Thursday, December 6, 2007

COFFEE - On The Verge Of Collapse

The next leg down in Coffee could be a big one!

Confirmation came today that coffee has officially started its next leg lower.

We have a position that was put on as a scalp and actually almost got stopped out, however
we remain short coffee.

I have adjusted the trade from a scalper trade to a short term trade and look to probably be out of the trade by year end.

Downside Targets Are As Follows:


The bold faced targets are those with the highest probability.

Daily Equity Market Comment - 12/6/2007

Obviously there is no question that the call of the short term top was premature as the S&P after breaking down from its bearish pattern was able to stage a comeback of 10 points.

While from a distance this may seem impressive there is much more to this action than simply the reversal from a potential breakdown.

If equities on a short term basis had a substantial amount of upside energy pent up, then a bearish pattern such as we saw would not even form. The fact that this pattern occurred failure or not shows that the market is losing momentum.

Add to this the lopsided risk to reward model and the market continues to send signals that it will work lower.

I used the strength today to unload 90% of the equity positions in the Aggressive Trading Account and also 4 or 5 of the positions in the 20% in 7 days account. Once I receive more confirmation that the market has in fact rolled over and is going to work lower short term, then I will add a very limited number of shorts to the Aggressive Equity Trading Account.

Day Trading today was very slow, as I had only one signal all day and this managed to break even. Sometimes on these large spike days my day trading models can just mark time. I actually did not mind the inactivity of the day trading models today as it allowed me to work on some intermediate term models I have been developing.

Once again the Day Trading Blog is
Stop and by and give me some input.

Also I am sure you noticed that I changed the look of the blog and I want your input on how you like it. Either drop me an email or I placed a Poll on this blog for your input.

Have a great day trading tomorrow!

Huge Move On GCA Today - Take Profits!

GCA was purchased in the 20% in 7 days portfolio and exploded today.

Take your profits on this 59% runner.

I am not even going to pretend that I saw a move of this magnitude coming, because while it met all the criteria for a potential 20% mover, I did not anticipate a move as huge as this.

You know the saying, "I would rather be lucky than good" I never have agreed with that, but at times luck will play a part in your investments and I will chalk this gain up to that category.

Equity Market Update 12/6/07

It appears that the call was a bit early on the high, but the important thing to remember is that we are very very close to a short term high and profits for short term traders should be locked in, whether it be through options or outright selling of the position.
Aggressive option traders can begin to purchase a small line of put options in here and given the 50% rule on declines I think it would be safe to go just a bit out of the money. Not alot mind you, but just enough to give you the extra leverage. Make sure you do not over pay on the option either.
You can check the actual value of an option at they have a free option calculator that allows you to change the variables.
One item to note is that as tempting as it may be to buy the December puts because of price, I would advise the purchase of the January puts just in case the correction takes a bit longer than anticipated.
I have also basically cleaned out the long positions in the Aggressive Equity Trading Account and I will have that updated tonight.


We now have a clear impulse move up from the lows set in late November.

From here, the odds favor a 50% correction of that move which would bring the S&P 500 back
to 1450 or so.

Short term traders can look to lock in their profits of this rally and if aggressive can start putting a short line out.

Intermediate term traders should be looking to pick up more equities on the correction and also look to confirm that a correction is all we are going to have.

Wednesday, December 5, 2007

Euro - Move Your Stops

Our position in the Euro has been a challenge to say the least as it went from profitable to unprofitable almost on a daily basis.

However, both euro short positions are currently showing a profit, the second position giving us better than a double. But I am not here to gloat about such a thing as you could have taken just
about every other day since I put the line out and thought I was out of my mind.

Currently, the Euro is looking very bearish and should continue its decline.

While we are in a very nice position to profit from such a decline, I am still going to do the prudent thing and move the stop up on both positions to lock in profits.

The position that was taken on first and has given me the most trouble is going to be stopped out at break-even now and the double that we have in the second is going to move up to lock in a 50% R.O.I.

Equity Market Comment - 12/5/2007


I use Elliot Wave for a guide line of the market only.

For years and years I tried to figure the entire concept out for it to become a stand alone
system, but I was never able to get fully to that point. Using it as a guideline has been very reliable and really helps to give guidance as to where the market is in relation to itself.

Well I think we can safely say that the bullish scenario has been confirmed.

Regardless of this fact, we are still about 90% done with this first leg up and short term traders should be looking to take some of the chips off the table especially if the alternate structure as the chart describes below is in effect.

The probability model for tomorrow calls for a fairly large ranged day and a close very close to the middle of that range with a slight bent to the downside. The model stipulates that this type of market action would mark the end of the first leg up and the onset of a counter trend rally. The probability model also says that fading a gap opening either up or down is a safe bet.


Tuesday, December 4, 2007

Equity Market Comment - Alternate for 12/5/2007

I was doing more analysis tonight and I cam across another possibility to where we currently stand with equity prices.

