?

Anyone from tennesse still participating?

Does anyone have a take on AAPL. I'm still holding my shares at $180. I have read several places that say it is still a "buy". Anyone have an opposing opinion?

I picked up more RSTI today. I think this should be a good performer for us over the next several years. I'm also doing quite well with my AMED stock. Unfortunately, the CC on these two are not worth doing in May. I may look at June, because I have no intention of selling either of these stocks. May 1

AAPL, Earnings, and what's next...

Well Apple returned better than expected earnings yesterday which is a great thing.  One would expect investors to like that and would expect the stock to gap up substantially.  However Steve Jobs decided to tell everyone next quarter won't be so good (which he always says).  This created mild panic.  In after hours trading yesterday the stock traded way down into the 155 range.  It really made us curious what would happen this morning.  Interestingly enough, stock moved up drastically, then moved down drastically, and 15 minutes later it was like nothing happened.  Everything traded as though there was no big news.  It fits the pattern of the last several days, everyone's happy.  No one made money, no one lost money.  Earnings this time were SHOCKINGLY a NON event.  Who knew?

So what's next?  Well once the fear's over AAPL continued in it's trend - that's what's next.  AAPL traded down to the 20 day MA today, bounced, and never looked back.   Nice close.  We're in a good profit on our 160 calls.  Tomorrow I actually expect a better day of trading.  There's a good chance we'll also close our position and take profit, maybe looking at a 170 Call for June.  

I mentioned SNDK a few weeks ago.  If you can look at a chart pull up the B. Bands, a 5 & 10day  Exponential Moving Average, and also put a 100 day Simple Moving Average.  SNDK is in an uptrend based on the moving averages and B Bands.  However it's stopped and been stuck trying to push through the 100 day average.  Effectively what's happening is it's trading into a wedge pattern.  This is an ascending wedge - MOST of the time this breaks to the upside.   To encourage a bullish position on this over the last few weeks SNDK has formed a bullish head and shoulders pattern.  Watch for SNDK to continue trading in the wedge patter and eventually break out.  It COULD break out tomorrow, it COULD break out next week.  Who knows, point is, when it breaks out watch for it to move.  In the past SNDK has been a good stock to trade with very predictable patterns.  Options are cheap too.  It's a great stock to own and write calls against, and it's a very cheap credit spread stock.  Lots of good strategies for this one.  Keep watching.  

One more stock worth mentioning.  I think I mentioned Dry Ships.  DRYS.  We missed a bullish entry on this today.  When it push down through the 5 day MA and then bounced and the bulls took back over that was our entry.  Tomorrow Josh and I may take a bullish entry if the conditions are right.  Target 1 is going to be about $ 88 which it should reach very quickly.  Target 2 is in the $99 range and the next target would be 120.  Keep a close eye on this one as well.  I think 85 calls while DRYS is at 82 is a real good deal.  

Other stocks to watch in the near future - VMW, FSLR, CMP, RIMM, SHLD, WYNN, XOM

J-

CCs

If I place a call in Etrade for ETFC, is it automatically a covered call as long as I only write 45 contracts (assuming I own 4500 shares)?

How Accurate?

http://seekingalpha.com/article/73116-comparative-price-shopping-selected-banking-mortgage-and-brokerage-stocks?source=etrade


How much faith can you place in articles like this from the web?

E*TRADE

Etrade is looking to open at $4.15 today - up 26% in the last 3 days. cha ching

AAPL... you're so predictable

Well, to follow up on my previous AAPL post, we did indeed find support at the 20 day SMA and rocketed back bullish with a hammer and today's gap.  The following chart is from roughly 11:30 on Wednesday.

The shooting star we ignored -- so for the sake of our position I was thrilled to see yesterday's hammer (which is the reverse of a shooting star.)  With the gap this morning we cut our loss in half already.  The last bit of resistance to get through is that 200 day SMA (the top line).  Keeping fighting bulls!

Hey, it's about time for a post from JW :-)

-josh

E*TRADE

Etrade has taken a pretty nice slide from

$4.55 to yesterday's close of $3.40. I've increased my position to 4000 shares and keeping my fingers crossed for earnings report Thursday around 4:15pm. Even if earnings miss, the stock will recover - I'm not worried at all. Good time for all you guys to jump in.

