INTC and GE

I continue to have problems downloading my videos to youtube. So I have to do this the longer way. Anyways, I had a question about INTC and GE as longer term, 2-3 year investments. Let me be clear from the get go, I usually hold about 2 months at most with the rare exception being held longer. About INTC, it is in a downtrend with strong support at $12 and resistance at $15. It has been trading in this range for about a month. Meaning it seems to be trying to find a bottom.

This is a lot more evident when looking the weekly chart. The range bound stock has a target of at least $19 over a longer time horizon. A break above 19 means it will return to the trading range it once held in the $20's. Again, this is why i dont invest, i trade. It is because it becomes more and more difficult to determine price targets, and relies more on fundamental analysis (which I dont really do) and less on technicals (which is my bread-and-butter).


As for GE, this stock is a train wreck. It is in a long term downtrend with no signs of slowing up. There have also been a lot of false bottoms, or kickback rallies, on the way down, making me even less trustful of any "bottom" that may form in the stock. Even though it is at $8 (down from a 3 year high of $42), there is nothing to say that it wont keep going. I do know this stock has been having a lot of problems with bad earnings and the like. So until those start to come back, and a low has been tested several times, I would stear clear of GE.

Hopefully I can have my video problems fixed soon. But in the meantime, keep your eye on GME(enter if it holds above 28.50), GENZ (nearing both horizontal and diagonal support, play the bounce), BIG (long play but earnings are next week), AOC(long at $39.5 or short at $38), PNRA(descending triangle), CRM (descending triangle), plus more bearish flags than I can count.

Next Video coming soon

I will be posting a new video in the next day or two. i tried to post one over the weekend but had some technical difficulties. But i think I have them all fixed now. next video will be up on the afternoon that I think the market, or at least some stocks on my list, get finished with their current swing downs. As for the markets in general, the dow broke through key support, and is just under 200 away from 7000. S&P is sitting a millimeter above support, as is the Nasdaq. Ill go into more detail on these later.

First Video Weblog

RIO

Here is a stock I have been watching for a while. In my real money account, I was buying this puppy up ever since it dipped below $10. With several hundred shares at an average price of 12, I had a large enough position to put on some covered call trades over the past couple days. I sold the Feb. 17 call on monday for 1.25 each while the stock was at just over 17. That was a lot of time value for just two weeks left in the stock. I closed them out today for 0.2 each. That was a nice 1.0 per share, or $100 per contract, profit i made in just a couple days. And with the stock looking like it is ready to bounce here, I may load up with some more shares with my new profits. i would like to see RIO stay above 14.9 by the close.

Need a Stimulus for the Stimulus

WHAMMY!!! And there you have it. Geithner drops the stimulus on our laps and the market hates it. Perhaps it had to do with how vaguely it was described. Perhaps it had to do with the talk being directed to "Main Street" and not towards "Wall Street" (i hate those generalizations by the way). Perhaps it had to do with the fact that wall street hates the idea and wants government out of the way. Either way, the markets responded as expected, with a hard move in one direction. Unfortunately for bulls it was down. But thats okay. I just take things as they come. And right now, all the major indices are sitting right on support. It never fails to amaze me how that happens time and time again. I wont post any charts but ill describe the general levels of support. The Dow is sitting right on support at 7900. This has been acting as support for really dating all the way back to the 2001, but looking at more recent times, it has been hit repeatidly and has ever time but once in November. The S&P is sitting right on diagonal support in the 825 area. If this breaks the next area of support is at 800. The NASDAQ is sitting on horizontal support in the 1520-1530 area. If this fails, which it very well may, the next support will likely be at 1480, where both diagonal and horizontal support will meet. As for my current positions, I closed out LNCR right after the open. The stock gapped lower by a couple bucks following earnings, but as I watched it premarket, the opening price kept creeping up and up. And this continued right through the open. I closed quick as i could. My other 2 positions, BTU and KALU, I am still holding on to. Both followed the market down. No biggie. My stops remain where they are. But I am really watching the diagonal support line to see if it holds. As of right now there is no reason to think it wont, but if it gets penetrated, I may close out before my stops get hit. Perhaps a little pre-emptive but I can always reenter later, whereas i cant necessarily recoup lost money so easily.

A Turning Point In the Market

So last week ended pretty well. All three major indices were up nicely. And ending the week in such a will typically carry over to monday more often than not. However, we didnt see it happen here. From a fundamental standpoint, this could be because the market does not want to get to assertive ahead of the vote on the Obama's stimulus package. From a technical standpoint however, its because all three indices are right up against resistance. The S&P500 is hitting horizontal resistance, and is about halfway to the top of a larger triangle pattern. The Dow is at both horizontal and diagonal resistance, and the NASDAQ is at diagonal resistance. This only means one of two things. Either things will explode through these levels, or they will go down. Neither move will affect me to much as I have plans for either scenario, but for right now, I am leaning towards a move to the downside.

