$SPY #Options on a roller coaster for a losing day trade

Today’s price action in the SPY was truly a day on a roller coaster. Consequently it was the same for the weekly calls and puts.

First, a gap up, then a plunge on the ETF (see the chart on the left below), another bounce into mid-day, and another plunge before a final surge into the close.

The SPY triggered a day trading buy on the calls, which stopped out for a loss 27% loss, $2688 on 10K traded, before reversing to the puts which saw a loss of $602 at the close (see the white flags on the lower right of the charts below, in-the-money calls on the left, puts on the right). That made the total loss for the day almost 33% per 10K traded, a draw down of approximately $3290, the fourth losing day in the past 20 trading days.

However, there were plenty of times defense could have been played during the day. This is day trading after all.

When the call failed to hold its open at 1.79 it could have been stopped out for less of a loss than when the system signal finally sold (the chart below on the left). On the reversal the put trade made up all of the loss on the call and about 11% more at its high (the yellow-coded spike into the last hour on the chart on the right). Selling that gain would have been a gift for the day but even coming down from that high on the puts, there was a breakeven (the end of the first cyan-coded bar)

Defense. Always take the signals, then play defense…

(click on the charts for a larger view)

$SPY #Options – #DayTrading 10K in weekly puts…FINAL UP 55%

Trading weekly 286 puts – 64 contracts at $1.49 – to start the day trade.

Current return per $10K in the white flag on the lower right of the chart below.

Will update.

Update #1 – stop at breakeven.

Update #2 – the trade topped out at up 39% (the green vertical line on the updated chart below). Violated its rising moving average at up 15% (the first red vertical line), a point at which to take some or all off for the day.

Stopped out at break even (the second red vertical line).

Obviously a disappointing day-trade in the put. Just as obvious it is the trades that do not hit the stop loss that make the most money.

Update#3 – Reentry at $1.49 again, $10K, 64 contracts. Stop at breakeven. See updated chart below.

FINAL UPDATE: the last entry in the puts rode the sell off to the close, netting approximately 55%, $5,500 per $10K in the trade. So the disappointing, even with the first stop loss, day in puts turned out to be just fine. See final updated chart below.

TUESDAY UPDATE: Another day trade in puts, triggered off SPY’s gap at the open. A fairly frustrating sideways move after the open. Stopped out on the first entry for a 12.2% loss on $10K in the weekly in-the-money 284 strike, 36 contracts. Reentered the 284 strike, 41 contracts, for a 27% gain into the close, for a total net of 14.8% on the day, $1,480 per $10K in capital. I’ll skip the chart for today.

(click on chart for a larger view)

$SPY $QQQ #Options – Day trading $10K…Final Update

THE FOOL’S GAME – BUYING CALLS AND PUTS

As other bullish week in the bull market begins to draw to a close, the $10K buys in the weekly in-the-money SPY 283 calls and QQQ 168 calls are up 45% and 28% mid-day (see chart below). That is $4500 and $2800 on a $10,000 buy in each index ETF.

Will update on the close.

UPDATE: The week ended with a glorious options trade in the weekly SPY and QQQ options. The SPY 283 call, expiring Friday, was up 130%, $13,300 per $10K traded for the day. The QQQ 186 call, expiring Friday, was up 96%, $9.660 per $10K traded for the day.

SEE UPDATED CHART BELOW.

(click on the chart for a larger view)

#DayTrading #SPYoptions – Ho-hum, another 80 to 120%

THE FOOL’S GAME – BUYING CALLS AND PUTS

Today was again a day to live for in “The Fool’s Game.”

The weekly SPY options bracketing the open at 280.17 — the 279, 280, and 281 calls expiring Friday — netted 80%, 100% and 120% respectively on the $10K day trades. See the white flags on the lower left of each chart below for the cash gains and percentages per $10K committed to the trades of each strike.

Been a lot of days like this in this bull market.

(click on the charts for a larger view)

#MarketTiming – a choppy Friday leads to a buy-it Monday

Friday’s market action continued its sideways chop as it consolidated the gain from last Wednesday’s trending day to the upside.

