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Gap and Go or Pop and Drop- I don’t think I need to tell you which route the markets decided to follow. Unbelievable.
This all reminds me of Fed days. As we see every Fed day the market pops big and drops big all in the course of one day.
Why? Because there are traders on the street who straddle the events. And believe it or not they make sure they get paid on both ends of the equation. That’s really what its looking like here. But we’ll see.
One of our subscribers asked us why we bought the gap up this morning after we dropped mind you. No disrespect and is a good question, of course we would not have got this question posed to us if the market staged a gap and go mind you. Our answer is simple, from the lows of 2009 and all of 2010 if you did not buy the gap up opens you got left in the dust and missed huge moves.
So now that we popped and dropped what are we going to do about it?
Well the first thing we are NOT going to do is Leave our
WINGMAN!
So who exactly is our wingman by the way? They are our positions all based upon what the charts are showing. By paying attention to the charts it allows us to operate in the framework of what we are seeing technically vs emotionally, just another tool to help keep you centered. The bulk of our newset holdings (NFLX,CRM,TSCO,VMW,BWLD,HOG) ALL show positive chart pattern structure and that is what we are keyed in on currently. So lets take a look at our wingmen and women shall we?
As you can see, thus far everyone of our wingmen are intact (a little in flight buffeting today I’ll give em that) and holding they’re own. The overall structure combined with the most recent few days structure allows us to hang tough with these issues.
So should we jump to a conclusion immediately and sell all our new buys and leave our wingman? Or should we look at the charts and let that dictate what we do?
As for the index charts, all compliments of today’s manufacturing data (news flash-July is always the weakest month due to vacations and plant shut downs by the way folks) mind you.
We talked about the blue lines being major supports (S&P 500) and here we are on the verge of testing them.
As for the Nasdaq Composite its approaching the 200 day average and all the leaders are intact.
Overall? If I told you I was happy with today’s action I’d be lying as I’m not. But I’m also not going to react to today’s action either as we are getting severely oversold in here and the leaders (many of which we now own) are for the most part just there doing nothing here.
As for our issues that are not market leaders compared to the above names? given how washed out things are here we are just going to grit our teeth and hang tight with them. We did so with the earnings events of NANO,ARBA,NXPI and made it thru that emotional gyration so we’ll do the same thing for the time being with them again, consider it ding ding round two with them.
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Short Side Coming Attractions
NONE
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LONG SIDE WATCH LIST
"Only The Best And Forget The Rest "
"We Trade What We SEE, NOT What We Think, Hear Or Fear "
Remember the name of the game is Pullback Off Highs (POH) AND FIRST THRUST UPs as they are the only patterns you’ll ever need.
NOTE: CRM,NFLX and TSCO also have got that look and upon a relief rally can also be bought at the open or after the opening dust settles assuming we get resolution and a first thrust up POH during the day taking shape.
WYNN
NEW NOT FOR THE FAINT AT HEART NAME
JVA
TIBX
7-31 It’s all about an upside break of the Pink Line for going long, it’s all you need to know. Overall the structure still looks pretty tight if you ask us.
7-26 For those who do not know what TIBX does? Below is for you.
TIBCO Software Inc. is a provider of infrastructure software for companies to use on-premise or as part of cloud computing environments. Whether it’s efficient claims or trade processing, cross-selling products based on real-time customer behavior, or averting a crisis before it happens, TIBCO provides companies the two-second advantage(TM) — the ability to capture the right information, at the right time and act on it preemptively for a competitive advantage. More than 4,000 customers worldwide rely on TIBCO to manage information, decisions, processes, and applications in real-time. TIBCO Spotfire(R) is the company’s in-memory analytics software for next generation business intelligence. By offering a visual, interactive experience
IPGP
7-31 This issue needs some work as you can see. It’s not of the clearly defined uptrend channel sporting a POH like all the others are.
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FEATURED BUT NOT TRADE TRIGGERED BY US
This is where names that we have on our watch list that have triggered but for whatever reason we did not take them (can’t do them all) in our trade trigger alerts. This section is because a lot of our subscribers opt to use our information as they see fit from a do-it-yourselfer standpoint.
