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OfflineBambi
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Re: Stock Update for May 3, 2012 - X, AXLN, AAPL [Re: geokills]
    #16481519 - 07/04/12 05:12 PM (11 years, 6 months ago)

Quote:

geokills said:

Total newbie mistake (I've been guilty of it myself), and often the reason those new to investing are attracted to penny stocks.  "Wow, I can afford 10,000 shares, it only has to go up a few cents for me to make some nice change!"





Well, in my defense I wasnt looking to buy a penny stock. I was looking for an energy stock priced somewhere between $5 and $30 since I had upwards of $1500 to invest and thought it would be best to get 50 or 100 shares of a lower priced stock than 10 share of a stock over $100. still wasnt my best buy though :frown:


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OfflinegeokillsA
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Re: Stock Update for May 3, 2012 - X, AXLN, AAPL [Re: Bambi]
    #16481720 - 07/04/12 05:52 PM (11 years, 6 months ago)

Quote:

Bambi said:

I was looking for an energy stock priced somewhere between $5 and $30 since I had upwards of $1500 to invest and thought it would be best to get 50 or 100 shares of a lower priced stock than 10 share of a stock over $100.




While not a penny stock, it's the same principle I was attempting to illuminate.  That is, that a lower dollar cost per share is presumed to be of better value because one can buy a larger quantity of them compared to a higher dollar cost per share of a different stock.  This is an inappropriate way of evaluating value.  Share price alone, is in fact completely irrelevant.  Value is best determined by the number of shares in the float (aka circulation), relative to the company's earnings and growth rate (aka the PEG ratio), with special attention paid to whether the growth rate is accelerating (good) or decelerating (bad).  Generally, if a stock has PEG that is less than 1, and its growth will be accelerating over the next year, it's a buy. 

Take a look at AAPL.  It is still undervalued with respect to its growth rate, yet it costs $600 to buy a single share!  You would have paid around $350 to buy a single share of this stock a year ago, but you would still nearly have doubled your money in a year's time.  The point is, it's the %-return that counts, and that has nothing to do with the dollar price per share.  It has to do with how well the company is presently performing, with special attention paid to the pace of its growth over the future 6 - 18 months.

Big money sets the price of any given stock, because they do the vast majority of the buying and selling (supply/demand).  Thus, you really need to understand what THEY look at to determine value, because they ultimately determine price.


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Offlinescatmanrav
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Re: Stock Update for May 3, 2012 - X, AXLN, AAPL [Re: geokills]
    #16484656 - 07/05/12 10:07 AM (11 years, 6 months ago)

Well I made a good call getting into aapl and vhc as I got back into the stocks after a few months off, but made a bad one with idng. At first I made a good chunk off of it, but stayed in as they split the shares not realizing I couldn't touch them for about 4 days, and in that 4 days I lost the 25% gain i had as well as 75% of my investment.

I'm usually good at most things, especially ones involving numbers, but this game continues to elude me. That's why I took the last few months off, which is funny since its when stocks really rallied. 90% of the decisions I make are wrong and the ones that are right I change my mind half way through because I question myself because I always get it wrong, then I alter my right decision to the wrong one. Well i'm gonna keep trying anyway, maybe I'll get it someday.

Just be careful for websites promoting a penny stock that keeps going up, make sure there's no fine print somewhere that they get paid to send out those alerts, cause they usually do. Bolinger report got me with idng. I just wished I dumped it before the split, with my profit, but everything I read said a stock split was a good thing. Not when its a pump and dump though..


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"life is like a drop of rain getting closer and closer to falling into a lake, and then when you hit the lake there is no more rain drop, only the lake."

Growing with bags, start to finish (including my new grain and substrate prep)
Anyone looking to start bulk tubs/mono tubs/shotgun hybrids? Good tubs to use..
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Edited by scatmanrav (07/05/12 10:09 AM)


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OfflinegeokillsA
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Stock Update for July 5, 2012 - NFLX, AAPL, GOOG, ROST, PCX [Re: scatmanrav]
    #16484954 - 07/05/12 11:40 AM (11 years, 6 months ago)

Quote:

Just be careful for websites promoting a penny stock[s] that keeps going up




scatmanrav, sucks about IDNG/IDNGD.  Hopefully this has taught you not to mess with stocks that trade "over the counter" (i.e. are not listed on a major exchange that maintains stringent reporting standards such as the NYSE or NASDAQ), or that otherwise trade on very thin volume or sub $1 share prices. 



