Its about time, Ass! Nah just kidding loved the "theme song" and liked the post.

Much love
Steve L

It's all good Jeff, you gave us enough yesterday to tide us over for today. Besides, we all expect you would need some sleep the day after your 9 year anniversary ;)

Jodi

Jeff,

Thanks for the Ed. The videos and articles are very informative. I not sure what "alpha" is even though I hear you and Eric us it and other Greek letters a lot. Can you or someone please enlighten me?

VeroBarbara

Jeff-
This is a great community and the song fits. If you're Ted Danson does that make Brett or Raimo Woody Harrelson?

liz

Doji Girl have you had the opportunity to be at one of Bill Fields real-estate seminars. He's one of the most sought after real estate trainers and seminar speakers today located in Florida. He and my broker are very good friends. So he made a special trip here and this morning I had the opportunity with about 20 other agents from my company to sit in on a 3 hour session with Bill as gave us his inspiration seminar and then we got to go one on one with him. That was quit a surprise from our broker, you how they all say sure I know him and him, LOL he really does know Bill. Let me know if you've evry seen him Doji and if you haven't he's very good.

Vero Barbara,

I color coded a definition to "Alpha" in my post.

Think of it as "Qi" which is reserved for only the best traders.

Jeff,
Where does Q1 come from? Does it stand for something (besides Alpha)?

Michelle

Housing Headlines for Southern California...

"Southern California Home Sales Hit 15-Year Low"

"Foreclosures near 10-year high"

"Home slump hits cheaper O.C. ZIPs"

Oh, and I'm sure Eric would be happy to know that I saw an article saying the "experts" foresee a recession in the near future...

liz

I was at a conference this week where a bunch of us were sitting around the bar discussing the sub-prime situation. One southern calif business owner said that he hasn't seen a decline in home prices or a rise in foreclosure sales except in the cheapest neighborhoods.

All I can say is Jeff, great job at home, in the office, and here on the blog.

I know for a fact Brett does not get his advice from talking heads. He gets it from a bobblehead...and a Cramer one to boot.

And while CVH kicked me in the nuts yesterday, I threw those $$ at SOHU today.

AGU....if you did not get in, watch for a retest...

Michelle,

I should enlarge my font.

"Q 1" is actually "Q i." Go back and click on it for a definition.

Qi (pronounced ch-EE)

PS- In case anyone doesn't know, everything underlined in my original post today is a hyperlink, meaning you can click on it and it will take you somewhere, only to make you hyper for more.

Nanananananananananana......

When I click on Alpha, it gives me an error and tells me it's not found. BTW, I like the new pic beside your comments. You look way tougher - haha!

Jodi

This internet connection is so slow my laptop keeps hibernating while I wait for a new page... so this'll be my only post tonight.

liz... Gravel stands for the driveway to our new acreage. Our anniversary gift to each other is going to be a farm in the country. Complete with gravel driveway.

Jeff, if you refuse to toot your own horn (my teenage girls laugh hysterically at that saying) then I'll toot the horn of this blog. Two weeks ago I decided to get back in the game after cashing out for a while. I only invested $3800 as I had no idea what the market was doing and I didn't want to throw money away. In the two weeks, I'm up $1800 which is pretty darned close to 50%. And it's all because of getting in at my exit point and taking profits when they choose to show up (except for EXM which I haven't been around during market hours to sell.) And listening to Jeff, Eric, Brett, Raimo and all the other awesome bloggers here. I only have 5 positions right now.

I say this not to do any tooting... but just so those who are worried that trading a small account isn't worthwhile, can see that the profits will come no matter what size account you have. I have to admit it's a bit anticlimactic to see a day like today that I've made $200... but I'm learning... and it's a decent percentage. So stick with it.

Have a good evening all. I'll be home tomorrow by noon.

Finally.

I fixed it. I am glad I did before I was labeled a dumbass again.

Do you like the pic? The other one made me look like Martin Short in the movie Pure Luck, after he was stung by a bee (his character was allergic to bee stings).

Jeff,

Are you teaching master talk tonight?

P.S. you are never a dumbass! maybe technically flawed.

Technically flawed, yes.

This is why I am not teaching tonight.

BTW- Webex finally found out what my problem was. My sessions crashed because I would respond to questions via chat privately instead of publicly.

