Hey wait a minute, what's Eric doing drinking milk?


Sarah

P.S. today's blogging is really entertaining, I'm really falling behind on the work..... Thanks.

That's a WHITE RUSSIAN!

"Hey, careful man there's a beverage here!"

You want a toe? I can get you a toe, believe me. There are ways, Dude. You don't wanna know about it, believe me. Hell I can get you a toe by 3 o'clock this afternoon...with nail polish.

that huge, swift downward move in LCC brought to you by Pat the blogger.

You DID get in today, right Pat????

I guess I am renting a movie this weekend....

Anyway....SOX broke out, NDX broke out....NETL (a semi) is in a nice uptrend. Broke out of consolidation today.
BBBBUUUUTTT earnings tonight. Any words of encouragement out there ?

Jamie

Hey Brett,
I need a toe. Have you got a spare? Thank goodness LCC decided to keep it's cratering trajectory intact. And thank goodness for HWCC and TSO. Other than them (and CMG) it's been a yucky day (that's professional trader talk. The Jedi Master-to-be will learn.)

Bailed on HMIN earlier than I wanted. Hope I don't regret it.

Off to the doc.
Chris and Catherine

I came across this stock by mistake but take a look BW if it brakes support it should move to $45 what do you think?

David S

by the way -- i love this blog and this community. i'm in for the group hug, chris.

and i, too, am getting very little work done today.

Great comments. I didn't think anything could bring more laughs (and education) than last night's Marketcast...I stand corrected. This blog is great!

I too am in KBH. I set my stop loss based on the ATR from my entry. Volume has been declining on this little rally, so I am hopeful for a selloff at the end of the day. i will also wait for the last hour of trading to make any decisions.

Did anyone catch Jeff's comments that he has known Brett for 4 years. This job isn't a quick 6 to 9 month learning curve. I have been at this for almost 3 years. I am no where close to being a professional. Patience and discipline are the two most important keys. I have continued to review my trades and I see the same mistakes. Patience and discipline. I will conquer these two obstacles and live to trade professionally.
Thanks Jeff and Brett! We are blessed to have teachers that want us to succeed.
Amy

C'mon Amy, Brett's still a Jedi Knight. Don't be giving him his sabre sword just yet. But you are soooo right. I've been in options for 6 months now and can't believe how much I've learned and have yet to learn. Good thing I'm so old. It just proves you CAN teach an old dog new tricks.

But it's the people on this blog that are keeping it interesting and educational. Thanks to you all.

I will be running back from the Doc to listen to tonights 'Cast.

Chris and Catherine

hey Chris,,rest easy,,,we don't use rubber gloves anymore,,,nitrile only,,lol

sue

Amy,

I think you misread Jeff's post. I have only known him for a little over a year. He's been with INVESTools for 4 years, I believe.

For you long-term pattern people, check out the 9-month chart on AKAM. I see a huge head and shoulders broken today. I know, the stock's down $8 or so in 2 days, but a pattern's a pattern.

Brett,

So, it didn't take you four years to learn the art of trading. How long have you been trading on your own?

Amy

David S,

BW… HMMMM

I bought BW on 4/2 on a breakout with volume. I rode a few small flags until yesterday and exited 2/3’s of my position at a 286% gain! Great! I kept the other third to roll through earnings, which is against my rules, because of the $10 advance on the stock on last earnings.

Last night I placed a trailing stop at 1.00 on the option.

The not so great part... This morning I removed my stop because I saw that after/pre market trading brought the price down $1.70 on 100 shares volume. I figured that since after/pre market changes and prices can be completely irrational based on the volume or lack there of at times that I would have my trailing stop trigger ready to go on the gap down to start my trailing stop. (side note: I have seen gap ups and gap downs on low volume retrace the gap in very little time…)

So here I sit at the opening of the market with two windows open ready to hit the “confirm” button on my trailing stop. The only problem is that while all my other positions are trading and daily volumes going up, BW’s volume says “N/A”. I start getting emotional, grinding my teeth, tapping my feet, and virtually going crazy.