As the 10-minute screenshot for the day shows there was almost no money to be made in the choppy action, and if there were any profits to be taken, they would have had to been taken fast while losses would have been easy to come by on both sides of the market (see the flags on the lower right of each chart below).

However, with both the SPY and QQQ closing above their respective opens and intraday moving averages, as well as all end-of-day swing signals turning bullish again, the initial trade on Monday is to the buy side (see table below) for another possible up swing.

Long-term breadth remains down, but barely (-1) with the threat of another bullish whipsaw. It has been whipsawing daily for the past week.

(Needless to say, this market, in general, remains wildly overbought and can pull back any week, any day, any hour, any minute but that is the way it usually is in raging bull markets.)

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Sell (Day 2).

PRICE: Buy. (Day 1).
SHORT-TERM BREADTH: Buy. (Day 1).
VOLATILITY: Buy, (Day 1).

CONTEXT:

SPY CLOSE – 280.41
QQQ CLOSE – 166.34
CNN MONEY’S FEAR AND GREED INDEX: 80, rising, extreme greed level).
NIFTY-50 STOCK LIST: 30 Buys; 17 Overbought, 3 Oversold, 10 new buys today, 1 new sells.

(click on the chart for a larger view)

#IPOs – $FIT shows the first day’s range is sacrosanct

As has been stated in a previous post here, buying into an IPO is actually one of the easiest decisions in stock investing but never let a broker con you into doing it the day of the offering.

Instead, note the high price and the low price on the first IPO is traded. Those are the lines in the sand or the Darvas box around the first day of trading (see the charts below). The time to buy, invest, is on a close above the high of the first day with a stop loss below the high of the first day. That is usually a low-risk trade since the real good news comes when the stock proves it can move up from all the hype surrounding the offering itself and if it falls back the stop to exit is close by.

So, with history on our side, let’s take a look back at one of the most famous IPOs of past couple of years – FIT.

FIT came public in 2105 at 30.40 and had a high on its first day of 31.90, a low of 29.50 and a close of 29.68. That would make the “sacrosanct” range from the 31.90 high to the 29.50 low (see the blue rectangle on the chart below).

The next day, FIT closed at 32.50. That was the buy signal as it finished outside the first day’s range. It then rallied as high at 51.90, a pretty nice rise in a couple of months.

I’m not one for fundamentals but how far did anyone think the company was going to go on a gadget product keyed to New Year’s resolutions and open to competition from virtually everybody?

Needless to say, like New Year’s resolutions themselves, the stock began to fade and by the end of the year 2015 it was violating its “sacrosanct” first day’s range. It started 2016 with a serious break to the downside on substantial volume making it a clear short in IPO trading and, as they say, the rest is history.

It has now dropped into the $5 range from its IPO low of $29.50 in the face of one of the greatest bull market’s in history.

This price action, long or short, is the same with every IPO.

By the way, history, me thinks, is the best market indicator of all.

(click on the chart for a larger view)

$SPY $QQQ – finally a gap and fall that’s worth some money

The general market gaped up today, ran higher, quietly rolled over, then roared down into the close.

It was the quiet at the highs of the day that was a bit eerie. VIX was up (as it has been for the two previous days) and that’s not supposed to happen as the indexes advance. The NYSE advance/decline line was almost immediately below its open. The SPX tagged 2800, the Dow ran through 26,000, and then everything just stopped and reversed. At first, it was almost as if Coyote from the Roadrunner cartoons had again run off his cliff and had yet to plummet to the valley floor below and then like a car that runs out of fuel going up a steep hill.

In the end the day felt like SPX 2800 and DOW 26,000 could be nice round numbers to leave behind.

If one looks at the close in comparison to yesterday’s close it appears as if nothing much happened today. But the close today is deceptive. The close does not quite register the initial leap and the final fall.

And it was a fall worth something. On my $10K weekly options model, the intraday sell signal on the in-the-money QQQ 166 put raced up to a peak gain of 167% and finished the day up 127%; the SPY in-the-money 280 put peaked at 94% and finished the day up 51% (see the white flags on the lower right of the charts below).

