SecurityGuy's Blog

Today was very hard on the bulls.  Glad that I have been getting progressively more bearish in my portfolio.  I have had  changes in the bullish portfolio and I know that the market really appears to be changing trend.  The SPY and the IWM definitely had negative days and we have officially changed trends in the SPY as  we now have a lower low and  a  lower high.  105 is the next support with 102.50 poPtentially being closer.  Based on the Bear Flag pattern that completed  today 102.50 is much more likely.  The IWM is also showing the same trend as the SPY.  IWM  is at support now. If 59 breaks 57 is the most likely stopping point right now.

I am expecting a brief respite  from the selling but we should see some more later.  The QID  trade  closed today with the sell signal. That makes 2  for 2 and roughly a 2.5% gain on average from the 2 trades with each trade averaging 2 days.  I will be continuing to trade this system for the time being. 

HSP closed today by hitting my stop.  Counting the covered  call this trade made about 3% in 3 months.  I was hoping for  this to work better and would like to have  retained more of my paper profits but trading the trend that is in front of you and what the chart says is the way it must be. 

MGM will be closed tomorrow morning as the stock price violated support. 

VPRT  was closed as well as it reached  my stop.

PETS is close to being shut down but has not violated the line in the sand. 

XRT is also close to being shut down as well.

TEVA is  still in play and was up on this very bearish day.  The covered call is still in play.

UUP is still very bullish. If there is a close below the low of the day today I will be closing the trade.  As long as UUP stays bullish the markets do not stand much chance of rallying.  I am expecting this to stop between here and 24.  It may trend sideways  some before  continuing this upward push.  I actually would like it to do so as that will allow the  trend to last longer.

I entered a bearish trade in CAT yesterday.  This trade is looking very strong and I used a March Call spread to trade this symbol.  Almost 50% of the max credit received already.

The DIA call spread is looking very strong  right now.  I  am expecting to be able to close this next week for nearly a maximum credit, not my normal 80% of the max credit. This will allow my net trade on the DIA this month to show a reasonable profit.

QID was closed and I am looking for things to settle down so that another trade can be taken.

All in all I am still very profitable and I am keeping my losses within reason or usually smaller than my gains.  Would just like to see more successful trades right now.  There has been  more failed  trades than I like but this happens to trend followers when the market is changing  directions.

One  final note, should the Dow break 10000 I am expecting the short term move to go to 9500 but  a much more  significant downtrend is likely to develop.  The government debt issues in Europe and China's current moves are beginning to change the tone of the market.  The government debt issues are significant and I don't believe this is over until the balance sheets of the majority of the world's governments,  including the US are corrected.  This will take years. This does not mean that the market will only go down but sideways can also occur.

I did not have time to post on the days movement yesterday but not much has changed from Friday or the analysis done on Sunday.  The SPY is still trying to stay above critical trendline support but has not yet broken it.  Based on prior movement in the short term we are forming a bear flag pattern.  If we break below 109 it will be time to short the SPY with a price target of  103.

The IWM is sitting at one of many support levels between here and the 60 area.  Falling to 60 is not out of the question at this time.  Still looking for a move up so that effective shorts can be entered, unless there is significant volume accompanying the move up.  Still in a wait and see mode.  The DIA did break a critical support trendline and almost reached the underside of the trendline.  That would be an ideal place to short the index.  We could also be forming a bear flag here on the DIA as well.  The inverted hammer on all 3 index exchange traded funds could result in a bottoming pattern here.  We will need a higher close tomorrow to confirm the short term pattern.

I occasionally use a proprietary indicator to make very short term trades.  The trades very rarely last  more than 5 trading days.  I received a signal towards the end of the day to enter and I bought a half position in QID, the ultrashort leveraged Nasdaq exchange traded fund.  The symbol has broken out over the last couple of  weeks from a long term downtrend.  The symbol is forming a bull flag  pattern now.  The entry allowed me a purchase price of 19.73.  I did not do a full position because it is not clear what the trend will be.  This signal has a high rate of success, but has been known to throw false signals in areas where trends are changing and not clearly defined.  We shall see.  Nothing risked, nothing gained. Reward:Risk is about 2:1 based on the way the signal normally trades. Entries and exits are not 100% defined so estimates have to be used when entering.  It will act as a nice hedge against long positions.  Should we get another purchase signal before the exit  is received I will buy the 2nd half.  I have attached a  chart but  this charting package does not have the indicator.  Notice that price is sitting at a resistance level.  Lots of reasons to not take on a full measure  of risk.

