Wednesday, August 24, 2011

Anatomy of a SPY trade

I have been asked how I trade the SPY or any other index for that matter, so I thought I'd show everyone my trade today.  This high volatility makes day trading easy but holding overnight a nail biter.

First off, I enter with an initial position when the 10 crosses above the 30 on the 15 minute.  I usually hold a debit call or put spread, but I chose to not place/keep one on last night.  When the 60 minute shows the same crossover I usually add to the trade, but did not as the volatility is so high there was no need or desire to risk more capital.

So coming into today SPY already met my first condition and I was long, and it looked ready to meet my second condition today (which it did). 

In the chart, I laid out my trades, but one more thing I usually do but did not this time as SPY was below its 200, so failure is in the back of my mind, and I chose to hedge with a credit spread vs. keeping a debit spread on as my hedge.  I chose also to end the day with just a debit spread as the SPY is above all resistance until the gap fill.

I point out these exceptions as it is as important to get a feel for the tape and events in shaping your response to trading decisions than just being mechanical.  You definately need to be paying attention.  Anyway enjoy.

Sunday, August 21, 2011

Oil Study

Looking at this sequence of the USO chart shows us some tradeable information.  First off the weekly is showing us a huge range, and within it, a smaller secondary range.  The two daily charts show, one a successful test of the secondary range last week, and zooming closer in we see a series of higher lows on price and stochastics, and a nice gap just above price.

My play is this, I opened a 25 option Sept 33 call position on the open on Friday, plan is to sell or scale out on the gap fill.  Then I will watch for a successful move above the next fib line or a failure of the range low for my next move with USO.

Market Sniper pointed out a trader post on playing ranges yesterday, and looking back at the weekly you can see a failure of the smaller range gives a high probability of a test to the 09 lows.

One mistake in my chart, the smaller range is the 10 lows, not the 09 lows, sorry.

Wednesday, August 17, 2011

HI HO Silver and Away?

Interesting strength in silver tonight, and the charts are looking constructuive, as well.  My suggestion is to take a back ratio call spread for September on SLV and buy the breakout on SLW.

Sunday, August 14, 2011

Coal Stock relief rally play

Here are two coal stocks that could catch a bit of a move higher.  They were slaughtered last two weeks.  They both currently sport a small bull flag att he 23% retrace area.  A break out and I will buy both.  They gave me a buy signal on Friday but I preferred to not enter anything until Monday.

Wednesday, August 10, 2011

Miners Breaking Out

I started buying miners last week with GDXJ, and the juniors were threatening for a week.  Today, they are breaking out.  Gold up, oil down, miners beat up makes for a low risk trade.  MACD and Moving averages are now confirming.  I also have some AEM, bought earlier, but underwater on it so far.

IAG, EGO, GDXJ, AEM, and NG are in my portfolio.

Saturday, August 6, 2011

EDZ- The perfect antidote for a stock market panic

Contrary to common belief, as the U.S. struggles, the world will be forced back into finding real dollars, and abandoning the emerging markets, why?  It all has to do with leverage. The dollars that circulate pale in comparison to that which is borrowed into existence to fund speculation.

We are now entering the third speculation rinse out in a decade, and this will cause a rush for real dollars.  EDZ is a prime beneficiaey of this move, and I easily can foresee a revisit to new highs.

I currently own some shares, and will add on this upcoming relief rally (dollar weakness), but options are nice for some additional leverage.  Right now the vol is too high to buy options, but I will sell strike 15 puts to pick up some share at a discount, and will buy Jan 12 calls OTM that will give me potential 5 to 1 return at my target price.

On a shorter time frame you can see a cup formed and now I suspect a handle before we really breakout.

This chart blows me away

Look at the massive divergence in the price of the miners to the gold/oil ratio.  Something has to give here.

Friday, August 5, 2011

SLV fib lines

I currently have a sell on Silver, but this fib line is holding for now.