Case Study: "I Love This Set-Up"

If you click on the image, it should blow it up to a full size chart. If not, the ticker is HWCC. The symmetrical triangle just confirmed today. Imagine that! Market gets pounded, and this stock breaks out. The pattern happens to measure 5 points wide, and took about 5 weeks to form. Implied volatility is rock bottom.

Before you start to get excited...look at the chart for a moment. Here is a cheap stock that makes huge moves! This goes right in line with my Stock Picker post from the other day. I like this stock to take out it's high and land at $31. Because I am expecting an aggressive move to happen relatively quickly...I like the May 30's. Call me crazy, but watch the percentage gain on these after a little follow up from this stock. Even a slight lift in implied volatility should have a huge impact on the premium.

Whaddya think?

Recommendation: Give this one a bit of thought. Almost forgot...please consult your financial advisor before taking any position in HWCC. He might want to get in on it to boost his performance.

Long: HWCC of course... PCAR shortly

Short: Covering tomorrow

It's very intriguing how the intra-day price today based along the top trend line of the triangle around the $26.20 price before breaking higher again. I like the play, Jeff.

Justin in Omaha

I like the price pattern set up but the April 30 call spread is 0.15 while the ask price is only 0.10 -- as soon as you enter this trade you are down 60%. Like a lottery ticket - you need a very small position size and you go into it assuming you will lose -but if it hits 31 then the drinks are on the house.

Allen,

Did I say April! Whoops! I meant May. My fault. May's would be better for the time target.

I'm in - Thanks Jeff!!

Jodi
Canuck

Jeff,
You are all to generous with your stock picks. Thanks for sharing your hard work with us.
Brent K.

Hi Jeff and all,

Thanks for the word on HWCC. Been keeping my eye on PCAR too.

I've got another in my pocket here -- didn't get in before close today but take a look at MO and let me know what you think. Symmetrical triangle broke today, est. 5pt move.

Thanks.

Todd

Todd,

CG looks like the better play if you're going tobacco.

I would caution everyone here to be careful with HWCC if it gaps open tomorrow. Don't chase it. You missed the breakout, now wait for the potential retest.

Jeff, thanks for doing this. I appreciate the 'case study', but could you post them with a little time left in the trading day?

Thanks JK,
Check out HP, broke resistance of 30 and is retesting. Looks good on a two year chart

Jeff,
The volume yest in HWCC was due to secondary offering @ $25 offering price. Generally, how does the secondary offering affect the price of the stock since their is further dilution of the outstanding shares???? This also happened in the last few weeks on ACAS. On the surface, it seems like the additional stock should drive the price down. I would really love your insight on this.

MICC...sym triangle?? with two strong up days and volume picking up, maybe today it breaks ??

How about NKE...retest from 3/16??

Lois,

It is very common for a newer issue to have a secondary offering. As to whether or not this is bad, I think the price reflects what the market thinks, right? The company is raising capital, yet the market is not selling out. They must like what the company has plans for.

X...marks the spot.

G'day all,
Just trying to get caught up as I've been traveling and staying at hotels that I haven't been able to hook onto the internet at. That's what happens in the Great White North, sometimes. Am I the only one making money on shorting CME and ICE? Haven't heard anyone talking about them recently and after making a small fortune (enough for 5 or 6 White Mochas) off ICE on the way up, I'm now in for the ride back down.

MA is acting beautifully for anyone playing spreads. I've got an Iron Condor on the go (well... it's actually a Paper Iron Condor) which should net me about 50%. With the big bucks we're playing right now... that'll be yet ANOTHER 3 or 4 White Mochas.

I'm sold on PCAR... yesterday was the perfect time to get in, I think. Have no idea what the market's going to do, but I've been finding the Puts working a lot better in this market than most of the calls I've been looking at. It's very true what they say... it takes 5 weeks to go up... and 3 weeks to come down. Substitute days, hours, minutes for weeks... things drop faster than they rise.

Chris and Catherine

Well..here are my trades...

