Trade Opportunity: TripAdvisor

TripAdvisor (TRIP) has taken it on the chin lately and there might be some good short trade opportunities for those that are nimble. Trip is very oversold right now and will likely bounce a little which will provide a potential trade with a decent risk to reward opportunity.  I'd look for a bounce up to the $80-82 range and I'd place a stop at $87.  After the trade is on, I'd set a profit target to sell half at $69 and trail a stop down to the ultimate target of $60 and change (i.e. $60.30).  Check out the chart below.

I am going to start posting at least once a week on this site again.  I'll do random trade ideas when I see them and then some general market update.

Have a great day.

TLT

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

Review of a Trade Set Up: The Snap Crackle Pop Trade

This is a phenomenal set up in the forex and futures market.  Today, there was a great opportunity to go long the Eur/Usd with the Snap Crackle Pop trade.  The setup is basically just a "swing low" that most traders are familiar with.  A swing low is a 3 day pattern where one bar's price action is surrounded by higher highs and higher lows. Swing traders and day traders use these to go long and place a stop under the low of the swing low. The slight difference with this setup is that a couple of conditions have to be present on top of the swing low.  Let's use the recent price action in the Eur/Usd for illustrative purposes.

1.  Snap -- the instrument needs to me massively trending down and making new lows.  This is the important part of the trade that distinguishes it from a normal swing low.  The more bearish the better.  In the chart below, you can see that the Eur/Usd just broke a major support level and looked like it was going to drop like a rock.  This entices a bunch of traders to hop on to the short..even though they are late to the party.

2.  Crackle -- the crackle is when buying action kicks in and the Eur/Usd trades back up and closes near the highs with a long tail on the candlestick/bar chart.  This is commonly referred to as a bullish hammer.  These are the pros trapping the amateurs by fading the obvious "short trade" which leaves amateurs scratching their heads.

3.  Pop -- if buying continues, we wait for prices to break above the prior highs and we enter a long trade on that break.  The key to this trade is to be nimble and remember that you're probably trading a counter trend.  I like to trail a stop under the daily lows or drop down to a lower time frame (like the hourly) and trail an atr stop to get me out.  These trades usually last about 3 or 4 days (or bars on other time frames).

Here's the chart:

This trade is taking advantage of the retailers and the traders that are late to the party, over leveraged and not taking their losses.  We want to see a text book short sell that fails and traps these traders and then we ride it up as their stops are hit or when they finally throw in the towel and admit defeat.

Sound brutal?  Well no one said trading was nice.  The forex and futuers markets are zero sum markets and either you're the loser or you are taking the loser's money.  This is one of my favorite setups.  It works on all time frames but obviously, the bigger time frames like the daily chart make for bigger moves.

Hope everyone is trading well.

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

Big Break Out in $UNH

United Health is a position that I put on back in December and it has been nice watching it break though resistance and trend higher.  Check out the chart:

As noted in the chart, it might be a good idea to buy when the price pulls back to the 20 period moving average (yes the chart says 20 day but its really a 20 week moving average).  This allows for an entry in a range where risk can be adequately controlled.  Just a trade idea..I'll probably add to my position if it pulls back to that range.

Hope everyone's having a great week so far.

TLT

Take a Ride on the Reading Railroad: RDI

Okay, it's not a railroad but it is a fantastic trade idea.  It also happens to be a play on the Australian Dollar, but I'll let you dig into the fundamentals to figure that out.  Here's the trading plan:

Entry zone, stop loss, and profit targets are laid out.  I'm already in this one and I'll ride it to the profit targets, taking 1/3 off at each target, unless there's a close below the V-Stop..in which case I'll close the position.

Happy trading!

TLT

Show Me the Value

Here are four stocks that turned up this week on my "Ben Graham" style value screen.  I run a handful of screens every couple of weeks to look for ideas and there seems to be some potential in a couple of these names.  The screen that I run is pretty basic and I use FINVIZ to run it.  This is an excellent website that offers up so many free tools that I can literally spend hours on it just playing around.  Check out the site if you haven't already..fyi, I have no affiliation with FINVIZ, I'm just an enthusiastic user of the site.


On to the good stuff.  Below, are some pictures and charts that give a brief rundown of the 4 stocks that are currently coming up on the screen.  Then at the bottom of this post is a screen shot of the settings that I use to run the screen.  If you're interested in this type of screen, just plug in the same values and then begin tweaking the values and filters.  Let me know if you find an interesting take on this screen.  Here are the current value candidates:

 My favorite on this screen is CRWS.  CRWS just broke out of a range and is exhibiting major strength.  A pullback to the 50 day moving average around $4.50 could provide a great long entry with a favorable risk/reward outlook.  ELNK is also worth keeping an eye on..it could be a good trade as well, it just needs to find some support after its recent sell off. 