Quote:

90% of the decisions I make are wrong and the ones that are right I change my mind half way through because I question myself because I always get it wrong, then I alter my right decision to the wrong one.




I know this feeling and I know how frustrating it can be.  This is why it is so important to cut losers quickly and let your winners work for you as long as they can through the use of a trailing sell stop that will take you out of at least part of your position upon signs of a reversal.  Even if you're wrong most of the time, you can still come out ahead if your losers are identified and culled quickly, and your select winners are given time and a little more room to work.

Go pick up a copy of Michael Douglas' Trading in the Zone, if you are serious about this gig, it will help you identify and hopefully overcome many of the psychological hurdles that prevent us from being better traders.


Quote:

geokills said (2 days ago):

I did however initiate a July $70 call option position on NFLX last Friday on speculation that the stock had been putting in a long base, bollinger bands were narrowing, and the 50 day moving average had been given enough time to come down to meet the price.  They're paying off today, up over 140% as of this writing with NFLX breaking through its 50 day and volatility expanding to the upside.  Volume is also picking up, so it may not be too late to buy a little bit of this stock right here.

Look at AAPL as well, it is expanding out of a bit of a volatility squeeze and testing the psychologically significant $600 price level.  I would not be surprised to see the stock continue to run into its earnings report.




This is playing out much faster than I had anticipated, with AAPL expanding nicely to the upside for its fourth day in a row.

NFLX has also absolutely exploded, up over 14% today alone and well outside of its third standard deviation bollinger band on the daily chart.  This is a powerful move on very high volume, and the July $70 calls I bought last Friday are now up 560%.  I am therefore taking profits, with the expectation that there will be some measure of consolidation (even if it's just a couple of bucks in the span of half a day) that will allow me to rebuild the position at a lower price.  I am expecting NFLX to test $90 in the very near future, which is another ~10% higher than where the stock is presently trading.  I know I just spoke about letting your winners work, but frankly, this has been my best trade on a percentage basis and it would be foolish not to book a little profit (I only wish I had made this a larger position, but that's always the case with a winning trade).

In the macro view, we had the ECB and China lowering their interest rates, which indicates that government authorities still believe that the economic climate and outlook is weak enough to warrant this type of action.  Also remember that we have jobs numbers coming out tomorrow, and that could move the markets in a pretty major way.  Still not aggressive, though AAPL, PCX, GOOG, NFLX and ROST are all looking quite nice.  (I bought some ROST and AAPL today)


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OfflineThe Ecstatic
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Re: Stock Update for July 5, 2012 - NFLX, AAPL, GOOG, ROST, PCX [Re: geokills]
    #16489451 - 07/06/12 09:49 AM (11 years, 6 months ago)

Dearest Geo,

I'm about to take a little chunk of change and start doing a little swing trading.  I've done an exhaustive amount of reading on technical analysis, fundamentals, momentum, etc etc. 

Just wondering if you have any tips for me before I get started. Where should I set my stops as a general rule, do I center it around the moving averages? Whats the best way to identify an impending correction? I'm planning on holding short term, simply trying to bank on 1-3% volitility swings with a few stocks I've been watching.

Thanks in advance.


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OfflinegeokillsA
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Re: Stock Update for July 5, 2012 - NFLX, AAPL, GOOG, ROST, PCX [Re: The Ecstatic]
    #16489668 - 07/06/12 10:56 AM (11 years, 6 months ago)

If your goal is strictly to swing trade for 1-3% targets, you can forget about the fundamentals and focus entirely on technical analysis.  You should still look at your stocks in various time frames (intraday 5 min, 15 min, daily, and weekly) in order to identify longer term areas of support and resistance.  Use that information in conjunction with the moving averages and Fibonacci retracement levels to determine your best entries and sell targets.

If you're truly just scalping 1-3% targets, you should be "right or right out", since your gains will be so small that you truly cannot afford to take even moderate losses as you will at best tread water and at worst, spend weeks or maybe even months making up for one significantly sour trade.

