Thursday, June 26, 2008
Wheat - Close Out All Long Positions
If you have continued to hold your long positions in wheat then now is the time to liquidate these positions as we have a clear 5 waves up and a strong gap with a bearish reversal today.
Aggressive speculators can even look to establish short positions as wheat looks poised for a substantial pullback right here.
Aggressive speculators can even look to establish short positions as wheat looks poised for a substantial pullback right here.
General Motors - When Stockholders Feel Like Puking
What do you get when you cross extremely high volume with an extreme gap lower move?
Well, in General Motors case, you get some very high odds that a panic low has been put into place. If we follow historical precedence of past GM stock behavior then this is exactly what has been the case in a vast majority of cases.
Today saw exactly this action and because of this historical precedence, which constitutes 80% of the technical work I do, it is a fairly safe time to enter into GM on the long side.
Now I know it will be really hard for many of you to pull the trigger on this one, for no other reason than the drubbing the stock has taken over the last 6 months and especially the last 2 weeks. However, it is exactly this "I have to be crazy" feeling we get that many times will tell us that the bloodbath is over and it is safe to go back into the water.
This play should be good for at least a 38% retrace move which translates into 10 to 12 points on the stock, with an outside chance at a 50% retrace move which translates into a 15-17 point move. With the downside being very limited at this point and the strong upside potential and a possible double on the stock price, the risk reward ratio is on our side.
There are a few ways to play this.
1. Call Options out at least 3 months and at or just out of the money.
2. Leap Call Options out at least 12 months and at the money.
3. Outright purchase of the stock.
Myself, I will be doing number 1 and number 3 and I really only anticipate a shorter holding period.
Well, in General Motors case, you get some very high odds that a panic low has been put into place. If we follow historical precedence of past GM stock behavior then this is exactly what has been the case in a vast majority of cases.
Today saw exactly this action and because of this historical precedence, which constitutes 80% of the technical work I do, it is a fairly safe time to enter into GM on the long side.
Now I know it will be really hard for many of you to pull the trigger on this one, for no other reason than the drubbing the stock has taken over the last 6 months and especially the last 2 weeks. However, it is exactly this "I have to be crazy" feeling we get that many times will tell us that the bloodbath is over and it is safe to go back into the water.
This play should be good for at least a 38% retrace move which translates into 10 to 12 points on the stock, with an outside chance at a 50% retrace move which translates into a 15-17 point move. With the downside being very limited at this point and the strong upside potential and a possible double on the stock price, the risk reward ratio is on our side.
There are a few ways to play this.
1. Call Options out at least 3 months and at or just out of the money.
2. Leap Call Options out at least 12 months and at the money.
3. Outright purchase of the stock.
Myself, I will be doing number 1 and number 3 and I really only anticipate a shorter holding period.
Equity Market Comment - 6/27/2008
While my short term market calls have been something to be desired over the last week and a half, it is always nice to see the bulk of ones portfolio hedged against market moves such as we have seen this week. The market moves lower and our portfolios remain virtually unchanged!
On the Aggressive short term front, our stop loss order have been getting a workout as I have been trying to go long in here for some type of bounce. As you can see this supposed bounce has yet to materialize, but once again it is strong evidence that protective stop loss orders are essential when short term trading.
Once again there is evidence that a short term low in being put into place and there may be an opportunity on the long side. However, given the downside momentum I am going to wait for any aggressive long side plays.
Intermediate and Long Term investors should be smiling from ear to ear knowing that they are hedged during this entire decline.
For the very aggressive there is a nice value play in General Motors right here and I will go more into detail on this in a new post.
For Intermediate and long term traders, keep your hedged positions in place and should some type of counter trend rally develop, use the strength to reduce your exposure even more as the real fireworks to the downside have yet to begin.
On the Aggressive short term front, our stop loss order have been getting a workout as I have been trying to go long in here for some type of bounce. As you can see this supposed bounce has yet to materialize, but once again it is strong evidence that protective stop loss orders are essential when short term trading.
Once again there is evidence that a short term low in being put into place and there may be an opportunity on the long side. However, given the downside momentum I am going to wait for any aggressive long side plays.
Intermediate and Long Term investors should be smiling from ear to ear knowing that they are hedged during this entire decline.
For the very aggressive there is a nice value play in General Motors right here and I will go more into detail on this in a new post.
For Intermediate and long term traders, keep your hedged positions in place and should some type of counter trend rally develop, use the strength to reduce your exposure even more as the real fireworks to the downside have yet to begin.
Tuesday, June 24, 2008
Equity Market Comment - 6/24/2008
We are starting to see the short term volatility that is indicative of a market attempting to put short term low into place. Today was a good example of such activity.
It is a good time for short term short sellers to cover their positions and take some very handsome profits. From here, aggressive traders should look for a spot to establish some short term call options or long equity positions.
Intermediate and Long Term Traders should continue to be extremely defensive with an equity allocation of no more than 35%. If you did not scale back your equity exposure yet, then this rally will allow you to do so before the final leg lower comes our way and final bear market moves lower are very typically bloodbaths so be prepared.
It is a good time for short term short sellers to cover their positions and take some very handsome profits. From here, aggressive traders should look for a spot to establish some short term call options or long equity positions.
Intermediate and Long Term Traders should continue to be extremely defensive with an equity allocation of no more than 35%. If you did not scale back your equity exposure yet, then this rally will allow you to do so before the final leg lower comes our way and final bear market moves lower are very typically bloodbaths so be prepared.
Monday, June 23, 2008
Equity Market Comment - 6/24/2008
The cash S&P 500 has reached the wedge downside target that I had discussed last week and has done so in a manner that is consistent with the current move being over or very nearly over.
With this in mind, if you have had put options or short positions in place for this decline, now is a good time to take your profits on them and simply sit on the sidelines until we get a stronger confirmation of this move lower being over. When we get this confirmation, then aggressive short term traders can look to establish long positions for the forthcoming counter trend rally.
Intermediate and Long Term traders should remain in their extremely defensive posture as this bear market continues. During the course of this bear market we will have periods of rally and at times very sharp rallies that begin to fool the masses into thinking the worst is over. Of course once we get a vast majority of players believing that this is the case and positioned on the long side of the market, we will know that another sharp leg lower is in the mix.
With this in mind, if you have had put options or short positions in place for this decline, now is a good time to take your profits on them and simply sit on the sidelines until we get a stronger confirmation of this move lower being over. When we get this confirmation, then aggressive short term traders can look to establish long positions for the forthcoming counter trend rally.
Intermediate and Long Term traders should remain in their extremely defensive posture as this bear market continues. During the course of this bear market we will have periods of rally and at times very sharp rallies that begin to fool the masses into thinking the worst is over. Of course once we get a vast majority of players believing that this is the case and positioned on the long side of the market, we will know that another sharp leg lower is in the mix.
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