There have not been any other changes in my positions.  Starting to see more evidence of this being a trend change. We will  have confirmation of the trend change if  we get a lower high on the broad indices.  This has not occurred yet but with the dollar still showing strength we are more likely to trend down than up.

The end of  the week was painful to bullish portfolios.  The massive sell-offs in some issues actually prompted me to close some trades.  We needed a sell-off but I think the tone of the market has now changed.  We are at best sideways for the coming months right now.  I believe the general tenor of the market has changed now based on the heavy selling the last 3 days.  We have not changed trends yet but have called the bull trend into question.  We are at some critical trendline supports in many indices.  Without a bounce the longer term bull market will definitely be in question.

This week the SPY closed lower than it started and it is sitting on trendline support starting in August and September of last year. Should this line break the SPY will indeed be fully changing trends.  I wrote last week that I expected a move  to 117-120 this expectation is still in force as long as the trendline stays in play.

The last week the IWM pulled back as well.  I am expecting this symbol to continue falling to the 60-61 price range.  We briefly touched the 61 range on Friday, but I am expecting the fall nonetheless.  We should  see a  brief move  up the first part of this week, but I am expecting a pull back later in the week.  A close below 60 would call the overall bullish trend changing.

SECTOR ANALYSIS:

XLY - Consumer Discretionary - This sector is  sitting at a support level.  I decided to futher evaluate this sector this week.  A trendline that started in the August/September timeframe has not been reached yet.  Price would need to fall to the 28.50 level for this to occur.  Some additional downside in this symbol is still possible.

XLP - Consumer Staples - This sector is trending sideways and we have not broken out of the sideways channel yet.  A close below 26.25 is worth watching.  Right now the symbol has formed a candle pattern that if it closes higher would indicate that  the sector will continue up to the 27 level.

XLE - Energy - The sector traded to the price target and  has pulled back  to support.  The quick pull back may be questionable to the long term health of the sector.  If the up trend resumes, bullish entries can be taken.

XLV - Healthcare - Healthcare is one of the single most bullish sectors in the market right now.  Bullish trades in this sector should still be taken.

XLB - Materials -  This sector has moved through a short term support/resistance level.  On a weak up tick bearish trades should be taken to the 30 price level.

XLF - Financials - The bull flag discussed last week failed but critical support has not been violated yet.  Any close below 14 is reason to take bearish trades.  No bearish trades yet.

XLI - Industrials - The bull flag failed but the sector is sitting at a support level.  A break below 27.50/27 would be construed as bearish.

XLK - Technology - Bullish support gave way to very bearish inclinations.  It touched 21.50 a support area but should the symbol bounce at all this week I will be looking for bearish trades in the sector.  It is also very important to remember that the technology sector tends to lead the rest of  the market so we may be seeing an intermediate top right now and bearish trades will become the staple trade.

XLU - Utilities - This sector very much has broken.  Any sign of bullishness and trades to the downside will be taken in this sector.  29.50 is the next level of support/resistance.

BULLISH:

My bullish trades were hit and hit hard.  Some were closed and I did open a new one amidst bullishness on Friday during the market weakness.

BULLISH CLOSED:

JOYG - Trade  closed for a small loss as it started pulled back further than expected.  Loss of $80 per contract.  Still keeping my roughly 2:1 reward to risk ratio.

LTC - Trade closed for a small gain.  $9 per 100 Shares.  The exit saved me from a $150 loss per 100 shares.

BEARISH CLOSED:

My net loss in the bullish sector based on closed trades is $71 overall based on single contracts or 100 lots.  This is not indicative of actual dollars made or lossed.

BULLISH HOLDINGS:

HSP - Still holding onto this trade.  Still a covered call.  Close below 51 and I would be inclined to close the position with earnings coming  up in a few weeks.

DIA - This bullish unbalanced iron condor is still doing okay.  The symbol is threatening the bullish portion of the iron condor but the trade is still profitable.  Will reduce the bullish leg this week on strength to take some of the risk off the table based on the recent  change in market behavior.