On that note, plan your trade, and trade your plan.  Don't let a short term swing trade turn into a long term hold just because it didn't do what you thought it would and you want to "give it time to work".  You will likely never sell at the absolute top nor buy at the absolute bottom, so don't try.  Instead, watch for evidence of buyers coming in to take your first bite, and set your initial stop right below the nearest level of support.  If that support level is too far away, you might want to forget about that trade and look for another opportunity.

As a general rule of thumb, you should never take a greater than 8% loss on any given common stock trade.  This is simply a function of math, in that losses greater than 8%, become increasingly difficult to make back with the reduced capital you have to work with as a result of the initial loss.


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OfflineThe Ecstatic
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Re: Stock Update for July 5, 2012 - NFLX, AAPL, GOOG, ROST, PCX [Re: geokills]
    #16489809 - 07/06/12 11:37 AM (11 years, 6 months ago)

Thanks man, appreciate the insight. :thumbup:


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OfflinePDU
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Re: Stock Update for July 5, 2012 - NFLX, AAPL, GOOG, ROST, PCX [Re: The Ecstatic]
    #16491866 - 07/06/12 07:30 PM (11 years, 6 months ago)

Quote:

The Ecstatic said:
Dearest Geo,

I'm about to take a little chunk of change and start doing a little swing trading.  I've done an exhaustive amount of reading on technical analysis, fundamentals, momentum, etc etc. 

Just wondering if you have any tips for me before I get started. Where should I set my stops as a general rule, do I center it around the moving averages? Whats the best way to identify an impending correction? I'm planning on holding short term, simply trying to bank on 1-3% volitility swings with a few stocks I've been watching.

Thanks in advance.




I am seeking reading material. Care to share?


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Offlineben_dover0802
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Re: Stock Update for July 5, 2012 - NFLX, AAPL, GOOG, ROST, PCX [Re: geokills]
    #16496137 - 07/07/12 05:44 PM (11 years, 6 months ago)

Nice NFLX trade, I am also involved in this one, but I bought on the day it went up 14%, sold half yesterday pretty high in the day because I had a 1% trailing stop on it. Still holding half though as the expansion is still intact. For newer traders a good strategy for these fast movers, especially in an expansion, that has worked for me is to put a stop at the low of the previous day of trading. but like Geo said, nothing wrong with taking some profit.

I have been watching the coal stocks and it looks like they might be starting to bottom to me.  BTU, ACI, JRCC are all changing their characteristics.  Most notably JRCC.

Also I was feeling risky on Tuesday and bought PCX, another coal stock, already up 18%, but enjoyed the ride up about another 10% and sold that same day.  Wish I didn't as it went up another ~18% the next day but what are you gonna do.  This stock is the riskiest of the coal sector but also has the biggest upside potential.  I may jump back into it for a trade if it retraces itself to 1.50 or so and starts bouncing or makes another move to the upside from here after a brief pause.  Looking a the weekly chart you can see the 20 week average (sorta acting as resistance before) is just a tad under $5, the stock is @ 2.19 now.  However for a longer term trade I am still liking JRCC better if this sector takes off.

I am also looking at Arena Pharma (ARNA) this has been one of this years biggest winners, it has increased from about $2 to $11 in 2 months but is still moving up on good volume.  This company received the first FDA approval of a weight loss drug in the past 13 years. We all know how many fat ppl there are in the world even besides the US so the market has the potential to be huge.  I am not so sure if this stock is going to continue its run up to $25, which many believe it will, but if it gets closer to the 20 dma (~$10) and looks like its bouncing, ill be in for a trade.  I also noticed this stock is owned mostly by non-institutional buyers (70% according to scottrade) I don't know if this is a good or bad thing, or maybe it doesn't matter much, but seems a little out of the ordinary. 

Edit: I wanted add all my positions:
short BTU (20%) Although I think the sector might be bottoming, the stocks are extended and if the market goes down I am pretty sure these will come down with it short term.
Long:
BAC (11%) opened yesterday
DANG (10%)
AAPL (17%)
NFLX (9%)


Cash (33%)

Take care all


Edited by ben_dover0802 (07/07/12 06:08 PM)


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Offlineben_dover0802
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Re: Stock Update for July 5, 2012 - NFLX, AAPL, GOOG, ROST, PCX [Re: ben_dover0802]
    #16505297 - 07/09/12 06:15 PM (11 years, 6 months ago)

Well PCX went under, glad I didn't get in. I would advise to hold off on the coal stocks until there is a definite bounce at a "higher low" level than the previous low.  BTU would be the safest bet most likely but again, I would hold off. 