As for the Value Screen itself.  It is a Graham style screen because it uses similar criteria and concepts that Graham endorsed.  These stocks have a relatively low Price/Book ratio and a low P/E.  They also have low Debt/Equity and positive earnings growth.  Furthermore, these stocks have a current ratio of at least 1.5.  The idea behind this type of screen is to find stocks that are cheap using the Price/Book and P/E but then qualifying the cheap stocks by making sure they have low debt and plenty of cash to meet their near term obligations.  Some stocks have a low P/E for a reason, and their P/Es continue to get lower and lower as the business gets closer and closer to having to shut down forever.  This is why Graham preached about the importance of the examining the "debt" side of the equation.

Here are the parameters that I use for the screen:

I hope everyone is having a great weekend!


TLT

Interesting Spread Trade: The Yield Curve Steepener via ETFs

It goes without saying that there's been some interesting trading in bonds lately.  We all know that bonds, especially treasuries, are in a bubble.  The big question is: when does it end?  Some pros have already called the top in bonds and others say there's no telling how low the fed will bring down yields.  What I find to be interesting is the relationship between the shorter term bonds versus the longer term bonds. 

Here's a chart of SHY, which is the Barclays 1-3 Treasury Bond fund etf:

Notice in this chart that prices took a small dip recently but have retraced most of the fall and appear to be ready to re-test their highs.  I would state that this is a pretty bullish looking chart.  Now compare that to the daily chart of TLT, the Barclays 20+ year bond fund etf:

This price action in TLT has taken a dip just like SHY, however, it has failed to rebound at all.  In fact, it appears to be testing it's uptrend and is looking dangerously close to entering the 3rd Stage of a trend which is the top prior to the Stage 4 crash.  The weekly chart of TLT looks quiet bearish, however I'm going to leave it up to you to look at it as I don't won't to overdo the number of charts in this post. 

One last chart that is interesting.  This is a weekly pair chart of SHY and TLT together.  So when looking at this chart, for the price to go up, SHY would continue to go up and TLT would go down, or SHY would go down but TLT would go down more.  Here's the chart:

In the above chart, you can see that I highlighted 3 different areas of price action.  The first is "Normalcy" which is where prices of SHY:TLT have been during relatively stable times.  The "Nervous Market" area is where prices have been when the market is concerned about another severe crash..where we are now.  "End of the World" is where prices went when it looked like the financial system was going to break down all together..that was as bad as things could get without a collapse of the entire banking system. 

The question is:  do we think it's likely we'll go back to the "End of the World" zone or will bonds trade back to the Normalcy area?  Short of a Sovereign default or something outrageous happening, I'm betting we trade back to normal levels and maybe even overshoot those levels if people panic and dump their treasuries.  Time will tell.

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

Watch Bonds and Utilities

Here's two trade ideas for the new year. Keep an eye on both bonds and utilities. They tend to have an inverse relationship and both are interest rate plays. Longer term bonds (and short term as well) have been pretty bearish lately and are looking like they are heading for a steep decline in the near future. Here's the chart for Barclays 20+ year bond etf (TLT): If that support at the 87.70 gets taken out, expect a sharp move. What's moving bonds lower? Long term interest rates are moving higher after hitting record lows. Bond traders are anticipating higher long term rates, creating a steeper yield curve. As long as bond traders believe this, bonds will fall.

Utilities (XLU) look poised to pop right now, which acts as confirmation of the short bond trade. Utilities have been incredibly strong during the month of December and now, after a little consolidation, they look ready for a move higher. Here's the daily chart of XLU:The bond market is saying that the stock market is heading higher and utilities are confirming the bond trade. I'm currently short bonds (via TBT) and I might take a position in XLU if it drops down to the buy zone that I highlighted above.

One thing that I want to touch on real quick is the relationship between bonds and utilities. I stated that they tend to have an inverse relationship and that this is because they both are interest rate plays. Don't just take my word for it, lets take a look at it. Here's a 1 year chart showing the relationship of TLT and XLU:I'd say that the above chart shows a pretty close inverse correlation.

As always, we'll see how this theme plays out. I hope everyone has a Happy New Year!