UUP - As discussed last week the dollar rallied.  This trade did well.  New close below 23 and I will close the position otherwise I am planning on letting this run for a while.

XRT - The reatail ETF is still trading sideways.  Looking to initiate another covered call to take advantage of this price action and provide a limited cushion should it turn negative.

TEVA - Looking to  initiate a new covered call on  this trade.  Weakness from here and  the trade will be closed.  Looking at$58 as a critical  area right now.  On some  strength I will initiate a new covered call trade.

AENY - Entered this trade expecting a triangle/pennant breakout.  Entered about 4.41.  Close above $4.55 and this  give us a price target of about 5.55  to close the trade.  Close on close below 4 ish.

BEARISH HOLDINGS:

XHB - The homebuilders have reached  their price target of 15 and will be closed on Monday for about an 80% gain in 2 weeks.  Order is already in to close it.  May reenter on siginificant bullishness to downtrending trendlines used as exit point earlier.

The long weekend prompted me to not do much in the way of analysis but the time has come to get ready for the next week.  This last week finally saw some selling and interestingly the bears started to come out of the woodwork indicating that the downtrend may have finally started.  We have not seen a break in the trend yet, however.  Interestingly the weak days have had higher volume than the up days.  Does this mean that the new downtrend has started?  No, but reducing our exposure at this point in time is probably the wisest course of action.  There are some interesting set-ups coming and those will be mostly to the upside.

This week the SPY closed lower than it started.  An additional pull back to the 112.50 level would be  beneficial especially if the volume dropped  moving into that level.  Movement like that would be more indicative of additional upside and less risk of a deeper pullback occurring. I am watching the 112.50 level very closely this week. Any moves up above 115.00 are a continuation of the current bullish trend.  I am expecting some bullishness in the early part of the week and some additional downside later in the week.  I am actually expecting this overall bullish move to end around the 117.00 to 120.00 levels.

The last week the IWM pulled back as well.  It closed lower this week versus last week.  63 is  the critical level to watch this week.  A close below 63 would indicate a deeper pullback is developing and I would expect it to run to the 62 level as the next level of support.  A close below the low of the close on Friday would indicate that the bullish engulfing pattern has been confirmed.  We shall see what actually occurs.  The identification of support and resistance and the constant change in the markets is exactly why I love this buisness.

Based on the broad market analysis, we should know more about the market status after the close on Tuesday.  The overall market is still bullish so the majority of trades should be taken in this direction but we may need to provide more leeway on exits and only enter half position sizes if the key support levels are violated.  We can enter the other half at lower levels this way moves up from here or at a lower level will be beneficial to our accounts.  We never really know where the market is going, we can only trade based on proababilities.

SECTOR ANALYSIS:

XLY - Consumer Discretionary - This sector is  sitting at a support level.  Can move  a little bit lower from here and still be within the support structure.  A close below 29.50 and trades to the downside in this sector will need to be evaluated.

XLP - Consumer Staples - This sector is sitting at the top of a trading range between 26.25 and 27.  Watching for changes beyond either price range.

XLE - Energy - The Energy sector has pulled back some.  This sector still has a price target of about 63 so bullish trades can be taken.  We are currently forming a bull flag.  A close below 59 will lead to the viability of  the 63 price  target.

XLV - Healthcare - Healthcare is one of the single most bullish sectors in the market right now.  The sector has moved significantly so a pullback to 31.50/32 could still occur.  Bullish trades in this sector should still be taken.

XLB - Materials -  This sector still has some movement to the downside to reach a support level.  I am watching the 33 level to take more  bullish trades.  A bounce from here is possible but preference would be for a deeper pullback.

XLF - Financials - Sector is forming a bull flag and currently has a price target of 16.  Looking for a close above 15 to initiate any bullish trades.

XLI - Industrials - This is another of the most bullish sectors and is currently forming a bull flag.  Close above 29.50 would equate to a price target of 31.50.

XLK - Technology - This sector has had a very significant pullback into support.  This is a sector to really watch this week for bullish trades as  it is ahead of the other sectors in terms of pullbacks.  Biggest concern is the significant volume that has hit this  sector since the start of January.  Close below 22.50 would indicate bearish trades are the way to go.  One interesting component of the technology sector showing extensive weakness are the Semiconductors.  The XSD is sitting at a support level now.  Additional weakness would call the overall bull market into question.

