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Wednesday, January 31, 2007

Day Trades That I Missed: X, MAN

I was not paying full attention to the markets last night as I was expecting a repeat of boring Monday action. But looking back at the charts, there were some good trading setups which I missed.


X on 5 min setup. This is a higher risk setup than what Jamie has traded. Stock bounced off the low of Monday & last Fri. Note the strong volume when stock was picking up speed


MAN on 15 min setup. Self explanatory.


Tuesday, January 30, 2007

Strangled By MHP; Strangled GWW

I closed my entire position on MHP strangle. As you can tell from the title, yes, I was strangled by this stock.


Day 1 after earnings, coupled with weak overall markets, it headed south $3, but not sufficient to breakeven. My breakeven points were: 64.3/70.1.

Day 2, it gapped up, back to where it was before earnings, which I really dreaded, and then only to head south again.

Day 3, it was hovering around 50MA, unable to decided which direction to go. Decided to close the position for $0.7 loss/strangle because:

-stock flip flopping around
-50 MA acts as some sort of support/resistance and it may well stay there for awhile
-FOMC upcoming may also mean sideways market, and could have the same impact on this stock as well
-The trigger event, i.e earnings, was over by 3 trading days already and looking back, stock would have made the move, if there's any.

Unfortunately, this stock just did not move as much as it did in the past, but loss was within my calculated worst case scenario ($0.8). Just one of those losing trades...


Another strangle which I entered was GWW, which initially also gave me some heartache, lol.

Bought the Feb 75 Call and 70 Put for total of $1.5. Breakeven points: 69.1/75.3. Worst case: $0.9 loss. If I were to rate it, its actually a better setup for strangle than MHP because it is nearer to the midpoint of the 2 strikes and it also has a greater minimum jump historically. But because of MHP performance and also because such trades are not my bread and butter type, I only bought 1 contact.


Day 1 after earnings, it was up nicely, but gave back most of its gains later. Not a pleasant sight, but heck, its still within my loss threshold and I will give it another day or two to prove itself

Day 2: Gapped up (yes!!!), not sure why until I checked briefing.com as I was busy earlier with switching over to use the laptop due to PC down. Analyst upgrade. Volume strong too, better than last Fri. I was wary when it came close to $76, being:

-That is about the 6 mth high mark
-1.62 Fib extension of the opening high to previous day's low
-Also the R2 of pivot point.

I watched it closely and indeed it was hovering around there for quite sometime. As I have only 1 contract and faced with conflux of resistance, I sold closed my call at 4th bar for $0.35 or 23% profit. I left my put alone as it was only worth $0.1 and if it does come back down, I have a chance of closing it for more profits. The stock continued to hang around $76 and only pushed up during lunch time to hit 2.0 Fib extension. I left about $0.5 profits on the table, but given the circumstances, I think I did the right thing. If I had more contracts, I would have taken partial profit at $76 and leave the rest to run.


FOMC Stalemate

Simply ranting: My PC has been behaving weirdly for the past 1-2 weeks since we upgraded the OS. The audio is not working at times, so I gotta switch my existing trading alerts over to my laptop. Then the taskbar keeps flicking. We thought we resolved it over the weekends. Last night, while setting up for trading, it showed even more signs of instability. Eventually, my hubby decided to re-format the PC, while I had to make do with just trading on the laptop for these few days.


Dow and Nasdaq were marginally up and S&P slightly down in a choppy Monday. With FOMC policy statement up coming on Wed, traders are unwilling to put more money on the line unless there's some exceptional earnings results. This is a week with heavy dose of economic data and earnings, so sit tight!

Tue: Consumer Confidence
Notable earnings: CKFR*, AMLN, MMM, CFC, CYMI*, JNPR, LCC, SNDK, PG, MAN, SIRF*, ITW, WBSN, KYPH*, WYE, CME*, K

Wed
: FOMC policy statement
Notable earnings: MO, GOOG*, SBUX, BA, EL, FORM*, LLY, GILD, SLAB*, OXPS, SUN, VRSN, WEBX, TWX, LLL, IR, PHM, SEPR*, EXP, HOLX*, AH*

Thurs: Personal Income, Personal Spending, ISM Index
Notable earnings: AMZN, ILMN*, VLO, ISRG*, MNST, RACK*, BSX, ERTS*, EOG, BUD, MYL, RGLD, YRCW, WCC*

Fri: Unemployement
Notable earnings: NYX, OSK*, THQI

*Stocks that tend to have big moves after earnings


-Filtering Wallstreet shows you how to create a filter based on Tweezer Bottom.