LONG SIDE
ICLK
SLV
GLD
7-25 Looks as though its starting to get that fear of a Government shut down trade going on as well as a fear of missing it after most have already missed it. Hmmm what happens to this issue along with the other metals stocks when the Washington issues are resolved ?
What if the government shuts down? Climax spike would be my guess, of course we all know the emotional money would jump in that day and buy greed from Wall St. right? Of course this assumes that were to occur mind you.
Long term investors who don’t care? A resolution in the Washington standoff corrects back some excess to perhaps the 50 day? No biggy for those folks. Traders that are buying it here? Lot of risk in my book.
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All About Options In The World According To All About Trends
Over the weekend we posted an article in this space entitled:
OPTIONS — Your best friend and worst enemy
That article is at the bottom of this newsletter for reference anytime you need it.
NOTE: The exchanges recently started WEEKLY EXPIRATIONS of options. Going forward, make sure that you check to see which ones you are buying. Let’s stay with traditional options expirations which are the ones that expire the 3rd Saturday of every month.
Current Holdings
VMW September 90 Calls to open (We are now long 1 Sept. 90 call at 12.30 5 as of 8-1-11)
As we post they are currently trading at 11.50
NOTE: In the trade alert this morning on this issue the header showed a Aug. 90 call option. No biggy if you bought those as we’ll post them here in this space as well.
As we post the Aug. 90 calls are priced at 10.10
CRM August 135 Calls to open (We are now long 1 Aug. 135 call at 14.05 as of 7-28-11)
As we post they are currently trading at 11.75
NFLX August 235 calls to open (We are now long 1 Aug. 235 call at 25.75 as of 7-26-11)
As we post they are currently trading at 30.35
TSCO August 60 calls to open (We are now long 2 Aug. 60 calls at 7.50 as of 7-21-11)
As we post they are currently trading at 5.40
ARBA August 30 calls to open (We are now long 2 Aug. 30 calls at 5.20 as of 7-19-11)
As we post they are currently trading at 2.65
MAKO August 25 calls to open (We are now long 2 Aug. 25 calls at 6.70 as of 7-19-11)
As we post they are currently trading at 4.70
NANO August 15 calls to open (We are now long 2 Aug. 15 calls at 4.10 as of 7-13-11)
As we post they are currently trading at 1.80
ENTG August 7.5 calls to open (We are now long 2 Aug. 7.5 calls at 1.50 as of 7-13-11)
As we post they are currently trading at 1.15
NXPI August 20 calls to open (We are now long 2 Aug. 20 calls at 3.70 as of 7-13-11)
As we post they are currently trading at .50
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Let Your Stocks Tell You What To Do By The Action They Exhibit"
LONG SIDE POSITIONS
BWLD (We are now LONG 200 shares at 65.02 as of 8-1-11)
Shown above
HOG (We are now LONG 200 shares at 44.00 as of 8-1-11)
Shown above
VMW (We are now LONG 125 shares at 100.09 as of 8-1-11)
Shown above
CRM (We are now LONG 100 shares at 146.01 as of 7-28-11)
Shown above
NFLX (We are now LONG 50 shares at 256.54 as of 7-26-11)
TSCO (We are now LONG 200 shares at 65.85 as of 7-21-11)
RAX (We are now LONG 200 shares at 43.42 as of 7-19-11)
8-1 ABC pullback off highs? Two days of nowhere.
RUE (We are now LONG 200 shares at 33.69 as of 7-19-11)
8-1 Questionable, lets see what Tuesday brings for this issue
ARBA (We are now LONG 200 shares at 34.56 as of 7-19-11)
8-1 Unless this issue breaks the red line we’ll stay with it.
MAKO (We are now LONG 200 shares at 31.08 as of 7-19-11)
NANO (We are now LONG 300 shares at 18.71 as of 7-13-11)
8-1 Until this issue breaks the 15.00 support level we will hold it. Of course we are not construeing that its going to break it either here as last week it had every opportunity to do so and did not.
