20 Jan 2011

Market Overview:

The S&P finally had its long awaited pullback today. We shall see if we get some follow through to the downside tomorrow. There's a lot of support at SPY = 128 as that coincides with the 10-day SMA. Below that there will be more strong support at SPY = 127, which coincides with the 20-day SMA. It's options expiration week so that will probably add to the volatility.

SPY Options Trading:

I got out of my large long Feb 127 put position today for a modest gain. I'm still holding 22 Jan 2011 126 calls and 22 Jan 2011 129 calls short. My plan right now is to hold these calls short until expiration. If we can get a pullback to 127 then I'll look to close out the 126 call position and at the same time sell some weekly 126 puts. If we make another run to 129, I may look to start building another Feb put position.

Key Levels in the SPY:

Resistance: 128.50, 128.75 (5-day SMA), 129.20, 129.50

Support: 128 (10-day SMA), 127.50, 127 (20-day SMA)

Individual Stock Trading:

The Ag space had a big sell-off today on news that Cargill is selling its 64% stake in Mosaic (MOS). If there is continued selling tomorrow I'll look to try and capitalize on the volatility by selling weekly OTM puts in one more of the following Ag stocks: POT, MOS, AGU

Trading Log for Jan 2011

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.

13 Jan 2011

Market Overview:

I was completely wrong about the break of the SPY 126.15-127.80 range. The market gapped up today and it didn't look back. Just about every individual stock I look at is showing overbought conditions, particularly the financials and the ags. I think we'll see a pullback to at least SPY=128 before the end of the week. If not, I will get hammered.

SPY Options Trading:

I sold to open more weekly 128 calls on the pop today. I was way too early with the selling and I now find myself down big. I also started buying Feb 126 puts today as I'm trying to dig myself out of hole. I'm looking, better to say hoping, for a pullback to 128 tomorrow. If that happens then I'll look to close out my SPY put position.

Key Levels in the SPY:

Resistance: 128.72

Support: 128.30, 128, 127.50

12 Jan 2011

Market Overview:

The market remains stuck in a pretty tight range as rallies are sold and pullbacks are bought. The SPY has been trapped between 126.15-127.80 since the start of the new year. I'm still expecting the break of this range to be to the downside.

SPY Options Trading:

I sold to open weekly 128 calls on the pop this morning. I'm thinking the market stays capped below 128 for the rest of the week. I wouldn't be surprised if we see a false break to the upside. If that happens I'll probably try to sell more calls. I will most likely only look to sell weekly puts if we see a major selloff.

Key Levels in the SPY:

Resistance: 127.50, 127.75

Support: 127, 126.50, 126.15

Individual Stock Trading:

USO -

If we see a pop in USO after the oil inventory report tomorrow I will look to short it. I don't think the economy can support oil around $95/barrel yet. I'll look to short USO around 39.50 with a stop at 40.50 and a target of around 37.

10 Jan 2011

Market Overview:

The market shook off a slightly worse than expected jobs report on Friday and managed to finish the day nearly flat. The market will likely move based on three news generating events this week:

1. The beginning of earnings season.

2. Macroeconomic data released on Wed-Fri.

3. A renewal of fears about the European sovereign debt crisis.

I think this will be the week we see a reversal of the uptrend in the market. After an early pop on Monday last week, the market failed to move higher as volume remained relatively high. To me this churn represents bulls using up their ammunition. I expect the market to find a reason to selloff this week.

SPY Options Trading:

Thankfully, my weekly options expired worthless last week. I'm still holding the 22 Jan 2011 126 calls short in expectation of a pullback to at least 125 before expiration. Since I have a bearish bias for the upcoming week, I will look to sell weekly 128 or 129 calls on any rally. To the downside, I will look to sell 124 or 123 puts if there is a major selloff.