-A stock's move is made up of market movement (40%), sector (30%), and finally the fundamentals of the stock/company account about 30%. With that in mind, it is important that we trade with the market trend.

-Nice short squeeze play by Jamie

Lastly, be sure to check out MY DEL.ICIO.US at the left column for more good reads.


Monday, January 29, 2007

Stock Screeners

Last week, The Kirk Report posted a long list of stock screeners based on his readers' feedback. For new traders, one problem is also where to find the stocks that fit their defined criteria. And it is tedious going through thousands of charts to eye-ball them each day. So here I'm going to talk about 3 screeners that I have used or still using. And as per my style, they are free resources which require no charges.

Stock Fetcher
This is my favourite at the moment, simply love it! Why?


-Customization of filters:
You can combine a varied of indicators (e.g. ADX, Moving Averages, Bollinger Bands, RSI, MACD, etc) all in one filter. And they can be customized e.g. moving average can be based on any number of days you indicate.

-Ease of use:
You "program" it using plain simply english. See image above as an example. You don't have to be a rocket scientist in programming to do this.

-Backtesting available:
I have not tried this, because I don't really believe in backtesting. But you can backtest your customized filters if you are interested

-Forum:
Have problems creating certain filters or not getting the right results from your filters? You can get help from their forum, where fellow users share their experience in using this tool and offer solutions.

The only thing I wish it can do better is allow download of the whole generated list to excel or at least have the list appear in one page (I think this is probably available to paid subscribers). Right now, only 5 stocks are shown on each page, and you need to ignore current list and click next to view the next 5 stocks. A little tedious, but hey, what more can you ask for when it is a free tool!

MSN Deluxe Screener

Most of you may have probably heard or use this before. What I like is it can show the sector of the stocks of the generated list if you choose to display sector. This helps me to know at one glance what sector the stock is in.

However, you can't customize the indicators like stock fetcher does. Moving averages only comes in the standard form of 50day, 200day. Also no criteria to search for only optionable stocks

Prophet
Another good scanning tool which can scan for optionable stocks and you get to see the charts in the same page as well. What I particularly like is the ability to scan for intraday activities. Good source for day-traders.

It is also not as dynamic in terms of scanning customization compared to stock fetcher. Also for the intraday scanning, I recommend you do the scan after 10am ET, because you most likely won't get any results if you run any earlier.

So for those of you who don't know where to search for scanners, do explore these 3 that I've talked about. If you want to look for more, check out kirk's link above.


Multiplicational

Nothing related to trading, just that this innovative way of doing maths is too cool not to share with you. Very handy if you don't have a calculator or excel to use.


Friday, January 26, 2007

Update On MHP Strangle

Quick one as I'm expecting a power shortage soon to come due to maintenance work. The strangle position is currently sitting on a loss of $0.45 because the move is not large enough. It did however, closed below 50MA, but is resting above $66 support level. I'm giving it a bit more time to see how it will work out.

Meanwhile, have a read at these:
-Understanding the link between bonds and stock market

-Personality of the trader and how it affects performance

-Richard gives some very good insights on how to read TRIN and TICK

-BTStrader weekly series: Stop Losses - Should You Use Them?

-The VXO spiked up yesterday. Read VIX and more to know more about volatility. Also Zen gives an Options sentiment update


Thursday, January 25, 2007

MHP Strangle For Earnings Play

MHP is announcing earnings on Thurs BMO and I entered a strangle, Feb65 Put and Feb70 Call for a total cost of $1.25/ strangle. Note that such strategies are not my bread and better type trades. Such opportunities only occur occasionally during the earnings season.


Highlighted areas in the chart shows the stock movement after earnings in the last 3 occasions. MHP moved a minimum of about $4 within 2 days of earnings release. IV of about 20% is 5pts higher than HV of 15%. Yes, IV is higher, but still reasonable. I would have preferred a straddle, but given that the stock was trading at $68.4, a strangle would have worked out better. Ideally, I would like the stock to be trading closer to $67.5 (right in the middle of 2 strikes) so that both my calls and puts have equal chance of performing. But given that there is still 23 days more to expiration, the low cost of the strangle and the calculated max loss of $0.8 (in the event the stock didn't move and IV drop back to HV levels), I decided to go ahead with this position.

Let's see how the stock reacts tomorrow...


Tuesday, January 23, 2007

Goodies To Share

I've come across some fabulous sites and want to share them here:

-Those who are observant would have noticed a newly added option blog in my blogroll: optionpundit. The author of this blog is a fellow graduate of mine. Great site especially if you want to learn more advanced strategies like how he uses backspread to trade earnings. Oh, and be sure to check out pictures of him with Warren Buffet.