Happy trading!

What was I thinking...

I think Dierks Bentely said it: What was I thinking?!? (Hit play and keep reading!)

Okay... so, I saw the sell signs in the beginning of the week, but just like our friend Dierks, I was too infatuated with the idea of making money that I forgot to stop and use common sense. First of all, I broke Rule #1 and traded against the direction of the market.  See S&P 500:
Okay, so first up to bat for sell signals is the Doji on the 4th (open and close at the same price), and the second Doji on the 7th -- which to add insult was in the form of a "shooting star," which is a classic conclusion to a bullish run.  Certainly, if we weren't convinced on the 7th... the down day on the 8th should have had us running from any bullish positions.

So, what did we do... Jumped into an AAPL call position on the 7th of course!  See AAPL:

What hurt us was a confluence of two profitable experiences.  1) We had just profited 120% on an April call that we sold on the 7th and rolled into a May option to "ride the rest of the trend."  We had our eyes fixed on the 120% and not the technicals.  2) We entered the trade near the open of the day and rode the wick all the way up.  When I looked at it we were already up another 10% -- it was like picking fruit off the money tree!  I did take notice of the shooting star that had formed on the 7th... but found ways to rationalize it away.  Then we came up with reasons for support all the way down to the close on Friday... watching AAPL be pulled down by the general market sentiment. (Despite, I might add, news from analysts that AAPL is expecting another great earning report.)  Now we're sporting a solid -50% on our option.  The only good news is you will notice that the price stopped right at my Gold support line that I had drawn from over a year ago.  It's also the bottom of the wick on 1/22 (which was that strange gap we saw on their last earnings report.)  We'll get into more technicals on a later post -- but I think we could certainly see some much needed support (for my trade at least!).  If we break through $146 there isn't much to stop it for a while... ugh.

So, let's all watch my little movie I posted -- smile, and vow to never get infatuated with our profitability to the point that we miss the technicals (or for Dierks -- the shooting father).

As a final note, any of you boys who would steal my daughter away better know that I'm a MUCH better shot than the guy in the video.  Better drive fast!

-josh

Red Headed Step Child?

The last time I looked in the mirror, I wasn't a red headed step child - but I sure am taking a beating like one. I got out from underneath SIRI today for a nice loss. I bought in at 3.00 after the DOJ approved the merge - and rode the wave down to 2.50 where I said I had enough. I am still looking for a 20% jump if and when the FCC approves the merge - assuming both companies don't go bankrupt before then. ETFC is continuing with its trend of strong resistance around 4.30 and strong support around 3.70 which has made for some nice profits that have been destroyed by the devil that is SIRI. I think I am ready to write a CC for a stock I have 100 shares of - CSE. I don't have any intention of selling, and I would like to try my hand at options. Do either of you two know how to write CC's in Etrade? Jeremy - I agree about SNDK - it definately looks to be in a bullish trend. One think about these stocks we're looking at right now is it is hard for any stock to maintain strong bulls when you're fighting the entire market which has had a rough week. Greener pastures ahead.

Could AVB be channeling?

Okay, I have a little time this morning while the whole family is out so I thought I'd analyze a stock we haven't looked at in a while: AVB

AVB (AvalonBay Communities, Inc.) is part of the housing market as a real estate investment trust (REIT). I'm not sure what implications that may have on the technicals -- any feedback? I could see the stock stalling and waiting for the housing market to finish its adjustment. I could also see it gaining bullish momentum as more people choose apartment lives for a while in order to build higher credit scores and down payments to purchase homes. Finally, it could be confused like me and trade sideways for a while.  I think the latter is the most plausible.  That doesn't mean, however, that we can't be profitable with it.  Read on...

AVB appears to be setting up a channel pattern fostered by strong support at 95 and strong resistance at 106. It has double tops on 3/24 and 4/7 and is setting up for subsequent double bottoms on 3/28 and 4/11(today).

