Is Santa Claus Rally coming?

The overall market is still currently bearish. It is now abt a week before Christmas. The Santa Claus rally that is expected every year has not materialised yet. Whether it does or not would partly depends on the outcome of the earnings results of the following financial plays:

• GS (Tues, BTO)
• MS (Wed, BTO)
• BSC (Thur, BTO)

The market would probably look out for further negative surprises from the above stocks which would send the stocks and perhaps the overall market lower. It would also be looking for excuses (any positive news) to provide a rally till the end of the year.

- PersianCat04 (Millionaire-in-progress)

Intraday Play - AAPL

AAPL is a good stock. It has gone up significantly to reach its all time high last Friday. But somehow, it pulled back to form a shooting star on Friday. The shooting star showed that the stock had reached a state of indecision. The RSI and stochastic indicators are on the high side and are already pointing south.
The probability is higher for AAPL to head south before breaking its all-time high again.

Today, AAPL was given an upgrade so AAPL gapped up above Friday’s close. The overall market was weak. It seemed a good setup was being made for shorting. I waited for the stock to go below session low after 10:00am EST before I shorted AAPL.

• Buy to open, Dec 190 Put @$3.65 (when the stock is around $190.17)
• Sell to close @$5.45 (when the stock is around $187.20 - Though it was not at the best prices but it was good enough).
• Profit = $180 per contract or a 49.3% gain for less than 2 hrs play

AAPL could still go down further over the next few days but I just want to lock-in my profit and have a better sleep.

- PersianCat04 (Millionaire-in-progress)

Open Positions - An Update

Sell to close MER Jan 60 Put @$6.40 (when the stock is around $55.90)

• Profit = 100% (Over 3 market days)
• Close this position earlier to lock-in my profits

Buy to close the TGT Bear Call Spread Dec 55/60 @0.30 (when the stock is around $51 ++)

• TGT have a strong support (52-week low at $50.25). Close this position because I am not willing to wait for another 6 days to collect the $0.30 per options. Could better utilise the funds for another play.
• Profit = 36.2% (over 5 market days)

Buy to open MER Jan 55 Put @$3.30 when the stock is around $56.80.

- PersianCat04 (Millionaire-in-progress)

Reflection - Who are you trading against?

In the initial period when I am still green in trading, I thought that when I play a trade, I am trading against other fellow traders. If I make money, they lose money. After going through some tough trades and reading more, I realise that I am trading against the Market Makers more than I am trading against fellow traders. And I thought I got that part right of my trading knowledge right !!!

Well, I am only partly right. As I gained more experience, when I played the right strategy at the right time, I realised that I no longer trade against the Market Makers. Actually, I am trading against myself - trading against my own trading rules, trading against my self-discipline, trading against my trading plan and trading with my greed and fear.

As the market is with me and my unrealised profits increased, I may be itchy enough to move my targets (not entirely wrong if I move the stop loss too) without placing the stop loss. The Greed sets in. I want to earn more. There were occassions when my profits started to slide and the charts showed a reversal, I keep hoping that the market will reverse again so that my profits will increase again. Very soon, my unrealised profits turned to losses. I keep hoping. As my losses increases, my Fear sets in. I fear that I lose more. I closed my position. The market then reversed. My confidence dwindled. I start to blame myself for a lot of things.

Thank God, I managed to overcome that challenge most of the time now and my trades improved. There are more challenges to overcome. It will take time. I need to be patient and persevere.

Till my next reflection ....

- PersianCat04 (Millionaire-in-progress)

Fed + Other Central Banks

The Feds and some Central Banks create a scare (at least to me!) at 9am EST yesterday when they announced some packages to help provide liquidity in the global financial system. The market immediately rally wiping off most of my gains from my current outstanding positions.

Fortunately, the market corrected itself and resumed its downslide. The package was deemed to be too small to made a dent in the financial market.

I also added another position shorting LEH in view of their pending earnings results on Thurs morning. I was expecting the earnings results to be bad or just meeting expectations. In the current weak market, LEH would then slide further.

• Bear Call Spread, LEH Dec 60/65 Call @$2.20 (when the stock is $60.68)

On hindsight, I should have position myself just before market close (for earnings play) instead of shorting too early in the day. LEH had a short rally before the market close yesterday.

- PersianCat04 (Millionaire-in-progress)

Post-FOMC

The FOMC announced a 0.25% rate cut. As expected, the market tanked.

Made 4 new trades (though not at the best prices) after the announcement:

• MER - Bought Jan 60 Put @$3.20 (when the stock is around $60.80); Target $50.50
• JPM - Bought Jan 45 Put @$1.60 (when the stock is around $46.36); Target $40.68
• CTX - Bought Jan 25 Put @$2.45 (when the stock is around $24.73); Target $17.77
• RYL - Bear Call Spread Dec 25/30 Call @1.60 (when the stock is around $26.26); Target $19.51

The charts for all the 4 stocks showed that the stocks are about to reverse. The FOMC announcement just expedite the reversal. The target are all 52-weeks low.

Actually, there are many weak stocks to short. Cannot play too many as I may not be able to cope.

Not reported before:

• TGT - Bear Call Spread Dec 55/60 Call @$1.55 (when the stock is around $54.98) - Played on 7 Dec and still in play.

- PersianCat04 (Millionaire-in-progress)

Pre-FOMC meeting

The FOMC will announce the next round of interest rate at 2:15pm EST. The market is expecting a 0.5% rate cut. If the FOMC announced a 0.25% rate cut or below, the market is likely to go another round of downward slide. If the FOMC announced a 0.5% rate cut, the market will scrutinise the languauge used and decide how to move. If the FOMC announced a 0.75% rate cut - all hell will break loose (so to speak). The market might rally but be cautious as the market might realised later that the economy might be worse than it seems (then the market dips).

I'm looking for the right opportunity (perhaps today) to short the following stocks:

• JPM
• MER
• RYL
• CTX

LEH will announce its earnings results on Thursday, 13 Dec (Before market open).

- PersianCat04 (Millionaire-in-progress)

MBI Play

Yesterday, MBI was halted within 5 mins after the market opened - pending news. When it resumes trading, the stock spike upwards. Since it is a weak stock and the news should not translate to such a huge jump (almost $8 spike), waited for the stock to reverse. I drew the Fibonacci levels. I enter on the 5th candle (5-min charts). Bought Dec $35 Put @$2.40 (when the stock was $35.95).

I waited till just before 2:30 pm (EST). At that point, the RSI and stochastics were very low. The stock consolidate somewhat. Typically, just after 2:30 pm, stocks might just start to reverse. Made a decision to lock-in my profit and sold my Puts for $3.20 (33.3% profit over a few hours) . As it turn out, the stock went down slightly further before it made a short rally till the end of day.

For those who might think that making $80 for one option contract is peanuts and is not worth the while, think again. For beginners, I always encourage playing small and earning peanuts. When you have consistently made profits (could be peanuts) with your trades, you can slowly increase the number of contracts.

For example, 10 contracts of MBI Put options (as above) would cost you $2,400 of capital but it gives you $800 profits for a few hours work. So those who are new, my advice:

Think Big, Start Small and slowly but surely Play Big.

If you start playing big when you are not good in your trades yet, you will also lose big.

So, how many contracts did I play yesterday? That's for me to know, and for you to find out (if you even bother ;)

- PersianCat04 (Millionaire-in-progress)

5-yr freeze on subprime-mortgage rates

Yesterday, after the Bush Administration intervened in the market by preventing the Adjustable Rate Mortgage from being reset for 5 years, the market reacted positively. The main mid-term beneficiaries are the housing lenders as they would delay the foreclosures of mortgages and provide more time for the house buyers to repay their loan/installment. I would refrain from playing banks, mortgages lenders and housing stocks until the market have fully absorbed the news (or least until next Tuesday when the Feds decide their next move).