Sold DANG and my short BTU today, holding on to BAC, AAPL, NFLX.

Bought a little CIGX today as it bounced off the 20 dma. This company deals with the harm reduction of tobacco products, however, I am just trading it as it is in a pretty strong uptrend.

Best of luck


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OfflinegeokillsA
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Re: Stock Update for July 5, 2012 - NFLX, AAPL, GOOG, ROST, PCX [Re: ben_dover0802]
    #16505398 - 07/09/12 06:34 PM (11 years, 6 months ago)

I happened to have PCX loaded on my screen right when it started to dive.  What was amusing, could have been horrifying had I owned the shares!  Happy to hear you didn't get hurt on that one either.  Yet again, a little reinforcement on the idea that stocks trading for pennies (or close to it) are usually priced that way for a reason... and not a positive one!

NFLX is hanging in there, but I don't see much reason to be holding it right here.  It has closed outside of its upper bollinger band for three days running, but isn't really advancing higher.  I would at least keep a stop just below $80.  I will continue watching it, hoping that it will come back to $74 - $76 on declining volume and bounce off of its 20 day moving average, at which point I would be buying rather aggressively in anticipation of a subsequent test of $90.

What in the heck are you doing with BAC?  The thing has a short term double top from 6/20 and 7/2, been sliding something fierce for days and broke through its 30 day uptrend support line last Friday.  I have alerts set at the 200 day EMA (~$7.30) and above $8.  In between those levels and I don't see a compelling reason to get involved.  I will concede that the XLF is at an interesting point that could offer some support, so perhaps BAC catches a bid here too, but the financials just seem really sketchy right now what with the Europe crisis and the more recent development of attempted LIBOR manipulation.  That industry is a freaking minefield.

Market was pretty boring overall today, earnings season is starting, which will add to volatility in an already volatile market.  I probably won't be trading much this week, especially since I'll be away from my desk all day Wednesday.  But also because the S&P is peeling back from a downtrending resistance line that extends back to the April highs and I would expect it to be on its way to testing 1335.


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OfflinegeokillsA
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Stock Update for July 11, 2012 - NFLX, AAPL, BAC, CHK, PSEC [Re: geokills]
    #16513746 - 07/11/12 10:32 AM (11 years, 6 months ago)

Quote:

geokills said:

What in the heck are you doing with BAC?  ... the S&P is peeling back from a downtrending resistance line that extends back to the April highs and I would expect it to be on its way to testing 1335.




OK, so we came darn close to our test of 1335 on the S&P.  Though there isn't any meaningful strength here so far, the market is basically stuck, I think the fact that we are holding right above the 50 day moving average (as well as yesterday's intraday low) and having been down four days in a row, that we could see some measure of a short-term counter-trend rally over the next day or two.  Yeah, I know this is really short term stuff, but truly that's what I'm most comfortable with in the market that we have in front of us.  Trade the market in front of you, not the market you wish were in front of you!

I have thus re-entered NFLX with some plain ol' common stock, though keeping a very tight stop on the position at $82.59.  If you want to give it more room (by perhaps taking a smaller position), I would suggest $79.49 should be your absolute lowest stop loss level on this position.  If it breaks that level, I would expect it to trade down to the low to mid $70's fairly quickly.

I have also taken another bite of AAPL today.  I have a small allotment of common stock shares in my retirement portfolio that I do not have a sell stop on, but the shares I'm buying today are in larger quantity and strictly as a trading position. Thus, I am keeping a stop below today's intraday low.  If I'm wrong, I'll end up losing the amount of money I'd spend on dinner... not a bad risk/reward, when you consider that AAPL is in phase two of a volatility expansion to the upside, and looks poised to test its all-time high as we head into its earnings report, slated for the 24th of July.

I am taking one longer term stab, with BAC.  Though I was doggin' it the other day, it has ground around its 50 day moving average for a few days now and has been showing uncanny strength since it opened this morning.  I still feel that there is significant risk in the financial sector, so I am only taking a small position via January 2014 $7 call options, which are going for about $200 per contract.  This means that BAC will have to be at or above $9 come 2014, for the position to remain profitable.  Of course, if it has a quick run up before then, it will become profitable fairly quickly and I can peel some off to reduce my exposure.  Because the contract doesn't expire for another year and a half and isn't tying up much capital, there's plenty of time for me to let this position ride as a placeholder for the financials, which will act as my barometer for the sector since I will always be seeing it in my active portfolio.