My three year old son woke up at 6:50 AM PST and had pi$$ed his bed. I help him through the process of getting cleaned up and into cloths. 7:00 AM (very fast cleanup) I finally get back to the computer to see BW down over $10! My first out loud thoughts were “you have to be f&%#&!g kidding me!” My hold over position was basically worthless! My total gain on all three contracts is still 191%. I will have to wait another day to record my first 200% gain trade…

Moral of the story, when taking larger than normal risks, “don’t be a John”. Don’t remove your stop, just make it a little larger to cover the gap down and have a few breaths to breath before it dies! Oh, and if your rules are to not hold through earnings, don’t get any wild hairs until you have been in the game a little longer and can make more rational decisions on the fly.

On the positive note, my BW contract isn’t as worthless as it was when it was down over $12, it is only down $9.87 as of right now. I am almost to break even and will salvage a little face. Well, maybe.

Alright, I feel better now! I’m still having a kick a$$$$$$$ couple of weeks.

Wiping the dust off,

John

Any thoughts on WCG? Big volume, below its consolidation break and below my intermediate term trendline. That spells OUT for me. I can reenter if it bounces off the 30 day MA like it has in the past.

Does anyone else have any thoughts on this?

John

Woo hoo, HWCC. Should I hold this over earnings?

:-p


MikeH

Does MAR look like a double top break to anyone else? The down volume has been BIG!

John,

Just my opinion but you bailed too early. You still have 2 weeks until earnings and you didn't wait until the end of the day, where i predict it DOES close above the $90.50 support level. Even if it doesn't, it's right there. My only concern would be the volume uptick today on a down day. Still, i'd plan around that lower trendline. Today it bounced perfectly off the lower trendline, which it's done forever.

John, I have WCG. My take is it still looks like it's above it's trendline. Nasty pullback today but it did the same thing back when i got in (3/29) on big volume and bounced right back.

John:

I have WCG. I see intermediate support at 90. I am not getting out, great trend great stock. I do have concerns the other day there was a story that 3 top heads sold a bunch of shares. Right before earnings it worries me. I still have to check if it is a substantial amount or maybe they wanted a pair of ROLLS Royces who knows. Right before earnings maybe people are getting nervous and just selling, mnaybe they all have the same rule not to hold over....
I have time and I like the stock. I will make my decision before earnings. Also It has been going up every day except a few maybe profit taking.

Hope that helps, but don't blame me if it tanks.

David S

I have waited for KBH to retrace, but it appears that the homebuilders are holding onto to their gains. Does anyone just sit around and wait to exit a losing trade? It hasn't hit my stop loss but has clearly broken my line of resistance.
Do you see what I see?
Amy

amy, as earlier blog posts show, i got out of KBH intraday, which i regret, since it was against my rules. however, had i followed my rules and held on until now, I would be exiting. well, i would probably be holding on to the last 15 minutes to be sure.

My exit was a close above the previous high of three days ago and it's looking like it's going to land there. That's my take for what it's worth.

Boo hoo, XHB. These homebuilders give me fits. Bad news piled on top of bad news for a year straight and they keep finding ways to rally on it.

MikeH

Jeff, if you ever want to demonstrate the following topics:

1) descending triangle breakdown
2) a successful retest
3) the concept of resistance

then a 3-month chart of LCC should do just fine. It would also be helpful for students to see that:

1) buying before earnings didn't matter (if you understood resistance and didn't panic this am), and

2) earnings actually gave *some* traders an opportunity to double up right before the bottom fell out today.

Kbh on my chart is right on resistance, It could bounce back down. A clear break over at the close is a good indication. That is why a lot of trader make their decisions when the market is closed.

How much more are you going to lose if u hold it another day?

Follow you rules, that is why you have them.

Take your emotion out of the trade and do what you think is right.

David S

DECK has been halted trading they came out with great earnings!!!!

The other side that takes your trade sometimes tries to manipulate the stock, so you have to make lines with a little room as most professional traders know where they could trigger panic and sales.

My opinion

David S

A big "hell yeah" to the Big Lebowski! Thanks for all that you do Jeff. Some time I'll actually come up stairs and say hi to you.

VLCM also beat and raised forecasts. Did anyone else take a small position in this breakout from Monday?

