Weakness signals at US Market

When market are trending up, it should create higher high and higher low.
Dow jones has been making higher high and low since July 13, 2009.
Yesterday Dow create its first lower high, and today (market still open when I post this) dow down again and testing its support line.
Three down days, one up days, then down days again. Today many bad economic news make market go red.

I like to see market to continue rally, but from technical analysis view, I will let the chart tell me what to do. Besides the lower high signal, there is another weakness signal which is negative divergence on MACD. Price goes up, MACD goes down, usually those directions should be the same.



We can not be sure whether dow will continue to dip further through its support or bounce and creating trading range, or market will just pullback, or maybe bargain hunters will come again and push the market up in one hour before market close.
I have taken my money off the table to see further development of us market. Protect our capital is very important to keep staying in the trading game.

So we have weakness signal on technical analysis (lower high and negative divergence) and fundamental analysis (economic indicator news are not good recently)
Do you believe marketwill continue to rally and keep your long position or see the chart and follow its signals? I choose the later, and wait another signals to enter long position.This is not recomendation to short the market, I will play short position after there are more signals to confirm reversal to downtrend.

The confirmation will be valid if today market close in red and penetrate the support level.

Best regards

Snip

OC, LVS

Two interesting uptrend stock for this post. The strategy is buy on support

OC looks like has tested MA 50 support as per below chart


We can buy call option for Nov 09 22.5 C
Pls check the implied volatility.


LVS also seems has tested its support.



We can buy call option Nov 09 18 C
Its implied volatility is also high, if it does not fit with your risk profile, dont buy it.

Remember, dont use more than 5% of your capital for one position, plan your trade by calculate the exit point (cut loss or take profit) before enter position.

Best regards

Snip

DOW Jones up 124 points

Well, we should not fight the trend until it is broken.
The uptrend is still intact. Market correction will be used by bargain hunters to push the market up again. Correction is little wave currently. We should go with the big wave which is up. Try to guess the market top or bottom is very hard work and can cost you much. Instead we should use the first weakness signal in uptrend market for taking our profit and wait another chance to enter long position.

Enter long position with call option but don't use more than 5% of your total capital for one position. Keep at least 50% cash in your portfolio, don't use all the bullets. Diverse your risk by not putting all your eggs in one basket, you will be able to sleep better in the night.

Bull climbs up wall of worry, we can see it is true by seeing the us market chart for the past 6 months.

Best regards

Snip

MU - Update 1

MU Nov 09 8 call has increased about 10%.
The stock tested the support and bounced up. Looks like it still can go higher.

Below list of Mu option as per Sept 28 closed.



It is really great to trade stock option in us market. The liquidity is high and we can choose from thousands of stocks which has options.
But don't trade money you can not loose because stock option is high risk activity.
Only if we found good risk reward trade, then we should go into the trade.
Analyze the chart, check the options list, check the risk reward value, plan your exit points, then enter the trade.

Best regards

Snip

SBUX - Update 1

SBUX go up significantly on Sept 28, 2009 (market still open).
Below are the option list of SBUX after about 40 minutes market open.




If I compare with my previous post:
The price of Oct09 20 call was $0.62 per contract on Sep 25, now it is $0.92 per contract on Sep 28. Nice gain about 50% for this call option. Not bad for only one trading day (Friday to Monday).

For conservative trader can take profit today. If one is more a risk taker, can wait another day to see more gain for SBUX stock price.



Best regards

Snip

SBUX

SBUX price has pullbacked for the last three days. Today there is news that Bernstein initiated coverage for SBUX with Outperform rating and $25 target price.

The chart below was taken about 70 minutes after market opened today.



SBUX price may found support on MA 50 days and 23.6% fibonacci retracement.
We can enter long position (buy stock or call option) at near market close today if the candlestick still show strength from buyer (price does not go below yesterday close)

List of options as below


We can choose to buy Oct 09 20 Call or Nov 09 20 call. For bigger delta we can choose strike 19. Personally I will choose Oct 09 20 call for cheaper price, so the risk:reward will be better. The position should be held until the profit target is reached or stop loss is hit. The profit target and stop loss should be adjusted to your risk profile. Do not use more than 5% of your total capital for each position. So if this position is 100% loss, your capital will be reduced only 5%. If you set stop loss at 50%, your capital will be reduced only by 2.5% (5%X50%). There will be still enough capital for you to stay in the trading game and you can sleep well knowing the risk is so small. I welcome any comments from visitors of my blogs.

Best regards

Snip

MU

I found interesting uptrend stock. The ticker symbol is MU.
It is uptrending stock. The price has bouncing few times when testing MA 20 days.
MU pullback yesterday and reach near MA 20 days ($7.84) and fibonacci 23.6% retracement at around $7.78. This is a good setup for buy on support strategy.
The plan is to buy stock when it retrace around $7.78-7.84 price or buy call option Nov'09 8 call

The chart as below (Sept 24 closing price)






List of options per Sept 24 closing price



Remember, always calculate your risk, don't use more than 5% of your total capital for one position.
If you buy stock, please set stop loss minus 8% from you buy price, if you buy option, please set stop loss minus 50%-80% from you buy price.
We must always now when to exit when the worst comes before entering the trade.


Best regards

Snip