Happy Friday Everyone

Amidst a wild weekend I am glad to see things coming to a close. I would shrug this price action off as it is only a short term price for wild profits ahead.

I have enjoyed reading the comments over the last couple weeks. Each comment comes to me via e-mail as it is posted, so I am always able to read what is being said. I like how the participation is ramping up, and people are not afraid to say what they want to say. For those who choose not to participate, please do not make this decision out of fear. This is not an "Investools" blog. It belongs to me. I want you to say anything that is on your mind. I love to hear peoples comments and opinions. Even when someone throws an occasional jab at me, I love it. I welcome it. Again, anything you can contribute is absolutely welcome.

Now that the market is about closed I wanted to give the watchlist in written format. Here you go...

Patterns

Triangles- MR, BLUD, CME, IBM, XLV, IYH, XLK, MRX, MGA, RHI, FIC, LOGI, FFH, HOC

Flags- AAP, WCC, PSYS, CMI, CAT,

H&S- DHI, MCO

Bounces

Support- BARE, GOOG, COL, BEN, CX

Resistance- BZH, SLM

Others- HOG, BRCM, LM

I might not have organized these in the best manner, but it is here nonetheless. A lot of this can be recycled into next week to be honest. If you'd like to add anything to this list, feel free. I was walking through last weeks list to do a before and after...not bad. Hope the same outcome happens into next week.

Recommendation: Leave a comment

Long: Metals....especially Gold, and VMC (still), despite nervousness. A great idea from last week.

Short: Subprimes....but not for long

like MGM as a bounce

also like FDX...breakout of a longterm ascending triangle today!

NTGR - flag looks ready for a 3 pt move.
PBY - hovering at support ? good entry point for uptrending stock with huge insider buying.
ISE - break out today for ? 8 pt move.
AAP - entered on break out of flag.
KYPH, DECK, AKAM - all at support.
DHI - Went short on confirmation of head and shoulders today.
Thanks for some great trades Jeff.

Hi Jeff,

I am in the process of writing out my rules for support bounces and I am having a little trouble making a decision. I value your opinion so I hope you can take a second to answer this or maybe write one of your posts on it. Here is my problem, I am having trouble deciding which is better:

buy a stock at a strong level of support in anticipation of a bounce to get the full move and put a stop 1% below the support -OR- buy a stock at .10-.25 above the high of the low day on confirmation of the bounce.

I like getting the full bounce, but I am wondering if I am getting too greedy and it could end up biting me somehow. I am fairly new to the trading world, so I am sure you have some insight that could help. I appreciate the blog and it is nice to see that you bring a great sense of humor to our "work" day.

Stephen

Jeff,

A good example of why I am asking you this question is PPC (I believe you mentioned this last week in your watchlist video). It is at a strong diagonal level of support, support from the 30DMA and even support from a previous high on 1/11 horizontally.

I was watching this today and was thinking how nice it would have been to have put in an order to buy if the stock dipped to about 31.25 (the area of all the support), but then I was thinking that it had not confirmed yet, so I did not know which would be better. 36.11 would be .15 above todays high, so that could be a nice play if it indeed does bounce. OK, just wanted to show an example to illustrate my question. Thanks for listening.

Stephen

I like Stephen's comment because it is something that I have been thinking a lot about since joining in on the BLOG. On the marketcast yesterday Eric mentioned something about support and resistance trading verses breakout trading.

Jeff, you have me changing my thoughts and see the wisdom in breakout type trading, especially when it's occuring close or at support. I don't know if Stephen is in the same boat as I am, but many times after the markets are closed and I come home from work and check the watch list, I see a stock that did indeed breakout but feel that I have missed the right entry point, because it moves up too much on the breakout.

I'd love to hear your advice for people like me. Perhaps it's the same process but just taking fewer trades if the % increase for the breakout day appears to be the majority of the break.

You've mentioned Fibonacci before, is there some technical study that we can apply here?

I too, love all of the messages and interaction on the blog! Thanks to all about discussing the "portfolio size" and the money in it. You're exposing me to some more volatile stocks than normal which can greatly increase my earning, but have hit me a little more than I'd like despite having the stops in place.

Keep it up!!! It's great...thanks again Jeff. You are awesome doing this while your wife is so pregnant...although that's just a 9 month vacation, isn't it????

(relax women, I have 4 kids!)

Gary
Boston

I see an article coming as Stephen, Gary and now me are all on on the same topic. Jeff, I hear you in the back of my mind...go have a weekend but I just watched two movies with my kids and they are all taking baths so here I am. In talking to the Hotline coach today about my VIP one day trade he said he really liked my entry and understood my exit (was stopped out same day) but after some evaluation told me that the breakout was too large and as a $5 pt move would require $5+ to determine if the breakout was a fake out. Or I could tight stop say mid candle on the 21st. I have done that before only to be bounced out to then go off on the breakout I wanted to be part of. I like Gary can not always be at the computer to watch - and some times that is a good thing.
Off to help my wife with the kids...someone started that kids theme!