Still long in X, PCP, BWLD, TEX, GRP, VIP

Short CAL, HOG, TOL

Hello Everyone,

A couple of bull flags that are shaping up this morning: SYK and CYTC. Low risk entry points on both. Of course, if the market gives up its early morning gains these will probably follow suit.

Anyone else participating in X. It broke the century mark this morning.

C&C, I was in both ICE and CME on the way down but failed to let my winners run. I'm still learning that lesson.

Joel R.
California

Good morning,

C & C... I am still in CME. I shorted it at 570 and have been in it for a while. My original target was about 510. I was happy to see the symmetrical triangle breakout yesterday. Since I only have 22 days left, I plan to hold until approx. 510 and/or follow the implied volatility as it approaches the earnings release date on April 23 to see if it increases the option price. Buying options on such an expensive stock sure gives me a wild ride every day. Yesterday, for instance, went from the option being up about $8 to down by market close. It teaches me patience and to not make decisions early in the trading day.

Sorry to all for not contributing to the blog for some time. I was on a golf vacation in Palm Desert, CA and then unfortunately at a funeral in Chicago. Happy trading!

Sean M.
CA

C&C,

I've been chugging WM's every morning for a month and it's served me well. I highly recommend it to anyone looking to get out of a slump. I think there might be some hidden power in those chocolate-covered espresso beans that Caribou places on the top of my lid each morning.

Anyway, I'm in X since the tri breakout. Can't believe i bailed on CYTC early yesterday when my ATR was hit mid-day. That forced me to keep a SECOND trading journal. This one is one where I will be forced to answer to myself at the end of the trading day. So far today, it has kept me in line. My biggest enemy is impatience, not waiting until day's end to make trading decisions. Now, this will fix that once and for all.

Anyone in on ZOLT? VIP sucks again. Last time i took a false breakout on this damn stock it killed me...then proceeded to climb to all-time highs.

Also, liking bearish plays on EXP, WRLD, PSA, CAL and GS.

Good luck today everyone.

FOR YOUR CONSIDERATION TODAY:

RS & BHP

-stephen

Check out the 1 year chart on SBUX. It made the nearly the same exact pattern (double-bottom follwed by a retest of new support) and then went on a 7-8 point run (the pattern was last August). Might be a case of history repeating itself.
-stephen

I saw that pattern on SBUX, but I don't anticipate it moving very fast at all. Maybe in an IRA that would be a good investment, but aren't there so many better setups out there for option traders?

All,

I just received a trade reccomendation from a very large investment firm. I'll leave them nameless to avoid any problems for Jeff.

They reccomend buying today at a maximum entry price of $9.90 the Merrill Lynch October 80 call! (MER)

I am not taking their advice....I'll stick with what I have learned and am still learning from everyone here on the blog and my experience with Investtools...

But I thought it was interesting so I thought I'd share this with you. Any takers??

Not me....

Unless they are smoking PCP this morning, I think they meant "put".

Also, i wanted to share an idea with you all. I've been in this ATW for a couple of weeks now, but back out longer term and you'll see a beautiful saucer formation,with a breakout to new highs today.

There smoking it. Probably short on PCP too..

They reccomended the CALL, not the put...

I wanted to jump on ATW when it broke out, but had no money left, spent it all on WM's....

Sean M,
Nice to have you back. Sorry to hear about the funeral. Hope it wasn't for the golf clubs. CME is definately a ride, but so far it's been worth it. That's one reason we're learing about spreads. They seem to give the blood pressure a bit of a rest.

Brett,
Don't let Caribou cloud your eyes on SBUX. For the past year (if you look at the 5 year chart) it's sat in a band between 30 and 40. Can you say Iron Condor? Looks like pretty easy money for 3 weeks work. There's very strong support/resistance at both 30 and 40. Besides... their symbol should be SUX. Compared to Caribou... they do.
Chris and Catherine.

Thanks Jeff! That makes sense!

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  • 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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