Apparently, that was the bug.

Hilarious.

Bottom Feeder-
This information is from reports by DataQuick. In Orange County banks foreclosed on 469 homes in August (highest since October 1997). They rose 27.8% from July and 694.9% from August 2006. This is just for Orange County.

In Southern California homes sales fell 36% in August but still showed a modest increase. This was considered the slowest August since 1992. (Once again this is from DataQuick Information Systems- a real estate tracking firm.)

Another article said that a lot of these foreclosures were focused within the inland empire like Riverside, etc. And in northern California places like Sacramento.

I know from some of our real estate agent friends that live out here, some of them are freaking out a bit. They started getting antsy before all the subprime stuff came out.

Anyway, that's what we're getting from our end.

liz

No more private chats. I don't like that. that takes all the fun out of it.

Jeff,

I know you talked about this but I wanted some clarification.

On the GRMN trade, there seemed to be some scoffing at those who got out and asked about what to do, me being one. I don't take it personally I just want to learn from it and understand why.

You said it closed just under support, it closed at 104.34 which I wouldn't consider just under(maybe I should change my definition?) I understand its an area of support but closing .76 down on average volume seemed like a decent break and reason to get out especially since that was near the bottom of that 10 day range you referred to.

I guess I just want to understand because if 104.34 was still in range that is significantly more risk, so if I got in at 105.50 lets say. So instead of maybe confirming a break at 104.75 and having only .75 risk I instead have 1.15. In context, I understand you were looking for a move to 125 in the underlying making the difference not that big, but I guess when the whole point is to minimize risk it would have been even better to get in at 105 or 104.50 making it that much better.

It is obviously not your job to tell us the range of support but that was definitely a wider range than I would have thought, and I would have held since ultimately I think the stock goes higher but I was trying to follow rules mechanically with no exceptions to see what happens and try and improve my trading.

I guess any tips on how to define the whole range of support, because i'd rather not have to see a 2.00 drop to confirm a break when I can hopefully only see a 1.00 or .5 drop to confirm.

thanks for the help and all the great stuff you do!

Ben

Sarah-
What private chat?

liz

Wahly,
I do not know of this real estate Bill that you've mentioned. I am so over the whole motivational real estate thing. I've been doing it for 22 years and now my motivation is to improve my trading so I can exit real estate and still earn a decent living.

Liz,

during master talk you can write in comments in the chat window and Jeff can respond privately, that's all.

BTW,

Jeff you rock , giving homework assignments on your night off.

Ben,

PS- The detail about your position sizing is not something I can answer. You should clarify those issues at the time of entry.

"I am out of my element" with that one.

Actually, Sarah...

iSuck

Reading my blog after hours...is that corny?

Ben'
6 months ago I would have been out of GRMN. You can use percentages or daily range but no one but you can come up with your rules but you. Gaining confidence may adjust your rules. Look back at your own trades and see if you are happy with your results. Then ask: do I want to change my rules or keep them the same? You are the only one you have to make happy.

Jim J,

Couldn't have said it better myself.

Thank you.

Sarah-
I was wondering... I thought maybe I was losing it. I never get to listen to masters talk live so I never get to use the chat window. I always have dinner, bath and then bedtime with 3 kids so that would be a feat to do all that and listen to masters talk. hee hee!

liz

Jeff,
That just means you truly love trading so much that you want to talk about it all the time. Shows you have passion.

That's the way I see it.

Michelle

Long: Halloween costumes
Short: Halloween candy

P.S. My little girl wants to know why the Superman costume has a longer cape than her Supergirl costume. I told her, "Maybe it's because he's taller." How do you answer that?

Jeff,

I guess that puts me w/you. Wednesday night, dont forget to tune into Real World. Need to keep up the ratings,otherwise I'll be trading for a living....lol.

P.S. I want a box with bold lines.

HUM positive news today, nice pattern formed. May want to add it to your list and watch for a break.

Jim,
What pattern? That chart looked kinda scary to me.

Michelle

Jeff - we are all reading the blog after hours too - do you think we are corny - it's not even ours! The people in here are addictive.

Sarah, that was funny - cuz I want one too!

Michelle - Hallowe'en candy can be convinced to be given away. My kids give most of it to the local children's hospital - cuz those kids don't get to go trick or treating. Really solves the too much candy dilemna

Nah, I don't think it is corny to read after hours. Being an Option Addict is a full time job, isn't it.