Bob H
CA

AMG...bull flag forming...6pt move??

Nice H&S on CAL forming...lots of volume to the downside with little volume to the upside...

Hey Jeff!
I am a relatively new trader. I have been trading seriously since January. My parents got my husband and I into it after they became PHD students through Investools.

I appreciate your blog and your willingness to share your wisdom.

I also appreciate all of your loyal commenters who are so willing to post their winners and losers. It makes me feel better to knnow that I am not the only one who loses money!

You said to comment so I am commenting! :-)

Thank-you!
Elaine Gardner

Jeff:
I've been a regular reader of the blog but haven't jumped in to comment before.
Ditto to all the positives that have been sent your way.
In trying to get a better handle on volatility, I researched some of your archives and would like a little clarification if you wouldn't mind.
When working with short term option plays, what is the most reliable resource for assessing the implied volatility? Early basic options trading taught us to stay under 20 -25% on the over/under evaluation, but since then we've heard that the implied volatility study in prophet charts is sufficient....or can you stay with watching the Vega, etc.?

Thanks,
Teresa B

Teresa,

The only assetment that I have been able to make of IV (implied volatility) is that IV is never under or overvaluted. It is the aggrement of real money in the market. So, do not look at options as undervalue or overvalue. Of course, you will see an volatility decrease after event such as earnings.

Rodrigo

Teresa,
I also studied the IV quite a bit while going through the master's program. I found that the CBOE website has a very useful chart for IV. It's a very long link so here's what you do...

www.cboe.com, mouse over on "trading tools" and click on "volatility optimizer" then choose "IV Index" and enter your stock symbol.

There is no right or wrong number for IV. So this chart just shows you if it's rising or falling. You don't have to worry about what the actual implied volatility is. If it's going up, you're probably going to be paying a higher premium for the stock.

I will look at this more often when I'm looking at an option before earnings, otherwise I figure 1 or 2 strikes in the money is fine.

Good luck,

Gary
Boston

You can pull up a chart of Implied Volatility in Prophet Charts. Just use a daily chart, go to "Option Controls" on the left side, and click "Avg. Imp. Volatility".

Just compare the highs and lows as well as what direction it's heading.

If you like the trade (alot), but fear IV, just go deeper in the money.

Larry

Monday morning y'all,
Just saw why I tend to park the computer for the morning (unless I'm reading the blog, or tuning up my learning skills.) Started the day up huge amounts (well... for me, anyway) as ICE took off again but everything's pulling back and I'm now up 80 bucks. That's a Starbucks for each of us.
Have a look at COL. Not only is it in a great upward trend... but it's fundamentals are very, very good. I know Jeff doesn't put a lot of credance into fundamentals, but I always figure if you find a great trend and it's backed up by great fundamentals, your chances are better.
Here's to hoping we have a good week. We've covered Chicago, now it's time to buy groceries.
Chris and Catherine.

Anyone jumping into Rimm looks like its breaking out.


Pat B.

Chris and Catherine,
I jumped into COL this morning when I saw it heading up. But I'm back to work this week so I can't monitor the trades. Just checked the quote real quick and the blog - notice it's down about $.60. I hope it will hold the support at $67.80. It does look like a good trade, though.

Gary

Keep an eye on CAL today. Head and Shoulders top that looks like it will confirm today. Possible 10 point move. I plan to wait until later in the day to jump in if the trend continues.

Sean M.
CA

Go CAL Go....hehe

CAL's puts has been printing free money since Thursday am, stock down about 10% since then...

'Conservative' option put play entered on wed pm (Mar 50 @ $4.70) have seen an increase of about 90% in 3 days....not bad

Will it break and run, or will it take a breather? Time will tell...

Larry

BTW -

CME & MCO have both been falling nicely (thanks Jeff).

Larry

Rodrigo,

Great comment. You are absolutley right. There is no such thing as an option being over or undervalued since the current price is determined by buyer/sellers and supply/demand. All you can do is analyze the chart of volatility to get a sense if the underlying options are relatively cheap or expensive based on how IV has fluctuated on the graph. Put most of your weight on recent activity, but take it all into consideration when trying to determine what has been high and what has been low.

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About me

  • I'm Option Addict
  • From Saratoga Springs, Utah, United States
  • I am a professional trader and an instructor for Investools. I've had relations with the markets for 9 years. Born in Concord, CA, but reside in Saratoga Springs, Utah. Father of THREE, Husband of one.
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