Saturday, June 21, 2008

Seasonal Plays part 2

Well, June is off to a rocky start for me, but quadruple witching expiry is now behind me, and with the expiration of some poorly held option positions, I finally feel that I have enough of my research time freed up to start looking forward to the seasonal plays that start the end of July, which I outlined briefly in this post.

Because I wanted to pick some stocks to play rather than the index itself, my first "need" was to sort through a lot of stocks to decide which was the right one. I think that part of being a good trader, like any other job is knowing your strengths and weaknesses, and right now my biggest weakness is fundamental analysis. I could try and look at the inner workings of a company, their earnings information, etc. and figure out if they are a company I want to invest in or not, but I would really just be stumbling around in the dark and guessing. So, rather than personally evaluating all of the companies in these sectors to find the stars, I entered their ticker symbols into Navellier's Portfolio Grader and let that do the fundamental analysis for me. You do need a subscription to one of his newsletters to get access to this tool.

So, I started a portfolio for each of my three sectors and then let it run. I sorted the companies by total stock grade. For Biotech and Gold and Silver, I eliminated any company with a grade of C or less. Utilities had so many A companies that I eliminated everything from B or less. Here are the results. You can click on any image on this post to enlarge it.




While that procedure reduced my list to 19 stocks, I wanted to get down to about half of that for my daily research. I was trying to decide how I was going to do this. One of the things that I have come to feel lately, is that while the Prophet Charts that I have been using since before I started day trading full time gives me some good information, I think there are better charts out there to meet my needs. One of the systems that I have seen used a lot, and seems very powerful is at So, I decided today was as good a day as any to start working with it. My initial thought was that I would look at each candlestick chart individually for patterns etc, and try to narrow my list down from there. I went to free charts and started with Sharp Charts. When I scrolled down to add a moving average line to the chart, I saw a link that said Interactive Performance Chart and saw that you could create one 200 day chart that compared the performance of up to 10 symbols! Well, what could be easier than that? So, I created three charts, one for each of my three seasonal sector plays and here are the results. Again, you can click on any image to enlarge it.




So, using these two elimination processes, I have gone from a list of hundreds of stocks to the following nine stocks that I will be tracking, stocks listed by performance.

Biotech (Season end of July to beginning of March)


Company Events

Illumina, Inc. engages in the development, manufacture, and marketing of integrated systems for the analysis of genetic variation and biological function. It provides a line of products and services that serve the sequencing, genotyping, and gene expression markets. The company's single-nucleotide polymorphism (SNP) genotyping product consists of Array Matrix, which uses a universal format that allows it to analyze various sets of SNPs, as well as offers Human 1M DNA Analysis BeadChip that combines an unprecedented level of content for both whole-genome and CNV analysis; HumanCNV370-Duo BeadChip, which enables researchers to analyze two samples simultaneously and access novel content for detecting disease-relevant CNV regions; and HumanHap550-Duo BeadChip. The company also provides BeadStation, a system for performing genotyping, which comprises BeadArray Reader, a scanning instrument that uses a laser to read the results of experiments that are captured in its instruments and genotyping and/or gene expression analysis software; and oligos, which are components of the reagent kits for its BeadArray products and are used for assay development. In addition, the company develops and commercializes genetic analysis technologies used for various analyses, including whole genome resequencing, gene expression analysis, and RNA analysis. It has collaborations with Invitrogen Corporation for the manufacture, marketing, and distribution of oligos; and deCODE genetics, ehf. to develop and commercialize diagnostic tests for variants in genes involved in disease related pathways linked to heart attack, type 2 diabetes, and breast cancer. The company was founded in 1998 and is headquartered in San Diego, California.


Company Events

BioMarin Pharmaceutical, Inc. develops and commercializes biopharmaceuticals for serious diseases and medical conditions. The company's product portfolio comprises approved products and multiple investigational product candidates. Its approved products include Naglazyme (galsulfase), a recombinant form of N-acetylgalactosamine 4-sulfatase enzyme used for the treatment of genetic disease called mucopolysaccharidosis VI; Kuvan (sapropterin dihydrochloride), a proprietary synthetic oral form of 6R-BH4, a naturally occurring enzyme co-factor for phenylalanine hydroxylase indicated for patients with Phenylketonuria (PKU); and Aldurazyme (laronidase) that is used for the treatment of mucopolysaccharidosis I caused by the deficiency of a lysosomal enzyme called alpha-L-iduronidase. The company also develops various product candidates for the treatment of genetic diseases, which include PEG-PAL, a preclinical enzyme substitution therapy for the treatment of severe PKU; PEG-PAL for phenylketonurics, which are not BH4-responsive; and BH4 for the treatment of various other indications, including cardiovascular indications. In addition, it conducts preclinical development of various other enzyme product candidates for genetic and other diseases, as well as an immune tolerance platform technology to overcome limitations associated with the delivery of protein-based pharmaceuticals. Further, the company holds rights to receive royalties related to Orapred and Orapred ODT as a result of sublicense of North American rights. BioMarin Pharmaceutical sells its products to specialty pharmacies, hospitals acting as retailers, and pharmaceutical wholesalers in the United States, Canada, Japan, and the European Union. It has a strategic alliance with Merck Serono S.A.; collaboration with IGAN Biosciences; and joint venture with Genzyme Corporation. The company was founded in 1996 and is headquartered in Novato, California.


