Pre-FOMC

The FOMC interest rate outcome will be released today around 2:15 pm (EST). It seems the market has already factored in a lowered 50 basis points. Whatever the outcome, the Feds will be having a hard time to please the market (it seems that they have been doing that for the pass few months).

If the interest rate is:

• Lowered by 50 basis points, the market may react in unpredictable ways.
• Lowered by less than 50 basis points, the market will slide again.
• Lowered by more than 50 basis points, the market might slide again as the market might feel that economy is worse than it is perceived that is why the Feds lowered much more than what the market wants.

Should I play a Put, my stop loss would be highest point among the last 5-6 market days. The target is January low. Good sectors to short are the same: retail, housing, banks, mortgage lenders, etc. These sectors had rallied a fair bit since the January lows.

Trade with care as the market is still very volatile.

- PersianCat (Millionaire-in-progress)

Aug Low Becomes Strong Resistance

The Aug 2007 Low is now a strong resistance level for DOW and S&P 500 indices. Closing above that level could spell trouble for the Bears.

This week there are 2 important news that could drive the market crazy. The first is the FOMC meeting on the Interest Rate hike (Wednesday). The other is the NFP - non-farm payroll (Friday). These 2 news could make the market more volatile. They could either break the DOW and S&P 500 indices higher above the Aug Lows or continue the downtrend and perhaps break the Jan 2008 lows.

Have to be extra careful in these volatile market.

- PersianCat (Millionaire-in-progress)

DOW & S&P500 has a hammer !

Based on the OX charts, the DOW and S&P 500 indeed formed a hammer candlestick with a long shadow yesterday. Almost a similar formation as Aug 2007 Low. It makes things more difficult to short at the moment. I do expect the bulls will try to take advantage of the situation and try to create a rally (however short-lived it may be) just like in Aug 2007. However, the overall trend is still down. Sell on rally is still the current mantra. I would still short the banks, mortgages, housing and retails at the right time. I mentioned energy and commodities as a possible play for shorting. Have to look into it in more detail.

However, I would refrain from shorting gold and precious metals. With the recession looming, gold and precious metals could be the few sectors that appreciates in price while the rest are just sliding down.


- PersianCat (Millionaire-in-progress)

Futures indicate DOW at -600 points !!!

On Friday, the market closed lower than on Thursday continuing the downtrend. As at Tuesday, 7am Singapore time, the DOW futures is already at minus 600 points with S&P500 futures at minus 60 points. The Asian market suffered a meltdown yesterday. It is likely that the Asian market continues it downtrend. The once invincible Shanghai market is also poised to lose its shine. The China bubble might have been pricked well before the Olympics Games !!

When the market sentiments is this bad, typically there are bargain hunters who would come in to long the market on a very short-term basis (within the day or over a few days). I expect the US market to be very volatile with big swings. We have to be careful just in case a similar hammer candlestick (with long shadow) is formed again (as in Aug 2007 low) . On that day, the market sentiment was very bad, stocks just pushed itself downwards. Then out of the blue, Fed Chairman announced some measures and the market quickly reversed itself. Nevertheless, the market is poised for another beating.

To my fellow traders, in market such as this, certain strategies do not work or difficult to make money. These strategies include Iron Condor and Selling Naked Put. So trade with care.

If the market really believe there is a recession looming in the US and perhaps even in Europe, it is very likely that the energy and commodities stocks which had a good run would also suffer a downtrend. This is due to the expected downfall in demand should the US and Europe is in recession.

Anyway, as I mentioned before, I do not want to be a hero and go against the trend. Until the charts showed a reversal is in play, I will short the market at the appropriate time. The weak sectors remained the same - housing, financials, retail and technology.

- PersianCat (Millionaire-in-progress)

Position Updates

The market was up when market open last Friday. As I do not think that the market can hold, I patiently wait to close my position (it was negative when market opened). Managed to close the following at a profit:

• Sell to close STX Jan 20 Put for an average of $0.25. Profit at 25.0%.
• Closed STX Bear Call Spread @$0.05. Profit at 113.0% (I sold the in-the-money spread on Thursday with little time value. What I gained is mostly the intrinsic value).

- PersianCat (Millionaire-in-progress)

S&P 500 at 15 months Low

The S&P 500 was at 15 months Low yesterday. The Dow and Nasdaq Composite broke Aug Lows convincingly. The Bears are now in control again. While the market may experience short rallys in the near future, the downtrend continues.

So how do we play the market? For the moment, I would only play shorts playing the weak stock in a weak sector when the market is also weak.

Yesterday, I played the STX in preparation of their earnings results after the market closed yesterday.

• STX - Jan 20 Put @$0.20 (when the stock is around $20.80)
• STX - Bear Call Spread Jan 20/22.5 Call @1.35 (when the market is about 21.48)

- PersianCat (Millionaire-in-progress)

AAPL, C & the Market tanked

The market tanked yesterday. Dow broke the Aug 2007 Lows again and closed lower. The S&P 500 and Nasdaq composite index almost test last week lows. Until these 2 indices broke the Aug 2007 Lows convincingly, the Bears and the Bulls will fight it out. In the meantime, the market will be very volatile.