However, yesterday's move by the Bush Administration does not change the weak housing landscape. Among the negative news:

• Moody reported that the U.S. housing market will fall into deep recession next year, with home prices dropping up to 35%.
• Just as starters, Luxury homebuilder Toll Brothers posted its first quarterly loss in 20 years. I am expecting more such news from the other builders.
• LEN sold part of its landbank at 60% discount though they retain the right to buy back at latter date.

Retail Stocks
Retail stocks are also expected to be weak due to expected weak consumer demand. We need to monitor this closely as the Christmas spending is not over yet. There is no plan bailout for retail stocks at the moment.

Among the stocks I am following are TGT, COH and JWN. TGT reported yesterday that it lowered its expectation for the next quarter. I would refrain from shorting WMT as it is a company targeting the mass market. In economic downturn, the middle income earners might have to downgrade themselves and shop at WMT while the mass market will cut down on their spending at WMT. COH focus on the middle income market and sells discretionary items (items that would be in the low priority to buy in an economic downturn).

- PersianCat04 (Millionaire-in-progress)

Black Friday

Today is Black Friday. It is the day after Thanksgiving and the day Americans starts their Christmas shopping. Typically, it is the start of the period where retail stores make money to cover the losses throughout the year. If the retail stores do not rake in much sales with good margin, then it is likely that the stores would lose money for the whole year. The sales figures on Black Friday could move the market especially during this period where there is a huge uncertainty whether consumers will minimise buying discretionary items and start a recession.

The sales figures should be coming in by Monday. However, analysts will start looking at the physical queues at retail stores on Black Friday to anticipate the actual sales figures.

As the market close early today, the market volume should be thin.

- PersianCat04 (Millionaire-in-progress)

FRE & FNM update

FRE & FNM gapped down at opening on Wednesday. Subsequently, it rally up and did not break the session low. Since I played Dec Options (front month) I decided to take whatever profits that are left by the end of the day. I would lose more on time-value of the options if I keep it overnight as Thursday was a Thanksgiving holiday.

Closed my FRE Dec 25 Put at $3.00 (Profit = 87.5% over 2 market days)
Closed my FNM Dec 30 Put at $3.80 (Profit = 2.7% over 2 market days)

I had left both my credit spreads overnight. Both are still positive since the time-value of the options had dropped.

- PersianCat04 (Millionaire-in-progress)

FRE & FNM

Yesterday, I heard from CNBC that FRE had a very bad earnings results . I had been monitoring the housing market. Checked both FRE and FNM. It was down for more than 20% at pre-market. Watched the stocks when the market opens. Both gapped up. Since I expect the stocks to go down further, I waited for the stocks to complete its retracement, typically 50% or 61.8% of Fibonacci level (measured from yesterday's opening price and the previous day closing price.)

.................FRE...................................................... FNM

Made the following entries:

• FRE Dec 25 Put @$1.60 (when FRE was $28.89)
• FRE Bear Call Spread Dec 25/30 Call @$2.80 (when FRE was $28.59)
• FNM Bear Call Spread Dec 30/35 Call @$2.50 (when FNM was $32.00)
• FNM Dec 30 Put @$3.70 (when FNM was $29.82)

Both the Bear Call Spreads are sold in-the-money. Both straight Puts play are bought out-of-money.

Closed part of my FRE Dec 25 Put at $2.65 after lunch time (not at the best price for the day though). I thought the market would continue its slide after 2:00pm (EST). It happened that the market reversed and enjoyed a short rally. Anyway, it was good money earning 65.6% from that play.

I have kept the rest of my play for today. So far, the market is still in my favour.

Note: When a stock tanked like FRE and FNM yesterday, the time value for the options increased substantially. It would be good to sell the options (in my play, I played the credit spreads). The time value would drop substantially by the end of the day.

- PersianCat04 (Millionaire-in-progress)

Level 3 Assets at MS, GS, LEH, BSC, C, MER

With the current credit crisis in the U.S., it is important to monitor the following development.

Extracted from Online Trading Academy email newsletter (free subscription).
"The Financial Accounting Standards Board (FASB) is the referee for accounting practices. They recently issued a new rule which will be implemented November 15. Essentially, Statement 157 requires a financial firm to divide its assets into three categories called simply enough, Level 1, Level 2 and Level 3.

Under FASB terminology, Level 1 means assets that can be marked-to-market, where an asset's worth is based on a real price, like a stock quote. Level 2 is mark-to-model, an estimate based on observable inputs which is used when no quoted prices are available. You can go get several bids and average them, or base your assumption on what similar assets sold for.

Level 3 values are based on "unobservable" inputs reflecting companies' "own assumptions" about the way assets would be priced. That would be market talk for best guess, or in some cases SWAG (as in Simple Wild-***ed Guess.)

.... It seems that some companies have far more Level 3 assets than they have capital. Take a look at these six banks which have already posted their Level 3 assets ahead of the deadline:

• Morgan StanleyEquity base: $35 billionLevel three assets: $88 billionLevel 3 to equity ratio: 251%
• Goldman SachsEquity base: $39 billionLevel 3 assets: $72 billionLevel 3 to equity ratio: 185%
• LehmanBrothersEquity base: $22 billionLevel three assets: $35 billionLevel 3 to equity ratio: 159%
• Bear StearnsEquity base: $13 billionLevel three assets: $20 billionLevel 3 to equity ratio: 154%
• CitigroupEquity base: $128 billionLevel three assets: $134.8 billion Level 3 to equity ratio: 105%
• Merrill LynchEquity base: $42 billionLevel 3 assets: $35 billionLevel 3 to equity ratio: 38%"

I will certainly monitor the above stocks especially MS, GS, LEH and BSC and consider shorting them when the time is ripe. At the moment, these stocks are recovering from their recent losses. It seems that there are more room for these stocks to go down.

- PersianCat04 (Millionaire-in-progress)

Market Update

The general market bounced back yesterday after 4 down days. Basically, the market bounced from its Support levels:

• Dow Jones (50% of Fibonacci level)
• S&P 500, SPY (61.8% of Fibonacci level)
• Nasdaq Composite (SMA200)
• AAPL (50% of Fibonacci level)
• RIMM (38.2% of Fibonacci level)

Could it be a bull-trap? It remains to be seen. (Btw, I have no open positions at the moment)

I am now looking at the right set-up to short the financials (banks, mortgage lenders, etc) and housing stocks again. They are now experiencing a rally (it should be a short one though). Frankly, I prefer the market to experience some rally to recover some of their lost ground before testing the August Lows.

- PersianCat04 (Millionaire-in-progress)

Tech Play - Positions Closed

Hi !

Just an update. I have closed all my positions in AAPL, RIMM and SPY when they are consolidating during lunch time yesterday. At that moment, AAPL and had been resting on its 38.2% Fibonacci level (taken from Aug low to year high), SPY resting on its 61.8% Fibonacci level and RIMM is resting on its 50 SMA. It seems then that the market is poised for a short rally. Since I have made my money, I thought, let's not take chances and take my profits that I deserve. The market went down further towards the later part of the day. Well, I am not perfect - but for these trades I am still very happy.

Sold Bear Call Spread AAPL Nov 185/190 @1.80
Bgt back @0.10
Profits = 53.1%

Sold Bear Call Spread RIMM Nov 125/130 @2.28
Bgt back @0.20
Profits = 74.5%

Sold Bear Call Spread SPY Nov 148/153 @1.81
Bgt back @0.83
Profits = 30.7%

The above play were over 3 market days.

Also played intraday trade for GOOG (straight Put). The first trade was disastrous. The second trade was much better and managed to recover the previous loss plus some profits. Then again, I closed too early and the market tanked further. I should not complain and still be thankful for what I have got.

