AEGR: The Highest Implied Volatility of any Optionable Stock

Straight from Options Alert today, they announced that AEGR has the highest IV of any trading optionable stock.  The stock is at 14.17 as of the close of today.  Right now, you can sell a Oct 15 call for $2.55.  That is some serious implied volatility.  So why the IV?  Because the FDA is meeting on October 17th and October 18th to debate the risks and benefits of two experimental drugs..one of which is from AEGR.  Here's a chart:

So how does one play this?  I bought the stock and sold a call...a covered call position as it is known in the options world.  My main risk is that the FDA announces something negative and the stock gaps down.  The FDA is meeting on the 17th and 18th and the option expires on the 18th, so I'm betting that either good news is released early or no news is released prior to expiration.  The ideal situation will be for the stock to trade up to the $15 area by next Wednesday and be able to cover the call after some loss of time value and hopefully some loss of IV.  We'll see.  This is one of those longer shot trades that you don't want to allocate too much to, but it's just attractive enough to nibble on.  I'll post an update on it next week.

TLT

LIve Trade: Opening Range BreakOut in the Eur/Usd

I've got a position on in the Eur/Usd today.  So far, it is working out to be a potentially good opening range break out trade.  I've put on 2 units of the trade and am trailing one unit with an ATR stop.  Here's a screen shot of three charts:

Notice that I'm looking at the S&P (via SPY) and the VIX in addition to the Eur/Usd.  It is important to see that SPY is above it's opening range and the internals are bullish (as indicated by the green painted bars on the spy chart).  The VIX is pulling in too..so along with spy and internals, it shows that the markets are all working together which gives the trade a higher probability of being successful.  At this point there's not much to do but wait for pull backs to add to the position and/or get out once price action starts tripping sell signals.

Hope everyone's having a great day.

TLT

Got a Sell Signal on the Euro this Morning

Building a short in the Euro/Usd, beginning with a fresh sell signal that occurred this morning. 

I hope everyone's off to a great start for the new year..let's make it a good one.

TLT

Get Ready for Round 2 with Winn Dixie

Winn Dixie (WINN) is poised for take off again.  After rocketing from 6.50 to 9.50 very quickly and then pulling back, it appears that buying order flow is driving it back towards the highs.  I'm still long this one from before but I am probably going to add to it.  Below is a breakdown of the trade.

 As you can see from the above chart, the weekly chart just had a crossover on the 20 and 50 week moving averages...possibly the beginning of an uptrend.  Furthermore, the Volatility stops are still in "buy" mode.  I'll be targeting an add between 8.50 and 8.00 a share.  I'll set an initial wide stop at 7.30 and then trail the stop with the volatility stops.  We'll see what happens.  The market overall is starting to look stronger via market breadth and sentiment indicators.  This stock could really take off if buying hits the general market.  As always, time and price will tell.

TLT

Fresh Strong Buy Signal on the EUR/USD and some Think Script Code

I'm long the Eur/Usd...my TrendFuzz system just switched from Buy to Strong Buy. The pair may make a run for it's recent highs, which would make for a great trade.  Here's the chart:

Note the bars changed from dark green to bright green indicating a "strong buy" signal.  This combined with the Trend Confirm Dots (a separate trend following system) makes the pair look bullish right now.

A quick explanation of the TrendFuzz system is in order and I'll briefly describe it since I've been referencing it for a little while now.  TrendFuzz, is a trend following system that combines a market thermometer indicator or thermo with a volatility break out system.  The thermo measures an instrument's ability to make higher highs or lower lows (similar to what A. Elder described in Come Into My Trading Room) and it combines this score with another score based on current price in relation to a couple of past prices..like prices from 20 and 50 bars ago.  So, one part of the trendfuzz indicator is based on an increased/decreased average of thermo scores and the other part is just a volatility break out confirmation...the instrument needs to move 2x its historic volatility kind of thing.

This indicator is great for catching trends and does a decent job of minimizing risk.  The volatility filter helps filter out moves that are likely to whip saw...although not all of the moves get filtered out.  The "fuzz" in trend fuzz alludes to "fuzzy logic." This is because it is an adaptive system that can change its criteria for readings based on recent trading activity.  This means that an uptrend reading from today can have different criteria than an uptrend from a month ago...hence a fuzzy definition. 

