Updates (as at 30 May)

As the market tanked yesterday (30 May), I closed my NEM and BHP to lock-in what little profit I made.

BHP
Closed my BHP Aug06 45 Call for a 1.8% profit over 4 trading days.

NEM
Closed my NEM Jul06 52.5 Call for a 9.7% profit over 4 trading days.

QQQQ - New Play
I bought the QQQQ Aug 39 Put for $1.00 on Friday (towards end of day) when the QQQQ was at $39.45. I played this purely based on intuition. I am trying to trust my intuition. I figured if I am wrong and the market when up on Tuesday (yesterday) then I would close my position and lose probably 5 - 10 cts as my option is out-of-money. As it turned out, the market tanked yesterday. The option closed with a 45% paper gain at closing time yesterday. On hindsight, I should have just lock-in my profit. Will try to close this position today.

- PersianCat04 (Millionaire-in-progress)

Updates (as at mid day 25 May (ET))

My NEM and BHP play was negative yesterday. In fact, I was too engrossed with my ES play (it was very profitable) that by the time I checked the NEM and BHP status again, the NEM exceeded my mental stop loss (last Monday's low). I was prepared to convert it into a credit spread. But the market was already starting to recover from its low. As such, I kept my positions.

As it turned out, the market recovers today. My targets for NEM and BHP remain intact at 52-week high. My stop loss would be their recent lows.

- PersianCat04 (Millionaire-in-progress)

New Play - NEM, BHP

The market attempted to recover from its recent fall yesterday. The market might just rebound and continue to rebound. However, I'm still bearish about the overall market. I would leave it to the Bulls to fight it out with the Bears. As most of the stocks have lost a fair bit from its highs, these stocks need to rebound before it can continue its downward trend. How much it recovers, is yet to be seen. The DOW might even reached all-time high.

In this rebound, I would play Call on the Mining and maybe Energy sectors only. My new play are NEM and BHP - both are mining stocks with a big chunk of gold play (among the biggest players in the world). I figure that should the market burst for good, gold stocks or gold mining stocks would have a good chance of appreciating further. China is also preparing a gold ETF for its citizens. A gold ETF (exchange traded funds) would be required to be backed by physical gold. Furthermore, the Chinese Government were also reported to have been advised to convert some of its US$ reserve to gold. As such, more demand for gold from China could be expected. Anyway, the charts for mining and gold stocks were showing bullish plays (e.g. stochastics crossover, low RSI, break 38.2 or 61.8% Fibonacci level, etc)

Even if the market did not burst, the mining stocks are due for correction.

I played NEM Jul06 52.5 Call and BHP Aug06 45 Call yesterday. My targets are their 52-week high and the stop-loss would be their last Monday's lows.

- PersianCat04 (Millionaire-in-progress)

Market Outlook

The overall U.S. market needs a major correction The writings are on the wall:

Rise in commodities (energy, metals, corn, etc)
Rise in commodities will indefinitely lead to a rise in basic materials which would lead to a rise in cost of doing business; rise in cost of goods and services; lower revenue and profits for most industries (except energy, metals, etc) and rise in inflation.

Rise in interest rate
The rise in inflation would compel the Feds to increase its interest rate further. This will rattle the stock market again. The interest rate hike would further hurt the housing market. We have seen in Singapore and Asia, how a high interest rate badly hurt the housing market. But in the U.S., to make matters worst, they allow 100% loan. If the price of their property drops, they will face a double loss - the outstanding loan is more than the value of their property but if they keep the property, they may not be able to afford the repayment as the interest rate increases.

Trade & Budget Deficit
Needless to say, the U.S. budget & trade deficit are extremely high. But some Republican still feel that the deficits are in good hands.

My 2 cts worth

For the major correction to happen, what the market needs is a trigger to prick the stock market bubble. What we see for the last 5 bearish days may just be a precursor of what is going to happen. I believe the trigger had not been pulled. The trigger could be anything from a huge pullout of funds from the U.S., dumping of U.S. dollars, new war in Middle East, U.S. housing market crash, oil price hike to US$150 per barrel, major terrorist attack, etc. Typically, the trigger is pulled when the market is least expecting it.

A classic scenario would be that the market rally after the recent fall. Perhaps, starting today. The rally could even bring the DOW index to its highest level ever (it was very close to achieve that before the recent market fall). Confidence in the market would be high. Conflicting market indicators were also interpreted as bullish news. About two weeks after the DOW breaks new highs, the trigger is pulled. Thereafter, all hell break loose.

As traders, we trade according to our plan. Do I plan for such a scenario? Yes. My recent positions had been mostly short positions. Should the market tanked again, my best instrument would be to short the eMinis (ES or ER2) as they do not have the uptick rule (unlike stocks or options). I have shorted ES during the last five days (after a long break trading eMinis - as I need to tighten up the trading rules for playing ES). It has been very rewarding - for which, I am thankful.