- PersianCat04 (Millionaire-in-progress)

Tech Play - AAPL, RIMM & SPY

In today's bearish market, I would not be a hero and play Long no matter how good the stock is - unless the stock benefit from an economic downturn. For shorts, which sector should we focus on then?

I would focus on sectors that had a good run recently and might be affected by the current bearish sentiments. One sector I'm focusing on now is Technology stocks. e.g. AAPL, RIMM, GOOG and many others had a very good run. While they are good stocks with strong fundamentals, they are not impervious to bad consumer sentiments. Since CSCO guidance yesterday, the tech stocks had been beaten badly yesterday. At market opening today, the bloodshed continues.

Since the market is volatile and the option premiums are somewhat expensive, I thought I should just play credit spreads and be less affected by the volitility (but less profit/risk). I opened 3 new positions yesterday, playing Bear Call credit spreads for Nov month (7 market days left) for the following stocks:

AAPL = Sell 185 Call , Buy 190 Call, for $1.80 when AAPL is around $182.72
RIMM = Sell 125 Call , Buy 130 Call, for $2.28 when RIMM is around $126.61
SPY = Sell 148 Call , Buy 153 Call, for $1.81 when SPY is around $147.60

For RIMM, I sold the 125 Call in-the-money. It is against what we have been taught (normally sell out-of-the-money). It is a higher risk play. But I reckon that since RIMM can move big, if I am wrong I would lose money anyway. I might as well collect more credits from my spreads and lower my risk that way.

So far, these new positions are positive. I may not wait for expiration Friday (Nov 16) to collect my profits.

Other sectors still bearish are Housing & Financials.
Note that SPY is not a Tech stock.

- PersianCat04 (Millionaire-in-progress)

Quick Comments on the US Market

My quick assessment of the US Stock Market:

I am generally very bearish over the US stock market based on the following reasons:

• Subprime woes. It is already affecting housing stocks, mortgage lenders and banks in US. I believe the bottom is not near yet. More bad news can be expected. Once consumers spending is affected, it will greatly affect credit card companies, retail and tech stocks. The general market will go down in tandem somewhat. The earliest sign that tech stocks could be affected comes from today's CSCO guidance. Tech stocks that had pushed the market lately, tumbled today (as at 2:00pm ET)
• Weak US Dollar. The ridiculous trade and budget deficit in the US coupled with lower Fed Interest Rate will push the US dollar lower. This somewhat pushed Gold & Oil to go higher. More countries such as China are also reducing their US$$$ holdings. As long as the FX market sees no bottom for the weak US dollar, the US stock market will be under pressure to go lower as inflows of funds to the US stock market might be lower.
• China's Stock Market Bubble. Greenspan had been saying that China's stock market is generating a huge bubble. Now that he is out of government, I tend to trust his words more than before. China had enjoyed a bouyant economy. However, with the recall of many products from China, it had created a BIG FEAR among consumers in the West. Demand for its product might be affected. I suspect that a significant number of Chinese factories should face overproduction now. It is a matter of time before the media get to know about it. If the US market go down coupled with the weak US dollar, US consumer spending would be affected. The demand for Chinese goods would go down too. Thus creating more overproduction in Chinese factories (unless they can create demand from elsewhere fast enough). Soon the Chinese stock market will be affected to.

In a down market, all stocks, good or bad will go down too. Stock markets all over the world might go down the drain too. My concern is that this whole episode might create a global recession. The question is, "What will trigger (it is just a market excuse) the global market meltdown?" Is it something from the US, China or elsewhere?

The above arguments may sound very simplistic, but I suppose you get my point.

- Persiancat04 (Millionaire-in-progress)

I'm Back

Hi All,

I'm back updating my blog. It's been more than a year since I last wrote. I have been actively trading though. It is just that I couldn't find the time to write. Sometime last year, my mum-in-law was diagnosed with cancer. So have been busy shuttling her for treatment and check-ups and handling new chores/routines.

Anyway, she is now diagnosed to be free of her cancer cells. I have more time now and you could expect more of me in this blog.

The market is now entering an interesting phase. So watch out for my 2 cts worth.

- Persiancat04 (Millionaire-in-progress)

GM Play

I have been playing GM for a number of times for the past few months - going in and out of positions. Technically, GM had broke new 52-week high and had been on an uptrend since April 2006. Its uptrend had been quite predictable within a channel (a rally followed by a a good pullback within a range). Lately, I have also been following the news about its possible alliance with Nissan/Renault and the sentiments that its Chairman Rick Wagoner has against the alliance.

03-Oct-06 08:34 ET Briefing.com
General Motors board faces key decision on alliance - Detnews.com (33.50 ) -Update : Detnews.com reports all eyes are on the General Motors board today as directors evaluate the widely different analyses of a blockbuster alliance of GM, Renault and Nissan Motor (NSANY). ........ GM declined comment Monday on the agenda for today's meeting of the 12-member GM board headed by Chairman Rick Wagoner. But people close to the co said Wagoner is certain to report on last week's summit meeting with Renault-Nissan chief Carlos Ghosn in Paris -- and possibly present GM's recommendation against the deal. People familiar with the matter say Ghosn is interested in Renault and Nissan each buying a 10% stake in GM, with GM purchasing a similar stake in the French and Japanese cos. However, GM insiders say that the automaker can't afford to spend its precious capital on stock in Renault and Nissan.

Received further news about GM on the same day.

03-Oct-06 08:44 ET Briefing.com
Newspaper Notable Mentions : FT: Nissan Motor (NSANY) wants to conclude talks on a possible tie-up with General Motors (GM) and Renault by mid-October, despite recent suggestions that the three auto giants should extend a 90-day study of their proposed alliance beyond that...

Since then, I have been on the look out for more news. Futhermore, CNBC reported that the Board is convening a meeting to discuss the proposed alliance. To me, that is strange since they have until mid Oct to decide.

On 4th Oct, Bear Stearns upgraded GM to Peer Perform from Underperform. Then the big news came:

04-Oct-06 11:46 ET
Follow-up: WSJ says GM, Nissan-Renault alliance talks terminated, according to source (32.47 -0.94) -Update : Dow Jones reports the chief execs of General Motors and Nissan-Renault terminated talks about a possible globe-spanning alliance, according to a person familiar with the situation. In a phone call Wednesday morning, GM CEO Rick Wagoner and Carlos Ghosn, chief executive of Nissan Motor (NSANY) and Renault, decided that the two sides were too far apart on the value of the potential tie-up and decided to stop the high-stakes talks which had been underway for two months. The move comes ahead of the mid-October deadline the two sides had set for a decision. Behind the failed talks was GM's demand that Nissan-Renault pay GM a "control premium" if it bought 20% of GM's stock as part of the alliance, according to another person familiar with the matter. Wagoner told his board Tuesday that investment bankers advised GM to secure a 20% control premium because such an alliance -- while not technically control -- would prevent the Detroit automaker from making any other joint ventures.

I interpreted this as bad news for the stock. As such, I expect the price to drop. The stock was dropping when I bought its Nov 32.5 Put. (And I bought F Nov 8.0 Call as I expect the stock to gain from this news. It was mentioned before that it is willing to talk with Nissan-Renault should the talk with GM failed.) It however gained in price over the next two days. Intuitively, I know the stock will drop dramatically. I just do not know when.

