We got off to a hell of a start.
Part one of our trade review was a very busy week where we went bottom-fishing with 46 trade ideas (mostly bullish) in just one week and only 7 of them were misses for a very nice 84% success rate to start off the month.
Of course bullish trade ideas are like shooting fish in a barrel when the market goes up and up like this – the smart part is that we had 46 of them and that we went heavily bullish in the last week of January, right when we were bottoming – giving us the best possible prices.
That's why these channels are so important to watch, we trade inside of them, playing the odds that the tops and bottoms will hold and we try to catch the turns. That's why, at the moment, we are BEARISH – until and unless we break over the tops of our channels – at which point we can go back to betting on new highs.
Most of the trade ideas we review here are from inside the daily PSW Member Chat Room (and you can join here) but some are right in our morning posts, which you can have delivered to your mailbox via our Report Membership, while it's in progress, at 8:30 ALMOST every morning (some mornings I miss the mail-bot deadline). In fact, today I'll put a couple of **'s next to trade ideas that were in the morning post – just to see how well those work out.
At the moment (7:50 am) our Futures are doing what they usually do in the morning – rising on very low volume. We went long in Member Chat already (6:44) because you don't have to show us the same move 10 times in a row before we finally get it. Already we picked up a nice move off the bottom with our /NKD longs up 50 points already ($250 per contract) and the Dow (/YM) up 70 points ($350 per contract), which is enough money to pay for our Egg McMuffins – so we're very happy.
- **Nikkei (/NKD) Futures long at 14,500, out at 14,550 - up $250 per contract
- **Dow (/YM) Futures long at 15,600, out at 15,670 - up $350 per contract
- **Russell (/TF) Futures short at 1,130, out at 1,110 - up $2,000 per contract
- 10 EXC 2016 $30/35 bull call spreads at $1.15 ($1,150), selling 5 $25 puts for $2.30 ($1,150) for net $0, now $500 - up $500 (infinity %)
- Oil (/CL) Futures short at $97.95, out at $96.50 - up $1,450 per contract
- BBY 2016 $23/30 bull call spread at $2.12, selling $15 puts for $2 for net 0.12, now $1.58 - up 1,216%
- Russell (/TF) Futures long at 1,100, now 1,202 - up $10,200 per contract
- TNA weekly $66/68.50 bull call spread at $1, expired at $1.55 - up 55%
EWJ puts/490 – Rule #1: ALWAYS sell into the initial excitement. Rule #2: When in doubt, sell half. Rule #3: If you ignored Rule #1 AND Rule #2, why the Hell are you even bothering to read Rule #3 you greedy friggin' bastard!
Since we always buy our stocks at 15-20% discounts, we're not afraid to be a little early with our bottom calls. We don't think the market is heading down 20% – 10% should do it – roughly the 15,000 line on the Dow, 1,665 on the S&P, 3,800 on the Nasdaq, 9,400 on the NYSE and 1,060 on the Russell
That's our worst case and, in between, we will look for support as the weak (+2%) and strong (+4%) bounce lines, which are:
In absence of more bad news, we're playing for the bounce this morning (we took a long on Oil(/CL) at $96.50 and we'll go long on the Russell(/TF) over 1,100 – with tight stops. There's USUALLY a bounce on the way down – it's the strength of the bounce we pay attention to, as well as the volume behind it.
- **Oil (/CL) Futures long at $96.50, out at $97.50 - up $1,000 per contract
- **Russell (/TF) Futures long at 1,100, out at 1,104 - up $400 per contract
- Russell (/TF) Futures short at 1,100, out at 1,090 - up $1,000 per contract
- Natural Gas (/NG) Futures short at $5.40, out at $5 - up $4,000 per contract
As you can see from Dave Fry's NDX chart, the MACD is still stretched, to say the least and the RSI already spells DOOM!!! and it's quite a long way down to the next proper support, 50 points lower at 3,420. NDX at 3,470 is 86% of the Composite's 4,031 and .84 x 70 just so happens to be 59, so close enough that both indexes are showing us similar support and, with the 5% Rule™, there are no coincidences – so that's going to be our bet!
From Chat (9:39am): Cramer's in a suit this morning – must be a market-pumping day (as if that wasn't obvious from the string of Bloomberg statements last night. There's something very wrong with the whole system when they consider a 5% pullback to be "panic" – it's like we're not allowed to go down at all anymore, the way you can NEVER look behind the curtain, lest the illusion would be spoiled and the whole scam would be undone…
- Oil (/CL) Futures short at $98.50, out at $97.50 - up $1,000 per contract
- VIX March $13 puts at .10 out at .25 - up 150%
- Nasdaq (/NQ) Futures long at 3,450, now 3,708 - up $5,160 per contract
- Russell (/TF) Futures long at 1,095, now 1,202 - up $10,700 per contract
- Dow (/YM) Futures long at 15,350, now 16,454 - up $5,520 per contract
- **QQQ Feb $86 puts at $1.90, out at $2.55 - up 34%
- **FB short 2016 $35 puts at $2.50, now $2.20 - up 12%
- **Oil (/CL) Futures short at $97.95, out at $97.50 - up $450 per contract
- Oil (/CL) Futures long at $97, out at $98 - up $1,000 per contract
Jobs/Jabob – They are not likely to be good, Jan is layoff month for retail, no Government hiring and we've heard plenty of job cut announcements from the big boys. If they are up, it will be a big surprise. Only 150K expected after last month's awful 74K. ADP just showed in-line 170K but that hasn't been very reliable.
