VALE and RDC

I found new uptrend stock that bounce off their support on MA 20. Today they go higher and will test their resistance line. The entry time should be today or for breakout play, we should wait until the stock break through the resistance line. For VALE we can buy Dec 28 Call or 29 call.

for RDC we can buy Dec 25 or 27.5 call. If you prefer bigger delta then you should go for more ITM call.

As always, dont forget to set your stop loss and do the good money management.

US Stock will likely to move higher after Ben Bernanke state today that the Fed will keep interest rate low for extended period. So the dollar will still be moved into stock and commodity. As long as the dollar go down, the stock market will go up. But becareful when the Fed start to give signal raising interest rate, the stock market will likely have big correction because dollar will be moved out from stock.

I have a thought that now the usa economy still in recovery mode but stock market has gone up fast. When usa economy start to grow fast, the interest rate will be raised, dollar move out from stock, then stock market will most likely go down. So Dow theory is correct, stock market discount everything.

Best regards

Snip

NVDA,SWKS,SBUX

After earning announcement last friday, NVDA and SWKS gapped up and break their downtrend line. With good outlook forecast news, these two stock can go higher. MACD has formed golden cross for bull signal. Stochastic has pointed up and leave oversold level.

SBUX also gapped higher because of earning announcement and made new 52 weeks high. I still believe this stock can go to $25 in less then next 3 months. This stock once in downtrend mode and now should be in uptrend mode because of its fundamental better now.

As usual for playing uptrend, we can buy call option.

For NVDA, we can buy Dec 09 13 call, SWKS Dec 09 12.5 call, SBUX Dec 09 21 call.

Their theta are 0.01, so it is quite small.

Best regards

Snip

Dow - Technical sign of reversal

Dow formed hammer candle on important support MA 50 days yesterday. It signal sign of technical reversal. Check the chart and see what happen when Dow created hammer candle on MA 50 in early Oct 09. If history repeat itself, technically we will see bounce up.
But last time, there were no concern regarding Fed will increase fund rate that can affect dollar carry trade. The following FOMC will be closely watched by trader to see if there is any sign that Fed may increase the rate in short time.
If trader find any sign of it, I think there could be market sell off because stock market discount any news and the herd will overreact. But this market sell off will not be long.

Usually the interest rate will be raised because economy is improving, so in the longer time frame, based on historical data, when the fed raising the rate, stock market went up after went down first.

I prefer not to add any position before Fed announcement because market will be volatile before and after announcement. If you lucky to have correct position, then there will be quick profit, otherwise there will be quick loss.

Best regards

Snip

BAC - took profit

Last night I put profit protection order for my Nov 15 put and it was hit at 45% profit.
I put profit protection so the profit position will not turn to a loss one.
BAC went lower at early trading yesterday and then reverse up.
It always feel good to take profit, no matter how much it is.

Best regards

Snip

Stronger Dollar, weaker Stock Market

From March 09 till now, it is clear that Dollar has inverse relationship with stock market. As easy dollar is provided by the Fed, people use it to buy stock, gold, crude oil. So while the stock market, gold, crude oil go up together, dollar has been in downtrend.

Recently the dollar show some strength, as trader took profit and move position from stock,gold, crude oil to dollar cash.

As a result, the dollar go up and the others go down.

From the dollar chart, it show that the dollar price has been above MA 20, down retesting it and go up last friday. It will test whether it can break the downtrend line.

Stock market can only go up when there are buyers who willing to take higher price from seller.

Currently looks like big institution start to move the money out, as we can see from the dollar chart. As individual trader, we must becareful not to be trapped buying from big institution. Follow the big money, when they get out, why we should insist to stay? My prediction is dollar will be able to move above the resistance line and stock market can go down to 9200 for dow jones.

For option trader, we can start to buy put option to play this correction phase. Start small first and can add when get confirmation from dollar break above the resistance line.

Currently I play put option BAC and my position now is 50% profit.

SP500 has breach its important support while dow close on MA 50 support, not yet breach.

Weekly chart of Dow and SP500 also show bearish sign, while their monthly chart create doji pattern which show indecision between buyer and seller.

When market does not respond well on good economic news, we should be ready that the correction will continue. If you can not handle shorting or put position, better stay sideline until the market show some uptrend strength again.

Best regards

Snip