The Ascending Triangle

December 15, 2011

Briefly I wanted to pen a quick post here on what I am expecting to see over the next few days and my intentions heading into 2012. I’m visiting New York City for the first time and have closed all positions while I intend to be double fisting watered down beer, blacking out for another NFL game, and touring the famous concrete jungle (not a big city guy, so I expect to breathe a huge sigh when I return to laid back Canada).

Without dabbling too much into specifics as Jake, Cain, and others touch on the US Dollar and forex almost daily, I suspect we take a breather here or slight flag out and test the 80 level again. For equities this should spark another quick short covering bear market rally, which I hopefully embrace (see long term below). I think there is opportunity to enter the market, especially on gap down, on Thursday with the intention of holding positive positions with stops through the weekend (talking 10-30% invested long here). Obviously, I would not be a good investor if I didn’t advocate sizeable cash, or at least straddling, position bases in your aggressive portfolios. Below is my drawn Ascending Triangle formation that I believe will resolve in the bull trap of traps heading into 2012. Upside target still in the 1260-1300 area, and would begin layering into long term shorts at 1280, add in as we go higher towards (possibly if obtainable) 1340 highs. I will be working on my short allocation, especially how I intend to attack certain geographies, sectors (well financials is a no brainer…), and broken down companies with an incomprehensible amount of debt in a credit crisis or large economic downturn. This I intend to complete over my few days off around xmas.

With that simple and really not helpful post, I look forward to more of these. My life went through a career upgrade whirlwind recently so between packing, moving, and rearranging all my accounts it has been one hell of a month. Cannot wait to kick back, eat some holiday grub with the extended family and returning friends from around the globe.

Any NYC suggestions please let me know, will be staying in the Financial district.

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Humbling Summertime Experiences from the Market

September 7, 2011

The market is a teacher; unfortunately, the most valuable lessons tend to result in losing money. When a trader oversteps his rules of risk management, the situation tends to resolve itself unfavorably.  Although money is important when you’re trading, recognizing losses and separating yourself from the emotional pull of intraday money management is integral.  Potential reward/profits tend to cloud the minds of an inexperienced trader (not calling myself experienced here). I believe I’ve learned a substantial amount over the past 12 months, the majority have come through losses, mistakes, and observations – lessons engrained permanently in one’s mind. Risk management is the practice any individual trying to trade the market must adopt. Unfortunately any trader will tell you, there are times where you will get caught and sustain unforgiving blows from the market. Mine came at the apex of this year. Sitting pretty in a core account at +8% on the year and an options account up a mild 21%, I was complacent. The breakdown I will detail below.

I, among many, always talked through the spring how the market was in need of a correction.  The majority of us assumed this would coincide with the end of QE2, but the addictive nature of easy money that has been capitalized on over the past two years kept me hanging on waiting for the magic injection of freshly printed dollar bills in the form of QE3. The market had seemingly priced in the end of QE2 and a bullish juggernaut in the wake of the Japan crisis. My timing begins at what is credited for market correction, the US Debt Ceiling debacle. Really, it is nice for television networks to place the weight of the breakdown on inept politicians who appear to have the intelligence of __________ (insert insult here). Ultimately traders and price action determine the significance of an event.

Friday July 29th, I decided enough was enough. We were selling off on decent volume, yet approaching the bottom of our range bound market from early June, and I decided this was meaningless fear mongering before the debt ceiling process – that I and many believed would be no contest, raise the ceiling immediately. I decided a bounce was technically viable, the market was oversold, and I even timed trades well on the Friday and was up respectively 20-80% in various call positions including $WNR, $TNA, and puts on $VXX (the volatility index ETN) by the close. $VIX (volatility) at the time had reached a level we’d found massive resistance on. Totally, I was leveraged long about 60% of my entire options accounting and had closed out my core and common equity positions on stops during the downfall. All weekend I was occupied by the news that I was sure would spark a rally electrocuting shorts – how I was accustomed to trading since September of 2009.  Monday morning came around and I was anxious, excited, and overwhelmed with joy when I awoke and checked the futures seeing, as I hypothesized, a 1-2% gap up in the futures. Needless to say on one of Canada’s best holidays, Natal Day, I was comfortably sitting on a couch drinking homemade coffee from my $GMCR produced machine and listening to the idiots on CNBC talk about how politicians had fumbled the debt deal. I wasn’t worried we were gapping up 1.3% or so and nothing else mattered – the market and price action are the determining factors in rational arguments.