XLU - Utilities - The utilities sector recently has pulled back significantly and is forming a base.  A move below  30.50 would indicate that it  is time to short the Utility sector.  A move up from this congestion area would indicate bullish trades should be initiated.  I will be watching this sector this week.

BULLISH:

My bullish trades this week did well and some were closed.  I will cover the closed trades first and then discuss the current open trades.

BULLISH CLOSED:

CERN - Trade  closed for a small loss as it started pulled back further than expected.  Loss of $68 per contract.  Still keeping my roughly 2:1 reward to risk ratio.

CMTL - Trade closed for a small gain.  $67 per contract.  I was able to exit on Friday successfully.  Stock had a significant pullback on Friday.  If the stock  price reaches the 36 level and volume is decreasing Iwill reinitiate the trade.

HPJ - Trade closed  as price had been reached and price movement had stalled, $154 per 100 shares. 

GGB - Stock trade closed for a small loss, $53 per 100 shares. 

XRT - Closed the short call for a $22 gain over 2 weeks.  Dividend plus short call equals a $50 gain per 100 shares thus far. Will be looking for another opportunity to sell another call against the position.

TEVA - Close the short call on Friday. Got lucky.  The pullback on Friday in the prices of TEVA allowed me the opportunity to buy back the call for a $20 profit.  I will be looking for an opportunity to sell another call against the stock position. Will probably be a $60 strike.

BEARISH CLOSED:

TAP - Closed for a small loss.  $9 per contract.

My net gain in the bullish sector based on closed trades is net gain of $142 overall based on single contracts or 100 lots.  This is not indicative of actual dollars made.

BULLISH HOLDINGS:

HSP - Still holding onto this trade.  Still a covered call.  Close below 51 and I would be inclined to close the position with earnings coming  up in a few weeks.

DIA - This bullish unbalanced iron condor is doing well.  The symbol hit resistance and dropped.  Further moves up will induce a change in posture of the bearish leg of the trade as the short strike is 107.

JOYG - The symbol is performing well.  Expecting a full profit on this trade.  Should close sometime this week on any reasonable strength.

LTC - Weakness from here and the trade will be closed.  Hoping for a breakout to the 31 level  but I am trading this as if it is going to fail right now.  Slight weakness this weak and I will close. I have a very slight gain right now but  weakness would indicate that the trade is going nowhere and Iwould rather use my dollars on something else.

UUP - The dollar etf is still forming a flag.  Dollar strength with the current dollar policy of the US Federal Reserve  is not bullish.  I would fully expect if the dollar really gains strength the recent bullish trend will be ended.

XRT - The reatail ETF is still trading sideways.  Looking to initiate another covered call to take advantage of this price action and provide a limited cushion should it turn negative.

TEVA - Looking to  initiate a new covered call on  this trade.  Weakness from here and  the trade will be closed.  Looking at$58 as a critical  area right now.  On some  strength I will initiate a new covered call trade.

BEARISH HOLDINGS:

XHB - The homebuilders are still showing some  weakness.  Looking for this to drop to about 15 to close.  Have about a 15% gain on the trade right now.  Close above 16.25 and I will look to close this trade.

Work has been driving me absolutely crazy and I have had limited time to do real analysis in the evenings.  Generally speaking analysis has been rather terse and focused almost exclusively on my current trades.  I value this work as it helps me to focus and keep my trades honest.

What happened today?  IWM and SPY moved up.  IWM is still bouncing along previous resistance that is now support.  The bad part of  today's trade in the IWM  is that the support bounce did not have siginificant volume.  We will see what happens.  Expectation is that we are in a bullish trend so it should go/continue in that direction. We may still get something of an  additional  pullback.  Break through the 63.60 level and I  will start to add significantly to bearish trades.

The SPY moved up on better volume.  While we still have strength in the SPY the differences in the current moves in the two symbols is of concern.  We will likely get  some additional  sideways movement if this  bullish trend  is to continue in the overall market should the weaker action in the small-caps continue.  A nice pullback or an extended amount of sideways movement will help keep the longer term trend  bullish.  The large  volume in the SPY the last two days is more indicative of a sideways market in the short term.