Company Events

Gilead Sciences, Inc., a biopharmaceutical company, engages in the discovery, development, and commercialization of therapeutics for the treatment of life-threatening infectious diseases. Its products include Truvada, Viread, Atripla, and Emtriva for the treatment of human immunodeficiency virus infection in adults; Hepsera, an oral formulation for the treatment of chronic hepatitis B; AmBisome, amphotericin B liposome injection to treat serious invasive fungal infections; Flolan, an injected medication for the long-term intravenous treatment of primary pulmonary hypertension and pulmonary hypertension; and Vistide, an antiviral medication for the treatment of cytomegalovirus retinitis in patients with acquired immunodeficiency syndrome (AIDS). The company also offers Tamiflu, an oral antiviral for the treatment and prevention of influenza A and B; Macugen, an intravitreal injection for the treatment of neovascular age-related macular degeneration; Letairis, an endothelin receptor antagonist for the treatment of pulmonary arterial hypertension in patients with WHO Class II or III symptoms; and Cicletanine, which is being evaluated for the treatment of pulmonary arterial hypertension. Gilead Sciences has operations in North America, Europe, and Australia. The company has research collaborations with Abbott Laboratories, Inc.; Novartis Institutes for BioMedical Research, Inc.; Novartis Vaccines and Diagnostics, Inc.; Genelabs Technologies, Inc.; Achillion Pharmaceuticals, Inc.; Japan Tobacco, Inc.; Parion Sciences, Inc.; LG Life Sciences, Ltd.; and University of Texas System. It also has commercial collaborations with Astellas Pharma, Inc.; Emory University; F. Hoffmann-La Roche, Ltd.; Pfizer, Inc.; Dainippon Sumitomo Pharma Co., Ltd.; OSI Pharmaceuticals, Inc.; GlaxoSmithKline, Inc.; Japan Tobacco, Inc.; and Bristol-Myers Squibb Company. The company was founded in 1987 and is headquartered in Foster City, California.

Gold and Silver (Season end of July to end of September)

1. GG

Company Events

Goldcorp, Inc., together with its subsidiaries, engages in the acquisition, exploration, development, and operation of precious metal properties in Canada, the United States, Mexico, and central and South America. It focuses on gold, silver, copper, lead, and zinc. The company owns a 100% interest in the Red Lake gold mine located in the District of Kenora in northwestern Ontario, which includes the Red Lake Complex comprising 89 patented claims covering 1,254 hectares, and the Campbell Complex comprising 77 patented mineral claims covering 1,084 hectares. It also owns a 100% interest in the Porcupine gold mine in Canada, a 100% interest in the Musselwhite gold mine in Canada, a 66 2/3% interest in the Marigold gold mine in the United States, a 100% interest in the Wharf gold mine in the United States, a 100% interest in the Eleonore gold project in Quebec, a 40% interest in the South Arturo gold exploration project in the United States, and a 100% interest in the Imperial gold exploration project in the United States. In addition, the company has 100% interests in the Los Filos gold mine, the El Sauzal gold mine, the San Dimas gold-silver mines, the Nukay gold-silver mine, and the Penasquito gold project, which are located in Mexico; a 37.5% interest in the Bajo de la Alumbrera gold-copper mine in Argentina; a 100% interest in the Marlin gold-silver mine in Guatemala; a 100% interest in the San Martin gold mine in Honduras; a 40% interest in the Pueblo Viejo gold development stage project in the Dominican Republic; and a 100% interest in the Cerro Blanco gold project in Guatemala. Goldcorp, Inc. was founded in 1954 and is headquartered in Vancouver, Canada.

2. KGC

Company Events

Kinross Gold Corporation engages in mining and processing gold and silver ores with a principal focus on gold, as well as in the exploration for and the acquisition of gold bearing properties in the Americas, the Russian Federation, and internationally. The company owns a 100% interest in the Fort Knox open pit mine, mill, and mineral claims covering approximately 19,682 hectares located to the northeast of the City of Fairbanks, Alaska in the United States; and an 80% interest in the Gil property mineral claims comprising approximately 2,521 hectares located contiguous to the Fort Knox claim block. It also holds a 100% interest in the Paracatu mine, including an open pit mine, process plant, tailings dam area, and related surface infrastructure located to the north of the city of Paracatu, situated in the north western portion of Minas Gerais State, Brazil; and the Maricunga heap leach mine consisting of 5,900 hectares located in the Maricunga District of the Region III of Chile. In addition, the company owns a 75% interest in the Kupol gold and silver project in the northeast region of the Russian Federation and a 49% interest in the Cerro Casale project located in the Maricunga District of the Region III of northern Chile. Kinross Gold Corporation also holds a 50% interest in the Round Mountain gold mine in Nevada and a 100% interest in the Kettle River mine in Washington, the United States; a 50% interest in the Crixas mine situated in Brazil; a 100% interest in the La Coipa mine located in the Atacama Region of northern Chile; and a 90% interest in the Julietta mine in the Russian Federation. As of December 31, 2007, its proven and probable mineral reserves were 46.6 million ounces of gold and 77.0 million ounces of silver. The company was founded in 1972 and is based in Toronto, Canada.

3. AZK

Company Events

Aurizon Mines, Ltd. engages in the acquisition, exploration, development, and operation of gold properties in North America. It owns a 100% interest in the Casa Berardi project, a gold-producing mine property comprising of 299 mineral claims and 2 mining leases covering a total of 16,637.17 hectares located in the Abitibi region in the Province of Quebec, Canada. The company also owns interests in 3 claims; and holds options to acquire a 100% interest in 87 claims and an option to acquire a 75% interest in 2 claims in the Joanna gold project covering 2,608 hectares located approximately 20 kilometers east of Rouyn-Noranda, Quebec. In addition, it has interests in the Kipawa gold uranium project with 1,277 mineral claims covering approximately 75,000 hectares located approximately 100 kilometres south of Rouyn-Noranda, Quebec. Further, Aurizon Mines, Ltd. holds royalty interests in the Beaufor Mine with an area of approximately 92 acres located 16 kilometers east of Val d'Or, Quebec. The company was founded in 1988 and is headquartered in Vancouver, Canada.

