31 Jan 2011

Market Overview:

Friday saw the first big sell-off in the markets in over 2 months as news of the growing political unrest in Egypt hit the wire. For the first time since Nov 30 the S&P closed below its 10-day SMA. This upcoming week will be driven by how the crisis unfolds in Egypt. I suspect most other market news will simply be ignored. I'm expecting the sell-off to initially continue on Monday then for the market to stabilize above S&P 1250.

SPY Options Trading:

If we open down big on Monday I will look to sell weekly 124 or 125 puts in SPY. I think SPY will find support around its 50-day SMA (~ 125) this week.

Key Levels in the SPY:

Resistance: 128.15 (~ 20-day SMA), 128.85 (~ 10 day SMA), 129.25

Support: 127.20, 126.25, 125 (~ 50-day SMA)

Individual Stock Trading:

GLD -

I got stopped out of my short GLD put position last Thursday. It sure looked like gold was on its way down, then the Egypt news hit and changed everything. I think that downward bias returns this week, so I'm going to look to fade this rally in gold. I suspect gold will open higher this evening and thus GLD will open higher tomorrow morning. I'm going to look to sell weekly GLD 132 or 133 calls on strength Monday morning. There should be some resistance in GLD around the 132.50 level.

USO -

I expect oil to continue higher this week. There will be a lot of volatility so I may look to sell some weekly options in USO. If oil gets back to $95/barrel, then I'll look to sell some weekly USO 40 calls.

26 Jan 2011

Market Overview:
It was a volatile day with a lot of ups and downs. The market bounced off the low of the day around 3 pm and rallied to close basically flat. We closed above the 10-day SMA once again to keep the streak alive.

Tomorrow the Fed announces. The Fed statement will be key. I suspect they will just say they are going to keep the party going with QE2. If so, this will likely give the market and commodities a quick boost and the dollar a punch in the face.

SPY Options Trading:
I'm still short the 28 Jan 2011 130 calls. If we get a big bounce after the Fed announcement tomorrow I may look to add to this position. If we happen to get a big sell-off tomorrow I will look to sell some weekly 126 puts on a test of the 20-day SMA (~ 127.70)

Key Levels in the SPY:
Resistance: 129.50
Support: 129, 128.80(2-day SMA), 128.50(5 & 10-day SMA), 128.20, 127.70 (~20-day SMA)

Individual Stock Trading:
USO -
Oil continues to pullback. I'm targeting crude = $85 as a place to get long. I think that works out to USO around 36. If we get a sell-off in oil after the inventory report tomorrow I'll look to get long USO around 36, with a stop around 35 and a target of 38.

GLD -
I sold some weekly 129 GLD puts today as GLD tested 129. GLD bounced around noon and closed over 130. I'll be using that 129 level as my stop in this position now. If we go back down there again, that's bad news for me.

NFLX -
Earnings are tomorrow after the bell. I have no intention of playing this stock ahead of earnings. I think NFLX is setting up for a fall though. A lot of these high multiple stocks have sold off even after good earnings. I expect the same from NFLX. I expect them to beat, the stock to briefly pop and then sell-off. I will likely be too chicken to play it though.

25 Jan 2011

Market Overview:

The market rallied broadly today. The Dow was still showing relative strength to smaller caps. AAPL rallied and that helped bring the Nasdaq higher.

SPY Options Trading:

I sold short some 28 Jan 2011 130 calls on the market strength today. I may have been a little early with this trade. I still think the market is due for a larger pullback. We haven't closed below the 10-day SMA since Nov 30. That's one hell of a run. If we rally further tomorrow I will look to start buying some Feb puts. The 129.50 level is my target for initiating put buying.

Key Levels in the SPY:

Resistance: 129.50

Support: 129, 128.75, 128.35 (10-day SMA), 127.50 (20-day SMA)

Individual Stock Trading:

AMZN -

I closed out my short AMZN put position today for a moderate loss. The stock looks sick as it broke and closed below its 50-day SMA, even after a late-day rally. Earnings will be released Thursday and I'd rather not gamble on that. I think they will beat big, but I'm not sure how the stock will react. I would guess that it will initially pop and then sell-off.