My trades did much better today than they did yesterday but I also had to make some changes and they are noted below.

BULLISH:

CERN - This symbol is  doing okay.  Forming another bull flag.  Breaking down from here and I will close.

CMTL - This trade has worked pretty well.  I am closing though.  Why?  The stock has  made a  nice move up.  The move up the last 3 days has  been on  steadily declining volume.  With the mixed signals in the indices  I am going to limit some of my risk by closing this trade for a 15-20% profit in 3 days on the option and about 3.5-4% on the  stock.

DIA - The  Diamonds trade, which is an unbalanced Iron Condor, is  doing okay.  The bearish leg of this trade is getting close to being in danger. The  long side is doing well.

GGB - Back to support.  Getting close to an  exit if it shows weakness from here.

HPJ - This stock is doing well.  Close  below $8.80 and Iwill be looking to book profits.

HSP - This is a covered call.  The covered call is still working.  Earnings are about 3 weeks out so the sideways movement is working to the advantage of this trade.  A significant close below $50 now and I will begin looking to exit.

JOYG - The trade that I am working here is a Feb Bull Put Spread. Just need a little bit more upward movement and the trade will be closed.

LTC -  Bouncing again but  is one of my weakest trades right now.  Close below $27 will indicate the trade needs to be closed at this point. I much prefer small losses than full losses.

UUP - This appears to be forming a new base.  We are sitting right at the $22.75 area indicated as a support area.

XRT - This was a covered call until today.  I closed the short strike today though.  This is forming a large ascending triangle.  I am going to roll to the next month for another covered call.  Between the dividend I received of $30 per 100 shares and this covered call I have better than $50 in additional monies in my pocket.   I will sell another month on some  additional strength.

TEVA - No change. It will be called away tomorrow or early Friday unless there is a big drop in the near future.  This is not likely to happen.

BEARISH:

My bearish trades are getting slim again.

TAP - TAP just does not want to drop.  I closed this trade today and my total loss including commissions are $20.  Could I have held this longer. Sure.  I don't like taking large losses.  My psyche deals with small losses great, but when they start approaching my normal gains I get a little anxiety.  They will still  happen, but my greatest failure last year was taking losses bigger than I should have on spread trades because I waited too long to  close.

XHB - The homebuilders showed a bit of strength today but did not violate my exit point.  Still holding.

Friday's action pushed the market higher yet again.  The one thing that Keynes was correct about was the "market can stay irrational longer than you can stay solvent". Glad that I am generally bullish. The trend is making me money.  The IWM and  the SPY pushed to new highs and volume has increased on this move up.  My premise for the week being a weak one and moving down was obviously incorrect.  This removed most of my hedges and allowed me to profit.  With the SPY and  IWM making new highs the trend is still up even though it might not make a lot of sense.  A healthy pullback will make this  bull market last longer so I hope it does not continue to rise in the short term.

My trades are still doing well:

BULLISH:

CERN - This trade is based on the very bullish price action over the last couple of weeks.  A close below 89 will force me to  close this trade.

DIA - This is now a bullish biased Iron Condor and both sides made me some money today.  We have about 40 days to expiration so it will be a while before this trade is closed.

GGB - This stock is  moving back to former resistance/new support. Should this hold the trade will be a keeper.  If it does not  I will close.  That line right now is at 17ish.

HPJ - Pushed its way to resistance.  Question now is whether we push through. Stop is still in the same place.

HSP - This symbol is doing well and the stock's uptrend is still intact. Will keep holding.  Appears to be forming a bull flag.

JOYG - Like the other oil service sector stocks enjoyed a very strong day. I am .12 on the spread away from closing the trade.  Looks like this trade should close early.

LTC - Still consolidating.

UUP - Still forming that bull flag.  Getting close to my line in the sand at 22.75

XRT - Still trending sideways.  Covered Call should be closed with full credit received this week.

TEVA - This  stock shot up like a rocket today.  TEVA made some big announcements about its business and the stock soared.  Covered call will be closed for me I am sure  this week.   Still a nice trade.  I will be watching for a pullback to take advantage of this symbol again in the future.