Hi Jeff,

It seems that the link to alpha is still not working?

Thanks,

Jeff,
We're following along with Ben for the homework. Assignment #1 & #2 seem to be the same chart. Am I doing something wrong?

I'm hoping this homework will support my decision to not sell RIMM today at it's high. It is still trading in my range with $86 being resistance and 80 being support.

And, thanks for all you do. IT $$$$, trading books $$$$$, this blog and all the wonderful people ... priceless!

Dan & Barbara,

You are right. Same chart, different chart type. One plotting O, H, L, C and the other plotting just closing prices.

You might see things differently using these different types of charts, or you might not.

PS- (everyone)I am removing the alpha link. Nevermind.

Jeff,

Looking at those two charts. Call me crazy, but they look the exact same to me?? Both line charts? I didn't print them out but I'm not seeing a difference.

Dammit! I hate blogger.

Let's try this again...

Ben,

Tell you what. I have some homework for you. Below are two charts (charts are always going to answer your questions about mechanics), what I would like you to do is tell me where support is.

Assignment 1

Assignment 2

Your homework assignment is due later this evening. I will grade it tonight or tomorrow.

PS- How did you orignially arrive at the support number you are using?

There, it is fixed.

Jeff- I'm copying the following questions I asked yesterday in case they got lost in the fog of the blog.

Jeff- (you provided) lots of trades to dissect. May I ask, are you in each of the trades that you offer up for our review and if so, what percentage of your trading account is allocated to each? I swing back and forth between "This trade is only one among thousands" (keeping position sizes small but numbers of trades to follow huge) to fewer numbers of trades with a higher number of contracts that I can follow more closely but the potential to hurt or help the bottom line is amplified.

With volatility ready to ramp up in the near future are you still trading both puts and calls just as business as usual?

Thanks for your hard work to make us better traders,
Stan

Posted by Stan Lake

Jeff....you are a legend in the makig....EVERYONE WILL KNOW YOUR NAME.....now get off the blog so you don't sleep all day tomorrow !!! must of been a late night, lol

That works much better. Technical difficulties.... I kept going back and forth between the two attachments--wasn't sure if something was up with my computer or if you had a problem posting them. Thanks.

ps. i am a DORK !!! i meant "making" not "makig"... stupey duh head!!!

Sarah and Jodi -- now if everyone had a box with bold lines, then Jeff's would have to have bigger and bolder lines. You can see the problem here. Sorry that I can't oblige :)

Maybe we could have an "addict of the week" contest and that person gets a special box around all of their comments for a week. I'm not exactly sure how you would become "addict of the week" but I'm sure it would have something to do with trying to post more comments than Arty.

I miss the poems!!!

Jeff,

I will preface by saying I went out earlier tonight(aka was drinking) so I apologize if this is at all incoherent. I want to try and get my homework in on time. :-)

Ok, after the trade was initially mentioned I looked at Garmin on ameritrade. I must admit I am out of my element with that line chart and timeline, it makes it much more difficult to determine any kind of support or resistance(likely the point). I am like a child that wanders in during the middle of a movie.

Using a candle stick chart though going a month back it looked like 105 was some resistance. I took the trade at the end of the day on 9/05 when it broke 105 and ended the day near 105, so I used 105 as my support level.

I was even more delighted when it was then mentioned afterwards on the 9/5 marketcast as being a trade to take after having broke 105, and you said closing "deep" below 105 would signal an exit. Maybe I didn't go deep enough, but I used 105 as support and figured a 50 cent allowance was decent to determine a break on usual volume.

Looking at the line chart it looks like 104 is even more reasonable but there are still only single cases of it being support and resistance. I kind of took what I thought was going to definitively signal a break out and a re-entry of the old range if it broke back below 105.

Maybe I am missing it but I don't see any difference between charts 1 and 2 on garmin.

my question on position sizing(which I am assuming you are referring to my email) was just about overall risk. I had 5 contracts on garmin when I bought in. lets say I got into the trade at 105.50, and 1.00 of risk meant I lose 500 on a 25,000 account(2% overall). Is this acceptable risk when you are talking about only risking 1-2% per trade, OR can I only be risking a total of 500 overall(possibly just buying 1 contract vs 5 assuming it may go to zero).