{Prior to the Put Position, I played in-the-money Oct Bear Call Spread (30.0/35.00) playing on the pull-back and planning to close my position when the stock reverse again upwards. My mistake was that I did not stick to the plan. From a positive position, my Bear Call Spread turned negative. As it was more negative, I hang-on to it because the Oct options had about 3 weeks more before it expires. Anything is possible in 3 weeks. On hindsight, I should have stick to the plan and close my position when it was positive then. - eventhough Friday's move saved my position}

Then on Friday, 6 oct 06, I saw my GM chart started to move significantly in the direction that I expected (down). The bigger news came as I read from Briefing.com:

06-Oct-06 12:09 ET
Follow up: General Motors dislcoses Tracinda has decided not to pursue the acquisition of additional shares of GM common stock (31.84 -1.29) -Update : From Tracinda's SC 13D/A: "On October 4, 2006, General Motors abruptly announced the termination of discussions regarding its proposed alliance with Renault and Nissan prior to the expiration of the time period originally established for the initial evaluation of the alliance and without the General Motors Board of Directors obtaining an independent evaluation of the alliance. On October 6, 2006, Tracinda received a letter from Jerome B. York stating that Mr. York had resigned his position as a director of General Motors. The Filing Persons have decided not to pursue the acquisition of additional shares of General Motors common stock. The Filing Persons will continue to review their investment in General Motors and may determine, based on market and general economic conditions, the business affairs and financial condition of General Motors, the market price of its shares and other factors deemed relevant by the Filing Persons, to acquire or dispose of additional shares."

A lot more news about GM were released that day. While it is uncertain what Kirk Kerkorian (one of GM's major investor) might do next, the market is not willing to hang on to GM at that price. Two analysts interviewed by CNBC also agreed (normally one is bullish while another is bearish) that GM stock will go down further with one of them saying that the price could be around $26 - $28. I added more to my Put position. The stock ended $2.08 lower at $31.05.

We shall see what happens next on Monday. I would probably lock-in some of my profits.

- PersianCat04 (Millionaire-in-progress)

Home Builders Stocks

Today, the existing home sales data was released. For the first time in years, the median price for the existing home sales decreased (about 1.7%). CNBC also mentioned that the inventory is at the highest since 1993.

The drop in the median sales price is what I have been waiting for. Continuing drop in median sales price would put pressure on the home builders stocks to break its recent support.

- PersianCat04 (Millionaire-in-progress)

Market Update

The DOW is now about 170 points away from its May high and 250 points away from its all-time high. On a very good day, to achieve 250 points is not a problem for DOW. The S&P 500 index had already broke its May high.

However, the market had shown a lot of lethargy, trying to break new high. It is in overbought situation. It had 2 down days for the past 2 trading days. While the market will probably make another attempt to break an all time high for the DOW, it is time to consider that the market might be in for a pull-back. There are many stocks as candidates to short, especially the Tech stocks (many with confirmation candles). The stop-loss should be the recent high.

A few things to consider however:

• Jim Cramer had been calling to dump energy stocks and push for Tech stocks (at least till the end of the month) as he believe that the institutional investors will window dress this quarter with Tech stocks.
• He also mentioned that crude oil will drop to $56 before it go up again.
• Many analysts are still expecting a Christmas rally. Such expectations tend to be a self-fulfilling prophecy.
• September tends to end lower.

While I tend to give what Jim Cramer says with a pinch of salt, what he says tends to move the market in the short-term. As a swing trader, I play on a short-term basis. As such, I have to take notice of what he says eventhough I may disagree with him.

- PersianCat04 (Millionaire-in-progress)

DOW and S&P500

DOW ($INDU) S&P500

Based on the daily charts, the DOW is just about 130 points away from its 52-week high. Whereas the S&P500 is just 10 points away from its 52-week high. One could expect the market to attempt to break the 52-week resistance line. Barring unforeseen circumstances (e.g. war with Iran), I feel that the market would break new high and remain high for most part of the next quarter.

- PersianCat04 (Millionaire-in-progress)

Home Builders

$HGX - the housing index made a strong rally today. Lately, the home builders stocks have been resisting the downtrend eventhough the homebuilders industry had been bashed with continuing bad news (e.g. increasing inventory & increasing lower sales). At current market value, most homebuilder stocks are valued at a very low PE ratio (single digits).

However, what is interesting is that the median price of each houses sold had not dropped. Until and unless the price of houses sold drop, the continuing slide of the home builder stocks could not be justified further. As such, I believe the home builder stocks would get a reprieve it badly needed (as shown in today's rally).

I'm however, feel that the prices of houses sold would start to drop next year if not sooner. Depending on the severity of the drop in prices, it could impact consumer spending (which would impact the market in general)

I've been playing Bear Call Spread on BZH and RYL recently (typically in-the-money). I closed my sold leg yesterday with profits. But what make it more interesting is that my bought legs, which were negative before is now positive. I might close these positions tommorrow.

I would wait for a reversal signal before playing Bear Call credit spreads on the home builders again.

- PersianCat04 (Millionaire-in-progress)

RIG - Huge Oil find in Gulf of Mexico

Heard from CNBC about the huge oil find in the Gulf of Mexico. Also read from American Capitalist:

Black Gold Gushes in the Gulf
Just announced this morning, Chevron Corp. (CVX:NYSE) has successfully completed what it called “a record setting production test” on a well located about 270 miles southwest of New Orleans in the Gulf of Mexico. Chevron said the well sustained a flow rate of 6,000 barrels of crude a day. Unfortunately, the equipment used is not able to maintain more than 6,000 barrels, but we’ll take what we can get.
Chevron owns 50% of the well, with companies like Devon Energy (DVN:NYSE) and Statoil (STO:NYSE) holding the remaining 50% equity interest. All three companies are estimating the new oil field to hold between 3 billion and as much as 15 billion barrels worth of oil and gas reserves. If 15 billion barrels are found, oil reserves would be boosted by 50% in the United States.

The find should benefit Oil Services stocks. One player I like a lot is RIG. It had quietly gained more than $4 on Friday and further gained $2.70 so far today. We have 2 more months before the hurricane season is over. Any freak hurricane in the Gulf of Mexico (where many of U.S. oil rigs are located, apart from Alaska) would again benefit RIG.


Target = 80.10, 84.05 & 90.16 (52-week high)
Stop loss = 65.52

- PersianCat04 (Millionaire-in-progress)

AAPL - Special Media Event

Read from Briefing.com about the impending AAPL Special Media event next week on 12 Sep 06 to introduce new products and services. I would expect the market to react positively to the new slate of AAPL's products and services (It had gained $1.65 so far today).

Chart-wise, AAPL broke its resistance today. Target 73.38, 76.60 and86.40 (52.-week high). Stop-loss at 65.12. Note that AAPL is now above its SMA 200 again.


05-Sep-06 12:13 ET
Apple Computer confirms media event - AppleInsider (69.77 +1.39) -Update : AppleInsider reports in a digital invitation sent out to US-based media this morning, Apple confirmed that it will hold a special media event on September 12 to introduce new products and services. "It's Showtime," reads the invite, which displays a white Apple logo floating amongst four crisscrossing Hollywood movie spotlight rays. The event is scheduled for 10:00 am local time at the Yerba Buena Center for the Arts Theater in San Francisco, Calif. (See 8:30 comment)

05-Sep-06 08:55 ET
Apple Computer: Cell phone is a reality; new product cycles including Macs, iPods, and cell phone drive ests higher; increasing tgt to $91 - AmTech (68.38 ) -Update : AmTech says Skeptics abounded when AAPL first launched their iPod MP3 players and revolutionized an emerging market and created a new business segment and a major rev driver for the co. Firm believes the new AAPL handset will be a major player and competitor set to disrupt another industry. Firm has learned that the kinks have been worked out of the new handset, and it is set for production. Firm is confident that AAPL will time their launch opportunistically, and that the new handsets are positioned to gain significant traction. This new market could easily represent an incremental $2 bln annual rev run-rate rev opportunity in Y07. Firm says 10 mln units does not seem a lofty target to them. This is not even contemplating sales of potential services and accessories which would be incremental. With Steve Jobs' history of revolutionizing the PC industry, the music industry, and the movie industry, firm encourages investors to get aggressive in purchasing shares of AAPL prior to the potential revolution of the handset industry. Firm ests for FY07 are now $22.2bln and $2.60 EPS up from $22 bln and $2.45. Firm adds AAPL to their Focus List, and their new tgt $91.