David,

The stock did close below my stop loss, but the break outside of the diagonal resistance with increasing volume had me concerned. Plus, how much more could I lose if I stayed in one more day? The sky is the limit. The movement in the stock no longer supported my original entry...a bounce off of diagonal support. Since that failed, I didn't have a reason to hang on to it.

Tim, your intraday exit strategy worked well. Looking at the last few days of intraday activity is a great idea. Thanks for sharing.

Amy

I guess Deck is guiding lower although they beat by wide margins.

The stock is not taking it well we will see how it opens tomorrow.

David S

Hey Sue,
Maybe you don't use rubber gloves down there, but remember, up here men are men, and sheep are nervous. First they take the rubber glove and dip it in glue, then they drag it through a thistle bush, then it's time for...
I'll stand for dinner, thanks.

So I'd like the Jedi Knight and the Jedi Master to have a gander at DRYS and tell me why it won't come down? I still stand by my decision to sell 3 days ago, but I sure wish I'd held on. All comments are welcome (... on DRYS. Leave the rubber gloves out of it.)

Brett keeps going on, and on, and on about LCC and I finally got in yesterday. Feared for my life this morning, and am looking at a nice profit this afternoon. Thanks, oh WM Master. My acount shows I was down a few hundred bucks today, but my profit/loss statement shows I'm up ten bucks. I choose to believe the P/L. Anyone says otherwise I will tell them that I refute their reality and substitute my own reality in it's place. I'm a "glass is half full" kinda guy.

I need to sit back and study tonight. We've had a great week so far, but I need some new entry points. I find I get on a roll and then lose track of what I need to be watching. Then I sell something (at immense profits, hopefully) and start replacing it with stuff I haven't studied as well as I should have. Then all my wealth melts into the sand and I start all over.

Looking forward to todays 'Cast. And dinner. I'm starved. What a great day on the blog!!! lots and lots of really good stuff. Thanks everyone. I'm off to digest... food and info.

Chris and Catherine.

I have no less than 10 VERY good setups circled for tomorrow to drop on you guys 1 by 1.

I can't remember if I gave you the flag breakout on MOS today or not, so there you go.

Hey Chris, where was that support you said you saw on CME? And what happened 3 days ago that made you sell DRYS? Did they email you their earnings or something?

Brett,
The CME support that I saw was around 525 (using my kids crayons.) It smashed through that today so I have decided to take this think seriously. But it doesn't look like a good entry point right now. Huh. Decisions, decisions.

As for DRYS... well.... it's like this... Brett, ol' buddy ol' pal. Don't yell at me OK? DRYS had been on a tear and I had made 210% and the volume started to drop off, and it started to roll over and it had never gone up for such an uninterrupted climb before. EVER!!! So I thought it was due for a correction. Oh sure, in hindsight I could have stayed in but I (unemotionally, of course) didn't want to lose that 210% gain.

OWWWW!!! Stop hitting me.

Chris and Catherine

I entered into a strangle on ICE today. I did it when the price was exactly 130, the 135/125. I paid 6.40 total.
My thought was that the price was right in the middle like it should be.
IV was at almost an all time low.
The Bollinger Bands tipped me off that it was looking overly restricted.
Earnings are coming and really this stock does not need earnings to make a worth while move, but the cataylist is in place.

I would like to get some feed back about why this might not have been a good idea.

Hey, Brett why wait until tomorrow with your ten trades of wisdom. It appears we all do our best work at night or at least after the market closes. As a west coaster (or as my friends on the right coast call us left coasters) I have a lot of time after close. At least when I am here and do not have too much math homework with the kids. The traffic on the blog has been great and Jeff do you really get each post emailed to you? You the Man!

Brett,
when you said in a previous post that you tried "every trading strategy until I found one that worked" what exactly does that mean? I always hear about trading strategies, but I still don't fully understand what that means.

Does that include the different option strategies (directional, spreads, etc.), different time lines, different technical indicators and rules?

Jeff I really appreciate this blog and everyone who contributes to it.

Yes, exactly.

When I took my first huge hit, I figured it was because of my aggressive directional style. So I switched to spreads. I actually did well trading spreads, and it was an important part of my trading only because it got my confidence back up and smoothed over some of the shocks, but spread trading just wasn't for me.