(FYI, click on the chart for a larger and clearer version)

In fact, a little broader view shows us that AVB is very comfortable trading in $10 channels. Unfortunately I can't draw boxes to highlight these trading channels - so you can discover that yourself ;-) (I've drawn blue and red channels and one Purple line to assist)

Now, for an interesting look at the moving averages - first study the chart below:

What is most interesting to me is that the 100 & 200 day MA's (the bottom and top lines) are working as support and resistance respectively. What is also interesting is how the price tests each exponential average (10, 20 & 50) on the way down, finally resting on the 100 day both times. It is important to note however, that neither the 100 or 200 has yet to turn up, both are still angled down slightly. This is an awful lot of pressure fora stock in the housing market to overcome! I think we'll see some bounces between the 100 and 200 -- effectively trading sideways.

With that said, a $10 swing is not to shabby! and if today continues bullish (contrary to the rest of the market) I'll likely jump in with a contract or two and ride it back up to the 200 SMA.

S&P Trend

Another thing Jeremy didn't really mention is that the S&P seems to have found a definite trend-line:  See the chart below.

The purple line on the bottom was originally the bottom part of the wedge pattern we discussed.  When the stock broke up over the wedge, the bottom part became a trend-line.  It makes sense that it retraced and touched it yesterday -- now today it has returned bullish.

Posted for Jeremy...

This is from JW -- it's hard to read, but I didn't feel like changing all of the formatting by hand!  Enjoy...

Okay - A couple thoughts for today. Iʼm currently in Wisconsin and interestingly enough
itʼs difficult to get internet here. Actually thereʼs plenty of internet, they just want me to
pay $10/day per computer. So I keep going to Starbucks where I already have a T-
mobile account. Personally I think Internet should always be free... but thatʼs just me.
All that to say this post may actually get up way later than when Iʼm writing it. On with
the important stuff.

AAPL - Whee!!! Isnʼt this fun. We made all that money, rolled into a may option, and
down we go. Okay, so in hindsite we should have waited to buy the may calls. But who
knew the morning of a gap when the stockʼs running up $4? Okay - so here we are.
Roughly $300 in the hole on our position but Josh and I talked today and weʼre holding
and hereʼs why:

-AAPL has a tradition (at least recently) of following the S&P amazingly close. That
explains a good bit of the down days. When the overall market is slow AAPL tends to
lack. Itʼs worth noting though that AAPL tried hard to be bullish this morning when the
market was really trying hard to be bearish.

-Second point is this: “Come on, even apple needs to rest sometimes”. Truth is weʼve
had a pretty good $15 run. While AAPL could have kept running if the overall market
had maintained strong, the bearish report at the FOMC yesterday didnʼt help it too
much. It looks like those who have done well are taking some profits. Truth be told, if
we hadnʼt already rolled out of our initial calls weʼd be taking profits too. So there you
have it.

-Next point - itʼs no real coincidence that AAPL ran up to exactly the spot it ran up to on
Jan. 22 before the big failed rally that kicked off what turned into a $25 sell off. Look at
the chart on AAPL.

Itʼs pretty interesting that on Jan. 22 AAPL ran up from an open at 148, ran up to a high
of almost 160 and pulled back to about 155.6. The next day it OPENED at 136, a
nearly $20 gap down - and all this on the day AAPL announced itʼs best earnings EVER!
All that to say 3 days ago on April 7 AAPL once again ran up to right at 160 only to pull
back and close around 155.6. Could this really be random? Itʼs called fear. Traders
remember what happened back on Jan 22 - it was what we call A DOOZY. The
emotions of loosing that much money so quickly, over night, with a booming earnings
report - that doesnʼt die quickly. So when the market looked weak on April 7, and AAPL
hit almost 160 - those memories come back quickly. NOW - with that fresh in your mind,
look at the indicators and you can put some framework around whatʼs going on.

-Today AAPL is bouncing between the 100 & 200 day MA. Check out April 2006 - the
last time AAPL bounced on the 200 MA. A few months later it broke through, but not
for long. And thatʼs when the big rally of 2007 began. Watch for one of the following
things to take place.

-AAPL will bounce tomorrow, continue itʼs uptrend, stop @ 160, 165 then
probably not really stop until 180.

- AAPL will trade sideways until the 10 EMA catches up and then continue itʼs
uptrend.

-Worst case AAPL will trade down to itʼs support at 146, bounce, and then take
off continuing itʼs uptrend.

-if it breaks the 146 mark look for it to potentially fall all the way back to 120, re-
establish a bottom and then return to building.

These are the 4 most likely scenarios for AAPL in their order of likelihood. Tomorrow
should be interesting.