NXPI (We are now LONG 300 shares at 22.96 as of 7-13-11)
8-1 We saw this issue on earnings put in some wicked thrills and spills last week and given its a small position and is beat down we’ll hang with it and on market strength see where it takes us.
ENTG (We are now LONG 300 shares at 8.71 as of 7-13-11)
7-31 — not exactly setting the world on fire but it’s weathered the storm last week and basically keeps us at break even. Here too a relief rally gets us going.
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To our NEW SUBSCRIBERS
What we’ve tried to do is break our watch list down into chart pattern recognition structure from a visual standpoint. Learn the patterns and the components of patterns and you’ll blow those Wall Street MBAs away. You don’t need a $3,000 software program either. All you need is a BURNING DESIRE to be the best that you can be and we’re here to help.
We have a lot of new folks here and we thank you! We want you to take it easy, get to know how the routine works around here for awhile and to feel comfortable.
We hope you all aren’t here because you are chasing performance. For us it’s more about educating and making you the best you that you can be first (that’s what we focus upon!). Like many of our long time subscribers they have all found out that they have no use for traditional Wall Street (and we don’t blame them) and it’s our hope that over time you’ll have acquired enough knowledge from us to say the same with conviction.
One of the most important things we want to stress is that of RISK MANAGEMENT via POSITION SIZING. You don’t need to stack your account with just a few big positions as we’ve seen it time and time again that those who get into trouble are the ones who take large positions and do not employ any risk management system IE shoot for the fences. Those are the people who live on the fringes of extremes and yes ultimately get burned.
As a guideline a good initial system is that of the following example.
Let’s say you have a $100,000 virtual portfolio and let’s say that as a guide you never place more than 10% ($10,000) into any one position. Now let’s say that one day a news driven event hits (over which you have no control over anyway) and one of the positions tanks 20%. On its own that position is sporting a $2,000 loss, while that may seem devastating on its own its really no big deal overall.
Why? Simple its all about risk management being properly employed. What is the impact of a $2,000 loss to the TOTAL VALUE of the virtual portfolio in this example.
Answer: A whopping 2% LOSS. Now you know why we say no big deal.
We can also tell you new people here that you will get stopped out of names and you will take hits. There is nobody on the planet living that has ever hit 18 holes in one and there never will be. We’d rather get you grounded in reality right away vs talking about pie in the sky all the time like a lot of other sites. In so doing your head is screwed on straight from the start and when those days happen (and they will) mentally it won’t mean a thing to you. To us that’s what’s most important is YOUR state of mind as it’s your most important asset. We hope you appreciate our honesty.
We have a very good retention rate here at All About Trends and a lot of great outstanding people here. We like to think that a part of that is being upfront about what can happen (in both directions). Verses those up 500%, I turned $50,000 into $3 million or some other absurd number to get you to bite. That’s not who we are.
WELCOME ABOARD!
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Lastly with regards to taking any trade:
Remember the moment you take a trade you are at the mercy of the market and have no control except when to sell. If you are not willing to take the risk and are not willing to pay that price do not take the trade. We are willing to take that risk knowing full well the end result could be a loss. That said make sure that virtual portfolio management trade size is used accordingly. With any position you may take make sure that should something go awry the amount of total impact to your account does not devastate your acct. Try to stick to a 5% position That’s the key to virtual portfolio management, not biting off more than you can chew.
Remember the mechanics of reality with regards to the stock market states a stock can only do one of three things: Up, Down, Nowhere. The moment you hit the enter button you are at the mercy of the market therefore the only control you have is when to sell/cover. You can’t manage your gains as you have none to manage initially. Knowing this in advance it allows you to stay in outcome, that being you will either:
1. Make a gain
2. Wash
3. Get stopped out at a loss
Remember the market IS the boss. IT is going to do what IT wants to do.