GLD -

I'm still stalking GLD. I'm looking for a test of 130 at which point I will look to sell some weekly 129 puts.

FCX -

FCX has failed three consecutive trading days at its 50-day SMA. I think this sets up a nice try at a short. I'll look to short FCX around 110, with a stop of 112 and a target of 100 or below.

Jan 2011 Trading Log

24 Jan 2011

Market Overview:
The market is giving me mixed signals. DIA and SPY are still looking relatively strong, but QQQQ and IWM are showing significant weakness. Generally, the bigger the market cap, the better the stock did this past weak.

There are a boatload of earnings reports this week and those along with the Fed announcement on Wednesday will likely make this a volatile week of trading. The 20-day SMA on SPY (~ 127.30) will be a critical level this week. We tested that level last week and bounced. If we break through there then we will probably test the strong support ~ 126. To keep the uptrend going we will want to break and close above 130 this week.

SPY Options Trading:
Last week I got out of my short 22 Jan 2011 126 call position at nearly break even and made a nice gain on my short 22 Jan 2011 129 call position which expired worthless. This week I'll be looking to sell weekly 130 calls on strength and weekly 125 or 126 puts on weakness.

Key Levels in the SPY:
Resistance: 128.50, 128.70 (5-day SMA), 129.15, 129.50
Support: 128, 127.30 (20-day SMA), 126

Individual Stock Trading:
AMZN -
I sold some 28 Jan 2011 175 puts on Friday as AMZN approached its 50-day SMA. I'm looking for AMZN to bounce here ahead of earnings. If we get a good bounce I may look to turn this position into a strangle by selling some weekly calls.

GLD -
GLD is approaching strong support at 130. I'll be looking to sell weekly 129 or 130 puts on further weakness. I suspect GLD will see some strength after the Fed announcement, which is likely to be dovish (it usually is) and further weaken the dollar.

I think this recent weakness in gold is due to inflation fears. I think gold is actually not a good thing to own during inflation. During inflation you want to own something that has a high yield to keep up with the inflation. Gold yields 0%, thus if the price of gold is not rising at the same rate as inflation you will lose value in real dollars.

AAPL -
AAPL is approaching its 50-day SMA (~323) and strong support at 320. I will be looking to sell some weekly 315 or 320 puts on further weakness this week.

GE -
GE popped on positive earnings report on Friday. If we get a pullback to the 19.50 level I will look to get long with a stop of 18.90 and a target of 21 or above.

18 Jan 2011

Market Overview:
It just keeps going up. I'm not sure how long this can last. I was expecting a pullback last week. It didn't happen and I got hammered. I expect it to be a volatile week as earnings season gets into full swing. For Tuesday, I think the market will reverse on whichever way it opens. If we gap up on the open, then I think it corrects back down towards Friday's close. A gap down will likely see "bargain hunters" come in and start buying.

SPY Options Trading:
I got crushed on my short weekly 128 calls position last week. I'm still holding 22 Jan 2011 126 calls short. I'm way down on that position. If the options don't get assigned before expiration, then I'll look to close out my position if SPY retests 128. I piled into long Feb 127 puts on Friday. I kept buying more as the market kept rising. My plan with these is to "go to war" with the market. If the market goes up, I'll buy more. I think (hope) that the market will pullback at some time between now and expiration.

Key Levels in the SPY:
Resistance: 129.33
Support: 129, 128.80, 128.60, 128.20, 128

Individual Stock Trading:
GLD -
If gold continues to sell-off this week I will look to sell some weekly GLD 130 puts. There should be strong resistance at 130.

AAPL -
AAPL reports earnings after the bell on Tuesday. I expect them to completely blow out earnings. However, the stock has had a huge run ahead of earnings, therefore I think the upside is limited. If I have enough capital to do so, I will look to sell weekly 355 or 360 calls on Tuesday.