BEARISH:

TAP - This symbol  continued the down move from 46 today.  It is now  sitting at an area of  resistance.  Should the symbol close above 45 again this trade will be closed.  Right now the trade is profitable.  Simply tightening the stop.

All in all a good week.  I will be looking for some  additional hedges over the weekend to offset some of  the bullishness in the portfolio.  One last item of note, I have noticed that XLF broke out of its triangle this week meaning that the bullish move in the market is likely to continue so I will be still very bullish in my market posture.

Today was a do nothing day.  Up a couple down a couple finally closing  with little to no change.  There was pretty significant change in my current holdings based on today's  price action though.  Very satisfied with my perfomance today and yesterday as I will explain.  I traded my plan and planned my trade.  This also means that failed trades are now out of the way and that the losses are half the size of my typical gain.  Since I have a success ratio on my spread trades of about 70% this will yield a net profitable trading system.   I made some changes to my current portfolio based on  yesterday's analysis and  it  proved fruitful.

The IWM closed down slightly today and is now almost right on top of the previous highs.  The IWM trade was closed completely today.  Closed because it had violated my level for closing the trade but did not do it enough to need a close on the short strike.  Loss on the trade was about $35 while my typical gain is about $70.  The bullish up trend in this symbol has not changed.

The SPY closed up slightly adding to yesterdays gains.  No  change in the up trend and my bullish portfolio benefited from this overall trend in the market.

My trades, particularly the bullish ones, are doing well and the analysis follows:

BULLISH:

DIA - The Bull Put Spread is a good fit for a market that does not move.  Was slightly positive today and will benefit for more sideways or moves up.

GGB - This  stock moved up through resistance early in the day but closed right in the range for  staying in  resistance.   We will see what tomorrow brings.

HPJ - Continued the strong move to the upside today. 

HSP - This stock did very well today for not moving.  Made money specifically because the stock did not move much.  Looking like it  is forming a consolidation pattern which works well for my covered call trade.

LTC - This stock was a disappointment today.  Still forming a consolidation pattern with the bounce.  Holding as we have not crossed my line in the sand.

UUP - Closed part of this trade down to take some profits.  Support still  at 22.75. Stock is currently forming a bull flag.

XRT - Stock is consolidating right now.  Will likely close the short call likely this week to bank some profits and allow the stock to continue its uptrend.

TEVA - This stock has done exceptionally well thus far.  This symbol changed direction today and formed a bearish candle pattern.  Will need a close below today's close to confirm that bearish formation.  The short call is out of the money now and is back to break even.  No changes  in  the trade.

BEARISH:

IWM - Closed the trade today.  Mentioned above.

OIH - This trade was also closed. The line was crossed.  It proved very beneficial considering the strength in fund today.  Trading the plan is essential.  Loss was about $45 right in line with the IWM trade leaving me  with a solid potential if my gains on  other trades continue to be consistent.

TAP - This trade had not closed above my "line in the sand".  The stock  reversed direction from yesterday and started the formation of a bearish candle pattern.  Close below today's close will confirm this move.  No real change in the trade.

NEW TRADES:

I did make one new  trade based on the change in OIH.   Yesterday JOYG made a nice move and I entered a Feb Bull Put Spread 48/50.   The trade revolves around the recent change in oil service sector and my buy signal with price above the MA, Stochastics and the MACD confirming the  move.  Will close on a close below $50, if the spread reaches .08 or if the stock moves sideways and reaches the 4-10 day window before expiration.  Expectation is a continuing move higher and a close within the next 2 weeks.  Chart of  the entry follows:

Wow, what an  upmove and I  did not expect to see that.  The SPY today confirmed its bullish trend. Today was not a good day for many of the hedge plays.  For the trading system that I use a buy signal flashed today on the SPY.  My bullish trades did well.  The IWM confirmed its bull flag today so the hedge using the IWM will be changed.  I am  closing the short strike and going to let the long call appreciate potentially.  Need to review the trade a bit to make sure that is the most prudent course of action.  Based on the bull flag break we have a $66 price target.

BULLISH:

GGB - Still sitting at the resistance level.  Hopefully the stock will break out and resume the uptrend.  Should have a price target of  $20.50.

HPJ - Still forming  a bull flag. No change.

HSP - Many healthcare stocks today did not fare very well. HSP was actually profitable for me today because of the short calls.  No  change.