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OPTIONS- Your best friend and worst enemy
Let’s talk about options for a moment. First off this is a big universe with a lot of advanced strategies and terms like theta, delta , straddles, butterflies and the whole gambit. For the purposes of this conversation we’ll keep it real simple and not try to get to deep.
We’ll approach it from simple buy puts (short side) buy calls (long side). The first thing I want to mention is that options attract the fast money crowd in hopes of turning 500 into 10,000 overnight. This is also the get rich quick crowd. And more often than not these type of people get broke faster than they get rich. Please don’t be one of them as greed kills.
Time and time again we hear from people who like to trade options, and time and time again we hear the horror stories too. When we hear the horror stories nine times out of ten we can guess as to why their option went to zero. Nine times out of ten it was because they bought out of the money options or at the money options. This is the reason why 80% of those who do options lose money by the way.
Sure there are folks who use out of the monies and at the monies but those are experienced traders that know the ins outs ups and downs.
You see the trick is to NOT pay for time. You want as close to a point for point move as possible with the stock because there is nothing worse than seeing your stock move yet your option does nothing or very little, know the feeling?
So for All About Trends we only want to look at IN THE MONEY CALLS OR PUTS and we DO NOT WANT TO PAY FOR TIME, sure they cost more BUT we want to be as close as possible to being able to see a point for point move with the stock.
We hate paying for time. We want true value without the time. We’re not saying our way is any better than others, we’re just saying it’s what works for us.
Now let’s touch upon how we would build a virtual portfolio dedicated to options and how to make it a piece of your overall virtual portfolio via allocation. Keep in mind this is more geared towards beginners so you advanced people might be bored with it but then again it never hurts to revisit the basics every now and then.
At All About Trends Trends we talk a lot about never biting off more than you can chew and trade size position management. We do that for a reason, we do it so as to when Murphy’s law shows up it never devastates us or blows us up. Typically we try to stay within a 5-7% position size when we do a trade. The same thing goes for options. If we were to start a virtual portfolio of options or shall we say allocate a portion of our overall virtual portfolio to options the way we would look at it is the following:
For example, let’s say the total value of your virtual portfolio is $100,000. The most we’d consider allocating towards an options strategy is 10% of the whole virtual portfolio. In this case $10,000. So now you’d have a $10,000 option virtual portfolio to work with. Now let’s say that you are the worst trader on the planet (we doubt that!) and you lose the whole option virtual portfolio, what’s the risk to the total value of the overall virtual portfolio? 10% in which case you live to play another day. Now let’s touch upon that $10,000 you allocated toward options. Let’s reduce the risk even further (and we haven’t even talked about what stocks to trade yet). Let’s take that $10,000 and split it up into no more than 10% ($1,000) can be allocated to anyone position as a guide. (Sometimes 1000 can get you 3-4 contracts you know). Now let’s say that one of those positions goes bust (and they will! and sometimes more than one at the same time we assure you.) What is the total impact to the overall options virtual portfolio? 10% right?
Now let’s take that a step further. What’s the total impact to the overall investment virtual portfolio of 100,000? 1% – that’s right 1 measly percent. When it comes to options you need to employ some sort of virtual portfolio risk management structure parameters as this way you can get in trouble and you don’t lose sleep – you just have a bad day that’s all.
As for getting rich overnight? Forget about it. That’s just a marketing ploy. As for taking 50,000 and turning it into millions? Ain’t happening overnight but it sure sounds good doesn’t it? And that is why people bite on those marketing ploys.
As for time? We never go out months. As a swing trader we’re in positions for only a couple of weeks best case so why pay for the time to go out further in time when you don’t have to. When the stock moves whether it’s right away or not they sure seem to suck that time out of you just as fast anyway right?
Typically we’ll look at the front month (current month) or the next month but not months. When we say front month if options expiration is a week or sometimes even two weeks away we’ll look out to the next month and not the current. While time is our enemy in most cases, in this case it’s your friend. It’s just that you don’t want to pay for it
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SUBSCRIBER ONLY WEB SITE
Don’t forget you can view updates in the middle and the end of each trading day complete with current charts, along with our current performance at our subscriber only web site.
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