Long C Calls

Long a small lot of Sept OTM C Calls. Looking for a pop up to the 200 DMA on a rally, and unload the calls.

CPSL Exploded

The last few trading days, CPSL has absolutely exploded. It is up from around 1.50 to above 2.50. I didn't think I would see those levels this early in the year, but it's happened.

I am short calls on my stock at 2.50 for June and September, so I expect this trend to hold, and get called out on my stock, which is the bulk of my portfolio. All of which is fine with me.

More Covered Calls

I wrote more covered calls on the remainder of my CPSL position. Half my position is short Sept. 2.5 calls, and the other half is June 2.5 calls, which I wrote today for a dime. Very overvalued, especially since CPSL has basically been trading in this range for a week now. I don't expect to see too many large jumps in the price until further on down the road.

CPSL - Covered (some) Calls

After an amazing daily gain, CPSL wobbled. However, there was a buyer interested in purchasing some September 2.5 calls from me, so I sold him 10 very overpriced calls at .20 cents, when theoretical value was under .10. Fine with me, now, I am going to continue waiting for another run up, hopefully to 1.80.

Right now, CPSL is below resistance again, in the 1.15 - 1.20 area. Watch for another break out in the next few weeks.

CPSL - Bullish?

Long time readers will know I am long CPSL--Chinese Precision Steel. Balance sheets look stable enough, but it is an extremely volatile stock. Which, translates in to premium for short positions, ie the covered call.

CPSL established a minor uptrend in the last week. Yesterday we saw a Doji candle, followed today, by a 22.3% increase in price today. Previous candlestick patterns resulted in a significant rally. However, it appears that the 1.45 area is solid resistance and might take some effort to break through.

Today showed great volume. I am looking for CPSL to break resistance and move higher as it has previously. Possibly up to 1.75-1.80 area. At this level theoretical values of Sept 2.5 Calls should be about .25. In other words, a few thousand shares would be worth a decent premium.

CPSL - Call Expiration

CPSL is a beaten down stock, along with everything else. I have been long this stock for some time now, playing the high volatility by selling calls against my stock, which worked great until November, when the stock tanked below 2.50 and left me holding the stock and no value in the higher strikes.

I took a chance and sold a few March 2.50 calls at great risk, but they are now expiring worthless today and I am keeping the premium.

I have since added to my position, and averaged down below 2.50.

I am estimating the historical volatility at 97%. As a result, the back month 2.50 strikes are showing some decent premium. I am hoping to see a move in the next few weeks to the prior resistance level of about 1.45. If it fails to rally above that, I will sell my calls there. However, if it breaks resistance, CPSL has a great chance of heading back to higher resistance at 1.80, where I can squeeze more premium out of those calls.

AXL - Auto Action

I had some very speculative calls on AXL, an auto parts manufacturer. Company viability was in question and they were at the governments door asking for a bailout, and very unsure of one. WSJ article this morning announced $5B in aid.

I had been holding some worthless calls, and was about to write them down as a total loss, and then today happened. I sold for a 51% gain. Hey, it's a great day to be an option trader.

USD Weakness

In my previous post, I mentioned McDonalds was not rallying with the market, until CPI news came out. It looks like inflation from loose Fed policies are starting the trickle of inflation dam.

This will make for a weak dollar again, as it still appears our central bank has one of the looser money policies. However, those nations with strong commodity exports such as oil, iron, and gold will fair quite well. Good candidate: Canada.

The Dollar failed to break resistance again, and broke a recent uptrend line. Fib re-tracement is at 118(38%) 114(50%) and 110(62%), which correspond to some good support resistance levels as well.

I'm going to take a small put position in the $CDD to take advantage of the move down.

Strong Dollar - Weak MCD

Last week I posted a possible swing trade on MCD and MACD divergence, however, the rally that the rest of the market saw did not crossover to McDonalds.

The dollar has been strengthening against the YEN, EUR, and GBP, and as a result global sales are off. Side note on the long run macro: as the US increases their money supply faster than the other central banks around the world, this will cause a shift in the long run equilibrium exchange rate. So I will be looking to sell the dollars strength in the next few months and buy foriegn securities. More on this later.

Rally Congress and Avert Disaster

For those traders out there who do not find this stuff amusing, please sign the petition and contact your congressman.

http://www.rallycongress.com/no2tradertax/1536/tell-congres-to-block-trader-tax/

The Political Circle Jerk

Representative Peter DeFazzio from Oregon introduced HR 1068. This bill basically states that all securities traded will be taxed at a rate of .25%, on a typical trading day for me, that's 90% of my profit, but that's just me.

Here is a link to the text of the bill:
http://www.opencongress.org/bill/111-h1068/text

Here is a rebuttal by the STA:
http://www.finalternatives.com/node/7043

Here is how you contact DeFazio
http://www.defazio.house.gov/index.php?option=com_content&task=view&id=127&Itemid=74

Peter DeFazio earned his masters degree in gerontology, not Economics. It's time to take these decisions regarding markets and capitalism out of the hands of those who are incappable and ungrateful.

