Week ending 3/28/3008

Well this was a pretty busy week.  I exited one position and entered five new ones, four of which are currently up.  It’s interesting how I can go 2-3 weeks without seeing any buy signals, then all of a sudden they just start piling on.  I actually saw many more buy signals that I wasn’t able to act on for two main reasons - either upcoming earnings release, or the options were too expensive.  It’s quite unfortunate because one of those trades would have already closed out for max profit and another would be well on its way.  I think I’m going to start keeping track of these buy signals so that I can later analyze whether it was a good idea to avoid these trades.

Monday is the last day of the second quarter, so I will be posting a quarterly analysis report soon.  Barring a huge collapse on Monday, this has been an excellent quarter, despite some mistakes that cost me quite a bit of money.  It’s actually kind of nice to know that I missed out on some big trade opportunities and still improved on last quarter’s performance.

This week my portfolio went up $191.99 to a total of $12,166.74.

Bought 1 BCSI Jul08 30 put for $8.20

This stock has been in a downtrend since August 2007, and has been bouncing between a pair of trendlines since then.  It has now come up and bounced down off the resistance level, with confirmation from the MACD and stochastics.

The stock is currently at $22.84, though it was actually around $23.25 when I got in.  Support is around $18.15 and resistance is around $24.50.

My exit orders are:

• Market order to exit if the stock trades above $25.40
• Trailing stop loss if the stock trades below $18.75
• Stop loss on the option at $4.00

Bought 1 XLF Jun08 33 put for $7.40

This is an interesting trade because the underlying is an ETF.  This is the first time I’ve traded options on an ETF, but my understanding is that the mechanics of it are the same as any other stock.  So far, I see no disadvantages to trading on an ETF, and three major advantages.

• There are no earnings releases for an ETF, so I won’t have the usual problem of not being able to trade a good entry signal because of upcoming earnings.  I had three buy signals today that I couldn’t take for that very reason.
• There is high liquidity on both the ETF and the majority of its options.  I missed another trade today on a stock with a good signal but low liquidity on its options.
• The options have strike prices that are $1 apart rather than $5.  This makes it easier to find the option that gives the right risk/reward balance based on the current price of the underlying.  I missed yet another trade today because the $50 put wasn’t far enough in the money and the $55 put cost too much.

We’ll see how this trade goes, but I’m going to keep my eye out for ETFs in the future.

Now about this particular trade.  This stock has been in a downtrend since June 2007.  It has been trading in almost a perfect channel between two trendlines, and has just come up and bounced down off the resistance line, with confirmation from the MACD and stochastics.

The stock is currently at $25.62.  Support is around $21.60 and resistance is around $27.00.

My exit orders are:

• Market order to exit if the stock trades above $27.80
• Trailing stop loss if the stock trades below $22.25
• Stop loss on the option at $3.80

Bought 1 AMLN Jul08 35 put for $8.10

This stock has been in a downtrend since mid 2006, with an accelerated slope since October 2007.  It was using two trendlines as support and resistance before breaking down below that support in February, and has now come up and bounced off basically both of those lines since they are very close to each other right now.  This appears to be a very strong area of resistance, and there is also a confirmation from the MACD and stochastics.

The stock is currently at $28.55.  Support is around $23.25 and resistance is around $29.40.  I actually bought the option when the stock was down around $28.25, so I’m a little bit in the red, but I like the pattern and this looks like a good trade.

My exit orders are:

• Market order to exit if the stock trades above $30.40
• Trailing stop loss if the stock trades below $24.00
• Stop loss on the option at $4.00

Bought 1 ADM Jun08 35 call for $8.80

This is the second call I’ve purchased in two days.  I’m not really convinced that the market is done falling, so hopefully these positions won’t get whipsawed if and when the stocks continue falling again.

This stock has been in an uptrend since January 2007, and it formed a trend with an even steeper slope starting in October of 2007.  It has now come down and bounced off of this steeper trendline, with confirmation from the MACD and stochastics.

The stock is currently at $42.70.  Support is around $40.85 and resistance is around $49.60.

My exit orders are:

• Market order to exit if the stock trades below $39.75
• Trailing stop loss if the stock trades above $48.50
• Stop loss on the option at $4.30

Bought 1 RIO Jun08 25 call for $7.80

Note: this trade actually happened on 3/24, but I was travelling so I didn’t get a chance to write about it until today.

This is my first call trade in over two months.  This stock has been in an uptrend pretty much since it IPO’d in 2002, with some minor short-term downtrends along the way.  Most recently, it has been in a solid uptrend since October 2006, moving up within a very well-defined channel.  It has again come down and bounced up off its support level, and there is confirmation from the MACD and stochastics.

The upper boundary of the trend is currently around $46, but the most recent high did not make it to the top of the channel and appears to have formed a double top since it hit almost the exact same point as the previous high.  Therefore, I am treating that as the resistance level.

The stock was around $32.00 when I bought it.  Support is around $30.85 and resistance is around $37.50.

My exit orders are:

• Market order to exit if the stock trades below $29.50
• Trailing stop loss if the stock trades above $36.75
• Stop loss on the option at $4.00

Sold 2 XLNX Jun08 27.5 puts for $3.60

Note: this trade actually happened on 3/24, but I was travelling so I didn’t get a chance to write about it until today.

I bought this option on 3/14 for $4.70.  One of my exit orders was to get out for a loss if the stock goes above $24.50.  Yesterday’s big jump in the market also raised the value of this stock, which went as high as $25.41 before closing at $24.72.  My position was closed very early in the day for a total loss of $226, including commissions.

Week ending 3/21/2008

Not much to report this week since I didn’t have any trades again.  My trade on XLNX is down a bit, so my portfolio went down $100.02 to $11,974.75.  I’m travelling this weekend so this is a very quick post.

Week ending 3/14/2008

This was a pretty quiet week again until today, when I closed one trade and opened a new one.  This week my account was up $125.50 to a total of $12,074.77. 

There’s not much else to report on this week’s activities.  I didn’t see any trade signals other than the one I took today on XLNX, and one other that had earnings coming out within a month so I didn’t buy that one.  As the market keeps going lower, I keep my eye on the stocks in my bullish watchlist, thinking that they’ll have to show a buy signal sometime soon, but I haven’t seen a buy signal since my last call trade in mid January.

I was thinking this week about how my ratio of calls to puts has naturally followed the overall market trend without me having to specifically do anything about it.  My goal is to take every call and put trade that I see.  Last October, the market was still bullish and I ended up finding a lot more call trades.  As the market started to shift, I had an even number of calls and puts for a while.  Now it’s been two months of nothing but puts as the market has headed down.  It’s neat to see the system automatically balancing itself to match market conditions, and it gives me more confidence in my ability to be successful long term.

Bought 2 XLNX Jun08 27.5 puts for $4.70

The stock has been in a downtrend since last April, with a pretty clearly defined movement between two downward trendlines.  It has again come up to the resistance line and bounced down off of it, and the MACD and stochastics are both high and starting to go down.

The stock is currently at $23.42.  Resistance is around $23.80 and support is around $19.00.

My exit orders are:

• Market order to exit if the stock trades above $24.50
• Trailing stop loss to exit if the stock trades below $20.00
• Stop loss on the option at $2.30