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All Week We Said:
We could chew around for a few days and that may still be the case. What we are seeing is encouraging though.
And that is exactly what we are seeing here thus far. BUT you wouldn’t know it by the headlines. Up 600 one day, down 500+ the next, up huge the next and so on. Again, what did NEO say yesterday? Look at what the charts are showing I think it was. And yes we have structure and chewing around taking place vs hysterics.
Let’s spend a minute on how I start my day around here.
First thing I do in the morning is look at the futures be it are they up or down.
Then I look where that shakes out on a chart. In this mornings case it was at the popped stops lows in early pre market trade for a retest of lows hence a double bottom shake out low all taking place in pre market all in the futures ( Where the machines from the Matrix prefer to play) markets.
NOTE: See what we have developing here? A POTENTIAL HEAD AND SHOULDERS BOTTOMING LOW in a micro frequency much like we talked about as in "Its gotta start somewhere. Keep in mind in the SPX and COMP there are gaps back there that probably will get filled but who knows the way the Matrix is trading.
Moving on back to our morning routine, after looking at the futures I then I look what leaders are doing. Remember what NEO said yesterday? He said look not at market (The Matrix) look at what stocks are actually doing right?
So I did that this morning when futures were down and CSCO (big index component) was up huge (earnings), AAPL up, BIDU up, AMZN up, CMG up, LULU up and a slew of others too, all kingpins. So that told me that this is a head fake shake and bake low and it wasn’t going to stick. Coupled with what the micro short term charts were saying and we had all the makings of a move higher after the opening, well that was at 8:00 AM EST mind you. The rest is history as they say.
Side Note
Bravo Bravo!
Most of you know I’m not really a big fan of Cramer as he’s got a habit of being a bit to shall we say emotional?
But while using some drift time last night and clicking th ru the stations I caught the opening of Cramer. He talked about the EU and all the doom and gloom. And in closing he said something that shocked me as it really wasn’t his old normal shock and awe style. He said with emphasis on bold print:
Maybe just maybe things aren’t as bad as they seem, I APOLOGIZE FOR TRYING TO PUT THINGS IN PERSPECTIVE , ITS EASIER TO BE HYSTERICAL THAN IT IS TO BE HISTORICAL.
Amen, isn’t that the truth. Key words here are EASIER TO BE HYSTERICAL. Say didn’t NEO talk about that a lot Yesterday? Don’t we try to drive that point home all the time around here? As in DON’T REACT! (Which is what hysterical people do) DON’T GET EMOTIONAL?
I gotta give credit where credit is due, and I can’t help but to respect a guy for saying he’s not going to bow to the bullets. I’m sure him and NEO are getting along just fine today. Just Saying.
For us — it’s all about getting back or close to break even in our current positions. What we aren’t going to do is break down and sell into fear. Especially AFTER the market has already been pummelled and the inverse ETF’s are in chasing a bus mode here.
8-11 What we are going to do is monitor our positions and as we get names back up we’ll look to lighten the load. Two such names that we have our eye on the most in here is GMCR and MAKO those will probably be the first we let go of. GMCR will be a nice gain for us and MAKO will be an acceptable stop out of for us.
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Short Side Coming Attractions
On a snap back rally (Wave 4) up to NEW resistance I’ll have a ton of names setting up. Lets get to the snap back rally mode first. My gut says it’ll be fast and furious and wicked just like we’ve been seeing since first of the year.
Below we’ve taken a few charts of some of the recent leaders and drawn up the charts with what we need to see transpire before we consider taking a short sell on them. NONE of these are to be shorted in the current environment!
CHKP
As you can see, with CHKP above this is just the first shot across the bow for it (and many others) If indeed we get the snap back rally, wave 4 call it what you will then upon completion of that these names really get it to the downside the next go around (Wave 5).
Its all about a snap back rally. Wait for it. Over the coming days/weeks we will be adding to this list and drawing up "What we need to see to make us take a short sell" lines and patterns. Over the coming days/weeks this list is going to get huge and honestly? I’m looking forward to building it, truly I am.
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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
None as we just bought AAPL and GMCR
FEATURED BUT NOT TRADE TRIGGERED BY US LIST
SLV
GLD
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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
AAPL September 345 Calls to open (We are now long 1 Sept. 345 call at 30.60 as of 8-8-11)
As we post they are currently trading at 37.30
GMCR September 80 Calls to open (We are now long 1 Sept. 80 call at 13.60 as of 8-8-11)
As we post they are currently trading at 24.05
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 5.85
NOTE: In the trade alert on 8-1 this issue in 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 2.40
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 5.40
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 12.25
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 1.10
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 .15
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 2.70
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 1.15
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 .50
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 .30
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Let Your Stocks Tell You What To Do By The Action They Exhibit"
LONG SIDE POSITIONS
NOTE: 8-11 Today’s charts are back to the last few days worth of chart action in a one minute time frequency. We do this because considering all the damage done, normal reference points are pretty out of whack. If we are on the way to a start of something higher over the coming days its going to start off of these reference levels, hence the S&P Downgrade day. In other words its gotta start somewhere.
We’ve tried to draw out micro support zones to be aware of in here and even a few breakout levels to the upside (green) as well as some POH’s although it might be a bit premature for those but nonetheless always something to be on the lookout for.
Bottom line is this, after the the huge double bottom shake out low and bounce hard off of it yesterday we need to consolidate that which would be healthy going forward and that’s what we are doing so we wanted to zoom in on what that looks like for you. All in Micro term.
Keep in mind we are not out of the woods yet and could chew around down here for days to suck up some supply so its one day at a time and try not to let the bullets get to you down here.
AAPL (We are now LONG 50 shares at 363.85 as of 8-8-11)
GMCR (We are now LONG 100 shares at 90.07 as of 8-8-11)
BWLD (We are now LONG 200 shares at 65.02 as of 8-1-11)
HOG (We are now LONG 200 shares at 44.00 as of 8-1-11)
VMW (We are now LONG 125 shares at 100.09 as of 8-1-11)
CRM (We are now LONG 100 shares at 146.01 as of 7-28-11)
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)
RUE (We are now LONG 200 shares at 33.69 as of 7-19-11)
ARBA (We are now LONG 200 shares at 34.56 as of 7-19-11)
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)
NXPI (We are now LONG 300 shares at 22.96 as of 7-13-11)
ENTG (We are now LONG 300 shares at 8.71 as of 7-13-11)
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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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