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.