Utilities (Season end of July to beginning of January)

1. EGN

Company Events

Energen Corporation, an energy holding company, engages in the development, acquisition, exploration, and production of oil, natural gas, and natural gas liquids in the United States. It also involves in the purchase, distribution, and sale of natural gas to residential, commercial, and industrial customers, as well as other end-users of natural gas in central and north Alabama. In addition, the company provides gas transportation services for industrial and commercial customers located on its distribution system. As of December 31, 2007, Energen Corporation had proved oil and gas reserves of 1,754 billion cubic feet equivalent in the San Juan Basin in New Mexico and Colorado, the Permian Basin in west Texas, and the Black Warrior Basin in Alabama. The company was founded in 1929 and is headquartered in Birmingham, Alabama.

2. LG

Company Events

The Laclede Group, Inc., a utility holding company, engages in the retail distribution and sale of natural gas in eastern Missouri. As of September 30, 2007, it served approximately 630,000 residential, commercial, and industrial customers in the City of St. Louis and parts of 10 other counties. The company also involves in underground locating and marking service businesses primarily in the utility and telecommunications sectors, as well as in the non regulated marketing of natural gas and other services to both on-system utility transportation customers and customers outside of its traditional service area. In addition, it operates a pipeline that connects the propane storage and vaporization facilities to third-party propane supply terminal facilities located in Illinois. Further, the company involves in the development of real estate properties and the provision of services for the compression of natural gas to third parties, as well as offers insurance agency services. The Laclede Group was founded in 1857 and is based in St. Louis, Missouri.

3. NFG

Company Events

National Fuel Gas Company, through its subsidiaries, operates as a diversified energy company. It operates in five segments: Utility, Pipeline and Storage, Exploration and Production, Energy Marketing, and Timber. The Utility segment offers natural gas transportation services to approximately 725,000 customers in Buffalo, Niagara Falls, and Jamestown in New York, as well as in Erie and Sharon, Pennsylvania. The Pipeline and Storage segment provides interstate natural gas transportation and storage services for affiliated and nonaffiliated companies through an integrated gas pipeline system extending from southwestern Pennsylvania to the New York-Canadian border at the Niagara River and eastward to Ellisburg and Leidy, Pennsylvania; and 32 underground natural gas storage fields. This segment also transports natural gas for utilities, industrial customers, and power producers in New York through a 157-mile pipeline. The Exploration and Production segment engages in the exploration, development, and purchase of natural gas and oil reserves in California, Appalachian region of the United States, Gulf Coast region of Texas, Louisiana, and Alabama. As of September 30, 2007, this segment had U.S. reserves of 47,586 thousand barrels of oil and 205,389 million cubic feet of natural gas. The Energy Marketing segment markets natural gas to industrial, commercial, public authority, and residential end-users in western and central New York, and northwestern Pennsylvania. The Timber segment markets timber; owns two sawmill operations; and processes timber primarily of hardwoods. The company also develops and operates mid-range independent power production and landfill gas electric generation facilities. National Fuel Gas Company was incorporated in 1902 and is based in Williamsville, New York.

To view the daily research on these 9 companies and make your own seasonal plays, visit my Daily Trading Research Blog.

Always perform your own due diligence before making any investment.

Wednesday, June 18, 2008

Three new option positions

I said I wasn't going to, but I couldn't resist these three small option position pick ups today after Bush's speech. Not because they had a lot to do with his speech, so much as every time I hear his voice on t.v., the market starts tanking, and then recovers some time afterward. It is almost as if it is the short sellers cue to scare the masses out of their positions. I think I will nick name this phenomenon the "chimp dip". Think it will catch on?

TRA 60 calls was my first buy. I bought the stock, and it has performed very well. I have calculated 7 to 10 more points to target from 55, so I decided to grab a couple of calls. I got in fairly reasonably, and am up about 15% as of close.

Click image to enlarge.

Next I grabbed some ENER 85 calls. This one has gone parabolic lately. If you view the chart, the two long white candles prior to this one had a couple of days of consolidation with the lows hitting about half way down the candle, and then starts the next leg up. These calls ended the day even.

Click image to enlarge.

Last position I added was the POT 290 calls. I have been trying to get these for a couple of days, and never was able to get a fill. I chased them a little, and ended the day even, but I left room to average down if the price drops. Looking at the chart, you can see why folks are chasing this one. I chose the 290 calls because they were inexpensive, yet reasonably achievable in the next four weeks due to the target being raised to 300, and the stocks recent performance.

Click image to enlarge.

Other position notes: QQQQ confirms double top if it closes under 47.82. I have a few of the 51 calls and will need to watch this closely.

JRCC and PCX continue to climb. I have a very small JRCC equity position, that I am up 80% in just a little over a month in my IRA. Coal is hot right now, and I don't want to miss out on any more of this opportunity than I have. However, we have a strange few weeks coming up. The fourth of July is half way between now and July option expiration, which means two weeks out of the next four are going to be very unpredictable. So, rather than purchase options that are a bit out of the money as I normally do, I will purchase just one in the money contract, and trade it as if it were an equity. I may have some time value issues, but it shouldn't compare with the profits made if the coal stocks continue on their parabolic path.

Click image to enlarge.

continues downward in it's channel, which is expected but rough on my account balance as I hold a few shares in both my IRA and trading account. I will add more as it approaches 543, and keep an eye out for a break down.

