Which way do we go???

Still waiting on the market to make up it's mind before I put on new trades. Currently, I don't have a single trade working. I've been waiting for the market to make up it's mind on which direction it wants to go.

Broken record time - "I don't get into a trade unless I have an edge." Since the last post, there still has not been an edge for me, so I've just been waiting.

Here's the chart:

You can see that after consolidating sideways (outlined with green lines), the market dropped lower. Maybe it was because of the earthquake and tsunami in Japan, maybe it was because of the attack on Libya - I don't really care WHY when it comes to trading - all I know is that the price dropped. In any case, the price dropped and has come back up a bit.

Here's what I see in the chart: we had a new recent high, then a pullback, then sideways consolidation. After consolidation the bears won over the bulls and price dropped. The bulls came in and drove price back up - however on decreasing volume (so I'm not so convinced on a bullish move at this point - yet).

At this point, we're getting close to a possible BEAR entry. If we roll over from this point, then I'll look for a move lower in the market. If you look closely at the chart above, you'll see that we have a high, a low, a lower high (in the consolidation zone), and have had a lower low. So, what trend is lower lows and lower highs? Bearish.

But, we could also go higher and right back into a bull trend from here. It's kind of a tricky area and before getting into any new trade, I want some good confirmation and I WANT AN EDGE before I jump back into the market. I'm in it to make money, not gamble.

We wait...

NYB - loss

The markets are in a state of consolidation right now, which can lead to some confusion.

Here's a chart of SPY showing the current market:

You can see that after making a new relative high, there was a pullback, then sideways movement. Right now, there's no reason for me to enter any new trades - because there's no edge. I don't know which way the market is going to go, but until I do, then I'm not placing any new trades.

Referring again to the chart above, I put on green lines above and below the consolidation zone. I'll look for a closing price for 2 CONSECUTIVE DAYS outside of the consolidation zone before entering a new trade. If the price goes above the zone, then I'll get into new bullish trades, if price goes below the zone, then I'll get into new bearish trades.

It's obvious why I'd take bullish trades - we're in an uptrend. However, not so obvious as to why a bearish trade. I would go bearish because we would have put in a lower high and a lower low. Always think in terms of highs and lows in order to understand market direction.

During this consolidation period, my NYB trade went against me and closed for 2 consecutive days into my stop zone.

Here's the chart:

I originally bought this option for $1.15 and sold it today for $0.35 for an $0.85 loss resulting in a ROI of (69%).

Nothing bad here, simply a loss. It's all part of the system. And how do we treat a loss? Same as we treat a win, we log it, learn anything from it that we can, and look for the next trade.

Now we wait until the market decides which way it would like to go - until then

HAPPY FAT TUESDAY!

PFE - more profit taken

Victory is ours!

I took profits today on the 2nd part of the PFE trade, here's the chart:

Looking at the chart above, you can see that we weren't QUITE to the target yet. I think there's still about $0.25 to move up or so. However, like my recent blog entry states - the market is a bit hokey right now. So, with the target being close enough and the market goofing around, I took profit.

I originally bought this option for $0.66 and sold it today for $0.94 for a $0.28 profit resulting in a 42% ROI in approx 2.5 weeks. Not too shabby. Again, I think I could possibly get more, but check out today's chart of the markets:

On each of the 4 market's charts you will see the big black (seller's) candle from this past Tuesday's trading. The top of that candle is where the seller's really came in and aggressively drove prices down. The bulls came back in and started going back up, but for the last 2 days, the bulls could not get above the top of that big black candle (i.e. that's the "line in the sand" for the bears).

I'm not getting into any new bullish trades until we get 2 days that close ABOVE that line. Otherwise I think any trading is more of a gamble and by now, you know how I feel about gambling. I'm a trader and I trade with an edge and I don't see an edge right now.

So, we wait until the market makes up it's mind.

MDR - took early profits

GLORY TO GOD - ANOTHER SUCCESSFUL TRADE!

Check out the chart of MDR:

A nice boost from earnings. Now, you are probably saying to yourself, "Why in the world would this guy take profit now instead of letting it go up to his target? He's got until the 3rd Friday in MAY before the option expires, so he has tons of time and not that much further to go?" Okay, I get your point.

However, the market is a bit screwy right now and I'd rather capture this profit rather than the possibility of the market making a huge drop and take it all back - and possibly even giving me a loss. We'll get into all this in a minute, but first, let's go over the results of the MDR trade.

Originally bought this option back on Feb. 2nd for $3.00 and sold it today for $4.90, which is a NET of $1.90. This gives me an ROI of 63% in approx 1 month. Sweetness, that's a nice trade.

Okay, now let's move onto the markets, here's the chart:

The top left is SPY, top right is DIA, bottom right is IWM, bottom left is QQQQ. This gives us a snapshot of the last month of trading. You can see that we made a new high, then came back down and touched a minor area of support and bounced a bit back up.

However, after bouncing back up, we had a big down day and then a bit sideways today. So, I'm thinking here we can go two ways:

1. We can either go lower than the last low (most recent blue circle) and if we do that then I'm going bearish on trades. I will go bearish because we will have a lower high and will get a lower low.

Or

2. We bounce back off this area again (notice 50 day moving average is immediately below us) and we go up to new highs. I will look to enter bullish trades if we get back above the big black candle.

So, the market is a bit wishy-washy right now and until it makes up it's mind where it wants to go, then I'm going to sit tight. Remember - I only trade when I have an edge and right now I don't feel there's a good edge for me in the market. But it should make up it's mind within then next few days or so. Right now, we relax and wait.

Working Man

Well, after approx a decade without a boss, I'm back working for corporate America again. Not to bore you with the details, but it does put a bit of a twist in my trading.

I'm still looking to enter trades around the 3:45 - 4:00 EST time and will take off trades whenever I can. Nothing has changed with the trading - it's just that I've got less time now and I gotta be more efficient.

So, things may be a little slow going for a few days until I get into the swing of working and working the work around the real work - trading. And, until I get my trading account high enough to be obscene, then I'll keep on working. Gotta let those profits continually build the account - taking to heart what Einstein believed, "The most powerful force in the universe is compound interest."