#SwingTrading – “Buy when the market tells you…”

Kennedy Gammage, the late great market timer, used to say “Buy when the market tells you, sell when the stock tells you.”

He could just as easily said “buy when the market tells you AND when the stock tells you.”

That is what this story is about.

Mr. Gammage’s market tools were the McClellan Oscillator ($NYMO) and the McClellan Sumation Index ($NYSI). The NYMO is a short term market-breadth indicator based on the New York Stock Exchange Advance/Decline line, and the NYSI is its longer-term brother.

Taken together, they are the clearest indication of mass market psychology which is to say: market direction, up or down.

When the NYMO and NYSI rise, it is time to buy stocks, ETFs, calls, futures, whatever money-maker one likes best.

That is the market telling you to buy…simple as that, and do not argue.

Now throw in my nifty-50-stock list (see its own story below) as it moves, again and again, from oversold to overbought and back again.

Each time there are 40 or more of the 50 stocks on sells, it’s time to sit up and take notice since that is the number that most often signals either the bottom or the beginning of a bottom on each down swing.

Once 40 more sells have registered on the list, it is time to take note of the NYMO to get market direction to trigger the buy, or if longer-term breadth, measured by the NYSI, is rising when 40 or more sells register on the list that is to time as they say in the market to “buy the dip” in an on-going up trend.

This is what market timing and swing trading are all about and the returns can be both rapid and remarkable.

#MarketTiming the #ShortList

#MarketTiming swing bottoms with 40 plus sells on the #Nifty50StockList

Again and again, my nifty-50 stock list moves from oversold to overbought and back again to oversold like an ever spinning wheel within the market’s spinning wheel…

And each time there are 40 or more of the 50 stocks on sells, it’s time to sit up and take notice since that is the number that most often signals either the bottom or the beginning of a bottom on each down swing.

I first posted about this strategy in November of 2015, one of the first entries on this blog.

Nothing has changed.

Usually it just takes one day of 40 sells, sometimes two days, to set up the bottom of a swing. Should be noted if it goes more than two days that’s is a warning that something bigger may be in the offing (last time that happened was the start of the Covid-19 bear plunge this year).

This is just an FYI, but it is what market timing and swing trading are all about.

The results can be quite remarkable, in leveraged ETFs like TQQQ, TNA, leveraged sector ETFs like SOXL, FNGU, and, of course, hot individual stocks.

The buy signal is the open of the first day after the Nifty50StockList ceases to have 40 or more stocks on sells. Stops are at whatever price level on whatever is bought based on each trader’s risk tolerance.

On the chart below the 40-plus sells are marked with purple paint bars.

(click on the chart for a larger view)

#MarketTiming the #Nifty50StockList – Marking progress in $QDEL

Today, a look a back at the swing signal and upswing in QDEL, number 25 on the Nifty-50 stock list.

Up 27% since the swing signal in an oversold list since the buy on the open 9/09, 13 trading days ago.

#MarketTiming the #ShortList – Stocks UPDATED

The obvious stock sectors that are no-brainers for shorting largely because Covid-19 has put them either out of business for the immediate future or has severely hampered profit prospects for this year.

The most obvious are the cruise companies – NCLH, CCL, RCL – since it’s going to be a long time before they can pack a liner with either customers and crews. And now several of the key destinations have so enjoyed being tourist free there is talk they are not even going to allow the ships to dock and disgorge passengers like they were doing before the pandemic.

Next on the list movie theaters – AMC, CNK – since even if they open with social distancing they will at reduced audience capacity. Can they make profits on half a house or less?

It’s the same in the airline sector – AAL, UAL, DAL, LUV – less flights, less passengers, more trouble with the virus every hour of the day. Throw with BA too. No need to buy passenger planes when there are so few passengers and you have a fleet of excess airliners in storage.

Banks are on the short list too — JPM, GS, BAC, C, WFC – largely because they have lagged the rally from the March low for too long. That spells trouble not only for the sector but for the market as a whole. If the economy is going to tank and take the stock market with it (any day, week, or month now), it’ll probably, seriously, start the drop in the banks.

UPDATE: Am adding YELP and TRIP to the list. Without as much to review as they had before the pandemic, they have diminished prospects for the near term and maybe longer.

Coal stocks – BTU, ARCH, SXC, CNX – on the short list because the coal sector is always a short. It is not the fuel of the future and is becoming more and more not the fuel of the present. If ever there is a sector for swing traders to short every bounce this is it.

In the $BLNK of the an eye, 40% and 12.6%

On my last swing buy signal $BLNK, a company in the business of providing charging stations for electric vehicles. You know, things like those posts in parking garages and any where else something like a Tesla might pull in for a recharge.

I’m not one to get into fundamentals but it seems to me BLNK is a baby with a whole world and all of its life ahead of it.

If one is so inclined to peruse the fundamentals there is this at BARCHART.COM.

Anyway…

Since my last swing buy on stocks, ten trading days ago, BLNK is up 40% (see the chart at the bottom of this post below). Since I tweeted this on its run out a Darvas Box it is up 12.6% from the open three days ago.

As some market guru might say — “Sprightly.”


AT THE CLOSE TODAY (9/22):

(click on the chart for a larger view)

$SPY #Options #DayTrading – FED CALLS an hour rally, then it’s all ka-PUTS

Today was a Federal Reserve open market pronouncement day. Pretty much as expected, no change in rates and no likely raise of rates at any time in the future.

One would think that’s pretty bullish, and it was for an about an hour (see the CALLS chart below), but like a lot rally days recently there’s a sell-off into the close (see the PUTS chart below).