TLT

Swing Trade Idea: Long UTX

Here's an idea for a swing trade for tomorrow. Long UTX at 68.25, which is the high of the last hourly candle of today's trading. Why not just jump in at the closing price of 68.15? Because you want to see it open strong and hold yesterday's lows...trading up to 68.25 will be an indication strength. The profit target is $75 and a stop should be placed at 66.80. This gives the trade roughly a 4.5:1 risk to reward ratio. Here's the chart:This trade offers a very tight stop which is important for this type of trading environment. If you're wrong on a trade, you want to pull the plug quickly. Furthermore, there is quite a bit of potential for this trade if it breaks higher...this stock's sector(XLI) is particularly strong as well. If the price rises, I'll be trailing my stop with the volatility stop (using 4.5 multiple and 20 period settings) on the 1 hour chart. Note that the trade plan has a profit target set for $75, however I will continue to trail my stop past this point, unless XLI is not still in a buy mode...if that's the case, I'll take half profits at 75 and trail the other half.

The important thing to take away is the stop...a hard stop. The market has been rather shaky lately, and all it would take is a small rally in the dollar, more Dubai-like bad news, or a nasty jobs report this coming Friday and this market could tank. As always, we'll see how this one turns out. Remember, it's just a probability, never a certainty.

TLT

Follow up on the Eur/Gpb

Last week I pointed out a potential trade in the Eur/Gbp pair and asked if the recent dip should be bought. The time has come for the trade as the pair has pulled back to the 50 day exponential moving average and the TLT Trender v2 has maintained a green buy/uptrend signal. To top everything off, the Stoch hit oversold levels and is now turning up...a bullish indication. Here's the updated chart:Remember, this is just a trade idea, not a forcast of the future. This setup tells me that the Eur/Gbp is likely to move up from here but there is always the possiblity that the pair will keep falling and for that reason it is important to use proper position sizing and a hard stop loss.

I'll post an update soon.

TLT

TSYS: Round 2

This is the second time I've posted on TSYS...the first post was for a potential channel trade but it did not work out very will. This stock has just chopped around a bunch since then but now it looks like it might be worth watching closely again. Here's the daily and weekly charts for tsys with a few comments:The bottom line is that both the weekly and daily charts are showing tightening price contractions which might lead to a tradeable breakout. I will probably start scaling in on the dips and I'll be looking for a breakout to new highs for a confirmation.

TLT

Keep An Eye On Regional Banking (KRE)

This one is definitely worth keeping on your radar screen. Here's the chart:I love trading breakouts from a bull flag pattern. I don't follow too many chart patterns, but I consider flags to be worth paying attention to. When stocks run up in price, like what just occurred with KRE, the stock sometimes enters a tight congestion pattern as it recharges its batteries. This congestion is the "flag" pattern and breakouts after the flag pattern tend to have a higher chance of being a true breakout that is worth trading. It's like a coiled spring that is suddenly released.

Be ready to jump in if this stock breaks out above that upper line of the flag pattern.

TLT

More AAPL

After my last look at Apple, which was not very long ago, I concluded that I wanted to buy around the 138-140 range. Well, that ship might have sailed, or at least it seems that way. One thing that you have to do when trading is be open to changing plans. I'm not saying that I will not buy in the previously mentioned range, but the current chart seems to indicate that a short term (and very tradeable) bottom my form above my target entry range. Here's the daily chart: I may have drawn the current price box a little too tight and I would not be that surprised to see the price fall back to the 145-150 level. The key is to let the market make the bottom. How will we know if the market makes a short term bottom? Watch the support levels and the BB Width. If AAPL bounces off a support level, lets say 155, and the BB Width hits a new low and levels off, then we know that a bottom is likely occuring.

I will look to buy while the BB Width is low, before it breaks out to new short term highs. This helps you get in the trade while the stock is still consolidating which allows a better risk to reward trade because you're getting into the stock prior to the next big advance in the stock. And what if the stock fails to advance to new highs? Dump it if it falls below the prior bottom.

It's impossible to say how much is left in this stock because it seems to be a very crowded trade, but don't underestimate a market leader like Apple in a short term bull market (which we are currently in).

Have a good day.

TLT

AAPL Revisited

I was speaking to my brother-in-law about Apple this weekend--a stock that we have both recently traded but are now out of--and he commented on how he'd like to get back into it at some point. This got me to thinking...how would I get back into it? Well, I've put together a little scenario/trading plan and if it works out as planned (which it often doesn't), I'll take the trade. Here's a chart with some annotations indicating my various buy, stop and profit target levels:Ideally, I'd like to buy in the $138-140 zone and take my profit at $160. This is just a range trade, the sort of trade that Apple has been offering up lately between breakouts to new highs. A good hard stop will be essential for this trade because I'll be buying a pullback and the problem with pullbacks is that sometimes they turn into reversals...which could easily happen given the run that Apple has had lately. My stop will be at $133.

