This low-volume rally is a joke.
As I pointed out to our Members in yesterday's Live Chat Room, volume on the up side of that v-shaped recovery has been 1/2 of what the volume to the downside was (comparing the last 3 weeks to the 3 before it), which means this "rally" is nothing but hot air – with very little support underneath.
And I know you get tired of hearing me say it and I get tired of saying it but, one thing I learned in 2008 is that you can't warn people often enough to be more cautious. Yes we lose subscribers when we go to cash (not much to trade) but, when the markets do pull back – my subscribers still have money!
And it's not like we can't make money with our cash. Just yesterday, we posted 7 bullish trade ideas for our Members, 3 of which we added to our virtual portfolios and one of which, a long on /SI at $16, made $2,500 per contract in 30 minutes and another $1,500 per contract this morning – that's not a bad way to sit on the sidelines, is it?
We don't ALWAYS have to be invested. We still have many long-term positions, it's just that we also have a lot of cash in case those long-term positions get cheaper and we decide to buy more. In fact, a few of yesterday's plays were just that – buying more of stocks that we've been liking all year as they go on sale.
This morning our Futures are at 17,600 on /YM, 2,040 on /ES, 4,200 on /NQ and 1,155 on /TF and we can go long on the laggard when (and IF) two of them are over and get out when 3 are below as a bullish play for the normal morning pump – that's how we make a quick $500 for you at Philstockworld!
Copper is bouncing off $3 again, that's also a good play, one that already made $1,250 per contract at $3.05 when I recommended it in Tuesday morning's post (which you can have delivered to you each morning by SUBSCRIBING HERE).
It's not all Futures at PSW: Our first Top Trades Alert went out a month ago, on October 20th and in it, we identified 7 trade ideas we liked at the time. They were:
- ABX at $13.40, now $12.50 – down 6.7%
- AKAM at $53.75, now $61.56 – up 14.5%
- BTU at $11.25, now $10.79 – down 4.1%
- EBAY at $48.25, now $54.94 – up 13.8%
- FCX at $30.60, now $28.08 – down 8.2%
- GSK at $43.47, selling 2017 $40 calls for $4.75 and $35 puts for $3 for net $35.72, now net $37.92 – up – 6.1%
- HOV at $3.70, now $4.13 – up 10.4%
GSK was the only "official" trade, the others were ideas but still 4 for 7 is pretty good and, more importantly, had you put $10,000 into each position ($70,000) the group would be up $2,580 (3.69%) a month later – that's pretty good!
That's how we teach our Members to trade at PSW, we DIVERSIFY our trades and allocate our portfolios so that no single trade can hurt us too badly. Once you learn to manage your money correctly, the only trick is trying to have a few more winners than losers and your profits will grow quite nicely.
All our winners are off their highs from last week and, when we called to cash out, that would mean taking the unhedged winners off the table (not GSK, they'll be fine and they pay a nice dividend) but we let the losers (all materials) run. In fact, we added to a couple of materials positions yesterday.
So, in this example, we would take $33,870 back off the table from AKAM, EBAY and HOV and we would get a bit more aggressive on BTU, ABX and FCX using some options hedging strategies (sorry, Members only). We still like them and we still expect a turnaround – it just hasn't come yet. Fortunately, we are patient, long-term INVESTORS, not just traders.
Our Top Trade Alert on 10/23 was also in the material space – CAT was at $97.60 that morning and is already back to $101.30 and our trade idea was:
As a new trade on CAT, I'd sell the 2017 $80 puts for $7.30 for a very nice $72.70 net entry. That's more than the $5.60 dividend you'd make owning the stock for 2 years and a 26% discount if put to you. That's great as a stand-alone play or it can be paired with the $100/115 bull call spread at $5.50 and you still have a net $1.80 credit (so net $78.20 entry – 20% off) but 100% of the upside over $100 for the next two years.
Already the short puts have fallen to $5.70 (up 21.9%) and the bull call spread is $5.75 for net .05, up $1.75 off the $1.80 credit (up 97%) in less than a month. That's the way we like to play a dip – our worst case scenario was owning CAT at net $78.20 while our best case is almost a 10-bagger we're already on track for!
So PLEASE don't be afraid of going back to cash into the holidays – I promise you we'll find something for you to trade tomorrow. 