I have also sold a couple of $18 weekly puts on CHK.  Pocket change, but they expire in two days and the stock appears to be reasserting its intermediate term uptrend from the $13.32 low it set back in mid May.  If you draw a trendline connecting closing prices from 5/17 and 6/26 (the uptrending support line), you'll see that we just tagged it with yesterday's intraday low.

Lastly, I added to my long term PSEC position, since they offered a secondary issuance of new stock in order to raise capital, which has the stock down some 8% on the news.  Note that these private equity companies need to raise capital for their business model, and because some of the more traditional ways of securing debt (i.e. banks) have become much tighter, it makes sense for them to raise money through issuance of new stock, especially on the heels of some nice stock price appreciation over the past couple of months.  The stock is somewhat of a snooze fest, but it's paying 11%+ annually through its dividend at the current price, and I don't mind snoozers that pay consistently high dividends.


  • Make no mistake, I do not like this market.

  • I am not wildly bullish by a stretch.

  • The vast majority of my portfolio is still cash.


Nevertheless, I recognize that when we see stabilization after a multiday swoon, particularly around a key moving average (such as the S&P's 50 day), it is the time to take some risk, since it is a low risk opportunity.  The market could continue to fall of that I have no doubt, but with tight stops in place (and they can legitimately be tight, because price has been given enough time to fall very close to near term support), there is truly minimal risk for loss.



EDIT:  And with that, I am out of all but the BAC/PSEC positions noted above :tongue:.  Some pretty gnarly across-the-board market selling
occurred moments ago at 11am, likely on account of the Federal Reserve minutes noting that economic expansion is more tepid than
earlier in the year, and that they have no intention to further ease policy.  The intensity of the selling was vicious enough that I
immediately exited my AAPL and CHK trades without waiting for the stops to be hit.  I was stopped out of NFLX about half an hour earlier
per the original stop loss order. Back to sittin' on hands for the time being. I'll wait for another indication of stability before stepping back in.

EDIT 2:  LOL, the market and AAPL close on good strength.  Sheesh, what a rollercoaster!  Oh well, win some lose some. :crazy2:


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Edited by geokills (07/11/12 01:51 PM)


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OfflinegeokillsA
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Stock Update for July 16, 2012 - PSEC, AAPL, MS, BAC, GNC [Re: geokills]
    #16539187 - 07/16/12 12:30 PM (11 years, 6 months ago)

Happy to have added to my position in PSEC on their secondary offering last week, locking in an 11% yield and having since subsequently gained an additional 3% in capital appreciation from the purchase price.  These consistent high yielders are great positions to hold for the long term, and the time to be buying them is when they take that quick dive upon notice of a secondary share offering, as we saw with PSEC last week.

I have also implemented an AAPL $595/$590 bull put credit spread, where I sold the July $595 puts and bought the July $590s as insurance.  The position expires this Friday, which is prior to AAPL's earnings report, and I think anticipation of solid earnings will keep the stock above $600.  I could've done a $600/$595 spread for a larger credit, but this market is too crazy to be too aggressive, and the $595/$590 allows AAPL to fall to $594.25 (approximately 2.75% lower than the current price) throughout the balance of the week, with the position remaining profitable.  It also gives me more room to unwind the trade if AAPL does break down from a retest of $600.

Took a trading position on MS this morning, since it bounced off of the bottom of its uptrending channel last Friday and is up above its 50 day moving average again.  This is just a trade, based on the two month channel and the 50 day moving average.  If MS falls below its 50 day, I will be out of this trade.  Currently, I have stops set at $14.18 and $14.09, though I will continue to raise them as the stock moves higher.  This company is set to report earnings before the open on Thursday, so I will likely be out of the trade by Wednesday's close, since I really don't know what to expect from earnings and the position is already well above breakeven... wouldn't want to let these profits slip away.

Also worth noting, I supplemented my small longer term BAC position with a lottery ticket play last Friday, purchasing a small boat of out-of-the-money $8 July calls for $10 per contract.  BAC reports earnings this week, and if they report well, I suspect that the stock could clear its 200 day moving average which presently sits almost spot on $8.  This is a pure gamble, but will only incur a very small loss if BAC fails to clear $8.10 in the wake of its earnings report.