The end result is the same, which is an ultimate correction low in the 1445-1447 area on the S&P 500.

The only difference here is that we would be a bit more bullish on the short term with a rally up to 1475 which would be followed by the final decline to 1445-1447. 1475 represents about 12 points from where we currently trade, so the open tomorrow should really help us to discern which scenario will unfold.

Equity Market Comment - 12/4/2007

Today was a very hard day to make money in the markets as there were multiple times that stocks would just drift aimlessly and at times that usually are not characteristic.

This tells me that there definitely is some indecision out there as many traders and investors weigh in on whether or not a major low has been put in place. The answer to this question will be given soon as the equity markets have some serious upside potential for the month of December.

However, we still need to get through this correction before any of that upside can be realized and while I really thought today would see the low for the correction, it looks as if it is going to be a more orderly progression.

Stocks currently are at their breaking point for this correction and the most logical downside target remains 1447. Once equities break, you could see that 1447 number in a hurry.

Option traders should continue to hold their puts.

Intermediate/Short term traders should be lining up their next round of purchases on the forthcoming weakness.

Long Term traders should continue to hold long and perhaps snap up a few of the battered down financial stocks during this correction.

RES - Option Opportunity

From the Aggressive Equity Trading Account comes an option play that could easily double over the next 2 weeks.

Notice the breakout of the triangle in price and also in momentum with the stochastics.
This triangle projects a target stock price of at least $12.90.

The best option for this play is the Dec 12.50 calls which are 0.05 Bid/ 0.15 Ask.
The true value of the option is 0.15 so they are neither cheap or expensive.

If the stock goes to $12.90 in the next 2 weeks, these options should trade .50/.55 for a 233% return. You might even be able to get the options for 0.10 and split the spread, but don't count on it.

Here is the rub though.
This HAS to be money you can kiss goodbye.
This is a very aggressive play as the bid on these options is virtually worthless.

That being the case, I would risk no more than you can comfortably part with in the event that the stock never makes it to 12.90.

There is some serious potential here though and should you have excess risk capital it might just be a great return.

Monday, December 3, 2007


Corn is nearing a major move one way or the other with a minimum move of 53 cents so keep your powder dry for this high probability trade.

Hold a gun to my head and I would say it will break down, but I will let the market do the talking and trade whichever way it breaks.


I will be adding January 2008 heating oil to the Long commodity portfolio at the open tomorrow.

Of course if it looks like it will have a large gap opening either way then I will have to finesse the buy side a bit and not just jump in at the open.

Keep the sell stop close at the low of today or just a few tick below.

This trade is looking for a quick sharp upward spike and not the birth of a new trend.

We are going to hit and run this one and I do not anticipate holding the trade any more than 3 or 4 days.

Equity Market Comment - 12/3/2007

The market has its share of difficulties deciding on direction today, but was finally resolved lower. However, the price decline does not meet even the minimum targets for a correction so we can expect more decline to follow.

The chart below shows the Broadening Wedge Formation on the 5 minute chart and the most probable outcome from this pattern.

Short term I continue to sell strength and Intermediate Term I am buying weakness.
I look for a minimum downside target of 1457-1453 basis the S&P 500 cash which is still another 15 points away and this is the minimum target.

We could see the completion of the correction on Tuesday and as a matter of fact a down Monday, down Tuesday could very well set up a very bullish Wednesday.

On the day trading front, we captured 9.75 S&P 500 points today, but we had to fight for every single point we got.

By the way, if you did not see the previous post, the Day Trading Site is up and running.

You can check it out at -

Sunday, December 2, 2007


The new blog is complete for Day Trading and so the LIVE day trading posts will be made on that blog instead of this one. This way, this blog can concentrate on intermediate and long term strategies. I will however continue to cover the commodity trades on this blog.

For those of you interested, the address for the Day Trading blog is as follows:

Stop on by and take a look and tell me what you think.

I spent most of the weekend putting it together and I will guarantee it will improve over time.

Weekend Equity Market Comment - 12/2/07

The market has made a clear impulsive move up from the lows, which is very bullish for the intermediate term. The mode of buying weakness continues to be the prudent action to take.

For those who have rode this rally from the lows and wish to shave some short term profits, we are at or very near an area that would be a great place to take profits.

It looks to me as though the first short term leg up was completed at the opening on Friday and actually the first leg of the corrective action may have completed Friday as well as the counter rally. So, if this is the case then Friday was a pivotal day with the High, First corrective leg and counter rally to that correction all wrapped up in one day.

If this is the case, then we should look for lower prices as early as Monday, with the potential of these prices to be sharply lower.

Short term position traders may even put themselves into some short futures positions or options and ride the move lower as it should be done very quickly.

Just remember that we remain in the buy weakness mind set.

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