V also on watch as it is having difficulty breaking through 85. This may be a bad sign, or it may just be because option expiry is in two days. Either way, the chart is teetering on a breakdown, and I am keeping a close eye on it.

Always perform your own due diligence before making any investment.

Tuesday, June 17, 2008

Position Reviews 6/17/08

Just wanted to review a couple of positions that I am holding, and document the charts for them as of today. Some may have been mentioned in other posts, some haven't.

Picked up some JASO today at 21.28. I liked this chart last night and put a bid in at 20.88, but it took off without me. I didn't want to chase, but did want to get in on the double top trend reversal, so I raised my bid to just over the confirmation line at 21.28. The stock went as high as 22.35, and at some point I stopped watching it to concentrate on other holdings. Looked up and it was below my fill. JASO ended the day down, with an inverted hammer. This could mean that our double top pattern had just pulled back, and is getting ready for it's next leg down. A break below 20 tomorrow would take us out of our upward trading trend.

I flipped TRA calls several times as the symmetrical triangle formed. I was out of the calls once the break out confirmed, but once I realized that I could still make a good profit from the break out trade, I started looking for an in on Friday. Determined not to chase the ask, I did not get a fill Friday, only to find that the price had gapped up on Monday. This is a good indication that the stock is going to move well. I got in on this trade Monday after a little chasing at 51.88. Target is in the range of 62.00 to 65.01, but I will let the stock tell me when it is ready to start heading back down.

HTE and GOT both moving slowly, but trending upward out of their breakouts. Close eye out for a throw back on these. As updated in this post, FWLT also on close watch for a possible trend reversal.

PCU is in a downward trending channel. Need to see a break above 110. I have a very small position. I wont sell red, but may average down if it dips lower.

V: Needs to clear resistance at 87 on this upswing. On watch for a triple top, then look out below!

Always perform your own due diligence before making any investment.

Monday, June 16, 2008

Chart Trading Ideas

Jaso: Target 26.58 to 29.88

ABK: Watch for bump and run break out over 2.85.

GOT: Confirmed breakout from descending triangle. Target 3.40.

Always perform your own due diligence before making any investment.

HTE confirmed breakout 6/16/08

It looks like HTE had confirmed a double bottom but then had a throw back, which formed a symmetrical triangle. HTE broke out of the symmetrical triangle today. If you are going to play HTE I suggest avoiding the options, there is not a lot of interest, and the stock pays you a .30 dividend monthly while the pattern unfolds.

Target range 26.97-28.20

Click image to enlarge.

Last year HTE peaked at 29.84 on 7/16.

Click image to enlarge.

HTE is one of the stocks I track daily. Click here for more HTE research.

Always perform your own due diligence before making any investment.

Sunday, June 15, 2008

Chart Education Part 2 ~ Symmetrical Triangle ~ Google

Symmetrical triangles don't seem to have a lot of sex appeal, but they do seem to be appearing in several of the stocks in my portfolio, so I have decided that this is the next pattern that I will spend some time studying. The information in this post comes from my copy of Encyclopedia of Chart Patterns by Thomas Bulkowski.

A symmetrical triangle is formed when the stock moves within a trading channel forming higher lows and lower highs as it progressive, giving a top trend line that is angled down, and a bottom trend line that is angled upward. Unlike some of the other patterns that I have studied, confirmation does not occur when the price paces a certain point. Confirmation occurs when the price touches the trend line at least twice on the top and twice on the bottom. By that criteria GOOG is already in a symmetrical triangle pattern, and we are waiting for the breakout. Also the price must cross the triangle several times, covering the white space.

Volume pattern tends to have a downward slope to it. I've drawn a line on the volume portion of the graph that is sloping downward, but it has only has 8 points actually touching the line. The last few days have volume going over the line. Look for trades with heavy volume on the breakout for maximum reward.

Breakout direction can be in any direction, including horizontal, but 54% of the time it will follow the prevailing price trend, which in the case of Google is upward.

Minimum length for a symmetrical triangle is 3 weeks.

Failures: When the price moves less than 5% and then returns to the triangle and then breaks out in the opposite direction, the move in the new direction is likely to be large. These failures occur just over 1/2 the time. Look for resistance/support (depending on breakout direction) before initiating your trade.

Before pronouncing a chart a symmetrical triangle look to the left. A mirror image may be a diamond top or bottom formation. Another minor high to the left of the triangle could be a head and shoulders formation. Both are more powerful formations, so make sure not to miss them.

On average, this pattern gives a 31% rise or decline, and 1/3 of the time you will get a 45% rise or decline.

As with EEDT, busted symmetrical triangle breakouts actually perform better. If you get a pull back after 5% or less move in one direction or the other, and then the price breaks out in the other direction, you definitely want to play that movement.

To get a conservative target price, subtract the price of the lowest low from the highest high in the formation and then add or subtract that to your breakout price. A higher target can be measured by adding the price at the start of the move leading up to the formation to the lowest low, and then subtract that from the highest high in the formation. Since the former measure is easier, and more likely to be fulfilled, I will use that one.

Symmetrical triangles are good for intraday trading. Buy near the support line, sell near the resistance until break out occurs. Since I like to channel trade, it is helpful to be able to recognize these patterns so I can cut my loses when I end on the wrong side of a trade.

Now, lets get down to the nuts and bolts of this Google chart.


The first step is to identify the pattern. We see that GOOG has a symmetrical triangle confirmed as it has four touches to the top trend line and three touches to the bottom trend line. They are in the formation of lower highs, and higher lows. The price has crossed the pattern completely 4 times, and is on it's 5th leg in the upward direction.

