Market Foolery

After the recent nonsensical movement of the market lately, I've been researching out some additional trading set ups.

Right now, the way I trade, is that I trade in a trending market. If the market isn't trending, then I don't have a way to trade. I completely understand the different ways to trade during a non-trending (i.e. sideways) market, but I don't like most of them. They don't send me the right mojo.

So, I'm testing some different setups and should have something within the next month or so. I just don't see any edge in the market right now - so no new setups until this market gets directional again.

In the meantime, I still have on 2 trades and we'll see which way they go. Until then, I'll continue to work on my new ideas. Watch out for the fools in the market out there!

SCHW - loss

Took a second loss today in SCHW. However, the good news is that I did NOT make a mistake on this one. It just simply went against me - you'll have that.

Here's the chart:

It just went against me and I got out today according to my rules. I originally bought the option for $1.00 and sold it today for $0.25 for a LOSS of $0.75 and a NEGATIVE ROI of 75%.

Not one of my happiest days of trading, but you gotta take the bad with the good. Now I look for the next set up.

WMB - loser

I made a mistake. It was either with this trade or with the RES trade. Either way, I've made a mistake. I NEVER want to put on trades from the SAME SECTOR at the same time! It's bad enough to have multiple trades working that are from the same sector, but to put them on at THE SAME TIME is stupidity.

The reason it's stupid is because of exactly what has happened with my trades - when the sector goes against your trade, then you are losing on multiple trades at the same time. Which is not good.

Anyway, I made a mistake. I did NOT take the time to check their sectors before entering. Hopefully I'll remember this the next time. That's the thing with trading, there's tons to keep in mind before putting on a trade.

Here's the chart.

Simply put, it went against me and close at/below my stop for 2 consecutive days.

I originally bought 2 options for $1.04 and sold them today for $0.37 each, not good. That's a NEGATIVE 68% ROI for a total loss of $1.40.

That's trading, life goes one, it doesn't change the way I trade, other than to work on trying not to make as many mistakes.

New Trade - WMB

2 Corinthians 9:8 "And God is able to make all grace abound to you, so that in all things at all times, having all that you need, you will abound in every good work."

Another new trade today - we are on fire!

This is the other trading strategy - a break of the previous high. I've been watching this stock waiting for 2 consecutive day's closing above the previous high. This happened today. I'm not overly concerned about the stochs and MACDs when making this type of trade because I count on it taking longer than a simple pullback trade like today's WMB and RES.

However, I do have the MACD lines looking very strong - so, I got that going for me - which is nice...

I bought an August 16 Call for $1.21. Looking to hit the next level of resistance above, which is approx 17.20ish or so - here's a longer time frame chart showing this:

My stop is just below the 15ish level. So, plenty of time for this one to work out.

I now have 4 live trades on and it's time to make some profit - glory to God. Now I wait.

New Trade - RES

Isaiah 43:19"...I am making a way in the desert and streams in the wasteland."

Here's the chart for another new trade today, RES:

Deja vu. Looks similar to WMB doesn't it. We have a close above the high of the low day in the pullback from our current bull trend. We even got a little uptick in volume today. Earnings have passed, stochs are just coming up out of the oversold zone and the MACD is looking like it may start turning bullish. Textbook bullish entry.

Looking to hit the most recent high and take profits there. Will take a loss if get 2 consecutive closes below the low of the low day. Simple as it gets.

Bought a June 25 Call for $1.55.

By the gracious hand of God, we'll get another profit!

New Trade - WMB

Romans 8:31 "What, then, shall we say in response to this? If God is for us, who can be against us?"

Time to enter the market and start making money again, here's WMB:

We've been in an uptrend, and have an entry today. There's a few things I like about this trade:

1. We've already had earnings.

2. The stochs are very low and just crossed up out of the oversold zone.

3. The MACD lines look to be coming together while it's histogram looks to be just turning bullish.

This is just a textbook entry. A close above the high of the low day on a pullback, nothing fancy, just OUR EDGE!

I bought 2 June 32 calls for $1.04 each. And look simply to get back to the most recent highs, where I'll take profit. If we get 2 consecutive closes below the low of the low day in the pullback then I'll take a loss.

Let's make some money.

MXIM - took early profits

Like Kenny Rogers sang, "you gotta know when to hold them, know when to fold them, know when to walk away, and know when to run..."

I'm walking away from this trade, here's the chart:

In and of itself, this chart still looks good. But there's too many other factors in the market that don't look too good for bullish trades right now. Not saying we can't shoot sky high from here, but my edge is gone in my opinion and since I've made a profit, I need to get out.

Let's first go over the numbers from this trade. I originally bought my call option for $1.25 and sold it today for $1.45, for a NET profit of $0.20, and an ROI of 16% in 8 days. Nothing to wet the bed over, but a 16% ROI in 8 days is good in any trading book. Glory to God.

Now let's look at why I got out. First, remember that support/resistance is an AREA, NOT an EXACT. The recent attempt at resistance came within 30 cents of this area, before getting a pullback. Then today we didn't get closer to resistance, we actually got to 33 cents instead (read: "sellers stepped in lower/more aggressive than last time"). This was still a nice move, since the rest of the markets are lower today.

No, the target was NOT hit, no the stop was NOT hit. But, you must look at the overall picture and when your edge is up, then you have to realize it.

Let's move onto my second reason why I got out - the overall markets posture. Here they are:

The horizontal green lines represent the prior highs, which give me a point of reference for each market. Clockwise from top left, the SPY broke down through this line today. Next, the DIA is still above the line but getting quite close to it. Then, the IWM has crashed through this line a few days ago and is approaching it's 50 day moving average. Last, the QQQ is still at the line, BUT look at that top seller's tail on today's candle - those seller's are aggressive!!!

Overall, the markets are looking weak and if the IWM is any indication, we've got a ways to go down.

Let's know look at the finally reason why I got out, sectors within the market. There are some sectors in the market that move in unison. They, for the most part, will go up together and go down together. When they are all in sync in going in the same direction then you've got a solid move. But, when they start going in opposite directions, then you don't know what's going to happen (i.e. you lose your edge).

Here's the chart of the sectors:

Again start in upper left corner and going clockwise:

/ES - the S&P 500 futures market (i.e. the "market")

/HG - Copper futures, look at how it's been in a bearish trend lately, and today BIG down day.

/CL - Crude Oil - good night nurse, that's a HUMONGOUS down day.

/IYR - Dow Transporation sector - looking okay (quite similar to /ES)

XLE - Energy sector - falling off the cliff for 3 consecutive days now

EEM - Emerging markets - also falling off the cliff.

So we have energy, copper, and emerging markets all dropping fast and who's the laggards? /ES (the market) and /IYR. That tells me there's a good chance that the market has a ways to drop now.

I know this isn't something I've addressed before, but it's something I do watch. You can't just watch ONLY the stock chart you are trading. You must have your eyes open to the overall markets and know when to take your money off the table and walk away - or run according to Kenny.

CAG - target hit - profit taken

GLORY TO GOD!!

Target hit - profit taken:

Just doesn't get any simpler than this. 5 days in the trade and target is hit, not much else to say other than the numbers:

Bought calls for $0.60, sold today for $.90 each for a total profit (2 option contracts) of $.60 for an ROI of 50% in 5 days.

Great success!