The market is starting soon. Till next time.

- PersianCat04 (Millionaire-in-progress)

Updates (as at 17 May 06)

The market had tanked for the past 5 days and it had served me well as I had shorted the S&P500 eMini (ES). ES is a fast game and one can make or lose money fast. I would not encourage this play to anyone unless they have good discipline and strictly follow the rules of the game.

Anyway, I am getting a hard time looking for stocks to short for options play. Most stocks had tanked and I am not willing to long a stock in the current weak environment. Perhaps, the energy and commodities stocks will be providing good opportunity for long plays soon.

DELL
Closed my Aug 25 Put on Monday. Made 43.5% over 4 days.
Closed my sold leg May 25 Call for $0.10 on Wednesday. This is the repair strategy for my DELL 27.5 Call (which is now fully paid for (free + some profits) by my profits from the sold legs - sold twice).

HOT
Closed my Aug 60 Put on Monday for a profit of 26.7% over 3 days.

WYE
Closed my Jul 50 Put on Monday at a loss of 24.4% over 4 days.

XSNX
Still holding on. Target date to liquidate is still July 2006 (awaiting the outcome of their marketing campaign).


- PersianCat04 (Millionaire-in-progress)

Updates (As at 11 May)

Under My Radar

The following stccks are under my watch list for potential reversal (just waiting for confirmation candle).

• GM
• SNDK (had ascending triangle - waiting for breakout with good volume spike)
• CMCSA

My Portfolio

My current portfolio updates (over the last one week)

• NVDA Put (Closed for 33.3% profit over 5 days)
• ORCL Put (Closed for 21.4% over 6 days)
• TXN Put (Closed for 3.2% loss. Closed too early)
• GM Bear Call credit spread (Closed my sold leg on Tuesday when the stock strongly rally and let my bought leg ride the rally. Closed my bought leg with small loss in total. Closed too early)
• SIL Bull Put Spread (Closed my sold leg with profit. My bought leg is now free - paid for by the profits made in the sold leg. See also my SIL Play)
• DELL Put and Bear Call (Still in play. See my DELL Repair Strategy Play - paper profit)
• HOT Put (Still in play. - paper profit)
• WYE Put (Closed for 20.5% over 1 day. Bought back the Jul 50 Put at lower price. Still in play. - paper profit)
• XSNX (See my XSNX Play - paper loss)

- PersianCat04 (Millionaire-in-progress)

XSNX

Left: Intraday Chart Right: Daily Chart

XSNX tanked with the market yesterday. As the stock dropped below $1.00, it was about to test SMA200. As it reversed after 10:00am ET, I bought more XSNX at $0.99 (thus lowering my average cost). As it turned out, the stock reversed convincingly and closed at $1.33 with an large volume. It formed a bullish engulfing candle yesterday. The stcchastics and RSI also showed a reversal (upwards). I would pick up more above yesterday's high and release them once I achieved a reasonable return.

- PersianCat04 (Millionaire-in-progress)

DELL - Repair Strategy

I've been playing Put on DELL for some time. For some strange reasons (we do make mistakes!), I bought a Jun 27.5 Call for $0.60 (way out-of-the-money) on 28 Apr. The stock keep going south. Sold May 25 Call for $0.95 (when the stock price was $25.31) on 3 May - thereby converting it into a credit spread. If the stock falls below $25 on expiration Friday, I would keep the $0.95 premium and still get to sell again the Jun $25 Call if needed.

Then the stock crept up (instead of down!). Just when the charts showed a strong bullish play, trading for DELL was halted on 8 May. DELL gave another downside guidance. Yesterday 's downslide saved my play. Yesterday, I bought back my sold leg (for a profit of course) and sold again at $0.70. My Jun 27.5 Call is almost free now (paid by the profits made from my sold leg). Since I am still very bearish on DELL, I also bought the Aug 25 Put for $1.15. DELL closed at $25.20 on Tuesday.

Targets remains at $23.26 and $21.90 (4-yr low).


- PersianCat04 (Millionaire-in-progress)

Trading Halt Play - ARIA

Played this on 4 May 06 (intra-day). I called it Trading Halt Day (for lack of better term). Read from Briefing.com at 9:55 am (ET) saying that trading for ARIA is halted.