Now Iʼd like to mention a new stock to watch. I havenʼt paid much attention to it for
several months but SNDK is looking good. If I had a better internet connection Iʼd jump
in with some $25 calls and ride it for a couple weeks to see what happens. Iʼll write
more about this as it develops.

Iʼd also like to mention some stocks Iʼm real excited about for the next month. When I
get back weʼll most likely be trading and talking about these a lot.
They ARE:
Iʼm bullish on:
AAPL
BIDU
FDX
RIMM
SNDK
VMW (Possibly)
XOM (if it will push through 90)
Iʼve got my eyes set on AZO, SHLD, SLB as good potential trades for one of the
following:
-Credit spreads/ Iron Condors
-Bearish trades.
Weʼll give it a few days to see what develops.
Trade on.

Special insights

Early morning woes

One additional reason I forgot to mention adding to yesterday afternoon's selloff - The Fed is releasing their FOMC Minutes today.  That always creates some slow down in the market.  Look for the market to trade down/sideways until after the meeting.  Who knows how the market will react to the news - no matter what the news.  Lower interest rates could spook the market into a sell off, or it could encourage it to fly high.  We'll see.  None the less watch the minutes after the report - that's always exciting :)

What's in a day

Well, we had quite a day in the market for sure today.  We sold our April 155 AAPL calls for a 120% profit in just 8 trading day - Not bad.  I would have held them but time was running out way too quickly - so we jumped in to another AAPL position.  It was shall we say.... EXHILERATING!  (who knows how you spell that word).  At one point I called Josh and said "hey how's AAPL doing" and he looked and said "we're up 10% already" (this was on our new position).  Then before we knew it by the end of the day our trusty ol' AAPL had retraced and closed with a DOJI!  In fact one could call it a shooting star Doji - I'm not that person though and i'll explain why.  

By definition a shooting star doji must occur at the top of a trend.  We won't know until tomorrow and maybe the next day if today is the top of this trend.  If it's not then today's doji is not a shooting start doji, instead it's what we call... wait for it..... a doji.    In fact it's not even a doji because a doji has to have the same open and close.  It's really just a small dark candle with a long upper wick - worth noting caution, but not worth freaking out over yet.  

Okay - with that rant said, let's look at what happened and why I'm NOT concerned .... yet.  

For starters let's look at the overall market:

S&P - Basically the S&P is kind of trading sideways for a couple days.  One might think it's bumping it's head on a former high, but in reality that's a pretty weak high point it's hitting.  The mark you can see a month earlier with the tweezer top is a much stronger resistance, that that too has no major significance.  1405 & 1432 on the S&P have much more significance if you look in the bigger picture. I can almost guarantee it will slow down at those spots, but the current price doesn't have major significance. Not only that, even with the small candle days the S&P is still following the rules of an uptrend - Higher highs and higher lows.  Until that breaks it's in an uptrend.  I believe what we're looking at here is actually more of a "stair step" patter.  Traditionally when this consolidation breaks it will break to the upside.  One additional reason the S&P may have slowed down today is it's coming upon the 100 day  Moving average.  That could cause some caution to some investors. 

 file:///Users/thesoniccellar/Desktop/Picture%203.png

A quick glance at the dow and Nasdaq shows they too are in similar patterns -- while the single day perspective might be slightly scary, the big picture of the market is it's just getting an uptrend going and thus far it's following the rules.  

So what about AAPL?  Well there's a few things in play - first of all one can't ignore the fact that it BLEW through the 100 day MA today only to retrace just on top of it. The 50 day EMA is crossing over the 20, and all of the MA's are converging upon each other with the 200 Day smack dab in the middle.  Now that's moving average magic - it's also a perfect recipe for a confused day or two in the market which we saw today.  I attribute this timing to today's confusion more than anything.  

Additional reasons to have seen today's major sell off after the push up is the fact that we DID have a gap.  A true gap.  Very often gaps are filled intra-day but today's did not fill.  That means either tomorrow it might fill or it very well may be the impetus for what would be called a continuation gap.  A continuation gap happens in the middle of a trend and it is characterized by a gap in the direction of the trade.  The fact that today was a true gap UP is actually more important than the fact that has a long candle wick on top.  Ultimately tomorrow will be the confirmation for what today meant.  