Lastly, I sold (shorted) four $35 July puts on GNC.  The stock is a new issue (started trading last year), and has been in a very nice uptrend ever since.  These puts expire on Friday, and will force me to buy 400 shares of GNC at $35 only if GNC is below $35 on Friday.  That would require GNC to fall nearly 10% in five days, which I don't find likely.  And even if it did happen, owning GNC with an effective basis of $34.80 is close enough to support (the last major weekly low) at $33.71 that I wouldn't mind owning the shares.

Despite all this activity, my trading account is still around 62% cash.  I just don't have a lot of faith in this market, but if I happen to notice an opportunity developing with a good risk:reward ratio, I'll take a stab at it.


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OfflinegeokillsA
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Stock Update for July 17, 2012 - AAPL, GNC [Re: geokills]
    #16544264 - 07/17/12 11:55 AM (11 years, 6 months ago)

Added some more bull put credit spreads on AAPL this morning during the opening swoon, using lower strikes (selling the July $590's and buying the $585's).  This position will allow me to keep the entire credit so long as AAPL continues to trade above its 20 day moving average through Friday.

I also tried to buy some GNC common, but got shaken out of the position.  Nevertheless, the stock has been off to the races ever since, and I expect my short July $35 puts to expire worthless, allowing me to keep the credit even as I missed the nice trade on this one today.  Because I really think this stock is behaving well, I am going out another month and selling some August $35 puts for a $1.05 credit per share ($105 per contract).  If GNC is above $35 on August 18th, I keep the credit.  If it's not, I will buy the stock with an effective basis of $33.95, which is very close to the stock's 200 day moving average, and a place I would want to be buying the stock anyway.  This August short put position is small to begin with, as I want to leave room to sell more contracts should we see some significant weakness in the market over the coming weeks.

The market in aggregate is nearing resistance from the downtrending series of lower closing highs created on the S&P from 4/2, 5/1 and 7/3.  However, there is a shorter term uptrending channel on the S&P the top of which presently stands at 1390-1400.  Because of this intersection of short and intermediate term trends, I expect the highest probability is a choppy but relatively sideways grind over the next few days as the markets digest the first round of earnings reports and Ben Bernanke's congressional testimony.


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OfflineThe_Aviator
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Re: Stock Update for July 17, 2012 - AAPL, GNC [Re: geokills]
    #16544442 - 07/17/12 12:37 PM (11 years, 6 months ago)

Can someone look at this stock and let me know what you think? I have never bought a stock before but microsoft and sony have both leaked documents that indicate that they will use AMD graphics cards in their next generation consoles (expected to be released late 2013).
http://finance.yahoo.com/q?s=AMD

I was also wondering if anyone knows anything about marijuana related stocks? I am asking because I was wondering what will happen to the prices if Washington and Colorado legalize cannabis this year.


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Re: Stock Update for July 17, 2012 - AAPL, GNC [Re: The_Aviator]
    #16545219 - 07/17/12 03:21 PM (11 years, 6 months ago)

Anyone watching the VIX here, hitting new recent lows. Why the VIX is so low is amazing considering the level of risk that exist in this environment.

Food commodities are also performing very well, wheat is really soaring. Corn, sugar, and soybeans are also moving higher, not enough rain for some of these crops.


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Re: Stock Update for July 17, 2012 - AAPL, GNC [Re: The_Aviator]
    #16546129 - 07/17/12 06:03 PM (11 years, 6 months ago)

The_Aviator, AMD is not lookin' too pretty.  The company is losing money while Intel seems most dominant.  I don't know the business well enough to know whether the addition of AMD graphics cards into these game consoles will make a big difference, because I don't know how much of the company's revenue comes from those product lines, nor the size of the sales that would be generated through the suggested contracts.  It may be something worth taking a stab at, since the stock has been so beaten up.  If you do get involved, keep a sell stop just below $4.30 (the last major low).  It's not the type of trade I like to take.  Rumors are easy to find and I generally don't like waiting around to see whether or not they come true.  On the marijuana stocks, I have not found any worth investing in, and probably won't until the Federal government gets its act in gear and removes the drug's Schedule I status.

qman, I always have the VIX on my screen, but it's so volatile and gappy that it is rather difficult for me to trade.  I've been burned by it twice, and I'm not lookin' for a third go 'round just yet!  I do think the VIX in and of itself has become less relevant in recent years, with the advent of various other hedging strategies such as leveraged inverse ETFs.  The traditional measure of index option premium isn't as reliable of an indicator because option hedging isn't used as exclusively anymore.