While we can see a breakout in either direction, the overall look of the GOOG chart points to a slightly better chance at the higher break out. Combining the pattern with my resistance levels from Stock Consultant, I will call an upward breakout at 587 on the current pattern. While I am not expecting a downward break, I will be on watch for it below 543. Note that the longer that GOOG stays in this pattern, the closer the two break outs come to each other (since we will continue to make lower highs and higher lows until the break occurs). I watch the chart daily so I will adjust potential breakout watches as necessary.

Our target measure will not change from now until the breakout, so we can calculate it by subtracting our lowest low from our highest high.

602.45-524.77 = 77.68

Using our current breakout watch numbers, we can conclude that an upward break of the pattern at 587 would give us a target of 664.68. A break downward at 543 gives us a target of 465.32.

Concentrating on the more likely break upward, we have some resistance areas we will need to overcome. First is 600. That is a big psychological resistance to get through. It shouldn't be a surprise that 602.45 is the high point of our pattern. Next is our 5% failure number, which happens to correspond with the triple top confirmation point from January. The pattern will bust if we can't push through to 613.00 without a throw back. If it fails here, we will need to keep a close eye to see if it breaks downward. A lot of money could be made on puts if this pattern was to fail. Next we have a psychological resistance at 650 which corresponds to the double top confirmation line at 652.50.

Referring to stock consultant though, the only resistance they show between the breakout at 587 and conservative target of 665 occurs at 640ish.
This is good news for our chart.

So, my watch points for an upward breakout are

1. 587
2. 600-605
3. 615-620
4. 640
5. 665

Go Google Go!

Always perform your own due diligence before making any investment.

Saturday, June 14, 2008

AAPL, another study of EEDT and initial 3RV (three rising valley) study.

One of the posters on Ihub asked for some input on AAPL recently. When I looked at the chart, I realized that a double top was forming similar to FWLT.

Confirmation: First the price was trending upward before the formation commenced. There are two peaks, with the price difference between them 1.19%, which is within our 0-3% variance. The valley is 10.52% lower than the highest peak, which is within our 10-20% range for the valley size. Most importantly though, per the Encyclopedia of Chart Patterns the pattern is not confirmed as an Eve Eve Double Top (EEDT) until it closes below the confirmation price of 172.00.

On Friday, we did dip below that price of 172, even dipping as low as 165.31 at one point. However our closing came in at 172.37, so by the strictest of definitions this pattern has not yet confirmed. I'm not buying calls at this point, though, as if the market turns down again on Monday we could confirm at that point. Basically, as I see it this one is in for a good sized move from here, we just wont know which way until next week.

Highest peak is 192.24. Using that and our confirmation of 172 we can calculate the target if the formation confirms.

192.24-172.00 = 20.24/2 = 10.12
172-10.12 = 161.88.

Our target of 161.88 is very near the 200 day moving average of 161.05.


If this stock confirms, one play would be a short sale or put play to the 161.88 target area. There is very mild resistance at 167.70.

If this pattern busts or doesn't confirm a couple of things could happen. Either way, a call would be in order though. If we start moving upward, we will either meet resistance at or go through our peak at 192.24. If we see a white candle forming tomorrow, and can get in between 175 and 180, we could see a return of 6.80% to 9.85% if we have to sell at the 192.24 level. However, on average, busted double tops see a 70% gain on perfect trades, which would put our price target at 292.40! We have 3 areas of resistance to break through, but once we are through 200, there is nothing stopping AAPL from rising.

In fact, if you take a look at the lifetime chart on AAPL on a monthly basis, it has been downright parabolic, and from what little reading I have done on the three rising valley chart, this stock will continue to fly if it can break confirmation of 202.96.

If we do the measurement calculation for AAPL based on the 3RV formation, we get an even higher target price of over 370! Granted it will have taken several years for that formation to confirm, so my assumption is that it would take several years for that target to be reached. All in all though, if we can confirm with a close over 202.96, AAPL would have to look like a great addition to anyone's IRA.


Always perform your own due diligence before making any investment.

In Review, week ending June 13, 2008

Friday the 13th was the only bright spot in this dreary week. My trading account has taken a battering, mostly in my portfolio balance, which is down 22.5% from the beginning of June. Realized gains have also slid some, but are still up 7.95% for the month. This is because I did not close out of all of my open option positions by Thursday, and for the most part that was a bad idea. As expected time value has been greatly lost on many of my open option positions, and GS in particular moved the opposite direction that I needed it too. I do not know how many times I will beat my head against this wall, thinking this one time I will do better holding an option over Thursday night into Friday before expiry week. I lose every time, and yet I continue to make the mistake.

Between the battering my account has taken, and what I see as a large number of bad moves on my part these past few weeks has made me decide to step back a little from option trading, and concentrate more on studying the market, and making fewer plays, mostly equities. I am going to be doing an in depth analysis here of my FWLT play for those of you interested in watching along. A couple of other plays that I will be watching this next week are AAPL which so far has failed to confirm it's double top Friday, and TRA which has recently broken high out of a symmetrical triangle.

I've created a list of seasonal plays to start watching. I went through and picked only stocks with A ratings from Navellier's Portfolio Grader. You need a subscription to one of his newsletters to access this. I am currently subscribed to Blue Chip Growth. Like everything else, I use it mostly for ideas and guidelines, but the portfolio grader is a nice bonus. Rather than doing my own due diligence on the hundreds of stocks in a few sectors, I was able to plug my lists into the grader, and sort by rank. This narrowed me down to 22 stocks across the three sectors targeted for seasonal plays starting the end of July. Over the next week I will start evaluating the charts on the stocks. I will be looking for recognizable patterns of course using my Encyclopedia of Chart Patterns, but I also want to look at 2 year charts to see each stocks individual performance last year during the sectors "season". Once I've done that, I will start a daily tracking for seasonal plays. My goal is to get that started before the end of June.