The market opened and I was almost laughing hysterically. From Friday midmorning till Monday at the open, I was up almost 80% in my account. I considered selling my positions in $WNR – which had earnings later that week – and $TNA as it is a high beta and truly risky asset. Instead, I was greedy.  I thought about the what-if scenarios that continued bullish buying would bring. Before I could collect my thoughts and do the rational thing (moving stop-losses up and locking in ridiculously risky profits), the market had sold. The entire gap was erased and we were plunging into blood split by aggressive bears.  I quickly sold my $TNA calls and ate a painful 50% loss, an intraday reversal of 130% per call. I hacked off half of my $WNR position’s riskier out of the money calls, but decided to stay strong in my $VIX short although volatility was spiking. By 1 hour into the open, I had reversed my YTD totals (limited to the options account) from +21% to +47% and impaled myself on -28%.  In that hour of change, I had become overwhelmingly invested emotionally in my account and at -28% I was so upset I was determined my positions would work and battle my account back.  We made an intraday bottom, so I decided to average back into my remaining $WNR position and buy more $VIX puts. These were despair driven moves that I should never have done. Over the next two days I was proven utterly wrong. I finally purged my options account racking up 72% losses YTD on August 4th. I then proceeded to drink an inhumane amount and vow never to trade with options ever again. The worst of the pain was the win-ship the market had presented to me….and I squandered.

I decided that I had lost my edge and needed time to speculate and watch from the sidelines to re-evaluate my risk management procedures, choice of trades, monitoring of my account, and position sizing. These fundamentals define the saying “self preservation”. Without even doing the math I would imagine at the open on Monday, August 1st my options portfolio beta valuation was around 10 – and I paid dearly.

Stepping away from the screen was rewarding as well, giving my time to enjoy the summer. I took some time to examine my trading book records and evaluate my strengths and weaknesses. My strong trades revolved around: are finding companies with strong management, resources, studying futures, balance sheets, in the sector I have greater understanding of: basic materials. This is how I intend to trade moving forward and where I will direct my studying through reading – textbooks, non-fiction publications, and reports/analysis – and additionally the passion I have for studying the daily market and the overall flow of money. You’d be surprised how much you can learn and reflect on while drinking Moosehead in the sun in between swims on the dock at your cottage.

I’m happy to announce I am battling back. I’ve taken advantage of lower prices we’ve been presented with to buy back core positions at substantially lower prices – albeit fractions of my intended positions. Names like $NVDA, $CVE.to, $SU.to are studs I value highly. I am still bearish on the overall macro picture and look forward to buying more of these positions. I’m regaining my mojo and have weathered the storm moving my core account (only common equity) to a satisfactory 14% YTD gain.

…ked

I hope to get back to tending to this blog, but the truth is my new style isn’t conducive to swinging positions and frequent posts – its buy and hold. This is a time tested method that the co-author here would argue is extinct.


STRANGLEHOLD

July 4, 2011

Well the title really says it all – but what you might know is that I’m leveraged short heading into tomorrow morning. I bought it knowing my $TZA calls would likely expire worthless, but it is a hedge worth owning after what defies both logic and statistics dubbed the ‘“Gotcha Bitches”-Ben Bernanke’ rally. So the real question is, if the majority of traders hedged up similarly like myself, are we in for an even larger squeeze tomorrow? Remains to been seen, the indicators say down, but a squeeze tomorrow and maybe we can officially call it the next leg up? (I don’t buy that sentiment either).

Toronto performed very well today raised by (you guessed it) higher commodity prices in Gold, Silver Crude, and building off the strength of Friday we saw breakouts in Iron Ore miners.  Without the NYSE open, I had cash burning a hole in my RRSP. I took time to add into some of my winning positions (core) that I intend to hold until my grave. Alderon Resource Corp ($ADV.vn – Canadian Venture) had immediate dividends to my new addition. I mentioned this in my last post as my favorite junior iron miner and it did not disappoint following through above $3.00 and rocketed to $3.30 into the close.

