42
Price target $52.00 (12% gain)
WDC may be bouncing off the bottom. The signs show an increase in buying of shares as it has bounced of $16 twice in the past couple of months and 3 days ago a large amount of buying went into the stock. This too is a long-term trade that may take months to develop. Here is the set up:
Buy WDC at $17.50
Stop loss order aat $15.50
No current price target.
HSR is a risky trade as it is a low-priced stock and basically it looks as if this is bottom-picking meaning that I am trying to predict a bottom. From here the stock should rise. This trade is not for the risk-averse.
Buy HSR at $8.10
Stop loss order at $6.80
Initial price target $9.90 (22% gain)
FMCN in buying range
FMCN (Focus Media) is a stock in buying range based upon on of my indicators. It is a short-term trade that will probably last only 3 to 21 days. Here is how I am setting it up.
BuyFMCN at $58
Stop loss order at $54.25
Sell limit order at $61. This order will sell your stock when it hits $61
For those who don't know what types of orders these are I put in the links for the stop loss order, but I am having a hard time finding a great definition of a sell limit order. Sorry.
More longer-term trades will pop up when the time comes.
Buy
Sell limit order at $61. This order will sell your stock when it hits $61
For those who don't know what types of orders these are I put in the links for the stop loss order, but I am having a hard time finding a great definition of a sell limit order. Sorry.
More longer-term trades will pop up when the time comes.
Sunday, October 01, 2006
Stock Selection
So that is one of the biggest questions is how to decide which stock to choose. Why not just choose a mutual fund? Well if you want to go for it, but that is not my style because I believe in the American way of building wealth as fast as I possibly can. Here is where I choose my stocks http://investors.com/ Granted, it is a subscription website and you can get a newspaper or digital format called eIBD, but the knowledge you gain from the website is remarkable. The How to Invest tab gives free educational tips.
The author/owner Wm. O'Neil has numerous books that are commonly in libraries and here are the links to the titles of the books:
http://www.amazon.com/How-Make-Money-Stocks-Winning/dp/0070480176
http://www.amazon.com/Successful-Investor-Million-People-Profitably/dp/007142959X/ref=pd_sim_b_1/102-5065660-1618504?ie=UTF8
http://www.amazon.com/Essential-Lessons-Investment-Success-Techniques/dp/0071357548/ref=pd_sim_b_2/102-5065660-1618504?ie=UTF8
I realize there are many other ways to choose stocks to buy, but I still profess that I am not a guru. If you follow the rules laid out by the IBD philosophy, you will see you portfolio increase dramatically over time. The greatest thing in the world is to fax the portfolio you removed from your financial advisor and show him your quaterly profits.
Another question is how much to invest. That is up for you to decide, but let's look at a few things mathematically. Let's say you have $10K in your portfolio. What would you do? Invest in 10 stocks? 5 stocks? 4 stocks? 1 stock? Personally, I would invest all $10K in one stock. Why? Well, let me count the reasons why:
1. If I follow the IBD rules and cut my losses at 8% below my purchase price, I won't lose all of my money as my friends said I would.
2. With one stock, I follow one indicator such as the MACD and that is it.
3. I get comfortable with the fact that I will make and lose money. (The hardest thing to do is watch your stock go down and your portfolio dwindle.)
4. I will make more money trading one stock that goes up 25% than if 4,5, or 10 stocks go up their respective 25%. Look at it this way - 25% of $10K is $2,500 and I pay a $7 commission to buy and a $7 commission to sell. So my total profit would be $2486 after commissions. If I have to pay the same commissions of 10 different stocks, my $2,500 profit will be knocked down to $2,360. Don't forget commissions can and will eat into profits.
The next question is when would I start trading 2 stocks? That is up to your tolerance level. Like I said, you can make more money faster if you invest a larger pot o' gold rather than spreading out amongst many stocks. If you add on more stocks, you increase your stress since you now have to follow 2 stocks. Many of the websites that tout "You can turn $1,000 into $3.1 million in three years!" are rolling the profits over and over into ONE stock by buying and selling on certain signals such as the MACD. Are you willing to take that risk? As my confidence level is increasing with my selected buy/sell indicators, I am.
So that is one of the biggest questions is how to decide which stock to choose. Why not just choose a mutual fund? Well if you want to go for it, but that is not my style because I believe in the American way of building wealth as fast as I possibly can. Here is where I choose my stocks http://investors.com/ Granted, it is a subscription website and you can get a newspaper or digital format called eIBD, but the knowledge you gain from the website is remarkable. The How to Invest tab gives free educational tips.
The author/owner Wm. O'Neil has numerous books that are commonly in libraries and here are the links to the titles of the books:
http://www.amazon.com/How-Make-Money-Stocks-Winning/dp/0070480176
http://www.amazon.com/Successful-Investor-Million-People-Profitably/dp/007142959X/ref=pd_sim_b_1/102-5065660-1618504?ie=UTF8
http://www.amazon.com/Essential-Lessons-Investment-Success-Techniques/dp/0071357548/ref=pd_sim_b_2/102-5065660-1618504?ie=UTF8
I realize there are many other ways to choose stocks to buy, but I still profess that I am not a guru. If you follow the rules laid out by the IBD philosophy, you will see you portfolio increase dramatically over time. The greatest thing in the world is to fax the portfolio you removed from your financial advisor and show him your quaterly profits.
Another question is how much to invest. That is up for you to decide, but let's look at a few things mathematically. Let's say you have $10K in your portfolio. What would you do? Invest in 10 stocks? 5 stocks? 4 stocks? 1 stock? Personally, I would invest all $10K in one stock. Why? Well, let me count the reasons why:
1. If I follow the IBD rules and cut my losses at 8% below my purchase price, I won't lose all of my money as my friends said I would.
2. With one stock, I follow one indicator such as the MACD and that is it.
3. I get comfortable with the fact that I will make and lose money. (The hardest thing to do is watch your stock go down and your portfolio dwindle.)
4. I will make more money trading one stock that goes up 25% than if 4,5, or 10 stocks go up their respective 25%. Look at it this way - 25% of $10K is $2,500 and I pay a $7 commission to buy and a $7 commission to sell. So my total profit would be $2486 after commissions. If I have to pay the same commissions of 10 different stocks, my $2,500 profit will be knocked down to $2,360. Don't forget commissions can and will eat into profits.
The next question is when would I start trading 2 stocks? That is up to your tolerance level. Like I said, you can make more money faster if you invest a larger pot o' gold rather than spreading out amongst many stocks. If you add on more stocks, you increase your stress since you now have to follow 2 stocks. Many of the websites that tout "You can turn $1,000 into $3.1 million in three years!" are rolling the profits over and over into ONE stock by buying and selling on certain signals such as the MACD. Are you willing to take that risk? As my confidence level is increasing with my selected buy/sell indicators, I am.
Subscribe to:
Posts (Atom)
Posts
