Sunday, January 30, 2011

Global Stock Markets - Negative Divergence Galore

Take a look at the charts from Breakpoint Trades guys:

Quick Snapshot of Some Foreign Markets

The US stock futures are down. Dow is currently down 24, but it was down more than 60 earlier. Ben Bernank to the rescue! He cannot let a pesky little people in Egypt ruin his perpetually levitating stock market, can he? Nooooooohhhhhh.

Friday, January 28, 2011

VIX Jumps on Egypt as Stock Market Dips

In the stock market carnage, particularly on Nasdaq, NFLX continued to go up. Oh well.

Other than the missed $400 additional gain if I held on to the option, my portfolio recovered some of the lost ground on precious metals (now that this punk trader finished liquidating his stupendous COMEX futures positions). He caused thousands of dollars of paper loss for me in such a short time, and I will make sure I'll have a word with him if I see him.

In the final minute of trading, I grabbed VXX, a very small position. It is an ETN on short-term VIX futures. Since this is an ETN, I didn't think it had options on it. Had I known, I would have just gotten the options. There is a scarier ETN called TVIX, that's leveraged.

VXX jumped 8% today with a huge volume.

The reason why is finally getting obvious to many people: Egypt.

Many inverse ETFs have been showing positive divergence lately. Here's what VXX looks like: a blip today after a long, long price decline as VIX was dying, but with positive divergence developing on MACD (the best indicator for me these days).

It's outside the chart above, but in May last year it went from $70 to $140.

Slow stochastics hasn't given a buy signal, but so? As Zero Hedge says, we're in one of the first "quantitative" revolutions. High VIX times, probably. If everything is dandy and nice again on Monday, so? It can simply collapse on Tuesday again. Who knows.

Be safe and do your DD.

Wednesday, January 26, 2011

Contrarian Trade Success No.2: NFLX

(UPDATE) out @8.86, 1/27/2011. Good enough.


IF the after-hour price ($202) holds tomorrow morning, that is.

After betting against Goldman on ISRG paid off big time, I was looking to put NFLX. It has had a phenomenal run, probably due for a decent-size correction. Their earning report on Wednesday AH seemed like a good enough trigger for that correction.

Then I read analysts' comments, and that changed my mind. They were almost all negative. I looked at the front-month options - more puts bought than calls. Then I looked at the chart. It wasn't great, with a recent correction, but I didn't see a negative divergence on technical indicators. The stock seemed to be building a base for about two months (ignoring a bump in mid January), as it worked off the MACD negative divergence from October to November.

Suppose it is a base that NFLX has been forming, and what would be the target price? I figured $205, to complete the right side of a cup. It if were to break out from the cup, the ultimate target would be $230 (cup depth plus breakout point). February 210 calls were selling under $3. I bought one at $2.84. All I would lose would be $2.84 x 100.

Barring unforseen disaster, it looks like I'll get my money back with some bonus.

Sunday, January 23, 2011

Tech, Small/Mid Cap Head Down While Big Caps Levitate

Just a heads-up for those who believe Obama is "pro-business". The two indices that represent growth (tech and small caps) may be heading south.

From the top: Nasdaq, Russel 2000, S&P500, Dow Jones Industrial Average.

Dow Jones Industrial and S&P500 continue to levitate, suggesting to me that they - big cap, multinational conglomerates - are the targets of Obama's affection for business. Like, GE.

Whether Dow and S&P can withstand the selling pressure coming from Naz and Russell remains to be seen. It is certainly possible, and may even be probable if the tax repatriation stuff passes Congress. After all, Dow and S&P500 are full of companies that stand to benefit from such a law.

Thursday, January 20, 2011

ISRG Surges AH on Earnings Blowout

(UPDATE 1/21/2011)

ISRG went as high as $334.39. I sold my option at $13.60, missing the top dollar at $13.90. Now I could care less if I lose my money on BAC and C... hehehe. Thank you Goldman for being a wonderful contra-indicator.


ISRG (Intuitive Surgical) has always been an elusive stock for me; I can't develop a tradable feel for the stock, the price movement is always radical, both up and down, options prices seem always inflated and not very liquid.

Then, two days ago, a Yahoo SKF board member linked a sell recommendation by the vampire squid, aka Goldman Sachs. (h/t heartless)

It caught my attention because it was a rare recommendation (any "sell" recommendation is rare), and Goldman was recommending 2/1 put spreads on (I think) the front month. Clearly they were expecting a bloodbath in the earnings report, which was today.

Since the vampire squid's forex desk has been a disaster for the investors (they recommended short Euro at the last bottom at 1.18, among other fine calls), I decided to pull up the ISRG chart and see if there's a case against Goldman.

I thought there were. They're in the chart below, but particularly the positive divergence in MACD. And just to test my thinking, I bought one February out of the money call (@330); if I was wrong, I would lose $3 (x100, of course). $330 is where the stock runs into some overhead from May to August last year.

And this is ISRG after-hours:

Never trust the Squid.

Of course the Squid may attack AH or tomorrow to make sure the stock gets beaten back down and I still lose $3.

Again, never trust the Squid.

Friday, January 14, 2011

Goodbye VIX, and Death of Inverse ETFs?

Seems like it, though never say never. As VIX heads towards sub-10, it is killing the inverse ETFs like SKF. The point and figure chart of VIX has 7 as the target.

The chart below plots VIX and SKF.

VIX is about to break down from a double bottom. If this breaks, hello 7. The last time VIX dipped below 10 was in November 2006 - February 2007.

Bank Run Part 2: Citigroup (C)

I am clearly overdoing it, I know. But since my BAC call options have been a success for me (up 300% since Christmas Eve), I thought, "Whatever..." Ben's stock market put is solidly in place.

So I bought C, February 5 calls, 2 days ago. It sat there yesterday, and it moved up a bit today, on the wake of JPM's stellar 4th quarter results. One junk after another, you might say. If you think about them on fundamentals, there's no way in hell that you would want to touch them (other than Ben's put on the market). I am just looking at their charts, and BAC had seemed a good buy back then, and C looked good enough to buy 2 days ago, as it was breaking out of a short consolidation. (Some technicals are signaling a slight negative divergence - MACD histogram, CCI, RSI somewhat - but do you care? The only time the technical signals are followed is when they happen on gold and silver..)

Both C and BAC continued to behave well today. Then I just saw this chart posted at Zero Hedge, and now I know why, and the reason is called "short squeeze". C regained the top spot for the most shorted stock on NYSE, and BAC is ranked 7th.

Ooops... C will report its Q4 earnings on Tuesday 1/18 (premarket), BAC on Friday 1/21 (premarket). They almost always disappoint... Oh well. I guess I did push my luck one day too far. C'est la vie.

Wednesday, January 5, 2011

Bank Run Continues

I mean Bank of America's share price. Today it broke decisively above the 200-DMA on a larger volume than yesterday, though less than on Monday. Congrats to those of you who joined me. The stock almost reached the target price I mentioned, $14.56.

Now what? It is a good place to sell, though I have a feeling that there will be one more final push before it corrects, like April 2010. Look at slow stochastics at 60 and 133, and compare the present with April 2010.

One more push, and then WikiLeaks hits BAC...? Maybe. Maybe not. I haven't decided what to do with my tiny position.

Here's the Point and Figure chart of BAC. It was a bullish reversal day, with the bullish target of $22. I have little doubt that it will get there, thanks to Helicopter Ben. Just the matter of when.