I’m still long half of my $X position I started on Friday, I reached my intraday plateau (a new rule I’ve adopted) where by any call (individual) that appreciates $1 within a day, I have to take half profit. Depending on my love for the trade or stock, I evaluate closing the entire position. My reasoning was by removing half I could add in again at a lower price. See the notes on the chart below.

Finally, worth taking a look at (I’m probably going to nibble [1/4 position] on strength): Genco Shipping and Trading $GNK. First of all, let me spit some numbers at you:
1. Book Value per Share: $32.8
2. Total Cash per Share: $7.84 (right about where its trading).
3. YTD Return: -47.60%
4. 55% is owned by Institutions
So, if this company’s debt is really bogging it down, why haven’t all the institutions bailed yet? This company, long term, definitely has the potential to regain its glory days. We may be in somewhat decline, but global shipping demand for everything from dry bulk to containers is sustainable. I doubt anyone can say with a straight face “Emerging Markets are bad for global shippers”. I’ve posted a weekly and daily chart below, notes on the charts. Some people consider shipping companies and their movement to be linked to the Baltic Dry Index, sure maybe they are correlated (http://www.bloomberg.com/apps/quote?ticker=BDIY:IND). I make this sort of trade based on the risk, reward, and underlying fundamentals.

So the question on everyone’s mind is will we continue to move higher? As I stated Friday – any profit I make being hedged will be turned into new longs. I will discuss some of my favorite Canadian Energy companies later this week if I have a chance.


Blow At High Dough

July 1, 2011

Seeing as how I am having a couple of dranks this beautiful Canada Day morning. However, that drink is coffee right now. Here’s how I see us playing out.

We’ve had a weak reversing the stream of selling in the market. Six consecutive down weeks have effectively been almost erased by a single week of action in the market. Beginning the week we led with large rallies in the commodity sector early in the week (Crude, Silver, Gold) and ending with massive reversals in softs (Corn, Wheat), bullish breakouts in Copper and Iron, with bullish construction and development data. There is no question it feels like the buy on the dip crowd while the S&P rested on its 200sma have been rewarded. I am once again feeling Long Term bullish, with a very short-term rest or pullback in the market.

I initiated a position in $X today and the trade length I am aiming for is early August. I hedged, and expect to be able to bank profit early next week with $TZA. Short Term we’re outside our Bollinger Bands on all indices and the $VIX is near its bottom support level. All these signal to me we need to have a small down day here and I intend to capitalize on this opportunity. See the charts of the $S&P, $VIX, and $IWM (Russell etf) below.

Hypothesis is, short term down, long term way up. Short profit will be immediately spent getting long.

I apologize this post is not well organized, going day drinking. Happy Canada day!

 

I also really like the iron/steel sector – lots of money rotation in. $ADV.vn Alderon on the Canadian Venture is my favorite Junior – life time hold.

Always remember we’re only seeing the beginning of inflation. Commodities are just pausing before we continue on to new records. This is still a bull market and there are still buyers.

Disclaimer: don’t buy my shit.


Clam-ato

June 7, 2011

Straight from the mouth of the great bearded one: we’re in for more fiscal stimulus. Nonetheless, the market sold off aggressively after a strong rally day into the close –post Bernanke speech at 3:45pm.

I had a strong day. As I said last night I will be adding gold on any “homo-hammers” with the intention of trailing a stop loss, ideally until mid-July. Take a look at the futures chart below, I added $GLD calls around 11am.  See the chart below for the classic homo-hammer formation at its greatest. A small pop in the $USD sent someone running for the door in gold. Also, its not a science, but TJWP would concur this always seems to happen right before lunch time.

I was well up in my $TNA position this morning, but decided to hit the golf course instead of focus on the Bernanke speech. Subsequently I was stopped out for a minute $20 gain, but nonetheless the trade had significant profit midday. This is another example of the volatility of a triple derivative. The stop loss placement is crucial and holding calls on them overnight can be excruciating.