MCD - MACD

McDonalds posted a low at previous significant support around 51.50 on the daily close. MACD histogram is showing divergence. Prices recently made a lower low, while the MACD posted a higher low.

MCD often holds up considerably better than the rest of the market. A good counter cyclical stock during the economic downturns.

Previous support is right at 57.50, I would expect MCD to head that direction in the next 20 days. I'm going to play a vertical call spread on it with April Calls.

QQQQ Retracement

Q's are at the 61% retracement level from the recent high. We'll see if we can get pas that, and push on.

Potential Swing Trade

Buyers have come in at a higher low. AXL has been trading in a channel for the last couple of months. A good swing trade from 1.50 to just over 3.00 at prior resistance. I am long a small number of calls. We'll see how this trade plays out.

The market in general is acting very indecisive. 5% decline one day and 5% gain the day after, makes for a lot of chop. Defense and discipline.

End of the world not so close?

If the Q's can hold this level, and continue higher, we might be in for a good ride back up. Thinking of adding to my long position. I, however, remain cautious, but cautiously optimistic.

Support?

It appears that the Q's are holding support at the 61% level. This level is also indicative of a higher low on the daily chart, leaving the uptrend intact. Some good rallies this morning, let's see if this can hold up. Financials, however, are looking worse for the weather.

Looking for some buyers

I'm looking for buyers to return to the market, but earnings reports among other things has them spooked. As a result the market has taken a turn from its highs, and broken through some important levels, but as long as it doesn't make a lower high, it should be okay.

I am still holding my long position. I got caught in a gap lower, and did not want to liquidate. I have held on hoping things would turn around. So far, no go. However, if the Q's can hold above 28.80ish and make a turn higher, we might have a continuation of an uptrend on the daily time frame. From there I will look into expanding my long position.

FLEX Breakout?

I am looking for a breakout of FLEX as it chugs upwards. I have taken a small long position with April out of the money calls. Time is on my side and FLEX is wearing away at resistance.

QQQQ (Daily Chart)

There is a trend on the 30 minute time frame, but weakness in the short term. Sellers are in control. Looking to establish a higher low to continue the trend.

QQQQ (1 Minute Time Frame)

Trading range narrowing. Looking for a breakout? We'll see where and with what kind of volume.

ALD Play

Yesterday I closed my long call position on ALD. The stock had broke out above resistance, and I purchased February calls one strike out of the money, hoping that momentum would continue within the next two weeks.

The stock showed good strength and volume on buying, the first day, but it was the second day burst that brought the stock up. It started showing weakness, or at least sideways movement when it failed to make a higher high after the break out. So rather than sitting on this, I decided to take profits.

In a period of about 24 hours, my calls made a gain of 266%. An excellent way to begin the first full trading week of the year.

Market Open

The Nasdaq 100 is opening with a gap higher near yesterday's highs. If it can maintain strength early on, the Q's have a good chance to make some more gains during the day.

I am still watching some small cap stocks waiting for some breakouts.

I am also still long calls on the QQQQ and ALD.

New Trading Week

I started out the trading week a bit slow. My trigger finger missed Citi. I am going to wait to see what develops.

The Q's looked solid, with potential moves higher, so I bought a small long position with OTM Feb calls. I am looking for some small daily gains over the next few weeks.

Small cap stock ALD showed some strength and broke above some prior resistance, I also took a small long position with Feb calls.

Just going to continue to keep it slow, and maintain descipline.

Trading 2009

2008 was a brutal bear market, with volatility up the sky; the DOW traded its largest daily swings ever. Lehman Brother's collapsed, yet other major banks found bailouts. The list goes on.

Here on the first trading day of 2009, the NASDAQ 100 traded up very nicely. Looking at the daily chart, we see that not only did the Q's break above prior resistance at 30.50 (the 61% retracement point from the November highs), but it closed above the 10,20,50 SMA. We also have convergence of these averages, which is important. This indicates the end of the market decline and the beggining of accumulation, the long process of healing. This type of market is subject to a long period of sideways movement; very much a range bound market. Also we have our first "long" signal from the DMI indicator. The crossing of the of the DM+ and DM-, as well as the ADX above 20 (though it is declining). I am not acting on this long signal, but it is the first real signal since August/September '08.

These are some promising signs that the world is not over and we will live to trade another day.

I started the trading year by closing out and posting profits from my short position I took on Citi. The stock has taken a beating, but has found good support. Come next week, I will most likely open another short put and let theta decay away.

Also, I have several stocks on my watch list that have also taken a beating, but have good potential for a fast rally this month. If these can show strength and break out, I'll take some small long positions with out/at the money calls.

2009 is all about managing risk and using what the market hands me to my advantage.