The final straw was having a spread on ICE and watching it go from the mid-90's to mid-$140's. So I learned that spreads are nice in a dull non-trending market, or on a stock with very expensive options and definable support/resistance lines. But price patterns give you targets to shoot for and I found that spreads are like someone giving you a free burger while everyone across the room is eating steak. You still eat, but you feel so unfulfilled.

Anyway, I learned that it wasn't my style that was flawed but my position sizing and lack of diversification. Jeff remembers at the very beginning when i hounded him about GOOG every day. That's because it was WAY too big a position for my account size. General rule: If you're focused on one position every day, it's too big a position.

I also looked at trading e-minis, but so far that's not really for me either. I don't much care about intraday moves. I'm more interested in grabbing a short to intermediate trend move.

I have yet to take down a straddle or strangle but i probably will if the trade presents itself. I can't see myself ever taking down a condor (unless it finds itself in the sights of my skeet gun).

I just try to keep it simple and do what I love to do. I do realize that this market will change one day and I'll need to look at other things and i'm very aware of that. It's why I continue to read every night before I go to bed.

Hope this was helpful.

Duane, on the ICE straddle. I'm not one to say it's a bad idea, but when I analyze it on TOS (I have been looking at straddles myself and trying to analyze how they work, so I looked at this one) it looks like the stock has to move either to 136.50 or 121.80 just to break even. That assumes you sell it on May 2nd. If you go past May 2nd, the break even points just continue to widen out as time decays.

Plus, I see that you've got a max loss of about $160 per contract if the stock doesn't move (again, selling it on May 2nd). So, just to achieve 1:1 reward to risk you're needing a move to 119 or 139 on the day of earnings.

The stock certainly could move that much, but it doesn't look like it has lately, even over the last earnings announcement.

To me, that seems like a pretty big bet on a stock that's not strongly trending right now.

That's just my two cents, but I've never actually traded a straddle (I haven't yet found one that I liked) so I would be open to hear why my analysis may be completely flawed.

I am finding (thanks in part to Brett) that I am waiting for too much confirmation before I pull the trigger on bounces, breakout or even trend continuations. So....COH entry point? I like the trend and looks like a dip buy.
Thanks

Tim,
thanks for the feed back on ICE Strangle. I do use TOS but never check out probability. It clashes with technicals. We will be able to follow this one as a Live test and see what happens. If moves a lot, it is a good trade, if no movement, bad trade! Sometimes there is a lot of luck involved.

Brett, thanks for the MOS tip, but I would be thanking you a lot more if you gave it three days ago!

Bob, I like the COH entry right now, take a smaller position than normal and see how it works for you.

I didn't have confirmation 3 days ago. Hey, i took the MOS breakout yesterday.

Also, JPM downgraded 6 airlines this morning. How timely of them.

I will post this while Brett's off at basketball (no wonder he's Jeff's favourite.) I anyone's looking for more airline stock to short, CAL is actually at a better entry point than LCC or AMR (if you missed getting in on the gravy train a couple of days ago.) Airlines are being downgraded today, oil's up... their world is falling apart. I work for an airline and this is exactly why I want to eventually turn trading into a full-time job. Who needs the stress?

By the way, one of the stocks I have in my 401k that I forgot all about is PCU. This thing keeps on going and going (not unlike the Eveready Bunny) and I must confess I stuck it in my 401k and forgot about it. It's up 70% in the last 4 months... wish I'd had calls on it. It just announced earnings yesterday and didn't move much, and it's right at support... Seems to me to be a perfect entry point.

Chris and Catherine

I don't agree with the idea that probability clashes with technical analysis. Probability is the inverse of reward/risk. I would think that all of us find it important to calculate reward/risk before entering a trade. What we are doing is calculating the probability of a trade as well.

Perhaps we believe we have some advantage over probability because we can identify support and resistance lines and other technical indicators? I'm not sure I agree with that.

For example, if I take a put and identify a resistance line and determine that I will exit the trade on a break above resistance, what I just did there is limit my risk, which increases the potential reward/risk ratio and also decreases the probability of the trade.

