Traders Corner   49 comments

There wasn’t much change in the technicals after yesterday’s flat day. On top of that, yesterday’s S&P 500 volume was the lowest we’ve seen since January 3rd. Regardless, there might be enough volatility for daytraders today.

The S&P 500 levels to watch today:

UPSIDE: 1881 (March 6th’s high), 1883 (March 7th’s high and the all-time high), and 1889 (top of the Bollinger Bands).
LAST CLOSE: 1877 (March 10th’s high).
DOWNSIDE: 1876 (2 data points), 1874 (March 6th’s low), 1870-1871 (2 data points), 1867 (March 10th’s low and February’s high), 1857 (March 3rd’s high), 1849-1850 (March 4th’s low and January’s high and December’s high), 1846 (20 day moving average), 1834 (March 3rd’s low), 1827 (50 day moving average), 1803 (100 day moving average and the bottom of the Bollinger Bands), 1775 (October’s high), 1770 (January’s low), 1767 (December’s low), 1761 (150 day moving average), 1745 (November’s low), 1737 (February’s low), and 1733 (200 day moving average).

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49 responses to “Traders Corner

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  1. Looking at some stocks pre market. The power plays, plug, fcel and bldp continue to “charge” upwards. GTAT is up 5% as they sold a bunch of equipment in Malaysia proving that they are not a one trick pony with AAPL.

  2. Still no sign of weakness in the S&P. Ed, what kind of drop are you looking for before you add long positions?

    • I would expect the S&P to revisit the 150 day moving average, possibly lower. While it could happen as soon as next week’s Fed meeting, I would actually expect to see it in April, and no later than this summer. Granted, that’s a long time period, but this isn’t a science.

      • That would be about a 6.5% drop from here. I doubt we’ll get it unless there is a major shock to the system.

      • Trader,
        I’d call going from an extra $85 billion to $0 being pumped into the financial system a “major shock”. We already see the symptoms in China and the weaker emerging markets. It’s only a matter of time before they return to American markets.

        Note that I also said we could go lower than the 150 day MA.

      • A shock is something unexpected. Seems to me that there is no surprise in the taper. If I remember correctly the hint of a taper was supposed to crash the market. Did I miss that? 🙂

      • Like Ed said: what about China? Look at dr. Copper these days. Look at commodities in general, those charts don’t reflect a healthy economy. Sure, the other stocks can party like crazy for a while longer, but somewhere they’ll catch up (or down). You are absolutely right in your comment yesterday about computerized trading. But if someone who is not that good in reading the charts as you are (and this is the majority), would you really advise them to go long for the short/medium term?

      • plastronneke, I’d just follow Marshall.

      • Now that is a really good answer Trader 🙂
        There is really much truth in that answer.

      • Trader, that’s smart he will make you a lot of money.

      • Trader,
        The “common knowledge” on Wall Street is the economy is recovering, in spite of the fact the economic reports don’t really reflect this view. So if the economy is recovering, ergo we don’t need the taper. But what if QE was the only reason the economy looks as mediocre as it does? I’m sure it will come as a shock to Wall Street when the Fed continues tapering, as the economy gets weaker.

      • Ed,

        Which reports are you referring to specifically ? Most of the reports I’ve seen show overall growth in the economy lately. Especially the ISM report which still shows overall growth in manufacturing and services that cover large parts of the economy. Maybe you are confusing it with recent slow downs in activity, but overall the economy is still on the upswing.

        http://www.ism.ws/ISMReport/content.cfm?ItemNumber=10748&navItemNumber=12949

        The link gives access to the ISM pdf copy of each monthly report for those interested.

      • mdistas,
        The last three employment reports have been poor to mediocre.

        Also, just using the PMI from ISM, the growth rate has dropped from the last 6 months of 2013. But I don’t read too much from that because it can take months before the tapering will show an effect on the economy.

        One disturbing thing I noticed: The PMI showed prices increasing. In a stagnant economy, that’s not a good sign.

    • Who really knows where the markets will be in a month or two? If there was a way to project it, it would have been done. Too many variables, very little is static, just because something worked last time does not mean it will work this time. Too much emotion and psychology. If you take a longer term view – say five years from now, you can have more certainty. The market over the long run has gone up 8 to 10% a year. The idea of trying to time something short term that is largely untimable seems to me to add a lot of risk.

      • Marshall,
        I agree with you completely. You’ll notice I haven’t touched my 401k investments (except to add HYG). If an investor is truly a long-term investor, and by that I mean “hold for 5+ years or more”, then what will happen overall in the next 6 months is almost irrelevent. However, I know you have investments with a 6 month-1 year time frame. Would you still be buying if you had reason to think the markets could potentially collapse in that time frame?

      • Ed – my approach is simple and consistent. I try to stay between 20 and 30% cash. If I REALLY thought the market would crash, perhaps I would buy a form of insurance. I would answer your question by thinking about the four components of my portfolio: (1) dividend stocks – these are long term in nature and if markets drops, I am ok as I am buying more shares with reinvested dividends (2) MFI tranches – while I roll these over once a year into five new stocks, my only change if I felt the markets had a high probability of a drop would be the types of stocks I picked – I might go more with a Kellogg than a ATVI, (3) discretionary – this is where I would sell if I felt market was overvalued and move towards the higher end of my cash range and (4) cash. But note that no matter what I intend to be invested in the majority. At the end of the day, it is about preservation of capital. I tried leveraged plays last year (NUGT) and lost an insane amount in three months (almost 75%). That was not enjoyable and will not happen again.

        My goal is not to correctly predict the next market crash, but rather to be in position to profit from the inevitable rebound. I think that those two points are very different.