I'm going into this week knowing that I will be looking at a blood bath on my stats by the end of the week, as open options expire worthless erasing my current realized gains. Because I will be scaling back my plays at the same time, I am hoping that my portfolios realized gains finds it's bottom for the month, and hopefully my account value found it's bottom this week (was down as much as 32.5% at one point). The good news is that I shouldn't have to withdraw any more cash for living expenses for the rest of the month, and my HTE dividend pays next week. That monthly dividend is always helpful.

Always perform your own due diligence before making any investment.

Thursday, June 12, 2008

Chart Education, Part 1 ~ EEDT (Eve Eve Double Top) ***Updated 6/18/08***

Well, I cracked open my Encyclopedia of Chart Patterns and quickly realized that this is going to be one of the best investments I have made to my career as a day trader. I heard about the book on Mike Anthony's Extreme Stock Charts message board at Ihub.

The book is a very comprehensive analysis of the different chart patterns that can show up in your stock charts. I have been flipping FWLT calls for awhile now, and just before receiving the book I noticed that a double top was starting to form. Because these calls are one of my largest positions I decided after reading through the first chapter to skip ahead and read about double tops. There are several different types of double tops. The one that I am seeing in FWLT is a called an Eve & Eve double top.

*****Identification: First of all, by definition a double top would imply that the price trend leading up to the pattern needs to be upward. 65% of twin peak patterns studded climb away from the pattern rather than dropping below the confirmation line. Tops should look similar. Valley between can vary, normally 10-20% difference. Tops should be similar price, 0-3% variance. Peaks separation generally 2 to 6 weeks apart. Lastly, confirmation must be met to be called a true EEDT pattern.

*****Confirmation: Price must close below the lowest low of the pattern valley.

Once you have confirmed that you have a EEDT you will want to determine your target price to decide how you want to play the pattern. Rule of thumb is to measure the distance between the highest and lowest pps between the peak and valley. Take that number and divide it by two. Subtract that from the confirmation price (lowest price per share of valley) and you have your target. This calculation works 73% of the time in a bull market, and 76% of the time in a bear market.

You can play the downside on this pattern, but playing the upside once the trend changes can also be very profitable. Also, as noted above 65% of twin peaks do not confirm, and price will rise on average 70% when the pattern busts out.

The information above is paraphrased from Encyclopedia of Chart Patterns.

Now, lets evaluate our FWLT chart.

Click on chart to enlarge.

Note: This chart was created during the trading day.

The first thing that you will notice with the chart above is that yes, we have an upward trending stock price leading up to our pattern. Our two peaks are similar in appearance, rounded at the top. The peaks are almost three weeks apart (12 candles, plus 7 weekend and holiday days), so our time frame is correct. The left peak (highest) is at 79.82 and the right peak is at 79.29. that difference of 0.58 is less than 1% difference, which is within our 0-3% variance. The valley low price is 71.36, which becomes our confirmation number. Valley is 10.6% of peak price, which is within the 10-20% norm for peak to valley difference. Today we closed at 70.82 which confirms our pattern.

Since our pattern has confirmed, our next step is to do the calculation that will give us our price target for the down trend.

(79.82-71.36) / 2 = 8.46 / 2 = 4.23
71.36 - 4.23 = 67.13

Based on this calculation 67.13 is our price target. One play would be to purchase some puts tomorrow morning at open. While I will probably do a paper play on this just to get a feel for playing this chart pattern, there are many reasons why I would not make this play. First of all, option expiration is next week, which exasperates time loss on option plays exponentially. Secondly the price difference from confirmation to target is fairly small. The difference is only a little over 5%. Since I try not to purchase options the first 30 minutes that the market is open, chances are that percentage will be greatly diminished before I was able to purchase the option. Finally there are several levels of resistance that FWLT would have to push through in order to achieve that 67.13 price target. On 5/12/08 the price of FWLT gapped up from 69.65. There is a possibility that this decline is just an effort to fill that gap before continuing the upward price trend. Next, the price has closed at support of 70.98 this is a very strong support (variance 1.99) for FWLT. The support level has been tested more than 3 times, with high volume and held. We also have the 50 and 200 day moving averages within that support variance at 69.45 and 68.98 respectively. This is going to be a ripe spot for mutual fund managers to pick this stock up for a run up.

Because of these strong support levels, and the huge upside potential I have decided that my play is to start making equity purchases of FWLT. I made a small purchase at 71.56 today, and may add to that if it dips to the target of 67.13 or below.

Update 6/13/08

"One play would be to purchase some puts tomorrow morning at open. While I will probably do a paper play on this just to get a feel for playing this chart pattern, there are many reasons why I would not make this play."

I did not even make this play on paper. FWLT gapped up from Thursdays close of 70.98 to open at 71.70.

"Because of these strong support levels, and the huge upside potential I have decided that my play is to start making equity purchases of FWLT. I made a small purchase at 71.56 today, and may add to that if it dips to the target of 67.13 or below."

I purchased about 1/2 of the position I was willing to carry on FWLT at 71.56. My target is 85.00. I will need to watch for resistance at 80, to see if FWLT is able to push through, or if a triple top forms. I also need to watch that it doesn't close below our confirmation line at 71.36.