Finally, my $RIMM short performed as I hoped. This truly is an unstoppable downtrend right now. Even with a strong market day by the S&P, Nasdaq, and Dow $RIMM (with 1.88 beta) still plummeted on high volume. I’m telling you now there is still plenty of room to fall for this company into earnings. With the profit I have made thus far, I may realize the majority and hold a small position into earnings on a tight leash. Trading consistently below the lower Bollinger Band now. Could either accelerate the fall, or maybe we could see a small run into earnings. Trailing stop losses will protect your neck. (Nathan Horton trades with no stop losses in the video below)

Between work and golfing I haven’t done much research recently, just taking time to stay on top of news and watch my select positions. I’m still (combined accounts) 95% cash. I’ll let you know if I see any interesting setups, but very much excited to see how we open and trade tomorrow following the Bernanke speech.

I’m hearing lots of rumblings on Ford ($F) at the moment – currently at the bottom of its channel. Some are expecting upgrades in the wake of the Asian numbers tomorrow.

May the Bernanke be with us.


Fade to Red

June 6, 2011

Even the most pessimistic bear must still be sitting at home overnight shivering at the thought: “Will Ben ‘Helicopter’ Bernanke consume of a blizzard of cocaine tonight”. What I mean is in the near future while there are still about 20 days of POMO left, when will Ben shred those who held shorts overnight by waking up to the S&P screaming higher?

I’ve predominantly left the market. My long holdings account is 100% cash at this point, and I’m holding 85% cash in my aggressive account. It seems like we’ve established a small downtrend here (not an actual bull market reversal) just what many believe is a slight step down before with find solid consolidation within a range for the summer – or until the QE3 helicopter takes off or worse interest rate hikes (yeah right…). We could even head towards the 200day of the S&P at this rate; with two strong bearish candles plowing through the 150day seen below.

So while being weary of the “futures fuckery” pattern since February, I’ve been looking for companies that immediately need a haircut. These are companies either extremely over valued, or simply companies like $RIMM that are getting pushed out of their market share. Here are two charts of $RIMM, first the daily where you can note the downtrend and extremely bearish volume. The second is a long out weekly chart of $RIMM as the company’s stock decays towards a massive support of 35.30(ish). Earnings are fast approaching on June 16th, the earnings that were significantly downgraded in late April. I expect them still to disappoint, but I will not trade the earnings. I’m looking for more decay as we head into earnings, where $RIMM will either be placing an iron stake in the ground or the final nail in the coffin. I love my BlackBerry, but they have “Nortel-itis”. A symptom I would best describe as a Canadian company that has a few great patents (security, data compression, arguably their mobile browser), but is getting muscled out by their larger American counterparts who have a strong marketplace of followers. That hurts a lot as a Canadian and a BlackBerry owner. Either way, $RIMM is my short right now, has a high beta too.

I added a small $TNA call position (a derivative of a derivative of a deriviative….yikes) as literally a hedge and final salute to the Bernanke. I’ve got a relatively tight stop on the call, and will dump it immediately any day we gap up in the market. I expected us to catch a bounce today, but the S&P looks very hurt right now. However, if anything is going to catapult us higher, it will be the Russell 2000.

Heading into the summer:

I’m still extremely bullish on Gold. Gold typically performs very well in June and July, and I will be tempted to buy some dips or “homo-hammers” (TJWP’s post: https://tradingeh.wordpress.com/2011/04/05/pms-to-shorts-die/). This is all while knowing the inflation trade may sputter in the absence and braking of POMO. I still think Gold is strong haven for money, while I am extremely bearish on Silver. There is no sense in being risky and betting against the market at this point – I suggest defensive plays and large cash positions.

I’ll try to post more, however I’ve been predominantly sitting in cash and golfing working.

Disclosure: Short $RIMM, Long $TNA (Bernanke Hedge)


Ayo Technology

May 12, 2011

Disclosure:

I added $AVL at lunch today on a bounce of the 100sma – looking to hold for further strength. $MCP was leading the bounce/rally for rares companies and the volume came in. Stop loss set below the 100sma. Don’t follow me if you don’t want to lose money.

Tech Setups:

Here are a number of companies that had good movement today either breaking out from descending columns like $CREE and $JNPR (my favs here) or consolidating in nice tight ranges that are easy to place buy and stop losses on for quick flips. Notes are on some of the charts.

A few picked up off Twitter from @Skibbs. Great semiconductor setups:

$LTXC looks phenomenal.