The food inflation spurred by the bad (dry) weather could make the current monetary policy difficult to maintain, hindering a central bank's ability to maintain low interest rates, due to the risk of exacerbating food inflation from the artificially low rates.  Interesting scenario to be sure.


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Stock Update for July 19, 2012 - AGNC, BAC, AAPL, GNC, X, AKS, NFLX [Re: geokills]
    #16553949 - 07/19/12 10:44 AM (11 years, 6 months ago)

This market has been behaving very well all week, even in the face of some extremely discouraging news from all over the world, Europe, China and of course here in the US as well.  When this happens, it pays to be a little more bullish, because if the market can trade up on bad news, it stands to reason that it would do even better if the news flow starts to improve.  In other words, expectations have already been set low, perhaps too low, in conjunction with monetary policy that is effectively forcing cash into risk assets, which is why we can trade up even when things look nasty.  That being said, the S&P is facing some resistance at around 1400, which is only 1.5% higher than where we are trading right now.  It has also moved up 4% since last Thursday, which is a pretty fast move, a pace that is almost certainly unsustainable over a longer period of time.

Therefore, I cannot in good conscience tell you to go balls crazy buying everything in sight.  As you have and will see from my own trading, I am being rather conservative.  If I think a stock is stable, I will sell a bull put spread.  If I think a stock has room to run, instead of buying shares or calls, I sell an out of the money put.  It won't be as profitable if the stock does indeed take off, but it also gives me the option of owning a stock I already like, at an even lower price, since the credit (aka premium) received from selling the put, will lower my effective cost basis in the stock, if I am forced to buy the shares at expiration.  To those of you who may have no idea what I'm talking about, but are interested in learning about option strategy, click here and get learned!

Now for my book...


Existing Trades:


AGNC, the big dividend yielder that has been a mammoth outperformer in my portfolio.  I think someone recently asked me about "when to buy" this stock in this forum just a week or two ago.  Well friends, the time to start building a position is right now.  The company just announced a secondary offering, which saw share price drop from the stock's all time high of $35.58 set this past Tuesday, right to its 20 day moving average at around $34.  I have added a little bit on the news.

My BAC lotto ticket via the July $8 calls got iced for a complete loss, but that was only about $100 and I knew there was limited potential for this trade to work from the get go.  BAC is testing its 200 day moving average as I type, which should prove interesting.  It has proven itself to be one of the weakest financials this week, just my luck that it's the financial I decided to trade! :undecided:

Fortunately, my bull put spreads on AAPL (both the $595/590 and the $590/585) are handily profitable and look to be pretty safe unless the market takes an exceptional dive tomorrow.  Because AAPL has behaved so well today, I fully expect these spreads to expire at max profit, allowing me to keep about $1000 worth of credit for a one week trade that tied up $7500 in capital maintenance requirements.

The July $35 puts I sold on GNC are well on their way to expiring worthless, allowing me to keep the full premium which is just enough to offset the loss from my BAC lotto ticket trade.  I also have a few short August $35 puts on GNC as well.  These have plenty of time to go against me, though due to the nature of this stock's longer term uptrend, I do not mind committing to purchase the shares for an effective cost basis of around $34 if the stock is below $35 on August 18th.


New Trades:


I sold a few puts on X today, specifically the August $18's at $50 per contract.  If X stays above $18 on August 18, I keep the full premium.  If it's below, I end up buying several hundred shares with an effective basis of $17.50, which is below the stock's multi-year low that was set last month.  While I am under no illusion that the steel industry faces strong headwinds as the global economy continues to slow, the stock has been beaten to hell for the past year and a half and I would expect that it will begin to carve out a base.  This position is not very large, just in case I am wrong and forced to buy the shares!  I may also consider buying a lower strike put to create a spread, but do not feel that is necessary at this juncture since I am managing my risk through the use of position sizing instead.