05-Sep-06 08:30 ET
Apple Computer to roll-out iTunes movies and 'one more thing' - AppleInsider (68.38 ) : AppleInsider reports Steve Jobs plans to summons the worldwide media to a special event this month in which he'll usher in a new chapter in the co's digital media strategy. Although the semi-official word out of Apple Americas is that invitations to the event have "not been sent" out, a seemingly inadvertent leak out of Apple Europe last week pinned the affair for Tuesday, September 12. Jobs will have much to talk about during the event, sources familiar with the chief exec's plans have said, including new iMacs and a much-anticipated update to the iPod nano. But the real push, they say, will be tied to the big screen. After what has seemed like nearly two years of rampart speculation and unbridled enthusiasm on the part of its fans, Apple is ready to introduce its al la carte feature film download service as part of iTunes. For some time now, published reports have insinuated that Apple and Jobs would be unwilling to launch a movie download service without a wide, touch-screen video iPod player to coincide. Jobs many months ago commissioned an elite group of Apple engineers to get the ball rolling on an intuitive hardware solution that would more closely tie the co's digital media strategy to the living-room. And so AppleInsider has been told, Apple has been quietly developing a video streaming device that will interface with an updated version of its iTunes jukebox software.

- PersianCat04 (Millionaire-in-progress)

ENER

ENER (Energy Conversion Devices) is a leading supplier of hybrid car batteries and player of alternative energy (e.g. solar). Yesterday (30 Aug), ENER break its 4-months downtrend by making a new higher high with a spike in volume.

The next target level ranges from $39.28 (38.2% Fibonacci level) to its 52-week high of $56.00. Stop-loss at $31.91. Currently, ENER is hovering at $35.51. This stock might be slow in movement. Have to be prepared to stay in the game for a few weeks.

- PersianCat04 (Millionaire-in-progress)

FOMC minutes (29 Aug 06)

Yesterday (29 Aug 06), the FOMC released its FOMC minutes. While analyst reports I read thought that the report is rather bearish, the market rally after the release of the report. Below is an extract of one such reports:

From Briefing.com The market took a surprisingly optimistic view of the August 8 FOMC minutes released yesterday. The minutes indicated that many members felt higher rates were needed. The minutes stated that it was a "close call" at that time not to raise rates, and that "additional firming may well be needed." The minutes also said that "All members agreed that the statement to be released after the meeting should convey that inflation risks remained dominant and that consequently keeping policy unchanged at this meeting did not necessarily mark the end of the tightening cycle." That's a fairly hawkish tone that conflicts with the financial market view that no more rate hikes are likely.

Nevertheless, traders poured over the minutes to find what could be considered bullish statements about economic and inflation trends. There was a clear effort to find the good news and ignore the bad. In our opinion, the minutes in themselves were clearly bearish for the stock market.

The fact that stocks went up after the release says more about the underlying tone than about what the minutes themselves revealed. We still believe the market is overly optimistic on the inflation and interest rate outlooks. There is a risk of disappointment on both. Nevertheless, the longer-term fundamentals remain good. -- Dick Green, Briefing.com.

I found Dick Green often give good analysis of the market. I tends to agree with him on this regard (FOMC minutes). I will treat any short term rally with care.

- PersianCat04 (Millionaire-in-progress)

DELL Earnings Play

Read in Briefing.com yesterday:

17-Aug-06 15:33 ET
In Play
Dell: earnings preview (22.62 -0.11) -Update : DELL is scheduled to report Q2 results today after the close, with analysts expecting EPS of $0.22 on revs of $14 bln. Note that on July 21, the co issued downside guidance, saying they see EPS of $0.21-0.23; sees revs of $14 bln. The co said these ests primarily reflect aggressive pricing in a slowing commercial market worldwide. AmTech does not anticipate much deviation from its pre-announced miss in late July. For the October qtr, they anticipate DELL to decline official guidance but express comfort with sequential growth. They are modeling $14.6 bln and $0.26 as they see a seasonal pick-up in the Americas offset by weaker seasonality in Europe and continued pricing pressure. With the stock trading at 16x depressed CY07 EPS, they see more upside than downside at these levels. A.G Edwards notes since Dell has already preannounced its July quarter, July sales and earnings are already known but P.C pricing details will be of interest. The firm says Dell's October quarter operating margin expectations will be important. They have assumed that Dell's operating margins will remain stuck in the 4-5% range for some quarters. The firm believes that Dell plans to regain some share in the consumer space, which is likely to result in ongoing margin pressure, though they think this is the right strategic move.

Since the July 21 downside guidance, DELL had gained significantly. As I do not expect any good news from DELL earnings, the only way for it to go is down. I played Bear Call Spread, selling Aug 22.5 Call and buying Aug 25 Call for $0.55. Also bought Sep 22.5 Put for $1.05 (almost at-the-money).

Today, DELL did opened much lower, dragging along the market somewhat. Closed my Sep 22.5 Put for $1.65 for a profit of 57% over one day. At the moment, I am leaving my Bear Call Spread intact. Hopefully, it expires worthless today.

- PersianCat04 (Millionaire-in-progress)

NVDA Earnings updates

NVDA did open lower the next day. However, it moved back upwards to fill the gap and gained much more the next day.

My mistake is not to lock-in my profit immediately in the current volatile market. In total, made a very small profit, helped by Bought leg of my Bear Call spread.

- PersianCat04 (Millionaire-in-progress)

NVDA Earnings Play

NVDA will report its earnings after the market close today. Read from Briefing.com regarding NVDA earnings preview.


14:59
NVDA NVIDIA: earnings preview (23.97 -0.36)
Today after the close NVDA is scheduled to report Q2 results, with analysts expecting EPS of $0.23 on revs of $677.08 mln. Caris says FQ2 results for NVDA should be roughly in-line with increased share in discrete notebook and incremental I.G.P sales. Despite the currently poor sentiment surrounding the PC space, the firm believes NVDA fiscal Q2 results were near expectations with low probability of an impending disaster. This would point to NVDA outperforming typical P.C seasonality with flattish revs QoQ as notebook and I.G.P strength offsets desktop related softness. The firm is expecting NVDA to report roughly $682 mln in sales, slightly above the street expectation. Given the increase in mix to G70 based components, the firm also looks for gross margin to be roughly flat at 42.5% despite the ramp of lower margin IGP business. The firm is slightly more optimistic than the street with a $0.28 EPS estimate for FQ2 as profitability remains relatively stable. Lastly, they believe the inventory situation will improve QoQ as NVDA burned additional G70 product and strictly management TSMC wafer-outs. The firm is looking for mid-single digit sales guidance as seasonal tailwinds commence... ThinkEquity believes Q2 results should be in-line and guidance for Q3 will be better than most are expecting. Most importantly, the firm believes DELL (DELL) will use NVDA's chipsets for its AMD PCs, driving revs up by $140 mln in CY07. Click here for techincal levels of interest.

The stock had a good steep run upwards since 18 July. In normal market, the market would punish stocks that had a good run upwards badly if the earnings outcome and guidance werejust in-line. As such, I expect the stock to correct downwards. (Anyway, Briefing.com earnings preview has served me extremely well before.)

Played a conservative Bear Call Spread (for $0.60) selling Aug 25 Call and buying Aug 27.5 Call. Also played a more agressive play buying Sep 23.75 Put (for $1.50).

After the close, Briefing.com reported:

16:21
NVDA NVIDIA announces voluntary review of the it's stock option practices (24.16 -0.17) -Update-
Co announces that the Audit Committee of the Board of Directors is conducting a voluntary review of the co's stock option practices covering the time from the co's initial public offering in 1999 through the current fiscal year. The Audit Committee is conducting this review with the assistance of outside legal counsel. The co has voluntarily contacted the SEC staff to inform them about the ongoing review.