An additional reason today saw a brief slow down is the fact that Jan. 22 saw today's high of around 160 as a high just before the stock continued in a major down trend.  This insight can help explain why there was some slow down.  However I wouldn't look for a long term slowdown in AAPL.  There could be - as I said, the next couple days will determine the immediate direction for AAPL.  But the 160 mark just isn't a strong enough resistance in my eyes and there's too many people believing AAPL is a 180-200 stock.  With that much sentiment behind it I can't see it stuck at 160 for too long.  

Additional reasons for continued bullishness on AAPL - Since AAPL broke out of it's box on 3-18-08  it has not traded all the way down to the 10 day MA yet.  Not only that, it hasn't even looked that direction since 3-20-08.  Today's move, even with the long upper candle wick, continues to walk the upper band of the Bollingers.  It's actually pulling AWAY from the 5 day MA, not closer to the 10.  With today's move the Moving Averages are setting up for a very nice long term trend on AAPL.  I'm sure Steve Jobs couldn't be happier.  To top that off Volume continues average or above average, the ADX indiator is Loving the move, cashflow is UP and it seems almost every day large firms are adding another buy signal to AAPL helping the larger public's interest in AAPL to be strong.  With all those things going on it's hard to see how today could be a warning sign that AAPL is about to drop like a rock again.   Granted everything could change tomorrow, but at this point all the indicators are strong.  I'd suggest setting a stop just below the 5 day Moving Average and continue trading long.  I really don't see much reason to stop before it hits 180.  A retracement or two would make a lot of sense but AAPL's recent history has shown "rest" to be something this stock doesn't care a whole lot about.  We'll see what happens.   The fact that after hours trading had AAPL trading up from the day's close is a good sign tomorrow may be a happy day for the AAPL bulls.   

 file:///Users/thesoniccellar/Desktop/Picture%204.png

Cover Calls

I guess I will address this question to Jeremy since he is the one that brought it up. I believe I am beginning to grasp the options concept and how they work. The cover call sounds like an attractive idea, but what are the down sides as far as how much risk is there, and in what cases to you lose money? Here's where I am with options - I think they are great IF you know what you're doing. I think with some time I may feel confident enough to "dabble" with options. I am trading with money I am planning on eventually putting down on a house someday, so I would like to keep my risk in the low to medium range. With that being said, I also know with more risk comes higher potential for returns - that is just not the route I feel comfortable taking right now with this money. I would really like to learn about and hopefully profit from options, but if there are ones that are less risky than others, they are probably the ones I would be interrested in.
Thanks to All

I'm in

We're good to go on my end. I think this will be good. APPL is having a good day. Maybe if it pulls back a few points here in the short term I may think about getting in a little. The only problem is with shardes @ $150+ , a "little" money doesn't get you many shares.. I'll be interrested to read feedback from today.

-Jon

What Are Candlestick Charts?

It's hard to write the very first post of a new blog! Therefore, I thought it would be best to start by discussing the obvious -- the name of the blog. "Trading by Candlelight" is a combination of a couple habits of mine: 1) the use of candlestick charts in my technical analysis and 2) the fact that this analysis usually occurs late at night! (often by a warm fire)

For those who are new to technical analysis or candlestick charts here is a quick course in reading them. Candlesticks measure the price movements of a stock (or other equity) over time. The four points that are recorded are: Open, Close, High, & Low. The following chart from Investopedia illustrates these.

As described by the arrow pointing to the Body, a black candle (sometimes displayed as red) will indicate a stock closed lower than it opened. A white candle in contrast (sometimes displayed as green) indicates the stock closed higher than it's open. Wicks on the top and bottom record the highs and lows of the session.

It is important to know that a candle's body is not derived by comparison to the previous candle. In the following example you will notice that although the last candle of the chart closed lower than the previous day -- it is still a green (white bodied) candle because its close was above the open.

The timeframe of each candle is defined by the chart you are reading. A daily chart will have the Open, Close, High, & Low for each day. A weekly chart records the same data but on a weekly basis. A 5-minute intraday chart records prices on 5-minute intervals. The vast majority of candlestick charts are viewed as daily charts.

There we have it... the first post. I'm looking forward to your interaction as we discuss the technical aspects of trading and begin applying them to our personal trading plans. I hope you enjoy Trading by Candlelight!