A few other trading candidates

Posted on May 30, 2011 by admin

A quick look shows the following interesting stocks as possible candidates:

MCP, SLW, YHOO, INTC,  NVDA.  We’ll study each of them in more detail.

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What to trade next week?

Posted on May 29, 2011 by admin
  • NFLX is overbought.  NFLX broke out of the 260 resistance.  The one-year chart below shows whenever RSI goes above 70, it has been always followed by a correction.  RSI is now at 71.  I don’t expect NFLX price to continue upward climbing without a consolidation.  There are 2 possible scenarios here.
    • NFLX price will stay above 260 while digesting the recent gains.
    • NFLX will retreat to below 260 and remain stuck in the 240-260 range.

  • So how to trade NFLX?  A bottom fishing strategy is a bull put spread of 240-245 ($.125 gain).  This is a quite safe strategy, albeit a lower gain.  SMA 20 is 242.63.  This is my preferred trade.

  • Another approach is to set up a bear weekly spread (expecting NFLX won’t continue much higher) of 270-275 put yields $1.1 profit.  Or a bear weekly call spread of 270-275, $1.12 gain.  The call volume is much bigger, as such the order should be easier to get filled.  The higher call volume indicates that many traders continue to expect NFLX to move higher.  The danger of this approach is overbought condition can get more overbought.
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Market Condition: Neutral to bearish, range bound.

Posted on May 29, 2011 by admin
  • This week’s Monday Morning Outlook shows a neutral to slightly bullish posture from Schaeffersresearch.com.

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Weekly Summary

Posted on May 28, 2011 by admin

Another interesting week ended with all of our trades being successful. In one of our trading accounts (we’ll call it Account EC, where we have been trading more spreads lately), we have achieved 4.8% gain this week.  Our total return in 8 weeks is 90%.

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PCLN: oversold

Posted on May 25, 2011 by admin

PCLN, like the rest of the market, is oversold.   Its RSI reached 36.6 yesterday.  The last time it was this low was during last year’s Flash Crash (as low as 33.15).  Statistically, the probability of PCLN price to drop much further from here is quite low.  

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BIDU credit put spread

Posted on May 24, 2011 by admin

I purchased a put spread of BIDU today: long weekly 120 put, short weekly 125 put.  Credit: $0.4.  4 days to expire.  The reason I chose 120-125 is b/c that area (see above) shows a lot of support.  I don’t believe BIDU will crash through that support in 4 days.

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Panicking market to most traders, a golden opportunity to me.

Posted on May 23, 2011 by admin

I love this type of volatile markets, where the weak and unprepared hands are washed out, leaving the true players in the game.  I placed 2 orders this morning, and they were both filled.

  1. NFLX weekly spread: 225-230 call, with a potential profit of $0.6.  Due to low volume, my call orders were not filled.  I replaced the call orders with a put spread (225-23o), potential profit: $0.43.  The order was executed.
  2. PCLN weekly put spread (480-485), potential profit: $0.4.  (I chose put due to higher liquidity or higher volume).  The order was filled.

My potential weekly return for this week is 4.8% (for one of the trading accounts where I do more spread trading recently).

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Market Condition: Range Bound, Neutral.

Posted on May 23, 2011 by admin
  • Chartadvisor.com:  This week’s Market Summary is neutral to slightly bullish.
  • Schaeffersresearch.com’s this issue of Monday Morning Outlook is near term bearish and long term bullish.
  • VIX: Increased volatility, broke through SMA 20, still under SMA 50 value.  Recently, VIX challenged the SMA 50 level in 3 separate attempts.  The more times it challenges the level, the more likely it may break through.  So we need to monitor the market volatility carefully, for it may actually break through the resistance this time. (see chart below)
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Next Week Trade Candidates

Posted on May 21, 2011 by admin

I will urge caution this week.  We may see a bit more turmoil and volatility in the market.  For short term trades, I’ll choose stocks that show better resistance to the volatility.  NFLX appears to be one of those now.  The following chart shows less volatility, when compared to BIDU or PCLN.

NFLX is on top of my list.  NFLX’s price has held up pretty well in the recent volatile market.  Its SMA 20 is ~ 238 and SMA 50 is ~232.  With these 2 support lines, NFLX is not very probable to go south of 230 within one week.  Hence a spread of 225-230 is a pretty safe bet in this short term frame.   As of Friday’s close, NFLX 225/230 spread has a $0.5 value (Cost $4.5, profit $0.5).  

BIDU: 120-125 appears to be a support range.  I may consider a spread of 120-125.  As of Friday, bullish call spread of 120-125 costs $4.775, with a profit of 5-4.775=$0.25/sh, low but safe (5% weekly return, 0.25/4.775).  

PCLN: A spread trade under its 50 day SMA is still a good trade (500-508).  Cost 4.5, profit: 0.5.  An even safer spread (495-500), cost: $4.55, Profit: $0.45.  I prefer the 495-500.  The original chart was corrupt.  I added a new one on May 24th.

 

BIDU: Under it’s 20 day and 50 day SMA.  It’s more likely to go lower than NFLX.

 

PCLN: It’s chart is between BIDU and NFLX: under 50 day but above 20 day SMA.

 

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Weekly summary

Posted on May 21, 2011 by admin

Another interesting week ended on a positive note, or at least for my accounts.  All the trades (PCLN, NFLX, BIDU and others) this week were successful and we made lots of money this week.  In one account in which I have been trading weekly spreads, I made 11.67% return this week.  This account has reached 80% return in exactly 8 weeks!  But this week wasn’t without surprises.  I was a bit concerned when the indexes dropped significantly on Monday, penetrating through many support levels.  I admit that I didn’t feel good that evening, although not bad enough to lose sleep over.  But the markets recovered quickly, proving those support levels are pretty strong.  This week ended with the indexes just above the support levels: a good sign that these support levels hold.

 

 

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