In line with the above trade, but slightly more conservative (because I think there is a greater chance that this company could actually go bankrupt), I initiated a bull put credit spread on AKS, selling August $5 puts at $22 per contract and buying August $4 puts at $6 per contract for insurance.  This nets me $16 per contract, which over 25 contracts is a cool $400 with a $2500 capital maintenance requirement.  So long as AKS is above $5 on August 18th, it's all wavy gravy.  I will have a protective stop on this trade, such that if AKS falls below yesterday's intraday low of $5.16, I will buy back the short August $5 puts.

I sold one $70 August put on NFLX yesterday, which brought in $250 of premium.  This is also a small position, because NFLX will report earnings before the August expiration, which is one of the reasons there is still so much premium on a $70 put contract, that was at the time over 13% out of the money, and today is over 17% out of the money!  Premiums get inflated when a given stock is expected to make a large move on earnings.  The larger the expected move, the higher the premiums will be.  If NFLX closes below $70 on August 18th, I will be forced to buy 100 shares with an effective basis of $67.50, which is approximately 10% above the stock's 2-3 year lows.  Because NFLX's 50 day moving average has started to turn higher and is above $70, the company would have to really screw up their earnings report for the shares to get put to me.


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Edited by geokills (07/19/12 01:54 PM)


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OfflinegeokillsA
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Stock Update for July 25, 2012 - X, AKS, NFLX, AAPL [Re: geokills]
    #16586453 - 07/25/12 01:53 PM (11 years, 6 months ago)

Mea culpa.

The trades I outlined on X, AKS, and NFLX were reckless and thus far, I have been wrong.  Not only are all three of these stocks in marked downtrends, I had even noted that the S&P was nearing resistance and had to digest a fast 4% upside move from the prior week; yet I did not heed my own words of caution, likely on account of my stoked ego from the very profitable AAPL spreads that I had implemented the week prior.  This is an important lesson, when you have a set of really great trades, be extra mindful of any subsequent trades you may make, as a string of winners has the tendency to make oneself feel invincible, which leads to a lack of risk management or plain ol' reckless trading.

I have been paying for that recklessness this week.  Not only was the aggregate market poorly positioned for me to start writing bull put spreads or even worse, selling outright puts with no protection, but I also neglected the fact that all of these trades involved companies that were scheduled to report their earnings during the option cycle I was trading.  Ugh, pretty reckless indeed.

So on that note, I am still holding my short $18 puts on X (down 112%), as well as my bull put spread on AKS (down 120%).  Neither of these positions looks particularly favorable, but they are nearing their respective lows set in early June.  I will wait and watch to see how they react around this level, since AKS has already reported (and didn't implode) and the S&P is now sitting on its 50 day moving average, which is also fairly close to its 200 day moving average.  Since these positions are based on August options, it seems reasonable that there will be a better exit for me, unless support completely breaks down.  In that event, I will exit the positions and save a few scraps, though no doubt these will have been some very bad trades.

NFLX traded down way more violently than I had anticipated on their earnings report, and I sold my short NFLX $70 put during the first 15 minutes of trading this morning, when it became clear that the opening bounce was reversing and sellers were still selling.  That turned out to be the right thing to do.  Despite losing $500 on this single contract overnight, that loss would have been more than twice as large if I were still holding the position.

As for AAPL, they also are experiencing a negative reaction to their earnings report, and the stock is presently trading just below its 50 day moving average.  It hasn't moved a whole lot intraday, and with the anticipated release of iPhone5 this fall, I don't expect this will continue to fall in a meaningful way.  The stock's price to earnings multiple, relative to (divided by) its growth rate, indicates that it is still technically a cheap stock relative to almost every other stock out there.  Here you have the largest company in the world, with a tremendous growth rate, trading like a value stock.  It's pretty wild, and on that note, I did sell a couple of August $560/550 bull put spreads today amidst the carnage, and also added a few common shares for my retirement portfolio position.

Not doing much else, as I'll be vacationing for a week starting this Friday, and don't want to have a lot of open positions on my books to fret over while I'm away.

Good luck, and please, learn from my mistakes! :crazy:


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Invisibledemiu5
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Re: Stock Update for July 25, 2012 - X, AKS, NFLX, AAPL [Re: geokills]
    #16587538 - 07/25/12 05:19 PM (11 years, 6 months ago)

when i heard about nflx being down 24% a few minutes after 10 this morning, my first thought was, "fuck i hope geo got rid of all his shares before this hit"


bummer


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