The chart below lays out a few trend and support / resistance lines, which give an idea of where my targets and watch areas are coming from. Our close yesterday came close, but did not quite fill the gap on 5/12 from 69.65. 85 seems like a reasonable target which will net us approximately 18.75% profit on the trade. I may bank some profits at the 80 level though if it has too tough of a time breaking that resistance. Even to 80 we can net a 11.75% return on this trade.

Click on chart to enlarge.

Update 6/14/08

Before I start my analysis of a few other stock charts, I wanted to review a couple different time frames on FWLT. In the first chart, we are looking at a 10 day chart at 10 minute intervals. As you can see FWLT has broken out of it's downward trend.

Click on chart to enlarge.

Looking at FWLT's 2 year chart, you can see a similar double top failure around this same May-June time frame.

Click on chart to enlarge.

Assuming a purchase of around 51.50 when the chart pattern failed to confirm, to the top of the run completed during the first half of July, the stock priced gained 20.3%.

Update 6/16/08

The stock performed pretty much as expected today, making another leg up. We may meet some resistance here at 76.43, and I will be surprised if we touch 80 before option expiration, though it is possible.

Click on chart to enlarge.

Update 6/17/08

The stock closed with a red candle today, but above 75. Volume was low, about 45% of the average volume for the past 6 months. We are still in the upward moving channel, but I will be watching this one close tomorrow. A close under 75 could indicate that this was just a pull back on the double top formation, and there is more down side to be seen on this stock.

Click on chart to enlarge.

Update 6/18/08

The stock closed today with a white spinning top, which signals indecision in the market. I am expecting the stock to stay under $75 through option expiration on Friday. I will hold my current position, but would not suggest buying or shorting this stock at this point, it can still go either way.

Click on chart to enlarge.

Always perform your own due diligence before making any investment.

Wednesday, June 11, 2008

What can you say about this market except...


I'm emotionally back where I was in February when I took a break from day trading, while not quite financially. I've made some great realized gains, but not enough to offset the damage this falling market has done to my portfolio. So, I'm off the day trading for awhile, and back to the slow steady rebuilding of my portfolio value through accumulation of blue chip equities. While I will no longer be spending 8 hours a day watching level 2's, I do have a list of things that I will be doing.

First of all, I will continue to update my Day Trading Research blog. Like I did in February, I wont be watching the daily ebb and flow of my portfolio, but I do keep up with watching the channeling and changes, because I will be swing trading some equities to regain some lost grown.

Next I will be doing some reading. Today my Encyclopedia of Chart Patterns and I am going to start studying that. I have also ordered DeMark on Day Trading Options and Options Trading 101. While I think I have learned quite a bit in the past few months by trial and error, I feel it would behoove me to spend at least part of the time that I would have spent day trading to learn some more about trading options for when the market finds a little more stability.

Third, I will start researching my July Seasonal Plays.

Fourth, I am attending TD Ameritrade webcasts to learn about their new Options 360 trading platform.

Now, about those equity positions I will be swing trading. I will be watching the following stocks for buying opportunities, using the support and resistance levels from Stock Consultatnt to determine the best buy and sell points. Since I will be trading the equities, and do not have to worry about the time decay associated with options trading, I will be trading around a core position, selling a percentage of my holdings when I reach a resistance level, and purchasing more as I approach support. Of the 5 stocks I have listed below, I already hold some PCU and HTE. The stocks are listed alphabetically, and you should be able to click on the chart to enlarge it for easier viewing.

DRYS: Look for entrance near $60.00

FWLT: Look for entrance near $70.00

HTE: Look for entrance near $23.00

PCU: Look for entrance near $100.00

SOLF: Look for entrance near $16.00

I don't have charts saved for them, but POT and GOOG are also always on watch for accumulation opportunity.

Always perform your own due diligence before making any investment.

Sunday, June 8, 2008

Seasonal Plays

One of the sections of my Stock Traders Almanac regards seasonal sector plays. It is because of this section that I purchased the QQQQ calls in April, and have been trading them successfully ever since.

There are three seasonal index plays listed to start at the end of July. Biotech (BTK) play ends the begining of March and averages a 15.6% return the past 5 years, and 38.3% over the past 10. The Gold and Silver (XAU) play ends the end of September and averages a 20.8% return the past 5 years, and 20% over the past 10. Lastly, utilities (UTY) end the beginning of January and average 13.4$ return the past 5 years, and 20% over the past 10.

If you are not day trading, buying the index fund may work for you, however what I will be doing is finding a few stocks in each sector that I like, and follow them over the next few weeks to look at for day trades. Once I find them, I will start covering them in my Day Trading Research blog.

Always perform your own due diligence before making any investment.

Friday, June 6, 2008

In Review, week ending June 6, 2008

Oh my gosh, what a week! The market continues to be manic depressive, and the longer that it is the more we come to expect it. While listening to CNBC I heard at one point this week someone refer to the DOW being down over 100 points as a minor correction. It wasn't that long ago that would be a major event! Now the DOW needs to move closer to 300 points for anyone to start batting an eye.

But enough of that, now for my notes for the week.

My research blog has worked out well. I have gotten some good feedback from fellow traders at Ihub, and I am glad to share my work with them. One of the things that I decided was to try and earnings play this week. I had done a few earnings plays and found that the price of the options increased the closer time got to the earnings, a premium seemed to be built in. Running with that idea I made a few plays, and I have to say the results are less than sterling. What I netted from the experience was extra work time in research, distraction from playing positions that I know (the ones I have been watching daily for months) and a loss of 2.1658% assuming that the JTX calls that I am holding expire worthless (I didn't get the end of day out I was looking for, or the earnings I was expecting). While I don't normally like to give up on an idea so soon (I only gave it a week), I have decided that right now is not the time to continue on with that path at this time. I may try it again, but right now the market is too precarious to be adding a new play to my bag of tricks.