Key Levels in the SPY:

Resistance: 127.50, 127.75, 128

Support: 127, 126.50, 126.15, 126, 125.50

Individual Stock Trading:

NFLX -

NFLX is still stuck in a tight range between 175-185. There is a convergence of SMAs around 180. The 2, 5, 10, 20 and 50 day SMA are all near 180. I'm expecting this stock to make a big move in the near future. I will attempt to play it in the direction of the break. I'd prefer it to break higher as I think that would give the biggest gains as the shorts are squeezed.

RIMM -

After a break higher RIMM has struggled to move higher the past 2 trading days. It looks like the rally is failing, thus I will look to fad an opening pop on Monday. I'll look to short RIMM around 63, with a stop of 65 and a target of 57.

FDX -

FDX is still trapped between 92-94. Like NFLX, I'm looking to play this one in the direction of its break from the trading range.

My updated trading log for the month is below.

7 Jan 2011

Market Overview:

The market rally temporarily ran out of steam today. The employment report and Bernanke's testimony before congress will be the big market movers tomorrow. Here's what I'm thinking on the jobs report:

Much better than expected: Market initially rallies then sells off as the dollar strengthens.

Much worse than expected: Market initially tanks then rallies as the dollar weakens.

Pretty much in line: Market slowly grinds higher.

Bernanke will probably say he's going to keep QE2 going and promise low interest rates forever, so that will likely provide a positive boost to stocks, but the employment number will be the big deal tomorrow.

SPY Option Trading:

I still have my open sells on the weekly 128 calls and weekly 125 puts. I'm hoping to keep SPY below 128 tomorrow and have all my weekly options expire worthless. I'm still holding the 22 Jan 2011 126 calls short as still expect a pullback to at least the 125 level before expiration.

Key Levels in the SPY:

Resistance: 127.50, 127.75, 128 (pre-market high this morning)

Support: 127.20, 127, 5-day SMA (~ 126.85 right now), 126.50, 126.25

Individual Stock Trading:

CHK:

CHK has rallied quite a bit since the middle of December. Today it put up a shooting star candle as it failed to hold above 27. This makes for an obvious stop on a short trade. If I have enough capital I will look to short CHK around current levels (~ 26.75) with a stop at 27.50 (above today's high) and a target around 25 (a potential area of support).

NFLX:

I'm still keeping an eye on NFLX, waiting for it to break out of the 175-185 trading range.

FDX:

FDX is another stock stuck in a trading range (92-94). I'll be looking to play it in the direction of the break.

See my trading log below for my current open and closed positions for the month.

6 Jan 2011

Market Overview:

The ADP employment report came out unbelievably better than expected today. This turned the market around from being down to setting new highs. Weekly jobless claims and chain-store sales will be released tomorrow. A lot of the individual stocks I follow are showing overbought conditions, as is the SPY, so I'm expecting it to be a struggle to go higher from here.

SPY Option Trading:

I started the day worrying about the weekly 125 puts I sold yesterday and ended the day adding to my short weekly 128 call position and worrying about that. I have now used up all my bullets. I got nothing left. If this market breaks above 128, then I'm going to get hit with a margin call, at which point I will probably roll out of this week's SPY call options and roll into next week's. If we happen to get a pretty good pullback tomorrow I will look to sell some weekly 126 puts as I still have the margin to do that.

Key Levels in the SPY:

Resistance: 127.73 (Today's High)

Support: 127.50, 127, 5-day SMA (~ 126.60 right now), 126.50, 126.25

Individual Stock Trading:

RIMM:

RIMM played out just like I expected. I couldn't play it though because all my capital was tied up in short SPY call options. Pity the fool.

NFLX:

Since about 1 Dec 2010 NFLX has been trading very similar to RIMM. Both stocks hit highs on 1 Dec 2010 and have since pulled back. I'm not saying NFLX is going to break out to the upside like RIMM, but it looks like NFLX is starting to get trapped in a tight range between 175-185, near its 20 and 50 day SMAs. I would play this, like I wanted to play RIMM, by waiting for the big volume break out of this range, either to the upside or to downside and then play it in the direction of the break.

See my trading log below for my current open and closed positions for the month.