TGIF

Just some updates on my current positions. I closed out of CRS at 18.30 for a 6% loss. I remain short in LNCR as my only remaining short position. As for my longs, they are performing nicely in the early part of the day. BTU is up about $1.20 per share, and has broken out of the ascending triangle. At the end of the day if BTU remains above the breakout point, I will add to my position and raise my stop. As for KALU, the stock is up but on light volume. It cant quite seem to hold above resistance, which i place about about 27.50. Perhaps as the day wears on it will see some more bullish action, but as of right now I am a little skeptical. Also, keep in mind the covered call article I wrote the other day. This stock may be a prime candidate for repeating this. I will however probably hold off until monday to see how stimulus package news affects the general market. At this point in the package's life, its not IF it will pass, but WHEN, and with what details. I am eager to see how the market will react once all the details are finallized. After all, its not the news that matters, but the market's reaction to that news that makes or loses money for the trader.

Covered Calls And Spreads

While I am not trading options on this "portfolio" I do however trade them in real life. My last post I briefly talked about taking a position in KALU. KALU recently had a move that I look for in a stock that provides a short term small scale profit on a position using a covered call or debit spread strategy. Let me start from the beginning. One of the things I like about this stock is that the current trend is linear relative to the diagonal support. A stock like this provides a good opportunity to make short time profits by writing a covered call against a stock position or selling a short dated option to create an option spread (if I was long a call option to begin with). When I do this, I look for stocks that I think will continue in the current overall direction based on strength of support areas. I generally like to do this in stocks that have a relatively low level of volatility. While lower volatility implies a lower option premium, it allows for my strategy to be more effectively executed. Here is what I do. In a bullish stock where I have a long position, I like to sell the nearest out of the money call in the current expiration month. For KALU this would have been the Feb 30 Call. In this case the trade would have brought in a premium of about $90 per option contract if I had sold the call on 1/28/09 when the stock began to show some weakness. I then hold the option until it makes a higher low near support. At this point I rebuy the call (close the position), locking in a profit of about $60 per option in this trade.

The reason I trade the nearest out of the money option is because I want to leave myself room incase what I perceived to be a higher high is just a hitch in yet a larger movement. In this case, the 30 call would have given me just over $2 of reaction time should the stock move higher and I wish to hold onto my position. Plus, options near the money have the highest time value, which is what I am trying to lock in. The reason for selecting the nearest month is because time decay occurs at the highest rate in the final month of expiration. So not only will the option lose value as the stock declines, but it will lose value as the month wears on.

The major difference between a covered call and a debit spread creation is that in a covered call you own the stock where as in the spread you own a lower priced call. In the trade above I locked in a profit of $60 per option that can be deducted from the total price of the long position. This may not sound like much. If i bought 100 shares at the break out above 24 on 1/23/09, i would have spent roughly $2400. In effect I am reducing the total price to $2340 by the end of this trade. Conversely, if I had bought the $25 call upon the breakout, I would have spent about $2.50 per share, or $250 per contract. In this case, I would be significantly lowering the total per contract price of the initial call position (2.5-.6=1.9 and 2.5-1.9/2.5 = .24 or 24% reduction in total cost per long contract.) I have indicated with the big blue arrow where the call should have been sold, and indicated with the big red arrow where it should have been rebought to close the trade. .

EQ

Something is not right about EQ. I have held the position for a couple weeks. But that is not the issue. The issue is that since it made its most recent lowest low on 1/30 and 2/2, the stock has not moved with the kind of strength I would like to see. Plus, today it opened below its diagonal trend line which is setting off some bells and whistles in my head that perhaps the strength that I had percieved this stock to have is evaporating. My trading philosophy is that if you are unsure what to do, go to cash, and that is precisely what I am doing here. I am closing out at 35.82. Rather than staying in cash though, i am taking up a position in KALU. Not sure what they do, nor do I care. The trend in this stock is good. I like trending stocks that stay relatively linear. I am entering in at 26.05. My stop is just below the diagonal support at 22.50. That will give the stock some room to work. It also is an area of support on the 30 minute chart. Max position I can take is 570. Ill take 550 to make it more round. Here are a couple pics of the 2 trades.

Market Review

And we're back!!! Im talking about back to previous levels of resistance which are now behaving as support. I will only pst the 30 minute charts for the NASDAQ and S&P, but suffice it to say the short term trend has gone sideways when viewed from a daily chart. I had mentioned the head and shoulders pattern yesterday that was present across all three major indexes. Well today opened with an explosion to the upside. The markets then slowly lost their initial profits until 1:30 when things dropped heavily down to support at the neckline of these different head and shoulders patterns. Now dont get me wrong, I remain neutral to slightly bullish in the markets right now just because I get the feeling like the market is trying to dig in its heels to prevent any more movement to the down side. That being said I expect tomorrow to finish even to slightly higher, though what happens in between is anybody's best guess.