This news is as good as reporting bad results. At the time of writing, NVDA price had dropped below $22.00. Hopefully, the price remains low when market opens tommorrow. Based on the charts, NVDA can drop further to $17.17 (my target).

- PersianCat04 (Millionaire-in-progress)

Market - Updates

As at yesterday, the indices (e.g. Dow, S&P 500, Russell 2000, Nasdaq 100, Housing) showed a confirmed short-term reversal to the downside. The first target should be the lowest point over the last 2 months. The immediate resistance (stop loss) would be the highest point over the last 2 months. I believe the market will try to break the support (where my target is) and go lower. Let see how it turn out.

There are many possible short plays. These include:

• AAPL - AAPL tends to close its gap whenever it has a huge gap up (last one in early July). Target $55.08 & %50.16
• Homebuilders & homelenders (DHI, TOL, KBH, BZH, RYL, LEN, LEND, etc)
• Index stocks (DIA, SPY, QQQQ)

I had already place my positions and am reaping the fruits of my labour so far. I will probably put more ahort positions soon.

- PersianCat04 (Millionaire-in-progress)

Playing QQQQ

When playing options, we could either play in-the-money options or out-of-money options. For QQQQ, I like to play in-the-money options with at least 30 trading days left. This is because in-the-money options tend to have a much smaller time-value than out-of-money options. For example, when QQQQ was at $36.00, the various in-the-money QQQQ options with its bid/ask price and time value were:

Options Description Bid/Ask Price Max. Time Value

• Aug $36 Put 0.95/1.00 1.00
• Aug $37 Put 1.50/1.55 0.55
• Aug $38 Put 2.15/2.20 0.20

Furthermore, when playing in-the-money QQQQ options (with at least $1.00 of intrinsic value), the movement of the option price follows the stock price movement very closely. As such, I get maximum price appreciation while putting up just a fraction of the price of the QQQQ stock. For example, by playing Aug $38 Put (say paying $2.20), when the price of the stock drops by $0.50, I could expect about $0.45 price appreciation for my Aug $38 options.

Another advantage for playing in-the-money options is that we minimise the time decay waterfall effect especially during the expiration week.

However, should the stock goes against you, you tend to lose more than those who bought out-of-money options.

- PersianCat04 (Millionaire-in-progress)

Middle-East Crisis - 13 July 06

Prior to Israeli military strikes in Lebanon, I believed the market is just waiting for any excuse to rally off its recent low (just like it tried to do on Tuesday, 11 July - rally on news that KLA Tencor is raising its guidance). The S&P 500 formed a bull-flag, i.e. a rally is due soon and it will be fast & furious.

Daily Chart showing the bull-flag (if we take out the last candle - yesterday's candle)

However, the Israeli military strikes in Lebanon changed all that. It seems that the market will get worse before it gets better. Please refer to my 18 May 06 blog posting. Perhaps, this is the trigger that would crash the US market (and the global market). Hopefully, it does not happen but we should be prepared.

The latest Middle East crisis if not tackled rationally could drag Syria and worse, drag Iran to war. Already Iranian President said that any attack on Syria (to punish its support for the anti-Israel militants in Lebanon) is an attack to the Muslim world. It means Iran would be drag into the whole crisis. I cannot help but think that this is the perfect excuse for Israel (with moral support from US) to bomb Iran's nuclear plants. That will "solve" US problem of having to negotiate with Iran on the nuclear stand-off. It seems like everything is well scripted. Iran's involvement would likely increase the oil prices as Iran threatens to choke off the Straits of Hormuz (if it under attack) thus choking off 30% of world oil supplies - thus lead to a dramatic and perhaps a sustained increase in oil prices. This would cause the world stock markets to slide and slide and slide....... and world economy tumble.

Enough of the geo-politics, now how should we play?

Since today is Friday, no sane trader/investor would like to keep a long position over the weekend (anything can happen over the weekend). If they do, they would probably have hedged it. If the crisis escalated, energy stocks should benefit as the oil prices is expected to break new record. Already it broke its record high yesterday and it broke again (US$78) today in the Asian market. To break $80 or even US$100 is within reach.

The rest of the stocks would drop. Close one eye (pun intended) and sell anything except energy (and perhaps gold/metals stocks).

If the crisis showed a promising early end, the market quick reflex would be a rally. Next week, we have a few heavy technology companies which are releasing their earnings. These include AAPL, GOOG and INTC. Their earnings announcement would also move the market.

I have already in position KBH Aug 45 Put and QQQQAug 38 Put (played this yesterday). Both are positive at the moment. KBH was played on 5 July (now waiting for a 100% return - coming soon). Will probably add more positions on other counters later. Of course, playing ES, ER2 or NQ is good if the timing is right.

My XSNX is negative. Will just keep this (very small play) and revisit at end of July.

- PersianCat04 (Millioanaire-in-progress)

Events Updates - Immediately after FOMC

As expected, the market made dramatic moves after the FOMC results. Immediately after the FOMC results, the following moved as much as:

• QQQQ +$0.88
• S&P Index +32.08 points
• Dow Jones 30 +133.35 points

All the above closed towards its session high.

How did I play?

When the news was out, I interpreted that the FOMC would be "data dependent" in raising interest rate (as I expected, as such should not be good news). However, the market treated that as good news and pushed the stocks up. So as the QQQQ retraced back after the rally, I bought the QQQQ Aug 39 Put (in-the-money) thinking that the market had overextended itself. However, the market rally further. My trade was negative for the next 2 days (30/6 - last day of the 2nd Quarter & 3/7 - half-day due to pre-Independence Day holiday). As expected, the QQQQ corrected itself thereafter. The extensiveness of the 29 June rally was partly due to fund managers trying to pruce up their portfolio before the end of the 2nd Qquarter. Closed my QQQQ on 10 July after the QQQQ bounced off its 52-week low. Made 44% over 6 trading days.

- PersianCat04 (Millionaire-in-progress)

How I Would Play The FOMC news

Just had a good shower. Quite refreshing.

Immediately after the FOMC news (2:15pm ET today), I expect dramatic movements in the market. It provides good opportunity to make money.

Key to playing the FOMC news is to have access to the news fast. In this case, I rely on Briefing.com (Platinum service) and CNBC. The next step is to quickly interpret what the FOMC statement meant and what the market interpret it as. Use of Candlesticks charts is also important to me.

If the market interpret it as a pause in interest rate hike, almost any stocks would probably rally. Housing stocks (e.g BZH, KBH, DHI, etc) and home lenders (e.g. LEN) would probably be among the gainers.

If the market interpret it as - more interest rate hikes in the near future, then most stocks would probably slide. The Housing stocks (e.g BZH, KBH, DHI, etc) and home lenders (e.g. LEN) would probably be among the worst losers.

To maxinise returns, I would play at-the-money or in-the-money options. I might even play the QQQQ.


- PersianCat04 (Millionaire-in-progress)

Awaiting FOMC news

The market had been volatile the last few weeks. It is difficult to choose a play without being slaughtered within the next few days. It seems that in such market condition, an intraday play seems to be the best strategy.

The FOMC is due to make their interest rate recommendation today (2:15pm ET). While a 0.25% increase is given, what is important is the language used - whether further rate hike will still be in the making. In this regard, I find that the market expectation is rather foolish. Which FOMC in the right mind would say that there would not be any more rate hike when inflation is still creeping (e.g. light sweet crude oil is still above $70 (abt $73.35 for Aug futures), metals prices are still high as compared to 1 year ago). Logically, the FOMC would still monitor the inflation figures and would be "data dependent" in raising future rate hikes.