      • Marshall,
        Isn’t staying in 20-30% cash at all times reducing your returns by that much? Also, what would make you go in 100%? What would make you increase your cash to higher levels?

      • Ed – it can reduce returns over the shorter term. But it also gives me the liquidity to take advantage of opportunities. I think if we were in a 2009 scenario, I would consider going down to 5 to 10% cash. Think of it this way, if you are 100% invested, then it is likely you will have returns broadly following the market. But if you keep cash back, and wait for the “fat pitch”, meaning a stock opportunity that has a high probability of exceeding the market by a wide margin, you can enhance your returns over time.

      • Marshall,
        I agree with your strategy, and I’m not suggesting you go all in. The few times I’ve been all in, I’m always looking for a quick sell to increase cash, with the only exception being my longer-term 401k. Since I’m still contributing to it, I never remain all in for long.

  3. I sold my PLUGs last Wednesday at 7.05. Had bought 4 postions between 3.6 and 5.15. I was super happy with the huge profit. Was hoping it would drop so I could rebuy…Now it is at $11. I have sellers remorse.

  4. OPTT @ 5.25. High risk trade.

  5. QD,

    PHOT looks like its breaking out above resistance at .50. I’m still holding and added to my position at .38 recently. I think you mentioned the possible dilution as a reason why the stock has not performed as well as the others inthe space. I’d think that’s a fair conclusion. I’m going to keep my eyes open to take some money out of it as it starts to head to towards .65. My average price on it is about .19 so not to worried about pullbacks. And nice call on some of your other picks. All I know is that short term this sector is hot. However it seems like all the real money right now is being made by the people who own actual dispensaries, or sell edible products. None of which are publicly traded that I’m aware of.

    • mdistas – Yes, I’m sorry I broke my own rule about not going in and out of stocks – especially penny stocks. I’ve been waiting for PHOT to drop. Who knows when it will. It also seems very possible it will drop, but only after rising quite a bit, and I’d still be buying at a higher price than I sold. On the other hand, TRTC, which I bought at 0.09 broke 1000% gain for me today and is now over $1. I’ve never had that happen before. You might also look at another one I added last week, DIRV. They do security, including for MJ stores which apparently the big security firms are not willing to do. For both medical and retail, there are an insane amount of security mandates from the states, everything from the # of video cameras in the stores, the parking lots, ID cards, how the money is transferred to a bank, etc. DIRV takes care of all of that, and they seem to be getting multiple contracts. They are a true penny stock, however. I bought at a little more than 1 cent and am down a smidge, but as with any penny stock, it’s a very, very small position that I treat as gambling, and if it goes to zero, oh well.

  6. Trying my first covered call. Trying to sell Gtat April 19 calls at 17 for 1.80. If I get it and the shares get called out then I keep about 1.30 for a 7% gain.

    If this works, and the premium stays up I may buy more shares and do it again.

    • I will be interested to see how it works for you

    • Hope it works for you Jeff. You picked a good candidate. I have two positions. March 15’s and March 17’s. Should get called out on the 15’s, too close to call on the 17’s. If I’m not called out on the 17’s I’ll resell the April calls. Don’t care either way as long as it doesn’t drop big. As long as I get 5% or better a month, I’ll stick with GTAT.

      • Trader, I’ve been reading your posts and it just felt like it was time to learn a new trick. Thanks

    • Sold them for 1.65. I own the stock at 17 so if I get called out, then I return 9.7% for basically one month. If it is below 17 I lose the shares but keep the premium.

      This just seems like a no brainer, even for me. Am I wrong?

  7. Trader a look at the SCTY Mar 14 call premium at 72. Premium is 5.26 while the stock is now at 72.76. That’s 4.50 net call premium. or a little over 6.2% for a 3 day hold. Looks like a great opportunity eh?

    • taking a closer look at the SCTY Mar 14 72 calls, the last was 5.26 but current bid and ask is 2.13 and 2.63 respectively. Still a nice net premium for 3 days.

    • Jeff, as I type this SCTY is 73.15. March 72 are bid 3.95. Your net cost is 69.20. If called out profit is 72.00-69.20= 2.80 4.0% If not called, you collected 5.4% on your purchase price of 73.15. Pretty good for a few days. Word of caution. Don’t get blinded by these good yields. Make sure you like the stock in case you have to own it for a while.

      • Good point Trader, As a rule it looks like I’ll make it a habit to only do covered calls with stocks that I want to own anyway since it could always go down, perhaps even more than the premium. This just adds a new dynamic to my thinking. Thanks

  8. Skimming 20 biggest losers of the day. What a reversal on the “power” companies. When I looked this morning some were up. Now
    Plug power -34%
    Ballard power -23%
    ARTX -20%
    FCEL -20%
    FTEK -18%
    Peix -13%
    Ideal power -14%
    Digital power -13%.

    That really shows that momentum investing works until it doesn’t work. I hope people here were not caught.

    • Marshall, that is why you get in and get out. These types of stocks are for trading and not investing. I left a lot on the table this morning with OPTT. 4.4% for 3 minutes exceeded my expectations. I learned the hard way. Don’t get greedy. They go down just as fast as they go up. The pro’s will pick your pocket every time.

      • Trader – you are absolutely right. But looking at the chart, you can wager a lot of money that there are people who did not get out anywhere close to near in time. To be successful, you had better not go off to a one hour business meeting.

      • Marshall, I know you are right. If I have to step away for even a few minutes I set a limit sell. Many a time I come back and have sold while I was away.

      • Quite a dramatic drop. My 7% gain on Ballard is feeling a lot better now

  9. Looks like I was half right on RVLT. Didn’t go up but didn’t drop much. Have to see what tomorrow brings.

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