ECB held rates, as expected but Draghi actually mentioned GRADUALLY raising rates in the future and that was enough to send the Dollar down from 81.40 to 81 (0.5%) in seconds. That shows us that the Dollar's "strength" is a very fragile thing and it won't take much for our currency to reprice down to Argentina-like levels if the rest of the World begins to tighten without us.
Meanwile, that's certainly NOT happening at the moment as the BOE and ECB don't see enough inflation to bother them (because we're all exporting it to the 3rd World) and none of us have much of a recovery going, so all the Central Banksters are still saying they will remain "accomodative" for as long as it takes (for the top 1% to get the rest of the money).
- Russell (/TF) Futures long at 1,100, out at 1,100 – even
- Oil (/CL) Futures short at $98.50, out at $97.75 - up $750 per contract
- GMCR Jan $110/90 bear put spread at $11, still $11 – even
- GMCR April $85 puts at $1.05, out at $1.90 - up 80%
- Natural Gas (/NG) Futures long at $5.10, out at $5.13 - up $300 per contract
- DIA weekly $155 puts at .47, out at .30 - down 36%
- FTR at $4.50, selling 2015 $4 calls for .60 and $4.50 puts for .65 for net $3.25/3.88, now $3.52 - on track
I give up! Why? Because the head of JP Morgan's Commodity Division has been INVITED by CTFC Chairman Mark Wetjen to join the Global Markets Committee that sets the rules for Futures trading. This is not letting the fox guard the hen-house – this is simply serving the fox all the hen he can eat! Didn't we just fine JPM $17Bn for manipulating the markets and screwing over investors?
It's Friday and China is open again next week so I'm sure they will try to put lipstick on this market pig and close us even or better today. yesterday was a low-volume fiasco and this morning "THEY" have already dropped the Dollar back below 81 to mask the overall market weakness (hit 80.50 for a minute) by re-pricing the units the market is measured in – nice trick for the CTFC to look into and – oh F*CK – I forgot…
- Oil Futures (/CL) short at $97.95, out at $97 - up $1,950 per contract
- MO at $34.71, selling 2016 $30 puts for $2.80 and $33 calls for $3 for net $28.91/29.46, now $30.66 - on track
- Dow Futures (/YM) short at 15,600, out at 15,550 - up $250 per contract
- S&P Futures (/ES) short at 1,767, out at 1,765 - up $100 per contract
- GMCR 2016 $110/135 bull call spread at $7.50, selling March $105 calls for $5.50 for net $2, now $4.70 - up 135%
- 20 AAPL 2016 $450/600 bull call spreads at $58, selling $450 puts for $44 for net $14 ($28,000), now $23 ($46,000) - up $18,000 (64%)
- NFLX June $290 puts at $5, out at $3 - down 40%
- Dow Futures (/YM) short at 15,690, out at 15,700 - down $100 per contract
- Russell (/TF) Futures short at 1,110, out at 1,110 – even
- Oil (/CL) Futures short at $100, out at $97.75 - up $250 per contract
- QQQ Feb $89 puts at $2.05, expired worthless - down 100%
TSLA/Sage – The usual suspects. Notice how well it works to go long over the $170 line with a 45-day $10 call. Now we're over $180 so all the people who didn't listen to me at $160 or $170 get another crack at it!
… for people who have long-term short positions on them, they can be covered by making a momentum play (goes for any MoMo with variations as to levels and prices) of a contract that is about 45 days out (choosing longer over shorter) and, as a rule of thumb, we look to BUY a $10 call to cover a move over any $10 line as a momentum trade on the assumption the Delta is about .50 and it offsets the losses on a short-leap call (which is what we usually have).
That capped off a hell of a busy first two weeks with this week with 39 trade ideas this week, only 4 of which missed the mark for a very nice 89% winning percentage and that brings us up to 74 wins and 11 losses for the first two weeks of the month – not a bad start at all (87%). Of course, picking bullish trades in early February was like shooting fish in a barrel and, of course, we're never going to be 100% because we hedge our bets and we never want to be 100% bullish or 100% bearish – even 87% is a bit extreme, but it does happen at the top or the bottom of a trading range (when we get it right, of course).
As usual, one of the most useful things to do with these trade reviews is to look at those misses and see if they are now ripe to turn into winners. One of our misses from Part 1, reviewed on 2/27, was 4 CMG Jan $570/610 bull call spreads at $10 ($4,000), selling 5 March $550 puts for $7.50 ($3,750) for net $250 and, as of 2/27, it was -$1,450, down $1,700 (-480%).
CMG subsequently recovered, the short March calls expired worthless and the Jan spreads are still worth $20 but we went to cash and, in fact, flipped negative on CMG $60 dollars ago, when the spread was $30. Either way, we're talking net $8,000 at $20 off our original net $250 cash position – up 3,000% on cash out of a potential 6,300% if the spread were fully realized at $610+ but, as I noted, we flipped bearish already so NOW that trade is done.
That was a trade ideas from 1/30 – AFTER we saw a nice earnings report and we simply extrapolated the move based on FUNDAMENTALS and, as long as you REALLY wanted to own CMG for net $550 in March and, as long as you understood that being down $1,700 on a trade with a $15,750 upside potential wasn't actually a big deal (especially if you REALLY wanted to own CMG long-term), then our -$1,450 on 2/27 was nothing more than a buying opportunity.
By teaching you the VALUE of a position and teaching you to take the PRICE with a grain of salt by helping you to understand all of the factors that affect your trades – we HOPE to be able to make you a better trader. But it does take time and effort on your part as well because these are PROFESSIONAL trading techniques and, like any profession, it takes PRACTICE to get good at it!