Hopefully, whatever the outcome, the market can find some kind of direction. While I am bullish on some of the US companies, the rising trade and budget deficits, extremely low savings, extremely high borrowings, and high cost of raw materials (e.g. oil, metals, food, etc) painted a bearish picture of the overall US economy.

I expect great movements (and perhaps quite volatile) in the market immediately after the FOMC statement at 2:15pm ET.

As for me, I'm waiting for the right signal to short the housing stocks (e.g. BZH, KBH, PHM, DHI) once the overall market direction is clearer. While I am still bullish on the metals (gold, silver, uranium, etc) stocks, it seems that at the moment, they are market followers (i.e. follow the overall market movement).

If the market reads that FOMC would pause any rate hike for sometime, then almost any stocks would rally at least for today.


- PersianCat04 (Millionaire-in-progress)

Updates

No confirmation candle formed on Friday.

Market update

Yesterday, the major indices INDU (DOW), SPX (S&P500), NDX (Nasdaq 100), COMPQ (Nasdaq Composite), RUT (Russell 2000) and even HGX (Housing) formed a hammer at a significant pivot low. ETF such as XLE, OIH and many others also formed a hammer.

And it is about time as I do not know how to play the market as most stocks are already oversold. It would be easier if the market correct itself before continuing in its bear trend. At the end of today, if the market closes above the yesterday's high, we would have a confirmation candle. Then the market is expected to have a rally next week (may be a short one though, but we never know). So far, the market is expected to open higher today.

For the rally, I am focusing on the precious metals (e.g. mining stocks like TIE, NEM, BHP). In the meantime, I have been sharpening my skills in trading ES.

- PersianCat04 (Millionaire-in-progress)

Updates (as at 30 May)

As the market tanked yesterday (30 May), I closed my NEM and BHP to lock-in what little profit I made.

BHP
Closed my BHP Aug06 45 Call for a 1.8% profit over 4 trading days.

NEM
Closed my NEM Jul06 52.5 Call for a 9.7% profit over 4 trading days.

QQQQ - New Play
I bought the QQQQ Aug 39 Put for $1.00 on Friday (towards end of day) when the QQQQ was at $39.45. I played this purely based on intuition. I am trying to trust my intuition. I figured if I am wrong and the market when up on Tuesday (yesterday) then I would close my position and lose probably 5 - 10 cts as my option is out-of-money. As it turned out, the market tanked yesterday. The option closed with a 45% paper gain at closing time yesterday. On hindsight, I should have just lock-in my profit. Will try to close this position today.

- PersianCat04 (Millionaire-in-progress)

Updates (as at mid day 25 May (ET))

My NEM and BHP play was negative yesterday. In fact, I was too engrossed with my ES play (it was very profitable) that by the time I checked the NEM and BHP status again, the NEM exceeded my mental stop loss (last Monday's low). I was prepared to convert it into a credit spread. But the market was already starting to recover from its low. As such, I kept my positions.

As it turned out, the market recovers today. My targets for NEM and BHP remain intact at 52-week high. My stop loss would be their recent lows.

- PersianCat04 (Millionaire-in-progress)

New Play - NEM, BHP

The market attempted to recover from its recent fall yesterday. The market might just rebound and continue to rebound. However, I'm still bearish about the overall market. I would leave it to the Bulls to fight it out with the Bears. As most of the stocks have lost a fair bit from its highs, these stocks need to rebound before it can continue its downward trend. How much it recovers, is yet to be seen. The DOW might even reached all-time high.

In this rebound, I would play Call on the Mining and maybe Energy sectors only. My new play are NEM and BHP - both are mining stocks with a big chunk of gold play (among the biggest players in the world). I figure that should the market burst for good, gold stocks or gold mining stocks would have a good chance of appreciating further. China is also preparing a gold ETF for its citizens. A gold ETF (exchange traded funds) would be required to be backed by physical gold. Furthermore, the Chinese Government were also reported to have been advised to convert some of its US$ reserve to gold. As such, more demand for gold from China could be expected. Anyway, the charts for mining and gold stocks were showing bullish plays (e.g. stochastics crossover, low RSI, break 38.2 or 61.8% Fibonacci level, etc)

Even if the market did not burst, the mining stocks are due for correction.

I played NEM Jul06 52.5 Call and BHP Aug06 45 Call yesterday. My targets are their 52-week high and the stop-loss would be their last Monday's lows.

- PersianCat04 (Millionaire-in-progress)

Market Outlook

The overall U.S. market needs a major correction The writings are on the wall:

Rise in commodities (energy, metals, corn, etc)
Rise in commodities will indefinitely lead to a rise in basic materials which would lead to a rise in cost of doing business; rise in cost of goods and services; lower revenue and profits for most industries (except energy, metals, etc) and rise in inflation.

Rise in interest rate
The rise in inflation would compel the Feds to increase its interest rate further. This will rattle the stock market again. The interest rate hike would further hurt the housing market. We have seen in Singapore and Asia, how a high interest rate badly hurt the housing market. But in the U.S., to make matters worst, they allow 100% loan. If the price of their property drops, they will face a double loss - the outstanding loan is more than the value of their property but if they keep the property, they may not be able to afford the repayment as the interest rate increases.

Trade & Budget Deficit
Needless to say, the U.S. budget & trade deficit are extremely high. But some Republican still feel that the deficits are in good hands.

My 2 cts worth

For the major correction to happen, what the market needs is a trigger to prick the stock market bubble. What we see for the last 5 bearish days may just be a precursor of what is going to happen. I believe the trigger had not been pulled. The trigger could be anything from a huge pullout of funds from the U.S., dumping of U.S. dollars, new war in Middle East, U.S. housing market crash, oil price hike to US$150 per barrel, major terrorist attack, etc. Typically, the trigger is pulled when the market is least expecting it.

A classic scenario would be that the market rally after the recent fall. Perhaps, starting today. The rally could even bring the DOW index to its highest level ever (it was very close to achieve that before the recent market fall). Confidence in the market would be high. Conflicting market indicators were also interpreted as bullish news. About two weeks after the DOW breaks new highs, the trigger is pulled. Thereafter, all hell break loose.

As traders, we trade according to our plan. Do I plan for such a scenario? Yes. My recent positions had been mostly short positions. Should the market tanked again, my best instrument would be to short the eMinis (ES or ER2) as they do not have the uptick rule (unlike stocks or options). I have shorted ES during the last five days (after a long break trading eMinis - as I need to tighten up the trading rules for playing ES). It has been very rewarding - for which, I am thankful.

The market is starting soon. Till next time.

- PersianCat04 (Millionaire-in-progress)

Updates (as at 17 May 06)

The market had tanked for the past 5 days and it had served me well as I had shorted the S&P500 eMini (ES). ES is a fast game and one can make or lose money fast. I would not encourage this play to anyone unless they have good discipline and strictly follow the rules of the game.

Anyway, I am getting a hard time looking for stocks to short for options play. Most stocks had tanked and I am not willing to long a stock in the current weak environment. Perhaps, the energy and commodities stocks will be providing good opportunity for long plays soon.

DELL
Closed my Aug 25 Put on Monday. Made 43.5% over 4 days.
Closed my sold leg May 25 Call for $0.10 on Wednesday. This is the repair strategy for my DELL 27.5 Call (which is now fully paid for (free + some profits) by my profits from the sold legs - sold twice).

HOT
Closed my Aug 60 Put on Monday for a profit of 26.7% over 3 days.

WYE
Closed my Jul 50 Put on Monday at a loss of 24.4% over 4 days.

XSNX
Still holding on. Target date to liquidate is still July 2006 (awaiting the outcome of their marketing campaign).


- PersianCat04 (Millionaire-in-progress)

Updates (As at 11 May)

Under My Radar

The following stccks are under my watch list for potential reversal (just waiting for confirmation candle).

