Wednesday, March 26, 2008

Market reversal - Downtrend to continue ?

The major market index (DOW, S&P500, Nasdaq Composite) had a short rally since a week ago. The three major index are now at their first resistance level.

While there are many Bulls in the market saying that the market have somewhat bottom, I personally do not believe it is. The market diarrhoea is not over yet. If this is a normal pull-back, I would agree with the notion that we have reached a bottom. However, this is not a normal pull-back. This is a systemic problem that affect not only the US financial market but also the global financial market. In the meantime, let's watch what happens next.

In the coming weeks or months, I foresee more bad news. These news should include more credit card defaults, more private education loan defaults and worse - the credit swaps defaults (a US$45 trillion industry - as per Moneynews.com).

The latter are basically insurance policies that buyers of mortgage securities (CDOs) bought against a mortgage default. Banks and hedge funds 'wrote' this insurance, a highly leveraged speculation. Now that the mortgages are defaulting, the sellers are saying they don't have the capital to make good on the insurance - as per Moneynews.com.

Currently, a number of financial and housing stocks seem to offer good setups for shorting.

- PersianCat (Millionaire-in-progress)

Monday, March 17, 2008

QQQQ - Intraday Play

After buying BSC Put, the market turned to the worse. I also played the following:

  • Buy to open QQQQ Mar 42 Put @$0.52 (when the stock is around $42.67)
  • Sell to close QQQQ Mar 42 Put @0.82 (when the stock is around $42.16). Profit = 57.7%

PersainCat (Millionaire-in-progress)

BSC - Intraday Play

Heard from CNBC on last Fri (pre-market) that BSC was pursuing financing from the Feds through JPM. Apparently they had liquidity problems. This kind of news typically offered a significant jump in the stock prices.

A quick assessment at that point of time, offered 2 possibilities:
  1. The market takes the news positively since the Feds and JPM were extending a life-line and end BSC liquity problems. The stock gapped up. (Probability = unlikely)
  2. The market takes the news negatively (Probability = likely). The stock gap down at opening hour. From here it offered some other possibilities. One, after gapping down, it stabilises it will not go beyond the first 5-min candle. Two, after gapping down, the market is still digesting the impact of the news. It later either goes down further or go up and close the gap.

So I waited and watched the market made its move. In a 5-min chart, the first candlestick formed was long, then an inside bar was formed. CNBC (I considers them as cheerleaders) could not provide anything positive about the event. I was ready to play my move then - Playing the Inside Bar strategy (even before 10am EST).

  • Bought BSC Mar 45 Put @$4.00 (when the stock was around $51.00). The Bid/Ask spread was huge then.
  • Sold BSC Mar 45 Put @$16.00 (when the stock is around $31.00) within 30 mins. Profit = A Cool 400%.

PersianCat (Millionare-in-progress)

Wednesday, March 12, 2008

Bullish Engulfing Pattern - Market Reversal?

Worm... Worm ... Worm...

It has been a week since my three computers were infected by worms. 2 of the computers are back in action. One is still down. Had to reformat the harddisk, etc ......

At my handholding sessions yesterday, I shared that the market was trying very hard to test the Jan 08 low and trying to find an excuse to bounce back. That Jan 08 level had not been breached by the DOW and S&P500 index. For Nasdaq Composite index, the Jan 08 low was broken. Prior to yesterday's move, the indicators were showing an oversold market. Since Jan 08 low is a strong support level I do expect some bounce before the level can be broken by the DOW and S&P500 index.

With yesterday's strong bullish close, a bullish engufing pattern is formed in both the DOW and S&P500. Should the market ends higher today, it would confirm a reversal is in play. Whether will be a short or long rally, it is yet to be seen. However, the market is still in a downtrend.

I close my MET last Friday @$1.20 (Loss of 24.2%).

Currently, I have not been playing as much as I would like to since I have been distracted by the handholding sessions that I am now conducting. However, I must admit that I am enjoying conducting those sessions.


Wednesday, March 05, 2008

Position update

Closed my QQQQ position at breakeven yesterday. The stock was doing well and my options was doing well too (made more than 30% unrealised gain). However, at the last hour, the stock rebounced with vengeance. I do not like the way it moved so fast and furious in such a short time. Furthermore, the stock is near its 52-week low. Will I believe the stock will break the 52-week low, I am not playing it at the moment. Let it retrace back before shorting again.

PersianCat (Millionaire-in-progress)

Monday, March 03, 2008

Market Back On Track

The market was down for the last 2 sessions. With a confirmation candle in the major index, the market is back on track to continue with its down trend.

Bought the following on last Friday:
  • QQQQ Mar 42 Put @$0.64 (when the underlying stock is at $43.19)

- PersianCat (Millionaire-in-progress)