If there more downside to come?

Over and over again, this bull market has said no and charged ahead after every little downside glitch. It will continue to do so until it doesn’t. After today’s reversal from higher highs, long-term breadth turned negative making all of the sells on my swing signals shorts (see table below). If today turns out to be the time the bull does not charge higher, well then…it will be a bull that dies with a sigh instead of a snort.

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Sell (Day 1).

PRICE: Sell. (Day 1).
SHORT-TERM BREADTH: Sell. (Day 2).
VOLATILITY: Sell, (Day 3).

CONTEXT:

SPY CLOSE – 276.97
QQQ CLOSE – 164.02
CNN MONEY’S FEAR AND GREED INDEX: 75, falling, extreme greed level).
NIFTY-50 STOCK LIST: 23 Buys; 18 Overbought, 7 Oversold, 0 new buys today, 9 new sells.

(click on the charts for a larger view)

#BellwetherStocks – longer fangs for the new year?

Let’s put it this way:

NVDA UP 14%
NFLX UP 13%
AMZN UP 11.3%
TSLA UP 7.7%
BIDU UP 7.0%
GOOGL UP 6.8%
BABA UP 6.5%
TWTR UP 5.5%
AAPL UP 4.0%
FB UP .9%

The above are year-to-date returns – nine trading days – which is why they are the “bellwether stocks” for this melt-up bull market. They also happen to be the stocks in the NYFANG Index, up 8.4% year to date.

Also I would add FSLR, up 8.2%, as a bellwether for the future of energy.

(click on the chart panel for a larger view)

$KC_F – #Coffee short netting 118%, looking for major reversal

The current short in the coffee futures is gaining about 118% on its initial margin requirement. That’s in six trading days.

Can be done, but it’s going to take some serious trending effort on the part of coffee bears to push this swing down more.

So a reversal to the long side?

Coffee is still in an overall downtrend (see chart below) but if it turns now, it will put in a second higher price low since its bottom in December at 118, which makes it not only a long trade to take, but also gives it a chance to have a major bullish reversal. Looking ahead if it can take out 128 with some conviction, there could be the birth of a new bull market in the commodity.

But all that is just speculating. For now the short is on and the profit on this swing is, once again, just fine…

(click on chart for a larger view)

#MarketTiming – Bullish #SwingTrading continues…

The market had its one down day two trading days ago and has, as usual, vaulted higher off the opportunity of buying coming out of that one-day dip.

Quite frankly, except for the money to be made by either buying and holding or trading the long side, I’m getting pretty bored this bull market’s endless advance. I would like to see some pullback. Actually I’d like see a drop that scares the balls off the bragging bulls. That would be amusing.

Possibly we’ll get some pullback with both short term breadth and volatility, of my three swing signals, now on sells, but I’m not counting too much on it – sells are sells only, not shorts, as long as long-term breadth remains positive.

Overall the swing signals continue to be consistently profitable.

Volatility since the beginning of last year has been crushed with the VIX falling below 10 repeatedly. On the swing signals – based on Price, Breadth, and Volatility – the leveraged ETF, XIV, appropriately performed best on its own signal – up 105 percent for the year.

See the chart panel below for XIV on all three signals – the white flags are the returns per $100K place on each swing trade, which also corresponds to percentage gains.

A buy and hold on XIV wildly out performed all of these swing signals, up 159 percent since the beginning of last year (what a year!), but one would have had to have known that a buy-and-hold was going to do that from the beginning. On the other hand, swing trading controlled risk at every turn while also notching remarkably returns.

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Buy (Day 2).

PRICE: Buy. (Day 2).
SHORT-TERM BREADTH: Sell. (Day 1).
VOLATILITY: Sell, (Day 2).

CONTEXT:

SPY CLOSE – 277.92
QQQ CLOSE – 164.49
CNN MONEY’S FEAR AND GREED INDEX: 79, rising, extreme greed level).
NIFTY-50 STOCK LIST: 32 Buys; 25 Overbought, 4 Oversold, 10 new buys today, 4 new sells.

(click on the chart panel for a larger view)