So all of the technical decisions we make and our "rules" we put in place, they all shape the probabilities of the trades we put on.

Ok, this has been a bunch of philosophy but I share this because it helped my trading a great deal to realize the relationship between reward/risk and probabilities. For one thing, it helps with expectations and also helps make wise decisions up front about position sizing. And, it continually reminds me to have respect for the market.

(by the way, this is not an argument for any particular trading strategy -- directional, spreads . . . etc. i think the same principles apply no matter what you are trading. i trade mostly directionally currently.)

CRS may brake out of the ascending triangle today. Potential for a 15 point move. Had a great quarter and guided higher.

Any thoughts on DECK, I listened to the earnings conference, and could not make out why they guided lower. They sounded like a bunch of idiots. I guess that is why you scale down your position if you are going to hold over earnings
David S

wish i had some puts on airlines

Has anyone seen WCG today? I don't understand what's happening here. So far it's broken it's diagonal support line today. I had a $1,000 profit on this and I'm now down to $170. I was really anticipating a bounce yesterday or today. I'll let it go until 3:00 or so and then sell if it doesn't do anything.

Not a good day for us so far. CME is heading back up to the $525 range I want to see it break before diving in. Could be a good entry today, we'll see.

Thank goodness for LCC and CAL.

Chris and Catherine

yeah, chris, i'm in WCG too. another one to test my "waiting until the end of day" patience. it's definitely broken it's diagonal trendline, but it's still holding (so far) around horizontal support.

I'm in this one with stock and still have a (very small) profit and at least the losses on it are being mostly offset by gains on PCP today. I only have one put play (SCHL) which is at least doing well. Wish I had some airline puts (wait, i think I already said that).

Most everything else I have is pulling back but within expectations. WCG is the weird one for sure.

I have a very good exercise for the group.

Check out TGIC's double bottom confirmation yesterday. If you were to get into this trade, what option would you select?

Go through the target and time frame and price the options. I've done this already. Let me know what you come up with.

vip, crs, netl, pcp, bud take a look

David S

Brett,

I'd pass on TGIC because I don't like the bid/ask spread.

Good luck and have a good weekend everyone.

I am out for the day...

Oh, WCG looked like a good exit yesterday, huh?

John

What do you think about the AMX june 60 call, they had great earnings, made it to 55 yesterday on huge volume. Ascending triangle looks for a 8 to 9 point move.

Anyone?

David S

David,

I don't see a triangle on AMX.

Have a look at the rails -BNI KSU they seem to bouncing off support. Also with the airlines down could RYAAY be shorted?
Tim V.

WCG has broken and crashed. What a big disappointment. So much for "anticipating the bounce" or "letting your profits run". Run away...run away...

Chuck

Brett,
From a purely technical standpoint, I’d expect about a 5pt move to just under $50 in less than 7 weeks…so perhaps the JUN, or more conservatively, JUL 50 calls. However, I have to agree with John on this. The low interest and non-existent volume is driving too large a gap in the spread. Love to hear your thoughts on this.

Dave
Atlanta

Brett, On TGIC. I would target a 5 point move over 8 weeks. I measured the channel from 3/3 at 45 to the low at 40. I would target the July 40 call offered at 7.50 (spreads are wide).

My stop would be below yesterdays candle at 43. Based on my target the option in 60 days would be worth 10.30. Risk reward a little over 1:1.
OK.... but looking at the option greeks the Vega is .054. With IVol at 41.23 and Hist Vol 31.64...the option price has 54 cents volatility premium in it. I'm not sure if I'd take it as an option trade.
I may take as a stock trade and position size using $2.30 as my stop.

Did you target the same option ?
Jamie

Hindsight is 20/20 on WCG. It could have just as easily bounced today. I don't see anything in yesterday's action that would have said the trend was breaking down. The strong volume was a hint, but it's done that before and recovered. Anyway, that's just how I see it. To each his own.

Because of that, I didn't exit yesterday, but if I had been looking at a new entry yesterday, I would not have entered. I would have waited for the bounce to confirm that the stock would stop going down. But, again, that's my rules.