In short, do I define risk by where I plan to exit the trade with an estimate on possible option decline, or do I use the overall value of the trade. So, if the formaer lets assume its a 4k overall value but I am expecting a 500 dollar decline before it breaks my support level to exit. or can I only buy 500 worth of options assuming it may go to zero.

This may not even be grade worthy, I apologize but any feedback would be helpful to help me improve my trading.

Thanks for the info Jim, I did define my own entry and exit, however if I can do it in a better way to benefit in the future I definitely want to hear it.

thanks again, sorry about the length.

Ben

Ben,

$1 on a $20 stock might be enough leeway, but on a stock over $100 it is not nearly enough room. Even if you buy $.01 over support, the stock could close $2.50 below that one day and snap back over it the next.

Consider support lines as 'areas', and know that there are many thousands, if not millions, of traders watching a stock pattern. That means there are a huge amount of stops that will be triggered right at the point you're using for your exit. If those stops are hit, then obviously the stock will unnaturally sell off below that level and then snap back up. For these reasons, sometimes you will find it helpful to use '2 closes below' your exit level.

As you gain experience with trading price patterns, you will become comfortable with how these retests and 'new support' areas work. In this case, you did not give the stock nearly enough room to work. Especially considering the strength of the overall trend in GRMN.

I'd suggest, at least for practice, trying out a little more patience with your next breakout trades and position sizing accordingly. They won't all work, but look at it this way:

You work very hard to find the right setups to trade. When you take the trade, work hard to allow the stock to make its move. Exiting too early is just as bad as exiting too late. You're going to have bad trades of course, but if you continually exit trades too early, you're going to destroy your chances at being wonderfully profitable.

Hope this helps.

Amy

I was just thinking the same thing,,I miss the poems also

sue

Ben,

I totally agree with Brett. Another thing that I have found helpful is instead of thinking about "how many contracts can I buy?" which is focused on trying to maximize potential profit, I think "how few contracts should I buy" which is focused on trying to minimize potential risk.

I think that managing risk comes first and then the profits come second. I used to try and put my stops really tight and think "yeah, I'll get out here so I can buy more contracts" in the hopes of being able to load up more. Now, instead, I try and project more of a "worst case scenario" so that I position around that and by doing so I buy less of a position and I am more able to give it the room it needs to move.

Generally, I am counting on at least 3% below the support level identified when factoring risk. Of course, this means less of a gain if I do pick a winner, but I'm more likely to give the winners a chance to win in this scenario.

Great analyses, Brett and Tim. Thanks for your perspectives.
Lori

Jeff,

RIMM... trade of the week... how concerned should we be about upcoming earnings? I was surprised you would recommend a stock that will release earnings next week thursday and all of us holding over those earnings.

Can you clarify?

Thanks!
Steven

EQIX.....

enter at your own risk..

Steven,

RIMM doesn't report earnings until October 4. I believe Jeff said he was looking at a possible spread on the front month. Which we shouldn't view as a "recommendation"!

For you BIIB folks ... UBS downgrades to SELL ... stock is down 1.61% overnight ...

Just FYI..

Jeff,
I tried to lick on alpha and it did not hyperlink. I also tried to search it in teh archives and could not come up with it. Could youplease tell me where to look?

Also I have a question about risk management. Is there a way you use to see how much an option will move as say the stock breaks a support. I understand the concept of delta but even buying an in the money option seems to give me trouble with this. The reason I ask is that many times I will enter at a very good entry right at REE but if the stock breaks this level, the option has dropped so much that I have risked more than my 1-2% of my account that I thought I would be risking less because I was so close to the exit.

If there is a way to tell this I could fine tune my position sizing and I think this would make a huge difference.

Lastly when you talk about support/ resistance being drawn with a crayon and not a pen, typically how wide is your crayon, or is that dependent on market conditions? I know I have to define my own crayon width, but any help on a starting point from where I could fine tune for my style would be greatly appreciated.

Anu

Doji I like you am here for the same reason, to improve my trading enough to not have to sell another house again, untill then I must preform the best I can. Soon enough we both will be full time traders.

Anu, do you use ThinkorSwim? If so, the Analyze tab on the desktop software is excellent for estimating option pricing based on the the changes in the underlying.

Tim,

Alright I understand about the box, but Addict of the week has a bit of a ring to it don't ya think.....haha!

Jodi

Liz and Sue,

You are right. I have been slacking off.

Raimo, Let's Roll!

PP

Anu,

if you use TOS, if you look on the trade tab,,about in the middle ,,,you can change price,,date,,and volitility,,,then one of the option choices is theo value,,,this is a quick way of checking how the options will change,,,i like this page better than the analyze page because you can see how all the options will react,,,then you can see fast which one is the best buy,

sue

Anu,,,

this is a technique we learned in the advanced 4 day live,,,i love it,,,if you have questions,,,i don't know if my explaination is clear,,,email me your phone number and i'll call you and talk you through it

SPGRLG@YAHOO.COM

sue

Thanks a lot Brett and Tim for the input, exactly the type of feedback I need to get from those more experienced.

Every trade is a learning experience and I am even more glad for this blog to discuss what I should learn and why. :-)

Thanks!

Ben

Raimo,
I looked at EQIX yesterday but stayed out of the trade because the open interest on the Oct. options was so low. Does this worry you?

VMI and SLB look like REE with diaganol support.


Michelle

P.S. Go RIMM. Guess all the Market Cast listeners are buying and moving it up (that's a joke.)

Thanks to those who stepped up and helped me put the Garmin questions to rest.

What should we talk about today?

Jeff,

I for one would love a lesson on ITM and OTM option pricing..what to look for when pricing them..how to know a good and bad deal.... a refresher on this is always helpful..when is the spread to big..etc..

This comment has been removed by the author.

Sean,

On open interest, the best answer is found right here, by the big kahuna himslef.

Look under links.....

Good Idea Raimo. I second what Raimo says.

Also Jeff, it was recently brought to my attention, that Bernanke is to speak on Tuesday. I never knew the impact of his speech's, and how they affect the market. Touching on this may be a good idea since it's right on the horizon.

Jodi

I second Raimo's suggestion.

I would like to talk about the perfect entry on KOP today.

Nah, we don't need to.

Anyone interested in a low priced biotech,thinly traded, no options? Check out ANIK.

I don't remember where I found this stock with but it broke out of a triange on Tuesday and I took the trade. It only has about a $4-5 move off the triange so it has about $4 left over 2 months but the story is compeling so I plan to hold on to this one as long as it's uptrending and possibly add to it.

They make hyaluronic acid products from Chicken combs. Talk about recycling into something useful!

--Patti

Sue,

Thank you. I will email you with my number and you can all at any time. My email is aum@aumsanthi.org just so you know who it is when you get the email. I really appreciate your help.

Anu

Patti,

Well, I admit I keep my hair short and have not used a comg probably in over 30 years, but I for the life of me have never seen in the store a comb for chickens. I thought chikens had feathers, last time i looked anyway. You comb them? And then a company gathers up the combs and does what to them??

I, SFM, queen of "I am late to the breakout" see another 52 week hi on PKX. Tho I hovered over this trade last week, the timing was good, so I didnt take it.
Any who dare can take a possible retracement, but I cant promise you I will be there, because I will probably be too busy working on my timing to get into the trade. SFM

Anu,,

i will call you in 15 minutes,,,11 am central time

sue

SFM

i too struggled with missing the trade,,,now i use a buy stop order and don't miss them

sue

Brett & Tim-
Thanks for your comments. They are very helpful. I feel like I'm refining all the time. I definitely don't have the same rules I did a year ago. And with the market the way it is, I've adjusted my exit rules slightly as well. I saved your comments so I could re-read them later when I'm feeling wishy washy about a stock I'm in.

liz

Brett,
Thanks for the input to Ben on position sizing, I was waiting for the answer eagerly. I like your rule "...sometimes you will find it helpful to use '2 closes below' your exit level."

Going back a couple of days when I was moving in out of positions at the speed of light with very tight stops you suggested I reduce my number of contracts down from 5 to 1 or 2. I agree totally.

Thanks for your input.

Also, what the heck are you doing up at 4am today?

Brian K

Raimo, you are a hoot! That was almost as funny as one of your poems.

Anyway that thingy on the top of the chicken heads has hyaluronic acid which is also a component in humans- though we don't have combs. The hyaluronic acid is extracted and used in humans to replace the missing hyaluronic acid in skin and cartiledge, ie. for softening wrinkles and lubricating joints.

I mistyped triangle in my post also.

--Patti

thanks for that sue, you are right. I have thought about using buy stops before.....but I was on the fence about it.......for a while........just kidding.

Thanks for your help sue and Brett and Tim, I saved your comments too.

SFM

Patti,

Instead of doing all that, I think the next time I order wings I'll first rub them all over my face to remove wrinkles, then woof them down to remove hunger. Seems easier, and cheaper too!

Blog too quiet today..

Okay..

CVH..ONE OF MY BEST TRADES RECENTLY..a LOSS I enjoyed.

Trading means taking losses too. Which I did on CVH...but they were minimal. I had taken an entry RIGHT at my exit, and although this trade went against me, my loss was small. Therefore, this was a winning trade...I prevented a big loss by my REE and follwing my rules. My winners have far outweighed this loser...

Trading profitably is not just about winning trades and making money...it is just as much about keeping losses small and preserving capital.....

So, don't be frustrated with your losers..cause your going to have them too...

Patti
So if we rub chicken heads all over our faces we'll look younger? I sense a chicken revolt.

Today's one of those days I'm glad I'm still only "one toe in the water." Everything's down. Puts, calls... chicken heads. EVERYTHING!!

I'm going out to brush my hair.

Oh wait... I don't have any.

Blogger of the week I'm not.

Raimo,
Thanks for pointing out the link on Open Interest. So, after reading it, I need to rephrase my question. First, isn't it hard not to put a U after Q when typing EQIX?? (That was the easy question by the way). Second, did the large spreads on the put options not worry you? Currently, the spreads are .60 to $1.00.

Brett,

Thanks for your comments to Ben early this A.M. I hope this doesn't seem like a stupid question, but with regard to KOP, I see a bit of a B/O but huge lack of volume. Is that a correct observation? or were you joking?

VeroBarbara

Raimo,

I agree w/you. I too was in CVH,exited a little earlier than you,took a small loss and feel very good about this trade. The way I see it ,is if I can trade in this market and breakeven or better then I'm waaaaay ahead.

VeroBarbara,
Volume is not as important in a bounce. Yes it would be nice to see something better than 50% of normal volume, but it's not imperative. I will wait on this one myself (I like to wait until it's too late to get in with any hope of making a profit... then dive in) and see if there's more interest... although it's a very compelling graph.

Sarah, I agree wholeheartedly. I'm thrilled that I've made a few bucks over the last few weeks. My mother in law says that the only difference between a good day and a bad day is beeing up ten bucks, or down ten bucks. Actually if I'm just down ten bucks I consider it a good day. But you get the drift.

ATI seems to be banging it's butt against $90. Is anyone else getting a bit antsy?

VMC? I see both horizontal and diagonal resistance at about 87 and a potential for a doji or spinning top. It has been in a fairly strong uptrend for the past 3 days but volume has been decreasing. Any thoughts?

Scoot, I agree with your analysis on VMC and took down puts this morning when it was right around 87.

Chris, I do think ATI is worth considering an exit if you are a swinger. I am in a spread so I'm trying to figure out what I want to do. I don't trade spreads as much so I have to deal with this conundrum. I've got about 75% of the potential profit now. I will get the other 25% if it stays under 100 for another week. Hmmm...

Clean Cups!!

CLEAN CUPS


sue

Thanks Tim. I am along for the ride too.

Chris and Catherine,

Thanks for your response.

Have any OAs ever traded directly as a result of Patterns that come up on the Prophet Charts? Because I am seeing various Patterns that sort make sense, as well as a few failed patterns. One example I've found today, is NHWK breaking above resistance of 23-ish.

Anyone else's thoughts would be welcome.

VeroBarbara

VeroBarbara,

B/O as in break out?

This is a great product for anyone with curly, wavy, or frizzy hair, it works

wonders!! my hair is like all three and its AMAZING! my hair is soo shiny and there is no frizz at all! My waves look gorgeous :) and it has a great hold but it doesnt weigh your hair down or anything! Its

soo touchable and beautiful!! A MUST-HAVE!! :)

I have thick naturally curly hair. I think the smell is too strong & more age appropriate for someone older but finding a product that

has everything good/ideal has been impossible. Quite expensive so if you can get a deal then it's worth it.