PCU

Stopped out of PCU at 15.30. I know i had my stop set lower, but it was a mental stop and i missed my exit. In general, this industry is up today. FCX, RIO, PCU and others are all outperforming the market.

While like I was expecting yesterday, the support held in all three major indexes. Upon looking at these closer, i noticed an interesting little pattern forming up on the 30 minute chart. Ill illustrate it on the Dow because it is easiest to see there. However, the same pattern is present in both the S&P500 and the NASQDAQ. Its the classic inverted head-and-shoulders pattern. I highlighted in thick blue where the neckline is at, and i highlighted the shoulders and head in yellow. Based on this set up i would expect the Dow to go up about 120 points from the break out point above the neckline. We got there upon reaching the high during todays move, but then started to pull back a little. Based on technical analysis, I am seeing the strongest support at about 7930 and the strongest resistance at about 8230. Since momentum is up for the moment, i see the Dow going and testing the resistance line.

In the S&P500 and the NASDAQ, I am also seeing upward momentum carrying through for the one to two days. In the S&P, weak resistance is present at 1880 with stronger resistance at 1910 (coincides with diagonal resistance or the upper resistance in a longer term triangle formation). In the NASDAQ there is some weak resistance at about 1560 (the high on 1/28), and stronger resistance at 1590, which just so happens to coincide with the diagonal resistance of a longer term triangle formation (see some of my older psts to view this triangle). Well see what happens when it gets there, but for now I remain neutral to bullish.

Early morning action

Took down BTU at 25.79 about a minute after the open. Stop is at 23.90. 1000 share max. But need to take less based on remaining cash in portfolio. Bought 800 shares. Price target is 36.

Closed out of AOC on todays open. at 38.72. Took a loss on this one.

Market outlook

Sorry, I am not on my work computer so I wont be posting any pictures here so youll just have to follow along on your own charts. Of the three major indexes, the Dow looks the weakest as it closed sitting right on its Support line. This support was penetrated earlier in the day, but prices rose just enough to get the price just above this line. Both the S&P500 and the NASDAQ are sitting on diagonal support. I anticipate these levels holding (perhaps out of hope) but until i see prices close below support, then i will maintain that these levels will hold. For the next couple days i am neutral to slightly bullish in the markets.

January Review

So I have been going over some of my trades, and trade ideas. So far I am not off to a bad start. A 4.7% profit in only a couple of weeks. Not to shabby. Most of the profits came from a fortunate trade in GERN. The kind of situation where i was more lucky than good in my stock selection. Looking at other trades, I closed out of TTI because of general market weakness as well as weakness in the stock itself. I also closed out of PNRA. After reviewing this trade, I was correct in my forcast of direction, but wrong in my timing. If I had either made my stop a little higher, or waited another day to enter, I would have probably stayed in the trade and would currently be enjoying a profit. As for my current positions, i have 4 short positions (AOC, LNCR, PCU, and CRS). These positions represent a relatively diverse range of companies. But thats not why I traded them. PCU, LNCR, and CRS were all traded based on head and shoulders formations, while AOC was traded based on a break below support in the 30 minute chart. Both AOC and LNCR are showing the most strength relative to my trading plan for them and will likely be closed out tomorrow, though i will hold if my stop is not reached. The other two I am anticipating a pullback to the neckline of the head and shoulders pattern followed by a continuation south.

My single long position is in EQ. This stock appears to be setting up in an ascending triangle formation. This stock also represents one of my larger positions in my actual portfolio, so I am definitely in position in anticipation of a breakout. My stop is held pretty tight for this with a plan in place to re-enter incase my stop is to tight.

Other longs that I looked at but did not enter include EGOV, ABX, ABAX, MCK. These all worked out. EGOV broke out today, but i was busy at work so i missed the boat. ABX and ABAX I could not get in at a price that I liked, so I just stayed out. MCK gapped up the morning that I put it on my watchlist, so i never entered. No problem there, i can always get in later if i still like the stocks. We will see. I would like to mention, that MCK appears to be setting up in a bull flag pattern, and ABAX has a very nice nice looking pole forming, and I am anticipating a bull flag formation in this stock as well.

Stocks I may buy tomorrow include:BTU (ascending triangle), CAH (trending), DRQ (trending), GENZ (ascending triangle), KALU(trending-found through OA), MCK (bull flag), MHS (bull flag), OCR, RIO

I wont put on any more shorts for the moment since i a little more short exposed than I prefer. But like I said before, i expect to be closed out of some of these in the near future.

Happy Trading