LTC - Still showing a support bounce.  No change.

UUP - The dollar did not do well  today against other  currencies.  I will  be reducing this position size  as the stock closed below the 22.90 level.  Next support level is 22.75.

XRT - The retail sector exchange traded fund created an inside day today.  A move up tomorrow will confirm the move today.

TEVA - Teva Pharmaceuticals has confirmed the bull flag.  I will not be chasing the trade but the stock that I still have is making money.  The covered call is at $57.50 so is now ITM.  I am  not changing  the trade.  If the call is exercised then the stock will exit my hands for about an 8.5% profit in about 30 days.  Not bad for a conservative covered call trade in an IRA.

BEARISH:

TAP - TAP is .08 from my exit point and is sitting at resistance.  We shall see what tomorrow brings.

OIH - Oil has changed direction  with the falling $.  Time to exit this trade with a small loss.

IWM - Mentioned above.

NEW TRADES:

DIA - This  trade is the opposite of the IWM trade and was run to counter some of the changes in the nature of the market.  Futures were up this morning so a bullish trade was necessary to take advantage of the move.

BTU - This was a nice support bounce and I entered today after seeing the bullishness of the energy sector.  This is a straight March call using the 46 strike.   Should we break 48, the  price should be expected to move to about 53 over about a month.  Trade will be closed if the price reaches the $52 price range, lasts longer than mid-February, or closes below $45.

As mentioned  in the previous post we are at some critical retracement levels.  The 2/3 retracement level is critical and since we are still in a general bear market.  Should we see a bullish push above the current levels on significant volume (63-65) then the longer term bear market will be in question on the  IWM.  Next critical resistance will be the 68-75 level.  A true new bull market cannot begin  again until we cross the previous highs back in 2007.  We can certainly trade this current upswing.  the next few weeks will be critical in determining future course.

The SPY is similar to the IWM but has not been as strong.  The SPY is sitting on top of the prior resistance area in the 111 area right now.  Should the SPY use this as a launching point it will reconfirm the bullish uptrend.  Could go as low as 110.50 and still confirm the bullish trend, but will be better if the bounce can occur from here. 

I still believe  that we will see general weakness this week but will not be changing any of my current trades unless support or resistance is violated.  I will begin looking for some new bullish trades.  This week should be interesting and help us identify where the trend will be going.

Current trades are still in good positions and both the bullish and bearish positions are net positive.

Now for some sector analysis.

XLY - Consumer Discretionary - The ETF is now at 29.77.  From the last set of  critical lows at 26.50, volume has been steadily decreasing.  Even the down day on the final trading day of the year occurred with lower volume.  Still bullish but a pullback should be in order to closer to 29.  This would provide a nice re-entry.

XLP - Consumer Staples - This is one of the weakest of the sectors right now.  In the following chart notice the recent change of character.  Notice the weakness in the MACD and the Stochastics. This is reason to believe that the overall bullish uptrend will continue.

XLE - Energy - The energy sector appears to be in a trading range but is currently making  lower highs and lower lows.  All of this  has occurred within a price range so we could be forming a pennant or flag.  Based on the direction the  sector takes  we will know the  future of the sector. Currently short the sector in the very short term.

XLV - Healthcare - This sector is sitting at a support level.  A break below our current level could potentially signify a new downtrend.  That would require a lower high as well as a lower low and  would only signify a potential change not  a real change.

XLB - Materials - The Materials sector looks much like XLV but real support is at 32 with the current level as former resistance so a bounce from here with some volume could be significant.  Should this sector begin to really move up the Dollar could see a move down.  Notice that MACD is beginning to diverge from the price action.  We did not have great up move  in price so the divergence is not as significant.

XLF - Financials - The financial sector is still forming a pennant that has been developing over the last 5 months.  I am not sure that if the financials do not participate that the market  can continue to go up overall.  14 is the critical support level.  A break below 14 should see a target price of 12 - 12.5 over about a 5 month timeframe.  Move up from this level should  see us reach 16 - 16.50. We should see which direction in the near future.