• GM
• SNDK (had ascending triangle - waiting for breakout with good volume spike)
• CMCSA

My Portfolio

My current portfolio updates (over the last one week)

• NVDA Put (Closed for 33.3% profit over 5 days)
• ORCL Put (Closed for 21.4% over 6 days)
• TXN Put (Closed for 3.2% loss. Closed too early)
• GM Bear Call credit spread (Closed my sold leg on Tuesday when the stock strongly rally and let my bought leg ride the rally. Closed my bought leg with small loss in total. Closed too early)
• SIL Bull Put Spread (Closed my sold leg with profit. My bought leg is now free - paid for by the profits made in the sold leg. See also my SIL Play)
• DELL Put and Bear Call (Still in play. See my DELL Repair Strategy Play - paper profit)
• HOT Put (Still in play. - paper profit)
• WYE Put (Closed for 20.5% over 1 day. Bought back the Jul 50 Put at lower price. Still in play. - paper profit)
• XSNX (See my XSNX Play - paper loss)

- PersianCat04 (Millionaire-in-progress)

XSNX

Left: Intraday Chart Right: Daily Chart

XSNX tanked with the market yesterday. As the stock dropped below $1.00, it was about to test SMA200. As it reversed after 10:00am ET, I bought more XSNX at $0.99 (thus lowering my average cost). As it turned out, the stock reversed convincingly and closed at $1.33 with an large volume. It formed a bullish engulfing candle yesterday. The stcchastics and RSI also showed a reversal (upwards). I would pick up more above yesterday's high and release them once I achieved a reasonable return.

- PersianCat04 (Millionaire-in-progress)

DELL - Repair Strategy

I've been playing Put on DELL for some time. For some strange reasons (we do make mistakes!), I bought a Jun 27.5 Call for $0.60 (way out-of-the-money) on 28 Apr. The stock keep going south. Sold May 25 Call for $0.95 (when the stock price was $25.31) on 3 May - thereby converting it into a credit spread. If the stock falls below $25 on expiration Friday, I would keep the $0.95 premium and still get to sell again the Jun $25 Call if needed.

Then the stock crept up (instead of down!). Just when the charts showed a strong bullish play, trading for DELL was halted on 8 May. DELL gave another downside guidance. Yesterday 's downslide saved my play. Yesterday, I bought back my sold leg (for a profit of course) and sold again at $0.70. My Jun 27.5 Call is almost free now (paid by the profits made from my sold leg). Since I am still very bearish on DELL, I also bought the Aug 25 Put for $1.15. DELL closed at $25.20 on Tuesday.

Targets remains at $23.26 and $21.90 (4-yr low).


- PersianCat04 (Millionaire-in-progress)

Trading Halt Play - ARIA

Played this on 4 May 06 (intra-day). I called it Trading Halt Day (for lack of better term). Read from Briefing.com at 9:55 am (ET) saying that trading for ARIA is halted.

Then read the following from Briefing.com:

04-May-06 11:22 ET
Ariad Pharm confirms jury rules in favor of ARIA and co-plaintiffs in Lilly NF-(kappa)B patent infringement lawsuit (ARIA) 5.52 : Co confirms that the jury in the US District Court for the District of Massachusetts has found in favor of the plaintiffs in their lawsuit against Eli Lilly (LLY) alleging infringement of the plaintiffs' U.S. patent covering methods of treating human disease by regulating NF-(kappa)B cell-signaling activity. The jury ruled unanimously in favor of the plaintiffs in finding that the claims of the NF-(kappa)B patent asserted in the lawsuit are valid and infringed by Lilly with respect to Lilly's osteoporosis drug, Evista, and Lilly's septic shock drug, Xigris. The jury awarded damages to the plaintiffs in the amount of approx $65.2 mln, based on the jury's determination of a reasonable royalty rate of 2.3% to be paid by Lilly to the plaintiffs based on U.S. sales of Evista and Xigris from filing of the lawsuit on June 25, 2002 through Feb 28, 2006. The jury awarded further damages on an ongoing basis, in amounts to be determined, equal to 2.3% of U.S. sales of Evista and Xigris through the year 2019, when the patent expires. The co-plaintiffs are Massachusetts Institute of Technology, The Whitehead Institute for Biomedical Research, and The President and Fellows of Harvard College. (ARIA is halted.)

I expected the stock to gap up then drop somewhere mid-way. Since this was going to be a very quick play, I was had prepared my 2 PCs for the play. At 11.50 ET, trading resumed. The stock behaved as expected. I short the stock as the stock came down after it gap-up. Made about $0.33 per share on this play. On hindsight, I should have closed some position (lock-in some profit) and left some to ride the wave instead of closing all positions. Anyway, it is still good money (about 4.5% returns for less than 10 mins effort). Below are the intraday 2-mins chart (on the left) and the daily chart (on the right) for reference.

New Play - SIL & ORCL

SIL
Read from Briefing.com about SIL today:

12:32
SIL Apex Silver Mines: shares plunge on concern for Bolivia mine project- Bloomberg (14.25 -6.75) -Update-

I checked the charts and the stock was already trying to recover its losses (It lost $6.75 at the time Briefing reported). Typically, with this kind of news, the market tends to over-react and the time value for the options would be very expensive. As such, I long the stock. I choose to play May $15.00 / $12.50 Bull Put Credit Spread for $1.00 when the stock is about $15.05. My sold leg was $1.75 or 11.63% of the price of the stock at that time (very expensive for a May At-The-Money option of a stock of just $15).

If the stock remains above $15 on expiration Friday. I get to keep all the $1.00 credit (or 66.7% profit) that I collected.

An hour later, Briefing.com reported:

13:32
SIL Apex Silver Mines responds to unusual trading activity in its ordinary shares (16.50 -4.50) -Update-

Co responded to the unusual trading activity in its ordinary shares. The co believes this activity is related to recent events in Bolivia concerning the country's planned nationalization of its hydrocarbon industry. The co is not aware of any plan by the government of Bolivia to follow a similar policy in mining. The co was particularly encouraged by recent statements made by the Bolivian Minister of Mines and Metallurgy in which he emphasized that "the mining policy does not contemplate nationalization and even less incorporation of private companies such as San Cristobal." The co is developing its 100%-owned San Cristobal silver-zinc-lead project in southwestern Bolivia. The project is expected to commence production in the third quarter 2007.

The stock closed at $17.70 today.

There are conflicting reports about Bolivia from CNBC. It was reported that the Bolivia government might extend the nationalisation of Oil companies to Mining companies too. Let see what happen tommorrow.


ORCL
The stochastic cross-over, RSI and candlestick charting showed a reversal. Played ORCL Jun $15 Put (in-the-money) on Monday.
Target 1 = $14.00
Target 2 = $12.92 (also 61.8% Fibonacci level)
Stop Loss = $15.21

- PersianCat04 (Millonaire-in-progress)

Updates

I am back after a lull of a few days. Been busy attending a course and backtesting a mathematical formula (wow! sound Chimp!! Ha! Ha!) for projecting the resistance and support levels for S&P500 futures (ES). So far, it looks good. Need more work on this though.

DELL
DELL continued its drop. However, I had closed my position in my May $27.50 Put on last Thursday for 29.6% profit. At that point, DELL plunged seems to have lost its steam.

DELL made a rally on Friday morning. Thinking that the stock had reversed, I played a Jun $27.50 Call (out-of-money). Bad mistake – should have waited for confirmation candle before playing the reversal. Anyway, my loss would be limited but I shall monitor closely and decide later whether to keep or close my position.

GM
My position is still negative. It announced its sales figures today. It was below consensus but the stock rally with the news. (This play is not Fun!).

TXN
This stock is still trending south though slowly. My Jun 35 Put is about breakeven (loss some of its time value)

XSNX
Uneventful.

- PersianCat04 (Millionaire-in-progress)