I'm not going to share the code or the internals of the full system, but, I will share the basic code for the Thermo...which is what a good part of the system revolves around.  Some of the programming might be a little redundant and amateurish because, well, I'm not a professional programmer...just a self taught market junky that knows enough to get by.  The code used in the system is similar to this one, but it has been tweeked quite a bit.  This Thermo indicator is still rather interesting and can be useful to anyone interested in a new indicator. It uses a 52 Week High/Low score verbiage but its not really referencing the 52 week high/low..that is leftover from the original indicator.  Now can be set to look back at any bar you want..like 10 bars, 20 bars or even 100 bars back, just make sure the aggregation period on the chart is the same selected for the indicator.  Here's the code for thinkorswim:
####################################################
declare lower;

input ThermoAGPeriod = {default MONTH, MIN, HOUR, DAY, WEEK};
input ThermoLookBackBars = 12;
input PlotType = {default ExpMovingAverages, Standard};

def HighLowScore = 1000*((high-high[1])/(high[1])+
(low - low[1])/low[1]);

def A = highest(high(period = ThermoAGPeriod));
def B = lowest(low(period = ThermoAGPeriod));

def FiftyTwoWeekHigh = A[ThermoLookBackBars];

def FiftyTwoWeekLow = B[ThermoLookBackBars];

def FiftyTwoWeekScore = 10 * (((high
- FiftyTwoWeekHigh)/FiftyTwoWeekHigh) +
((low - FiftyTwoWeekLow)/FiftyTwoWeekLow));

def ThermoScore = HighLowScore + FiftyTwoWeekScore;

input MAPeriodShort = 9;
input MAPeriodLong = 50;

def EMA = ExpAverage(ThermoScore, MAPeriodShort);
def EMA2 = ExpAverage (ThermoScore, MAPeriodLong);

plot Line1;
Plot Line2;

Switch (PlotType) {
case ExpMovingAverages:
    Line1 = EMA;
    Line2 = EMA2;
case Standard:
    Line1 = ThermoScore;
    Line2 = ThermoScore;
}

def InvisibleLine=close*0;
plot Line3 = InvisibleLine;
Line3.hide();


addcloud(Line1, Line2, Color.CYAN, color.Dark_RED);
addcloud(Line2, Line3, Color.Dark_Gray, Color.Magenta);     

#####################################################

Enjoy and let me know if you have any questions.

TLT

Silver is Sliding

Might be jumping the gun, but I started shorting silver last week.  I rarely take on pure contrarian positions but this one was hard to pass up.  After the 6th amateur trader told me that they were never going to lose money in silver and that they were waiting for a price above $50 to sell, I began shorting.  So far it has worked, but you never know with something like this that is parabolically rising. 

I believe that the big boys have unloaded most of their holdings (see volume above) and the day traders and retailers are the main ones still playing in silver for the time being.  Day traders will be fine for the most part, but retailers can easily get hurt here.  Just my opinion and I've certainly been wrong plenty of times. 

Have a great week.

TLT

Swing Trade Idea: TBT

Bonds are starting to move. Long term rates are creeping higher and bonds prices are reacting like they should (falling). I've been nibbling on TBT for a few months now and it seems like this trade is about to start moving.

As you can see from the chart below, TBT has been consolidating in a long wedge formation and is beginning to break out. One thing that jumps out at me right now is the huge volume that was traded on Thursday and Friday of last week. Here's the chart:Gameplan:

• Initial Entry Price--49.25
  
• Initial Stop Loss--46.00
• Initial Profit Target--60.00--sell 2/3 position
  
• Second Profit Target--75.00--exit rest of posisition
• Trailing Stop--once TBT closes above 55, the stop loss will be moved to 49.00 and the entire position will be closed out if TBT closes below an ATR Trailing Stop set for 20 periods with a 3.0 multiplier.
  

There you have it, the full game plan. Now we just need to put the trade on (I'm gonna add a fresh position to what I already have and manage the entire position with the above plan). Let's take a quick look at the risk to reward. With the 49.25 entry, the risk will be $3.25 with a potential reward of $10.75...a 3.30 R-multiple. This is good enough to put on the trade. Remember, the 60 target is the target for the first 2/3 and the remaining portion will be trailed up to 75, which means the trade could return more, but the intial targets are good for intially determining if the trade is worthwhile.

The scenario is built, the game plan is written out, and the risk-to-reward has been qualified as worthwhile to put capital to risk for...now I've just got to put it on and manage it. Easy right? Trading can be easy when you take those steps to plan a trade and then FOLLOW YOUR PLAN.

I'll write some follow-up posts to udpate on the progress on this trade.

TLT

I Bought the Market Today...

Went long with a leveraged ETF today as the S&P began pulling out of oversold levels. Will it continue going up? I don't know, but you have to be willing to step up and buy during times of uncertainty when you see a tradeable setup. For me, the setup is a pullback to oversold levels on the stochastic while an uptrend stays intact...the uptrend is indicated by the green bars painted by the TLT Trender v2. Here's the daily chart that shows the oversold level and the green bars:The daily chart gave me the signal to start looking for a long entry and a specific stop loss level. To determine this, I use the TLT Trender v2 on the 15 minute chart along with a volatility indicator to pinpoint the entry. The volatility indicator looks for rising short term volatility, which confirms a breakout. I'll post later on in the week about the volatility indicator and how I use it...don't really have time to right now.

