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trend trading stock, stock trading
[Weekend Summary]
Dear Member,
The NASDAQ may have given a glimmer of bullish promise yesterday. It broke up through a downtrend resistance that has been in place since January. However, it stopped right at a price resistance around 1975. Still a mixed message, but with a bit more positive tone. The DOW tested the August lows and bounced but remains both in the downtrend and within a trading range. Unlike the DOW, the SP-500 never tested the August lows. On Friday, the SP stopped at 1130.20, an area of minor resistance. Hopefully, the election will help the market gain a clear direction. If the results are clear, the uncertainty will be removed and that, alone, could help. On the other hand, if there is any serious litigation over the election, I would expect the market to be even more skittish. Bin Laden's statements will also likely increase the "worry index" for the near term at least.
This past week I bought the $12.50 Jan '06 LEAPS calls (YTIAV) on Knight Trading (NITE). Knight is the largest wholesale market maker in U.S. equities. Both the stock price and the option price would benefit from an increase in market volatilities. The stock is in a nice little uptrend. On Friday, it stopped near a little resistance at $10.50, but remains in a bullish ascending triangle. I wouldn't be surprised to see it retreat to the trend line before finally breaking resistance.
Speaking of surprises, Imclone (IMCL) had an unexpectedly bad earnings report and the stock paid the price. As a result of that, I have adjusted my spread on IMCL. Initially, I had sold the Nov 50 puts and bought the Nov 45 puts for protection. I adjusted by buying to close the Nov 50 puts (QCIWJ). I now have only the long position in the Nov 45 puts. If the stock continues down, the leg I still own should become more profitable. On Friday, the stock stopped at $43.80, having broken down through another support level. Friday's candle, though, is a "hanging man" which may signal an upturn. I will keep a stop loss order in place contingent on the stock price to preserve profit in this leg.
I also bought the Apr 15 Puts (AMDPC) on Advanced Micro Devices (AMD). AMD is at a critical juncture. It broke through resistance, but on Friday, created a "hanging man" in this area of resistance. The "hanging man" candle often foretells a reversal, particularly at a resistance. I'll have to wait and see what happens Monday. If it doesn't reverse, I'll exit with a small loss.
I am still naked the Nov $40 puts on Armor Holdings (AH). Since the stock has remained below $40, I expect that I will roll out the position by buying the Nov 40 puts to close that position and selling the Dec 40 puts. This countermeasure will just bring in more money!!!
I'm still long the Feb 60 calls on Harley Davidson (HDI) that I originally bought as part of the HDI straddle.
Won't it be nice next week when the incessant political advertising garbage disappears from the scene. I sincerely hope that the election process doesn't become a regular precursor to litigation. I believe that a continuation of the litigation pattern begun after the last presidential vote would denigrate our country. In my view, antoher fiasco of litigation should be avoided.
In any event, I am looking forward to the next couple of months. I believe the trading opportunities are soon to become much better than they have been over the past few months. I suspect we will be getting out of the trading range in which the market has been mired. As that happens, the opportunities for high returns on risk will become more plentiful. Getting past the elections is one step in that direction.
Have a great weekend and a super week ahead!
Bill
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