Speaking of my rules, i broke them again and exited WCG intraday when it broke through the line of support i saw at 86.75. I got out at 86.54 and 10 seconds later it was trading below 86. That's just dumb luck. I'm still not comfortable with exiting intraday. I think there are some times it's appropriate, but I'm not sure where to draw the lines.

I'm liking your railroad picks, Tim V.

C&C,

Right there with you on WCG today. Market open for 2 hours, stock down 5% on Big volume, straight down, 3 reds, earnings around the corner. Think it's time to break a rule, or revise an old one per Tim's question.
Common sense says bail, but is that too emotional? Don't want to be guilty of being a SNAG (Sensitive New Age Guy) as we call them out here in SF.

Weep, weep,

Peter V

Besides airline stocks, anyone seeing anything for a bearish play?

Amy

Jamie,

Beautiful analysis, and exactly what I came up with. This is a perfect example of a great 'opportunity' that many might jump on with an option play, not realizing that the reward just isn't there. This play isn't a good bet even WITHOUT a huge spread. Throw the spread in and you're just swimming upstream. Sure, it's a 10% move expected, but due to pricing, this is a play to either buy stock in, or pass altogether. The only thing that would make this worth it is if the stock reverses and really moves beyond its target.

As for the WCG discussion, you have to know when to break the rules. I know that sounds contrary to what we talk about here, but if you thought something was wrong yesterday, today's move should have confirmed that. I would have given it an hour, maybe even 1 1/2 hours to shake out, but after that, adios. Look at the volume the last 2 days. Does it seem likely the buying will come in and push the stock up over that $90 mark later in the day?

Sadly, now i'd be watching this for a bear flag and get in on a put play for the next leg down.

Amy, i see a double top on PSYS, but it's so crazy today.

Brett -
Missed the airlines entry. AAARGH!
Wasn't at my computer yesterday.
But I'm looking to get in to one of them today.

RE TGIC - I see a 5 pt move in abt 8 weeks, with support at about 44.
But I'm not getting a great reward/risk ratio on it.
Might do a credit spread - like a May 40/45 bull put.
:-) Pat

IT's Friday team and I fried my brain on the TGIC analysis.

So what is the set-up on CHK. Beautiful broad channel ? Could it be another OIL breakout ?

Jamie

Thanks for all the comments Brett. It is very helpful!

I don't post often but am an avid reader!

Is anyone else noticing MA breaking out of a symetrical triangle today on volume?

Blair
Kansas City

I like chk,but I think you have to wait for a clear break out of 33.8 or 34. I also like GVA if it makes a new high decisively.

I hate giving up virtual profits and CME is killing me, but you have to wait for stocks to move with the tide.

WCG is coming back it did something similar on march 27, it seems there is a seller that unloads at the highs.

Brett, I don't like the put idea on such a strong trend.
LPX for $1 move down and close to resistance for a low risk play?

David S

Jamie,

I see a potential cup and handle of CHK, looks like there could be a nice run here.

Tim, I was watching WCG and noticed heavier sells than buys for most of the last five days. Whenever I see a stock that is heavily owned by institutions and large sells are occuring after small run-ups, I am apt to exit the trade.
I usually will exit in the morning or the last hour of trading. Unless I see above normal activity at odd times in the day.

Glenn

Jamie - about CHK: ok - let me try my totally amateur skills on it. Nice channel! IF it breaks above 34 with good volume, it might be tradeable.
Ummm... how do you trade a channel breakout? It took about 3 months to move from the bottom of the channel last time, so I'd expect a 6 point move in about 3 months. Does that sound right?
I'd do the July 30 calls - a little conservative, but that's how I prefer to trade. It gives me a 3:1 reward/risk for a 4-point move (about 2/3 of the projected move)
Oh, yeah! Stops! (my weakness) I'd place a stop at about 33.
:-) Pat

Glenn -
That's a cup & handle on CHK? I didn't see it. I gotta keep practicing on the price patterns.

:-) Pat

Pat, that is the way I was thinking to. july options. Also they have very low implied volatility in the pricing. I like it.
I'll admit I may get in front of this before earnings. Except for APA ( which missed)all the oils seem ready to move higher.
Jamie