Hope everyone's week is going well so far.

TLT

Bought OSK Today

I decided to buy the dip this morning and purchase a little OSK. I got in at $12.90. Here's a chart with my entry and exit plans:We'll see how this one turns out. I like buying the breakouts after a pullback into resistance and this one is a near perfect scenario for that setup.

TLT

The Pound Keeps Rockin'

One of the best currency trades i've had in a while (it's up over 500 pips) is a long Gpb/Usd trade and it's starting to get within reach of my profit target. Here's an houly chart:I've been in and out of the pound over the last several months and on this trade I just waited for a little pullback with some consolidation on the hourly chart and I hopped on board. The pound has the potential to blow way past my profit target but I'm gonna stick with my plan for this trade and book profits at the target and then if the pound is still showing strength, I'll wait for another pullback to re-enter.

Good luck out there.

TLT

Oil Update

Oil is pretty hot right now and I was lucky enough to enter into DXO at the beginning of May...oil has doubled since its bottom earlier this year and it rose 30% in May alone. I'm still in the trade and I have a profit target for DXO set at $8.75, still a ways away, but I'll be trailing a stop below support levels just in case it doesn't hit my target. Here's an updated chart:The world markets are rallying today and America seems to be on board as well so let's go make a little money.

TLT

Review of a Live Trend Trade: ATW

April 13, 2009, I purchased ATW at just under $21.00 a share and today I want to review the trade and see if it's still worth holding onto. I initially put this stock on a watch list because it had been consolidating for a several months and it looked like it might break out of it's consolidation channel. Well, on April 13th it did and here is the chart:A little over a month has gone by now and the stock has shot up to $28-29, back down to the $22-23 neighborhood and now it's hovering around $25. I am going to hold onto this stock because the current chart pattern indicates that the uptrend is still intact and there is not a sell signal. Here's today's chart with some annotations:Based on the above observations, I think this is still a great stock to be in and this might even be a good point to jump in or add to a position. I personally will not be adding to my position because I have a sufficient exposure to equities right now, but I might wish I had later. We'll see.

TLT

Live Trade and A Quick Look At Multi Time Frame Trend Alignment

I've got an open long position in the Eur/Usd this morning. I got a buy signal about an hour and a half ago and I quickly thought that this trade would be a loser because the pair fell and consolidated right after I bought. Now the trade seems to be coming to life as it is moving to newer highs...sometimes you have to have patience and let the trade develop. Here's a five minute chart that shows my entry along with a couple of notes about the setup:As you can see, it's the same basic setup that I've been using lately. Trender line is green, the Fisher MA crosses the Zero line and the RSI is trending but not in extreme territory. I've really been working on keeping my entries and exits as simple as possible.

The above system generates a lot of good signals and also quite a few false signals. One thing that helps eliminate some of the false signals is to look at a higher time frame (like a 1 hour chart if I'm trading off the 5 minute) and only take signals that are aligned with the trend on the higher time frame. Here are the correlated time frames I tend to use when trading currencies:

• Trading with 1 minute chart--align with the 15 minute chart
• Trading with 5 minute chart--align with the hourly chart
• Trading with 1 hour chart--align with the daily chart
• Trading with Daily chart--align with the weekly chart

These aren't hard and fast rules, they're just combinations that seem to work well for me. You can match them up in whichever way makes the most since to you. I know that other traders, like Brian Shannon at Alpha Trends, like to use 3 different timeframes. An example of his approach would be using the daily to determine the primary trend, the hourly to determine the secondary trend and then when both of those are aligned using the 10 minute chart to place the trade.

The point I'm trying to make is that by using trend alignment in multiple time frames, you can reduce the number of false signals and only take trades that have a higer chance of being profitable. There are many mediocre systems out there that could be much better if they incorporated some of the above techniques. Just some food for thought.

I'll post an update when the trade is closed out.

TLT

AAPL Update and DXO

I bought some Apple back on April 13, 2009 and posted my trade plan, which included a couple of profit targets. Target number 1 was hit this morning and Apple looks to be in another trending move up. Here's the daily chart:So far this has been a pretty good "textbook style" trend trade...hopefully it will stay that way.

On a different note, I put on a trade in DXO this morning. DXO is the double leveraged long Oil ETF. I have a wide stop in place and also a big profit target...kinda necessary to have big profit targets when making trades that require wide stops. Here's the chart with my trade plan:Hope everyone's having a great start to the trading week.