At the stock level, Steve Jobs did not managed to impress market watchers at MacWorld 2008. As such, AAPL tanked almost as soon as Steve Jobs started his keynote address. Lost some money there. C also tanked on such a bad earnings results. Closed my positions yesterday with mixed results.

• Closed Bull Put Spread AAPL Jan 175/170 Put @$3.40. Loss at 48.4%
• Sell to Close C Jan 27.5 Put @$0.73. Profit at 87.2%

- PersianCat (Millionaire-in-progress)

News Play - AAPL & C

AAPL - I have been looking to buy AAPL in anticipation of Steve Jobs' address at the MacWorld on Tuesday (today). Typically, it is a much watch event as market watchers are looking forward for AAPL to launch new products. Sold a Bull Put spread yesterday - less risk for a relatively good potential profit. Might buy straight Calls today depending on how the chart goes and what other news is avalaible.

• Bull Put Spread Jan 175/170 @$1.90 (when the stock is around $175.85)

C - Yesterday, I bought out-of-the-money Put in anticipation of Earnings today. It's been a long time since I play earnings. The market have been talking about a big write-down of its capital. How the stock moves today will depend partly on the following:

• How big the write down
• How big they intend to lay-off employees (if any)
• Whether they announced any potential white knights to inject capital into C.
• Buy to open Jan 27.5 @$0.39 (when the stock is around $29.00)

- PersianCat (Millionaire-in-progress)

Market Bounced Off August 07 Lows

Yesterday, the DOW index breaks the Aug 2007 lows and bounced off from that level. Though the S&P 500 Index and NASDAQ Composite Index did not even touch the Aug 2007 Lows (quite near though), it took the que from the DOW Index and also bounced off its session lows. The major indices closed positive quite convincingly. I expect a retracement from here over the next few days. Any little good news could be treated with great fanfare unless something terrible happens.

The earnings season just started with Alcoa. It would be interesting to watch how the market unfold over the next few weeks with the bulls and the bears fighting for dominance. For the moment, I think the bears wants to give way, take a rest and let the bulls takes over.

As such, I have closed all my positions yesterday to lock-in whatever profits I can salvage. I do not need to wait for my stop loss to kick-in. All my positions are all Bear Call Spreads:

• BSC - Jan 75/80 Call @$1.60. Profit 6.3% over 2 days.
• COH - Jan 30/32.5 Call @$0.22. Profit 39.0% over 5 days.
• CTX - Jan 20/22.5 Call @$0.45. Profit 13.9% over 2 days.
• MER - Jan 50/55 Call @$1.50. Profit 7.7% over 4 days.
• QCOM - Jan 37.5/40 Call @$0.88. Profit 8.0% over 5 days.

I have been monitoring AAPL since last week, looking for the opportune time to enter in preparation for the MacWorld (starting 15 Jan) and its earnings on 22 Jan. Steve Jobs have got the knack of introducing an interesting product during MacWorld and I am bullish about AAPL sales last quarter. Actually, the best time to buy a Call was yesterday (assuming the the market is going to be bullish over the next few days). Anyway, I am considering either a Bull Put Spread, Bull Call Spread or a straight Call. I would need to check the option prices tonite.

At the moment, I am still bearish over the Financials, Retails and Housing. I will wait for a better time to short the stocks in the 3 sectors again.

Take note that semiconductors are also showing signs of weakness.

- PersianCat04 (Millionaire-in-progress)

No Christmas Rally, No January Effect

Late last year, there is no Christmas Rally. In the beginning of 2008, there is no January Effect. So far this year, the market had been going down. Typically, it indicates that it is highly likely that the market would end lower at the end of the year.

Currently, the Dow index is closing in towards the Aug 2007 lows (a strong support level). S&P 500 index and Nasdaq composite index is also closing in towards Aug 2007 lows. Typically, the market would like to test and break this strong support level. The stochastics, MACD and RSI indicators showed that the market is oversold. I would be careful and be alert just in case the market reverse once the market touch or near its Aug low. I do expect some kind of retracement before the market continue in its downtrend. However, should the market breaks the Aug 2007 lows with a spike in volume, the market could continue in its downtrend without much retracement.

- PersianCat04 (Millionaire-in-progress)

Position Updates

Before the Market tanked yesterday, I closed my CTX Put position and replace it with a Bear Call Spread. The idea is to reduce my risk should the stock decided to idle around and not moving down. I also sold a Bear Call Spread on BSC on news that the CEO is given the sack.

• CTX - Sell to close Feb 20 Put @$1.85. Profit 5.7% (over 3 market days)
• CTX - Bear Call Spread Jan 20/22.5 Call @$0.70 (when the stock is around $20.10)
• BSC - Bear Call Spread Jan 75/80 Call @1.80 (when the stock is around $75.07)

On hold

• COH - Bear Call Spread Jan 30/32.5 Call
• MER - Bear Call Spread Jan 50/55 Call
• QCOM - Bear Call Spread Jan 37.5/40 Call

- PersianCat04 (Millionaire-in-progress)

Position Updates

The market was very kind to me during the first 3 market days in 2008. All my short positions are positive. I have taken the liberty to lock-in my profits and expose less capital in the market by either buying new Put options at a lower strike price or playing credit spreads. Note that expiry Friday is just 2 weeks to go. The waterfall effect, where the Options time value decrease tremendously started to kick-in already. Below are my recent plays:

Thursday's (3 Jan) Play
Sell to close COH Feb 30 Put @$2.00.
Profit 5.3% (over 5 market days)
I closed this position as the stock had not move as much but it lost a fair bit of its time value.

Sell to open Bear Call Spread COH Jan 30/32.5 Call @$0.86 (when the stock is abt $30.46)
This play replaced the COH direct Put play above.

Sell to open Bear Call Spread QCOM Jan 37.5/40 Call @$1.00 (when the stock is abt $38.00)


Friday's (4 Jan) Play

Closed Positions
Sell to close CTX Feb 25 Put @$4.30 (when the stock is around $21.62)
Profit 79.2% (over 5 market days)

Sell to close MER Feb 52.5 Put @$4.90 (when the stock is around $49.63)
Profit 48.5% (over 5 market days)

Sell to close SLM Feb 20 Put @$3.30 (when the stock is around $17.42)
Profit 50.0% (over 5 market days)

New positions
Buy to open CTX Feb 20 Put @$1.75 (when the stock is around $20.87)
- on hindsight, I should have just play the Bear Call Spread. Anyway, let's see how it go when market opens on Monday.

Sell to open Bear Call Spread MER Jan 50/55 Call @$1.75 (when the stock is around $50.02)

- PersianCat04 (Millionaire-in-progress)

Position Updates

The market was very kind to me during the first 3 market days in 2008. All my short positions are positive. I have taken the liberty to lock-in my profits and expose less capital in the market by either buying new Put options at a lower strike price or playing credit spreads. Note that expiry Friday is just 2 weeks to go. The waterfall effect, where the Options time value decrease tremendously started to kick-in already. Below are my recent plays:

Thursday's (3 Jan) Play
Sell to close COH Feb 30 Put @$2.00.
Profit 5.3% (over 5 market days)
I closed this position as the stock had not move as much but it lost a fair bit of its time value.

Sell to open Bear Call Spread COH Jan 30/32.5 Call @$0.86 (when the stock is abt $30.46)
This play replaced the COH direct Put play above.

Sell to open Bear Call Spread QCOM Jan 37.5/40 Call @$1.00 (when the stock is abt $38.00)


Friday's (4 Jan) Play

Closed Positions
Sell to close CTX Feb 25 Put @$4.30 (when the stock is around $21.62)
Profit 79.2% (over 5 market days)

Sell to close MER Feb 52.5 Put @$4.90 (when the stock is around $49.63)
Profit 48.5% (over 5 market days)

Sell to close SLM Feb 20 Put @$3.30 (when the stock is around $17.42)
Profit 50.0% (over 5 market days)

New positions
Buy to open CTX Feb 20 Put @$1.75 (when the stock is around $20.87)
- on hindsight, I should have just play the Bear Call Spread. Anyway, let's see how it go when market opens on Monday.

Sell to open Bear Call Spread MER Jan 50/55 Call @$1.75 (when the stock is around $50.02)

- PersianCat04 (Millionaire-in-progress)

Intraday Play - Why more $$$ now?

Someone asked me how come I have more success in Intraday plays recently. My answer is simple. I change my mindset and perspective.

Previously, I would think that making 31.1% or $19 per contract is a waste of time (refer to Intraday Play - QCOM). When I have made $19 I would be begging for more (Greedy Me!). Many a times, the market would give me the opportunity to take my profit. But since I was greedy, the market would just reverse and punish me with a loss.

Now, I would just accept smaller profits percentages as long as the profit target is within reach. To compensate for smaller profit percentage , I would just increase the number of contract size. For example, in the QCOM play below, 10 contracts would give me $190 (capital $610). 20 contracts would give me $380 (capital $1220). And so on. So how many contracts I played? Hmmm....... ;)

- PersianCat04 (Millionaire-in-progress)

Intraday Play - QCOM

At pre-market, it was reported that QCOM lost a lawsuit against BRCM. The stock lost more than $1.50 at pre-market. When the market opened, the stock gapped down but it later tried to fill the gap. I expected the stock to weaken. The attempt by the stock to fill the gap just provide a better opportunity to enter.

Referring to the chart above, at A, I bought Jan 37.5 Put option @$0.60 after the stock showed reversal. The stock did go in my direction but it then reversed and filled the gap. I should have closed my position at loss at point B. However, I was distracted by someone who wants to talk to me. I should have loss a fair bit. As if the market want to reward me for my patience, the stock reversed back in my direction. I doubled my position at point C, as I am very certain that the market will continue moving in my direction. The average cost of my Puts was $0.61.

I sold my Puts @$0.80 at Point D for a $19 per contract or 31.1% profits. Well, the Put option increased its value by another $0.10 after I sold my Put. But I am still thankful for what I get.

- PersianCat04 (Millionaire-in-progress)

(P.S. I did not play one contract only for all my intraday play ;) )