My goal has been to close my open option positions by June 12th. I have been holding a lot of red options that I picked up since I came back to day trading full time in April. When I have an open option position, I like to watch the level two of the option side by side with the underlying stock level two. This works out great for trading, but I was having a couple of problems. First of all, only one of my accounts has level two functionality, and with their platform you are limited to 6 level two's open at one time. That meant that I could only basically have full vision of 3 option plays at a time (and I usually have a few more than that going). Another problem that I had is that very often the option level two on Ameritrade would either stop functioning all together, or their would be a difference between what the level two was showing as the option price, and what was showing on other parts of the site. These problems had more than once caused me to make a bad trade just because I wasn't clear of what was happening with my option bid/ask.

A great person I met on Ihub that runs the The Lotto Pick Project was helping me out with level two's now and then when I asked. She was kind enough to lead me to the AlphaTrade trading tools, and I have to say I'm very pleased! I am currently only using the level two and charting functions, but even those are well worth the price of the service. I'm now set up with level twos on one computer, complete with awesome real time graphs and my Command Center for trading open on the other computer.

One of the great things about the graphs at Alpha Trade besides being real time is that you can pull up graphs for options as well as equity ticker symbols. I went for months without having access to option charts. I also recently found that Big Charts has option chart access for free. Anyway, at one point I realized that I was holding way too many option bags to keep an eye on all of them, so I spent a little time one evening and pulled up the chart for each of the options that I was holding, found out what the highest price was that the option had achieved in the past few weeks, and set a GTC (good til cancelled) bid. If something happened to the stock in after hours, I could always change the bid, but if there was some unforeseen spike in the underlying stock while I was paying attention elsewhere, I would fill for what I felt was a fair closing price. This was invaluable for helping me to eliminate some of my positions.

Overall my trading account value is down 8.16% month to date, but that of course includes part of my monthly "salary" which comes out the first week of the month. My trading account has seen realized gains of 7.99% so far this month.

In conclusion, here are a couple of new option links that I found that I will start looking into this week as round trip option trading resources.

Most Active Options

Options you should have bought

Option Chains

Always perform your own due diligence before making any investment.

Tuesday, June 3, 2008

Round Trip Options 6/2/08 to 6/6/08

I didn't have the opportunity to make too many round trip plays this week. The ones that I did all turned red, though the losses were very small. My concentration has been on closing out my open option positions before next Thursday in preparation for expiration week.

VIP calls .07 loss for 38%
SOLF calls .25 loss for 14%
SOLF puts commission loss, 1%

Always perform your own due diligence before making any investment.

Another rough day at the office.

Well, I closed out my first two earnings plays today. Unfortunately they both closed red. I guess it would have been too much to ask that I close green on a new trading strategy the first time I tried it.

I started grabbing GES calls yesterday. I could have gotten priced in better if I had waited until today. The market did a shake down in the after noon, and while stocks did recover some from their lows, it was not quite enough to get the interest going on my calls. Doing these plays I may actually be better off buying calls that are in the money, rather than going with the cheaper out of the money calls. It's hard to tell if my theory is bad, or if today was just an aberration due to the market sell off. I decided against my original plan of selling all of the calls at the end of the day, and kept 1/4 of my positions to hold into earnings, as the stock price was resting on a strong support level, and GES has had a couple of recent earnings surprises.

Well, so far that seems like it was a good idea. GES is up 8% in after hours. Of course that does not mean that it will still be up at market open tomorrow. IPI had blow out earnings recently but went down after earnings on Monday and still hasn't recovered.

The difference though is that GES and retail in general have been fairly beaten down recently, while IPI and fertilizer had already seen big gains before earnings release. We'll see what happens with that tomorrow.

VIP was my second option play. I broke one of my rules buying it though. I put a bid in at open, which filled and then immediately lost 50% value. I was fighting an uphill battle all day, and never recovered. As always I need to remember never to purchase options between 6:30 am and 7:00 am (market open to 10am market time). It bites me in the hiney 90% of the time.

I purchased some JTX calls yesterday. I had an opportunity to sell for 100% gain at one point today and didn't take it. Earnings are pre market on Thursday so I will be selling those before close of market tomorrow. I'll be back here to update this post with how that trade turns out.

My one round trip today was SOLF. It broke through resistance and I bought the calls for a round trip based on the bump in the squeeze rating between Monday and Tuesday. It didn't stay above that resistance long, and ended up plummeting with the rest of the market. I was tempted several times to average down, but had decided not to for a couple of reasons. First of all it was still over a dollar away from the next support level (which was a weak support anyway) and also because I just started tracking this stock. I have not had a lot of success playing the solar sector, despite the huge amounts of money other people seem to make with it. My timing with solars has been horrible, so I decided rather than averaging down, I would just ride the position out to see if I got the bounce I thought we would the last hour of trading. As it happens we did get that bounce, and I sold for a .25 per contract loss. The good part of this story is that because I stuck with my plan, my loss was less than it could have been. Had fear ruled me, I could have sold those options for a .65 per contract loss when the shake down occurred.

My favorite part of today was that I was able to finally add some ENER to my investment account. It's only a small position, as there is a long way down to a support level, but I'm happy to have it. I purchased the stock, as I'm still new to following this stocks fluctuations. I would have to have a really strong signal that the stock is moving in a particular direction before I try to round trip the options.

Always perform your own due diligence before making any investment.