Then read the following from Briefing.com:

04-May-06 11:22 ET
Ariad Pharm confirms jury rules in favor of ARIA and co-plaintiffs in Lilly NF-(kappa)B patent infringement lawsuit (ARIA) 5.52 : Co confirms that the jury in the US District Court for the District of Massachusetts has found in favor of the plaintiffs in their lawsuit against Eli Lilly (LLY) alleging infringement of the plaintiffs' U.S. patent covering methods of treating human disease by regulating NF-(kappa)B cell-signaling activity. The jury ruled unanimously in favor of the plaintiffs in finding that the claims of the NF-(kappa)B patent asserted in the lawsuit are valid and infringed by Lilly with respect to Lilly's osteoporosis drug, Evista, and Lilly's septic shock drug, Xigris. The jury awarded damages to the plaintiffs in the amount of approx $65.2 mln, based on the jury's determination of a reasonable royalty rate of 2.3% to be paid by Lilly to the plaintiffs based on U.S. sales of Evista and Xigris from filing of the lawsuit on June 25, 2002 through Feb 28, 2006. The jury awarded further damages on an ongoing basis, in amounts to be determined, equal to 2.3% of U.S. sales of Evista and Xigris through the year 2019, when the patent expires. The co-plaintiffs are Massachusetts Institute of Technology, The Whitehead Institute for Biomedical Research, and The President and Fellows of Harvard College. (ARIA is halted.)

I expected the stock to gap up then drop somewhere mid-way. Since this was going to be a very quick play, I was had prepared my 2 PCs for the play. At 11.50 ET, trading resumed. The stock behaved as expected. I short the stock as the stock came down after it gap-up. Made about $0.33 per share on this play. On hindsight, I should have closed some position (lock-in some profit) and left some to ride the wave instead of closing all positions. Anyway, it is still good money (about 4.5% returns for less than 10 mins effort). Below are the intraday 2-mins chart (on the left) and the daily chart (on the right) for reference.

New Play - SIL & ORCL

SIL
Read from Briefing.com about SIL today:

12:32
SIL Apex Silver Mines: shares plunge on concern for Bolivia mine project- Bloomberg (14.25 -6.75) -Update-

I checked the charts and the stock was already trying to recover its losses (It lost $6.75 at the time Briefing reported). Typically, with this kind of news, the market tends to over-react and the time value for the options would be very expensive. As such, I long the stock. I choose to play May $15.00 / $12.50 Bull Put Credit Spread for $1.00 when the stock is about $15.05. My sold leg was $1.75 or 11.63% of the price of the stock at that time (very expensive for a May At-The-Money option of a stock of just $15).

If the stock remains above $15 on expiration Friday. I get to keep all the $1.00 credit (or 66.7% profit) that I collected.

An hour later, Briefing.com reported:

13:32
SIL Apex Silver Mines responds to unusual trading activity in its ordinary shares (16.50 -4.50) -Update-

Co responded to the unusual trading activity in its ordinary shares. The co believes this activity is related to recent events in Bolivia concerning the country's planned nationalization of its hydrocarbon industry. The co is not aware of any plan by the government of Bolivia to follow a similar policy in mining. The co was particularly encouraged by recent statements made by the Bolivian Minister of Mines and Metallurgy in which he emphasized that "the mining policy does not contemplate nationalization and even less incorporation of private companies such as San Cristobal." The co is developing its 100%-owned San Cristobal silver-zinc-lead project in southwestern Bolivia. The project is expected to commence production in the third quarter 2007.

The stock closed at $17.70 today.

There are conflicting reports about Bolivia from CNBC. It was reported that the Bolivia government might extend the nationalisation of Oil companies to Mining companies too. Let see what happen tommorrow.


ORCL
The stochastic cross-over, RSI and candlestick charting showed a reversal. Played ORCL Jun $15 Put (in-the-money) on Monday.
Target 1 = $14.00
Target 2 = $12.92 (also 61.8% Fibonacci level)
Stop Loss = $15.21

- PersianCat04 (Millonaire-in-progress)

Updates

I am back after a lull of a few days. Been busy attending a course and backtesting a mathematical formula (wow! sound Chimp!! Ha! Ha!) for projecting the resistance and support levels for S&P500 futures (ES). So far, it looks good. Need more work on this though.

DELL
DELL continued its drop. However, I had closed my position in my May $27.50 Put on last Thursday for 29.6% profit. At that point, DELL plunged seems to have lost its steam.

DELL made a rally on Friday morning. Thinking that the stock had reversed, I played a Jun $27.50 Call (out-of-money). Bad mistake – should have waited for confirmation candle before playing the reversal. Anyway, my loss would be limited but I shall monitor closely and decide later whether to keep or close my position.

GM
My position is still negative. It announced its sales figures today. It was below consensus but the stock rally with the news. (This play is not Fun!).

TXN
This stock is still trending south though slowly. My Jun 35 Put is about breakeven (loss some of its time value)

XSNX
Uneventful.

- PersianCat04 (Millionaire-in-progress)