So to recap:

• Long @ $138-140
• Stop @ $133
• Profit Target @ $160

This trade could provide a 22 point profit for a 5 point risk, assuming you get in at $138. That would be slightly over a 4:1 risk to reward ratio, which is certainly acceptable. What if the trade goes in my favor but it doesn't quite hit the profit target? I'll move the stop to break even once it gets halfway to my target.

There's the plan, now we just have to wait and see what happens. Always "plan the trade and trade the plan."

TLT

A Couple of Stocks Worth Watching

The first stock on my short term watch list is Genco Shipping (GNK). It's trading within a well developed channeling trend that might offer a good low risk/high reward entry point. Here's the chart:As you can see from the above chart, the entry point would be the lower trend line...it would be nice to see the stoch fall down to oversold levels right when the price hits the lower line. Shippers have been strong recently and a nice healthy pullback in a stong stock like this one would potentially be a great trade.

Another stock that's high on my list is Oshkosh Corp. This is more of a traditional break out trade. The key to this trade will be to wait for a pullback and I would also like to see the stoch come down from the current overbought level. Here's the chart with some annotations: These stocks may or may not offer up a trade, but I think they're worth watching. Just remember to wait for a good entry...good entry levels are indicated on the charts above. They may just continue to move up and I might be sitting on the sidelines because I missed the trade and that's okay because chasing stocks is not a good way to trade.

TLT

A Stock To Watch: TSYS

This one's channeling nicely...might be worth keeping an eye on.

A Good Potential Trade and Some Psychology

Sorry, I was really busy this weekend and didn't have time to post the TLT Trender signals...will try to post them some time tomorrow. Here's a potential trade...one that I'm currently in. Short the Eur/Usd. Yes, it rallied, and then it failed to achieve higher highs. Now's the time to jump in. I've got two targets right now: 1.27 and 1.25...we'll see if it makes it that far down. Here's a chart:
This trade may or may not work out, but it's the best currency trade that I see right now. Second best is long the Cad/Jpy...an oil play. We'll see how it works out.

I did put on a good continuation trade on Friday but unfortunately, it got stopped out. The only reason (or not really as you'll read about below) that I was stopped out was because the spreads were raised to ridiculous levels by my broker...like 20-30 pips on the Eur/Usd! Although this chaps me, I must also realize that it's my fault...my stop was not wide enough and I've even mentioned on this blog that setting wide stops going into the weekend is important, so it really does come down to me.

The sooner you learn to take complete ownership and responsibility for the outcomes of your actions, the sooner you can become a winning trader or a winner at anything else. When it comes down to it, everything in your life is the outcome of your own actions...whether you like it (or agree with it) or not. So make the best out of every outcome, whether good or bad, and either learn from an undesirable outcome or enjoy and grow from a desirable outcome.

So what does all this mean? For me, it means overcoming my natural feelings of wanting to blame external factors (my broker). What ticks me off is not the loss, as it was somewhat minimal, but the lack of profit because the Eur/Usd dropped down to my profit targets that I had set. Now, instead of just a loss, I have to deal with a loss plus a lack of profit. However, I will not dwell on this because I am taking ownership for the outcome and realizing that I should either accept the loss or just stop trading because blaming external factors does not lead to success...only learning and self improvement does. I'll stop preaching (ranting) now.

Hope everyone's doing well and is ready for a great trading week.

TLT

Potential Trend Trade: OIH

The Oil Service Holders etf (OIH) has been channeling since mid November and has printed a nice chart pattern that could lead to a good trade. The key will be to see a break to the upside and then for the upper channel line to support the price after the break. Here's the daily chart:As you can see from the chart, I kinda mapped out what I thought the potential price action might look like...or at least what I think the ideal price action would look like. The entry would be around $90 with a stop placed around the $80 level and the profit targets are $124 and $143 roughly. If OIH breaks out in a similar fashion, I'll enter around $90 and sell half at $124 (protect profits) and sell off the remaining at the second profit target.

Other things to notice about this chart are the rising RSI and OBV indicators...this sometimes gives you the heads up that a breakout is likely to occur soon. The other interesting thing to note is the low BB Width. The BB Width measures volatility by printing the distance (or width) between the 2 Bollinger Bands. One thing I like to see is for the BB Width to break and rise quicly with the breakout in price action...this indicates that the breakout is more likely to sustain and move quite a bit, as opposed to a false breakout that fizzles out quickly.

Thought this was an interesting chart and wanted to share it with everyone.

TLT