Saturday, October 20, 2007

ARNC - 92% In One Day!

Good News for those of you who were aggressive enough to make the purchase.

ANRC was up 92% on Friday!
Go figure, the Dow was down 366 points and this stock almost doubled!

I have a target of 15 cents on the stock and that is still a nice move from here, but even I am not aggressive enough to purchase any and I am pretty darn aggressive.

The problem with a stock like this is that it is very easily manipulated and it is very easy for the locals on the curb to throw you a bone and then take the meat.

The other problem I have with stocks like this is that in my early years (19) I played these quite a bit. Some worked out and some were complete busts. On the whole I saw the entire process as rigged and it was hard enough to make money in the market without somebody else stepping on your face. Can you tell it left a bad taste in my mouth!

There were times also that I had some incredible profits in some of these penny stocks and my selling created a quagmire of sorts as the more I sold the faster the price dropped and I am talking about 30 to 40% with each order. So getting out of these stocks can be a real challenge to say the least.

Anyway, if you had the guts to get in on this one then you might do quite well, as a matter of fact 92% in one day might be enough for you, but if you do decide to perhaps sell a quarter of your position or half or all of it for that matter, test the waters first. Put in an order for 5,000 shares and see what happens to the price. If it acts solid and the selling does not push the stock down sharply then start unloading the stock in blocks and try and not to upset the apple cart.

Equity Market Comment 10/20/2007

The probability work has been completed, both on a daily and weekly basis.
Both models are in agreement that lower prices are on the near term horizon.

While my original post on Friday had eluded to the possibility that a short term low was put into place Friday, the probability work has altered that prognosis.

The work is calling for a rally day on Monday, but nothing spectacular. As a matter of fact there should be some morning weakness carrying over from Friday, so day traders will want to buy the weakness. Then a rally of about 1/3 the damage done on options expiration should close out Monday. It is quite typical for the Monday after expiration to attempt some type of reversal. If we see the market close near the middle of its high and low range on Monday then the probability work will be right on cue.

It is all downhill from there with a strong drubbing over the next 5-8 days. Of course there will be some rally days mixed in there, but the net result should be sharply lower prices.

I remain hedged against further decline and with these new developments in the work I am going to hold onto the short positions in the Aggressive Equity Trading Account.

One of the keys to this scenario will be the area that the market closes on Monday. Should the market close at or near the middle of its trading range then consider the probability model dead on and brace yourself for some potentially ugly stock prices.

Take the time also to read the commentary on the chart below as it sheds some light on the potential intermediate term direction of stock prices.

Friday, October 19, 2007

Daily Equity Comment Part 1 10/19/07

While it was evident after yesterdays daily pattern that a decline had about an 85% probability, I have to admit that while I have been short term bearish I did not expect such a large decline.

I certainly am not complaining, as it took a crap day trading week on my part and turned it completely around and them some! : )

It also helped out our aggressive equity trading account which as you know has been comprised of nothing but short positions since last week. I will be taking most of the short trades off the table however as the market looks close to a short term low here.

The decline on the whole however is not complete as this entire decline from 1570 on the S&P 500 took the form of 5 waves down and a correction will not terminate when 5 waves down is the first pattern to develop.

This brings into play of a counter trend move back up, perhaps making up 50 to 62% of the decline followed by one more leg down.

There simply is too much bullishness right now to even begin thinking of a sustainable move to the upside.

I am confident that this correction should weed out most of the complacency.

Aggressive Equity Trading Account - Cover CSIQ Short

Cover the short sale in CSIQ and sell any put options you may have acquired as well.

All the short positions in the Aggressive Equity Trading Account made great progress with the large decline we saw today.

However, I am getting some preliminary indications that today or early Monday morning may mark the conclusion of the first leg down. I will go more into this subject in my daily equity market comment.

I am going to begin to take most of the short positions off the table starting today and into Monday Morning.

CSIQ gave us returns of +10.25%, +20.80% and +19.52% in just a bit over 2 weeks, so no complaints here.

Use the weakness we should see on the open Monday to close this position.
I will be posting the other short positions to take profits on over the weekend.

Thursday, October 18, 2007

STLD - Stopped Out of Put Options

We were stopped out of the STLD Nov. 50 puts at 3 1/2. These puts were purchased at 4 1/4, so we ate about a 17% loss, which is right where we wanted to have protection too.

Here is some great real time experience for you about exactly how important stops are in protecting your capital, and this is especially true in option trading.

Without this stop, we would currently be sitting on these puts at 2 1/4 which is almost a 50% loss.
Not to mention that the stock looks to have broken out from a triple top on heavy volume, so it should continue to rally.

Nobody ever likes taking a loss, but they are something we all have to get used too and in the event we are in error on our analysis, as was the case here, taking a 17% loss really is much better then letting it bleed to 50%.

So, I will say it for the 100th time.... USE A STOP and protect yourself. Tell yourself this over and over to get it into your head because there are still times I might not put a stop in (very rarely) and most of the time I really wish I had!!

Close The Short Cotton Position - 10/18

Cotton has simply gained to much short term strength in here and I would much rather lock in the profits then take the risk of them evaporating.
After taking into consideration all three positions, a loss and 2 gains, we will walk away with about 41% on our money. Not bad, but it could have been better had I exercised a little more patience on the first short position.
All in all the commodity positions are doing pretty well this year.Better than the equity side, but as I have said before, commodities are much easier andmore reliable to trade. I realize this goes against the popular misconception of investment lore that says commodities are fraught with risk, but if you crunch the numbers you will find that stocks harbor much more risk.

Equity Market Comment - 10/18/07

The market action was not as volatile as I thought it would be, but overall I think the market behaved pretty much along our expectations.
This lack of volatility today, should lead to an increase in volatility on the actual option expiration day Friday.

The daily price pattern is calling for lower prices on Friday and maybe sharply lower.

Look to sell any early strength as it looks like that might be the direction of choice over the first half hour. Take all of this with a grain of salt also as this is going to be option expiration and anything can happen!

The chart below is very interesting and quite rare for that matter. Tuck it away in your archives as a reference tool for the future!

Wednesday, October 17, 2007

Some Danger Flags on Stocks

I have some concern about how completely in stride investors seem to be taking this most recent decline we have begun.

While it is early in the decline, you can plainly see by the blue line that there is still a very large amount of call buying going on and that translates into investors thinking stocks will not go down.

Complacency like this can be very dangerous and while it does not send an all out sell signal on stocks, it does wave a red flag.

I will keep a close eye on this as well as the sentiment polls that are also showing most investors bullish. More so than in 2004!!

So, while these are negatives, we still have the smart institutional money on our side and until that trend reverses course I must remain in a long term bullish allocation.

Soybeans - Near Term Collapse Approaching?

Soybeans seem to be running out of steam here and there are still a slew of negative conditions to send the beans tumbling.

It is still to early to put a short position into place, but much like lumber, it needs to be watched very closely.

LUMBER - Buying in the Face of Doom and Gloom!

Lumber broke down out of the consolidation zone it had been in the last 3 weeks.

While from a technical perspective this is very negative, these technical rules change after a commodity has already had a long sustained move in one direction or the other.

Lumber has had a move from 313 to 226, so we can say the downside move has been extensive.

It is precisely at these times that we should be looking for lumber to reverse course and begin a major move in the opposite direction. The market may just be faking everybody out, trying to get all the traders short before it begins a move to the upside.

No position has been put into play as of yet, but it needs to be monitored as it could send its signal to buy at anytime.

Equity Market Comment 10/17/2007

Quite a wild ride today with the market reversing course several times.

Too bad I was on the opposite side 3 times today.
No matter, my stops protected me, but it still doesn't feel good going 0 for 3.

Tomorrow is another day and it should offer some excellent trading volatility once again.

The two day pattern we had on the S&P 500 today projects a sharp rally tomorrow, with perhaps the entire rally and collapse happening in the same day.

Hopefully the volatility will treat me better tomorrow! : )

Tuesday, October 16, 2007

ARNC - Remember This One?

Remember the penny stock that I talked about and how upon a pullback to the middle of the second candle (light blue line) that there would be some potential for a serious percentage move.

Well, here is the updated chart and it is exactly where we want it to be.

Now, I cannot stress enough that this is a VERY VERY HIGH RISK proposition as these stocks are at the mercy of the locals on the trading curb. So, any money you might allocate to this stock has to be money you could kiss good-bye should things go sour.

Then on the bright side, this is a stock that could go to 15 cents and perhaps higher.
We are talking about 500% in short order.

$5000 will get you 167,000 shares! Feel like a Tycoon!

Seriously, I would not put anymore than $1000 into this venture and should that be too much in your mind then do whatever you feel comfortable with, including passing on the whole bet.

So, if the stock goes to 15 cents, then $5000 will get you $25,000... $3000 will get you $15,000... $1000 will get you $5000.... $300 will get you $1500. You get the picture!

I never buy penny stocks and I mean never. I got burned to many times with them in my youth. However, putting down $1000 seems like it might be what I am going to do, just in case it decides to really move.

Equity Market Comment 12/16/2007

The hourly chart shows strong resistance at 1560 on the cash S&P 500, which is also the area that a re-test of the broken trend line will come in at.

Keep a keen eye at this level and use it to sell the rally!

While we did get another sell signal today, this time from the MACD and the market also broke below the up trend line on the chart, we could have a small reflex rally here.

The reflex rally will come only because we are grossly oversold on an Ultra Short Term basis and also with the breaking of the trend line today (light blue arrow) there is a high probability that we will rally up to the line and get turned away.

We remain in the sell strength mode so any rally that might develop use it wisely to purchase puts.

I also am starting to get quite concerned over the fact that we have had a decent sell off over the last 2 days and yet traders are still buying calls like crazy. This is VERY BEARISH!

Monday, October 15, 2007


The option scoreboard on the blog is still under construction, but as of right now there is only one position allocated and that is the STLD Nov. 50 Puts.

This newest recommendation will make it two.

Buy AMGN Nov. 57 1/2 Puts @ 1.95 or better.

I say or better for the simple fact that we might see a bit of a reflex rally tomorrow and this will bring the price of the put options down a bit.

Keep a stop just about 3% above the blue line on the chart to protect against a move away from us.
The blue line is the neckline for an inverted head and shoulders with volume confirmation.
The volume confirmation of the pattern lends extra credence to the potential outcome.
An inverted head and shoulders is actually a bullish pattern that would call for higher prices once the neckline is broken, but a failure of the pattern is even stronger thus the negative allocation with the puts.
The head and shoulders pattern is one of the most reliable chart patterns there is and one that you should become familiar with. Print out this chart for future reference!

Equity Market Comment - 10/15/07

The market produced some decent downside action today and we did get a few more sell signals.

The key here is the green trend line that is on the attached chart. The market needs to break this trend line and close below it to really confirm an intermediate term shift in trend.

The hourly chart is calling for some type of bounce tomorrow and this could be an all day rally or simply a reflex rally in the morning.

The important thing to remember is that regardless of when and where the strength comes from, it should be used to hedge or reduce equity exposure as we have been in the sell strength mode for 3 days now.

Sunday, October 14, 2007

Equity Market Comment Sunday Night 10/14

After 2 days of the day traders dream market, Friday the market got very quiet and attempted to recover from the large reversal on Thursday.

This market action on Friday set up a very bearish pattern of an outside day followed by an inside day. This pattern coupled with the anemic volume on Friday and you have a set up for a Ultra Short term sell-off.

On the short term front, the market has broken from the bearish diagonal triangle and is hanging on by a thread. Keep an eye on the trend line of the hourly chart I have attached to the post. We need a close below the trend line not just a move below. A break of this trend line on a closing basis should bring a break down in prices.


Short Copper at current prices, with a stop just above the most recent highs.

Lean Hogs - Looking To Go Long

The blood letting continued last week in Hogs as the small consolidation zone that was developing broke to the downside.

Keep your powder dry however as this looks like a head fake to get the small traders short.

It is this type of environment that could give us a buy set-up.

Of course if they continue to move sharply lower then all bets are off. As of now I have no position in place, but I will be looking for a place to get long and I will update the blog when that occurs.

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