Well Puts

We are getting a bounce off the 100 day moving average today. Moving averages can be areas of support/resistance, but I’m not advising you trade solely off of this. The short term trend is still down. This is what I’m looking for:

We hit 11,696 for a low today. I mentioned earlier that 11,800 was the first area of support we could expect. If this area doesn’t hold we will be looking at the area of 11,300 which is the 38.2% retracement level.

This is a weekly chart of the the Dow. I use the Dow because my indicators are less chatty than they are on the S&P or NASDAQ Comp.

I drew a fibonacci retracement off the lows of last June. If this short-term correction continues we can anticipate some support at ~11800 (23.6%). That will likely coincide with a rising 100-day moving average as well. It could take a couple weeks to get there though. And keep in mind that 11,800 is just an AREA of support. Round numbers are also logical areas of support (12,000 e.g.). We have some longer wicks on these last few bars. The market is testing these lower values.

I only look at the Dow to get market direction and then I make decisions on individual stocks from there. We are a week out from March expiration. I have no plans for any adjustments yet as none of my positions are in the money.

It always comes down much, much faster than it goes up.

We finally rolled over on the Dow Jones weekly chart. Short term trend is down, but the long term trend is still most definitely up. Using history as a guide (the following chart) we can anticipate a possible correction with a duration of a couple weeks. I pointed out a few of the corrections in the past 2 years on the chart. Yellow line is 100 day moving average. As long as that line is ascending I have a bullish bias.

My L1 watch list keeps growing daily. It is still too soon to pull the trigger though. I’m still hoping to fill April inventory, but my last few trades have been June expiration. A 1-3 week correction will help my chances of getting some decent April premiums.

I like to review a chart of T2118 each week. The McClellan Summation Index is the sum of all of the daily values of the McClellan Oscillator. I find this indicator helpful to gauge the intermediate direction of the market. This chart would indicate some downside.

I’m finding it very difficult to open any new short put positions. Puts are cheap right now. I’ve been increasing the expiration dates in order to get a decent premium.

Here is a weekly chart of the DJI to put it into a longer-term perspective. I would anticipate some selling here in the short-term, but what I anticipate doesn’t matter. This melt-up could continue.

I bought a Kindle a while back and I love it. The first thing I did was go to Project Gutenberg and grab all the free classics. In fact I’m getting rid of most of my books – save a few sentimental volumes and any trading/investing books I might read again.

Recently I’ve been thinking about how to use the Kindle to improve my trading. I decided a few days ago to try a few newspaper subscriptions with this in mind. With the Kindle you can subscribe to newspapers with a free 14 day trial. I added Investor’s Business Daily and Financial Times thus far. I will probably try The Wall Street Journal and The New York Times as well. I want to find one that has a good mix of articles that will keep me engaged.

My thinking is that reading a periodical or two might give me some ideas and help stimulate the thought processes. The price of these subscriptions is nominal and I don’t mind paying a premium to get some good content. Also, by reading them on the Kindle it gets me away from the computer and the constant barrage of distractions and other garbage that make up the Internet. I find reading them on the Kindle is quite easy. It’s just text and no advertising.

The difficulty with this endeavor lies in blocking off time each day to devote to reading the newspaper. Like any other positive self-improvement goal I just need to make it a habit.

Another day, another new low for UNG. This is why you need to pay attention to moving averages. It is very tempting to try to pick a bottom, but it will only cause you grief (and money).

I’m having a lot of difficulty finding any new long positions to initiate and looking at the NASDAQ Composite weekly chart it is easy to see why. The area around 2150 is clearly an area of importance that we need to watch closely. Former areas of support tend to act as resistance. This doesn’t mean that the market can’t continue. It is likely we consolidate either over time or through price. I’ve been a net call seller over the last few days in anticipation of some consolidation or a pullback.

A week to go before September expiration and I have a lot of puts expiring. I need to plan out what I’m holding through expiration and what I need to make adjustments on. The market has been up for every day for a week now and a pullback seems imminent. However, the market doesn’t care what I think and this could continue. I need a plan either way.

Oil & Gas Equipment & Services

BAS was a lottery pick no doubt about it. I’m short the Sep 7.50 puts and there is a good chance I could be put this stock but after the melt-up this morning I’m not so sure. I’m holding for now.

SII is also moving according to plan. I’m short the Sep 25 strike puts. I see no reason to adjust this position at this point.

Semiconductors

ENER
There is a chance I will be put ENER at 12.50 but I’m fine with that. ENER had a really big move on very high volume back on the 8th. It is currently battling the declining 50 day SMA so I need to be concerned with that. If put the stock I will likely look to immediately sell 13 or 14 strike calls on it.

JASO
The JASO and ENER charts look pretty similar. JASO was more of a gamble as I sold these puts well in the money to begin with (Sep 5 puts). Selling short ITM puts can be a very profitable strategy but you have to be very careful. I did this successfully with JASO back on June 24th and bought them back on August 11th.

There was a lot of volume on that recent push to 4 and I’m hoping this is some consolidation. If it can’t get back above 4.10 before expiration I’m getting out or rolling them to October.

Metals and Minerals

RTI I’m short the Sep 17.50 puts. This is moving nicely. Higher highs and higher lows, no adjustments necessary.

Medical Instruments and Supplies

BEAT was a ridiculous trade and I am little embarrassed to even have it on here. I’m embarrassed because the reasons I entered the trade completely go against my rules. However, it is moving in my favor and it looks to have absorbed the 50 day SMA. High volume on recent rallies might suggest accumulation.

ETF

UNG
I am short some UNG 14 strike calls that should expire well OTM. UNG continues to rip, but I’m still staying away until that 50 day SMA flattens out. I will look to sell Oct 14 calls after expiration.

It is very, very tempting to sell some UNG puts this afternoon. However, I’m not going to sell any puts until I see some of those short-term moving averages flatten out. UNG imploded far worse than I expected, but the market doesn’t care what I expect and UNG can still fall much further. If 9.00 does turn out to be the bottom then happy days.

I still don’t feel too much pain because my cost-basis is $11.52. I was put some UNG at 13 and 14 at August expiration and I still have plenty of cash to add to this when I’m ready.