XLI - Industrials - This sector is sitting at a major support line that has been forming up for since the July lows.  A break of this  diagonal support could be very important.   There was a slight break of this trendline on the final trading day of the year.  It was not enough to say that this uptrend was broken and we are either moving sideways  or down from here but this week will help us identify the nature of this sector in the cominng weeks.  The MACD and Stochastics indicator are beginning to show weakness and are negatively divergent. The chart follows:

XLK - Technology  - The technology sector is one of  the single most bullish sectors.  It has been doing very well.  A nice pull back to the 22.50 area would be very beneficial to this trend.  Hopefully that will occur over this next week or so.

XLU - Utilities - The utilities sector was not particularly strong on the last trading day of the year.  The down day settled at support and the sector is currently forming a bull flag.  A breakout above the 31.50 level would signify a new uprtrend is beginning.  This would indicate a price target of about 33.50.  Could still fall to 30.50 and easily indicate the trend is still intact.  The bull flag would be invalidated but the uptrend is not.

Bulilsh trades should be focused in the Technology sector, Healthcare, Consumer Discretionary.  Bearish trades should be focused in Energy and Consumer Staples.

BULLISH:

GGB - This trade is  still doing well.  We really need to see a break above 17.50 for the bullish uptrend to be continued.  Right now the  issue is in a basing pattern but these patterns tend to confirm the previous trend.

HPJ -Still in a bullish support bounce.

HSP - Extremely bullish.  Pullback to the 49-50 level will be beneficial for this trade.

LTC - This is  a new trade with an entry on the 31st.  Expectation is a for the support bounce to continue. Will exit the trade if the stock trades below 26 by 3%.

UUP - This ETF is not doing poorly at all.  Forming a nice consolidation.  Expectation is that for the short term for UUP to continue to move up.

XRT - This stock is still doing well.  The Covered Call is working exactly as designed.  Nearing the exit date for my covered call.  I will close within the 4 - 10 day ragnge to expiration and tomorrow will make 11 days. 

TEVA - The stock transaction is wokring well.  There was a break out of consolidation on Thursday and if  this is a legitimate breakout  the stock should reach about $60.  Volume was anemic so I am not sure that  this is completely legitimate.

BEARISH:

TAP  - Still sitting in my getting close but okay zone.   Will continue to watch the trade.  No  change.

IWM - No change in the trade yet.  Large up day we may need to close but this will be well within my minimum losses.

OIH - The oil service holders are still working okay and is profitable.  This is a January option expiry so is  looking to be closed  in the near future.

All in all trades are progressing and are well within trade limits.  Changes will be made  this week based on the price action as it occurs during the week.

Woohoo another day of a whole lot of nuttin'. Up, down, up and back to nothing.  No change in any of the analysis for the indices. We should see a pullback soon and then a resumption of the uptrend.

My current trades are doing well and I had another one close for a profit.

BULLISH:

CRM - Closed for a profit today.  This reduces my overall bullish portfolio risk.  I will be watching this for another pullback so that it can be traded again.

HSP - This trade is doing exceptionally well.  My covered call is doing okay and will be held even if the stock crosses the $55 level.  Volume was higher than the other days this week for this stock than in the last few adding support to the bullish move.

UUP - The dollar etf is still a hold.  It technically broke out of a bull flag pattern today and started the formation of a bullish engulfing pattern.  This is not necessarily bullish for the market.  A strong dollar would indicate a greater demand for treasuries and generally means there will be less money for the market. I say generally because there is a general correlation it does not have to be correlated.

GGB - This stock seems to be forming a basing pattern. If the global recovery story is true this stock should benefit and continue higher.  It is still a hold.

XRT - The retail spyder etf  looks like the uptrend is pausing and the covered call is working exactly as planned.

TEVA - Teva is still working and  the  covered call is positive by about 30%.  This pullback will be used to close the short call eventually and hopefully by another call in my regular options account.  The chart will determine when this will be.

BEARISH:

OIH - This trade is working very well with the large down day today providing the beginning of a nice profit of about 25%.   Just waiting for theta to evaporate.

TAP - This trade is doing okay.  No change in the trade.  Nice doji for today and theta will continue to erode making  steady cash.

Overall I have about $10 a day in time decay right now.  This is nice to have over long holiday weekends as you make  money every day when otherwise there is no money earned or it is lossed if you buy straight calls or puts.  Still looking for a couple of bearish plays to add to  the portfolio and  these will likely be added tomorrow.