TLT

Live Currency Trade: Long the Eur/Usd

Yes, the Eur/Usd has been all over the place. Up, down, down, up...etc. Attempting to trade it has been a roller coaster for me. I put on a long trade about 20 minutes ago and to time the entry I used the new trading method that I mentioned earlier this week. Here's a 5 minute chart with the 1, 2, 3 Setup spelled out on the chart. Take a look:I'm still gonna post a more detailed explanation of how the method works, but for now you can just take a look at the chart and note the various indicators used. The main problem with this method is that you can get lots of bad signals in choppy markets. The key is to look at a bigger time frame (I look at the hourly chart when trading off the 5 minute) to determine the primary trend and whether the currency pair is trending or consolidating...easier said than done, but I've been working on ways to work this out.

TLT

Live Trend Trade: STEI

This stock has been channeling for about a month and now it looks to be breaking out. I'm in at $3.80 with a profit target at 5.50 and a stop at 3.30...a 3.4 r-multiple (risk/reward). Here's the chart:We'll see how this one works out.

On a different note, I've been working on a new currency trading method...kind of a momentum/trend following system...and it's been doing pretty well so far. I've been putting a little money to work with it to evaluate its performance and potential problems. Soon I'll post a breakdown of it and explain how it works for those interested. It's not a very complex system and it's very similar to what I've been previously using...I guess you could call this one a polished upgrade of what I'm already using. Anyhow, be on the look out, I'll post about it within the next day or two.

Have a great day!

TLT

Puttin' the Eur/Usd Short Back On

We got a trend reversal confirmation this morning on the Eur/Usd...back in with a 1.25 price target. Here's the hourly chart:Note the huge down bar that I circled on the chart...that's what it looks like when people run for the exits.

TLT

Eur/Usd Update

Hope everyone's having a good trading week so far. I've been so busy with work that I haven't had time to initiate any trades this week...just been watching/managing the trades that I already have on. One of those is the Eur/Usd short...I'm short around the 1.3050 level. The pair rallied this morning, which probably caught a few people by surprise. Here's a look at the hourly chart:As I noted on the above chart, the pair was probably due for a decent pullback rally after the big drop we saw earlier this week. Does this rally signify a reversal? No, not yet. So far it's just a healthy pullback rally that will probably help the pair consolidate and then move to new lows. What causes these kind of rallies? It's hard to say for sure but generally, traders get nervous after big moves and start taking profits. That profit taking often leads to stops getting hit and panic from people that sold at the recent lows. The selling from the stops combined with the panic sellers is often what is behind large and quick moves like the one we saw this morning...this situation also provides a nice entry point if you missed the first move.

To get a proper perspective of this morning's move, it helps to pull up the daily chart. Here it is:The daily chart shows that the pair is still in a bearish pattern. The stair stepping lower lows combined with the failure to make significant new highs tells me that down is still the path of least resistance. What should we be looking for to determine if the move higher becomes significant. To start, a daily close above 1.30 (approximately Monday's high and Sunday's low) would be worth paying attention to and then follow through and a close above 1.3150 would be a sign to cut the shorts and run. The key, as always, will be the follow through in price action. If this morning's rally fails to continue, the pair will certainly move lower.

Only time (and price action) will tell.

TLT

Trades For Today

Good morning. Hope everyone has their taxes done...or at least has filed an extension. I put on a couple of trades this morning. First, I bought some TNA. TNA is the Direxion Small Cap Bull 3X Shares. Buying into an overbought market can be a little scary, but bullish conditions are still present so I'm buying. Here's an hourly chart of TNA:We'll see if that trend line holds as a resistance point. Other than TNA, I bought into the Gbp/Usd this morning after it dipped down to the 1.4920 area and then rose back above 1.4950. The pound has been strong this week, we'll see if it has any more steam left in it.

Have a good trading day.

TLT

LIve Currency Trade: Short the Eur/Usd

Good morning. Markets are a little mixed today after a few economic releases. I have a short term trade on in the Eur/Usd...found this trade while sorting through my morning chart scans. The dollar was strong overnight against the euro and this strength has continued throughout the morning. Here's the setup:

• Saw a sell signal on the 3 hour chart;
• Saw a sell signal on the 1 hour chart;
• And saw a buy signal on the 5 minute chart, however, the last 3-4 buy signals and rallies on the 5 minute chart fizzled out quickly.
• Therefore, I decided to fade the buy signal on the five minute chart and set a profit target for the prior lows in the channel.

Here's the five minute chart:As you can see, the outcome for this trade has yet to be determined. I'll post a follow up later today when the trade closes out.

TLT

**************************Update***************************************

It's just after 10:00 am and I just got stopped out. The trade looked good for a while but then it reversed. Fortunately, I didn't lose money because I had already moved my stop to break even...I try to do this with trades once they cross the halfway mark to my profit target. At one point in the trade, I was tempted to close the position with a small 10 pip profit, but, lately I've been bad about not letting profits run. Therefore, I left the trade alone and stuck with my plan. It's hard to do sometimes but I'm glad I did because I know it'll work out better in the long run that way. Here's the 5 minute chart with my exit: