Monday, March 14, 2011

Another down day for the markets

News about a meltdown threat at a nuclear plant in Japan probably didn't help out the world markets much. The earthquake in Japan made the Nikkei go down over 6%. Meanwhile the central bank of Japan pumps $184 billion into the money markets in an attempt to protect their economy.

Markets were down PM only to continue their way south in the first hours of trading. Halfway thru the day the S&P bottomed and started a recovery near the HOD. The index formed a (red) hammer on the daily chart. It's the second close under the 50MA in 3 days.

While gold went up (silver traded sideways) and oil ending up as well, the euro climbed higher to hit the resistance near the 1.40-area.

A couple of my swingtrades hit their stop losses (PCX and PAG). I closed TZOO near breakeven when price started forming an inverted hammer on the daily chart. Also, a base short formed on the intraday chart.
Meanwhile, SOA, GMO and NUVA went down along with the market, their daily charts still looking good enough to hold on to them. I adjusted the SL on all 3, near their 9EMA's.

My first daytrade was an alert from Stewie, he bought OVTI at 30.70 and only 15 minutes later he sold at 31.30. Good call! I got in at 30.73 and sold at 31.25 and 31.40. Almost 2% gains in no time, sweet!

POT was a stock I was watching to bounce on support but I couldn't pull the trigger, don't know why. It hit the 100MA near 52.50. I could've gone in at 52.60 with a 18 cent risk. Price came down on high volume, extended from intraday moving averages and than rocketed in a nice V-shape over 53 where I would surely have taken (partial) profit (9EMA on the 5-minute chart). This would have been a sweet, fast gain...
My second and third trade was HUM. It hit support on the 20MA and I got in at 62.86, only to be stopped out when the LOD (low of day) got taken out. Then I got in again at 62.86 when volume came in big to push the price higher, in divergence with the market. I took some profit at 63 and 62.94. Then I moved my SL to breakeven, to see it get taken out to the cent. Afterwards price went up passed my target of 63.30, very frustrating. I'll have to make a big sign saying 'leave that stop loss alone for now' and hang it above my screens...

Here the 2-minute chart for HUM:

Last daytrade of the day: TSO. Stock was already up +7% and was forming a handle on the intraday-chart.
In on break of former high and out near ORH (opening range high). Volume pop and shooting star near HOD signaled it was time to get out. 5m-chart below:

Every month, I play an option market hedge, usually a ratio put spread (in a bull market, call spread for bear market). Today I covered my long and short puts although they were all out of the money. Because of the time decay, the 1x2-ratio spread of SPY 128-puts (long) and SPY 124-puts (short) made me a nice gain. Better cover them now with the gain than wait till next week. If market would dive below 128, the spread could have netted me much more. But with option expiration next week, I'm not taking any risks.

Last week, I already set up a similar play for April, buying the SPY 125-puts and selling twice the number of SPY 120-puts. In theory, when at April expiration SPY is between 120 and 125, this will result in a nice profit. Since it was a zero premium play, over 125 it will only cost me commission. 115 or lower means I will have to cover my position to prevent losses. As you can see, this is a pretty save way to hedge your portfolio for a market downfall. Only a severe correction of 10-15% (in one month!) can force you to cover. The only downside is the margin you need, due to the number of shorted options.

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