When the market doesn’t charge ahead on so-called good news, it is not good news and it could turn bad in a hurry.

FIRST OPTION PLAY: THE CALLS

SECOND OPTIONS PLAY: THE PUTS

A SIDE NOTE ON THE PUTS PLAY:

Had that stayed with the initial breakeven and held to the close the second half would have been up around 130%. Them’s the breaks.

(click on the chart for a larger view)

#OptionsStrategy – #DayTrading $TSLA strangles

“No one can day trade stock options!” an irate administrator of a Facebook options trading group told me back at the beginning of the year.

His group was centered on “investment income using options.” He was basically doing covered calls or puts, rolling them forward when necessary, in an effort of adding ten or so percent to ownership of the stocks themselves. Fine.

I just happened to blunder into the group day trading SPY calls and puts for ten times that return. I don’t know if it was the returns or, as he said, his belief the practice was so risky I should not be suggesting it anyone.

I argued there were ways to control risk and he might want to open his mind.

He didn’t want to evidently since he blocked from the room.

Well, at the time I got tossed, I thought maybe he might right – after all, trading SPY options was not the same as stock options. As the most popular ETF its option were extremely liquid, with tight spreads, and three expiry days per week. I’ve chronicled much of the SPY trading in posts below so I won’t get into it anymore in this one.

Stock options didn’t have those qualities but some came close – AAPL and FB particularly, others like NFLX, NVDA. The trouble with each of the stock-option trades, however, was that not only did one have to get the direction right for the day (it is a call or a put?) but one also had to have enough movement to make it worthwhile, and then each trade needed to be monitored pretty much constantly all day.

What I was after was a strategy that could be put on early and ignored to the end of the day unless it hit a stop loss during the day, at which time there might have to be a reentry if there was still time to reap some reward.

The trouble with even the best stocks like AAPL, FB, etc. was there was usually not enough bang for the buck in a single day.

Then along came TSLA.

It didn’t take to discover TSLA weekly options were as good as it gets for day trading short strangles, lots of premium, a big range of movement and enough liquidity to fairly easy to put on the trade and, most importantly, to get out of the trade.

In a short strangle, one is playing time decay (theta) every day on the strikes both above and below the stock’s price at the start of the trade.

And one has to keep in mind that shorting options naked (without owning the stock) requires considerable margin buying power – one ends up needing to put up $30K to $50K to maybe make $500 on some days. That might not seem worth it, but the ringer in a day trade is it’s the same margin every day and stays the same as the daily profits pile up all week long. Oftentimes, the day by day ends up making double-digit on the margin requirement for the week (see the green cells in the table below).

Using a tight stop (like $200 per contract) and selecting the right spread of strikes prices, significant returns can be had in a month.

For August, the TSLA short strangles yielded $18,800 per contract on a maximum margin requirement of $50,521 per contract (as prescribed by the CBOE MARGIN CALCULATOR, a 37.4% return for the month (see the yellow cells in the table below).

That’s without having to know what TSLA was going to do on any given day in any volatile month of wild price swings.

(click on the table for a larger view)

$SPY #Options – #DayTrading puts as the market plummets

For twelve days the major market leaders defied the falling long-term breadth, measured by the McClellan Summation index (the all-important NYSI) dragging the general market high and higher on FED intervention (I guess) and irrational exuberance for the big, big tech stocks.

Well, today, the NYSI 13th day down, took care of that. Across the board, the indexes and stocks plummeted. The Dow was down 800 points, the Nasdaq Composite down 598. High flyers AAPL down 13%, TSLA down 14%, NVDA 13%, ZM down 14%. A lot of shock going around as exuberance gave to way how can this happen? Aren’t these stock things supposed to go up every day?

Funny.

Anyway, it was great day for day trading SPY puts:

The strategy for taking these trades is stated in this link: #DayTrading $SPY #Options – Buying calls and puts.

FIRST TRADE: 320%.

SECOND TRADE: SOME ICING ON THE DAY

$UVXY – a slow walk to its next explosion…

The fuse has been lit all that’s left is for the blast to blast.

ON August 10 I gave another heads up to look over at UVXY before it takes off, maybe to the stratosphere…again.

See this link: $UVXY – lighting a fuse for its next explosion…

In the link it was pointed out that UVXY – like other VIX derivatives – had again worked itself into a falling-wedge pattern.

The last time that happened was in January. In February, after a slow walk out of the wedge it suddenly rose nearly to 140 from 11 – FROM ELEVEN TO NEARLY ONE HUNDRED AND FORTY! That explosion was fueled by the worldwide pandemic and, in the U.S. particularly, by the utter incompetence of Trump and his administration to deal with it.

I have no idea what is going to drive it now, although the Trump disaster continues unabated, but UVXY has again walked out of a falling wedge and is slowly walking toward whatever it is (see the chart below).

Maybe it will be reality setting in that an economy — that has been masked by a exuberant market rally fed by FED pumping and a few big tech stocks like AAPL, AMZN, MSFT, FB — more or less sucks.

Much, much more than less.

So many sectors – airlines, movies theaters, cruise ships, BANKS, now even fossil-fuel stocks like XOM, CVX, BP – after the initial bounce off the March lows have been going sideways for months and are now poised to drop off cliffs the market has built for them.

UVXY showed a hard run up off its low today. That could mean it’s done with slow walking. Or maybe not.

Regardless, it likely won’t be much longer until it explodes to the upside, and when it does, it will be fast and across the rest of the market it will take no prisoners.

(click on the chart for a larger view)