-Not sure how to exit a trade? Downtowntrader offers some strategies such as:
->Raising stop to just under a strong candle that closes over the high of the previous candle or if reversal pattern is forming
->Break of a rising trendline
->Trailing stops under a recent pivot low
->Trailing stops under the recent highest high by a multiple of the ATR (average true range)

By the way, he was recently interviewed by stocktickr as well.

-An excellent site on swing trading recommended by ODA125. Loads of good (& free!) stuff with great details.

-Great news at Market Neutral Options, an advisory service which is performance-based (which I mentioned earlier here), has now capped it monthly subscription at $50!

-Why are companies shying away from stock splits? I was taught that generally, stocks will rise after announcing stock split, but I think this trend is slowly fading off. (via Kirk and Mike)

-25 tips to improve your market timing, by Alan Farley (via Kirk and Mike)

-Seems like options trading is gaining some popularity, with richard, gav and eyal expressing interest to look into this subject. I hope more will get on board and interest sustained, not a fad like futures trading in the recent blogosphere.


Week Ahead 22/1 - 26/1

Sorry, I'm late on this post. This week we will be seeing an avalanche of earnings reports with some notable earnings coming from tech, energy, pharmeceutical/biotech and steel sectors

Notable earnings
Tue: AMD*, YHOO, BAC, JNJ, COH, CTXS, XRX, BNI, JEC, QLGC, HYSL, UAUA*

Wed: EBAY, FFIV*, FDC, NFLX, RMBS, MCD, SYMC, STLD, SWFT, TRID, QCOM, COP*, CHKP, RYL, VAR*, WAT*, ATI*, TXT*

Thurs: AMGN, BZH, BEBE, BEN*, F, BMY, IMCL, LMT, MSFT, NE*, NUE, SYNA, DOW, NOK, BTU, OXY, SU*, SPWR, GWW*, UNP, WDC, TRMB, STJ, SYK, MDC*, BCR*, MHP*

Fri: CAT, HON, CDWC*, CRS*

*Stocks that tend to have big moves after earnings

Edit: Existing home sales data out on Thurs; New home sales data out on Fri


Here's a look at the markets technicals:






Monday, January 22, 2007

Profit With Options


This book is by Lawrence McMillan and he is widely regarded as one of the best in the options field. His other book "Options As a Strategic Investment" is also nicknamed as the bible of options education, even by professional traders.

Especially for those of you who already have basic knowledge on options, this book is a good complement. McMillan talks about how he uses options as a direct indicator and as contrary indicator. I find the section on how he uses options as direct indicator for insider trading particularly interesting. Not only did he cover what indicators or criteria to look out for insider trading, but he also highlights how to filter out noise to have a higher probability of insider trading setups, and not merely rumours you read on front page of some newspaper or magazines.

For those of you wondering why Option Expiration is important and its effects on stock market, be sure to read chapter 4 on System Trading. There are a few system trading being discussed in this chapter, but what I find most insightful is the section where he explains how to determine if there will be arbitrage buy/sell programs that is large enough to influence stock market on expiration day and how you can profit from it.

The last two chapters are concentrated on volatility and discussing a few of his favourite strategies and outlines the criteria for entering them. As always, there is so much more to volatility and I picked up some lessons from here as well.

A feature of this book is the review questions at the end of each chapter, with answers and explanation at the end of the book. Honestly, I never bother to go through them because this reminds me of studying for exams. But if you have time on hand and want to test your understanding, then why not?

If you're a McMillan fan or want to build on your knowledge on options, you'll probably like this book. I'll try to throw in some gold nuggets that I've gotten out of this book here, so stay tuned!

Grade: B+


Thursday, January 18, 2007

Apples Turning Sour?


AAPL earnings came out after the bell and its a wild ride for those who monitored after hours. Section in blue on the right is the after market trading. As you can see, right after announcement, AAPL stormed up to about $99.5 (near R3 of daily pivot) before reversing course and closing at $94.17 (near S3 of daily pivot). The sell off occured during the conference call and I think it is probably due to this:
"Asked if there is room for gross margin improvement: Co notes thrilled with op margin for the quarter; notes exceptionally high driven by gross margins; says was influenced by the record revenue; 'do not get used to 18% operating margins'; says looking at 12% op margins for MarQ; says realize they are in a favorable cycle but would never forecast that number long term.. How much of gross margin sustainable: Guiding to 29.5% for MarQ; tgt gross margins in the 27-28% range; notes favorable commodity environment helped this quarter; expects different commodity environment and product mix to further push down margins; says product mix and favorable commodity environment were big drivers for margins this quarter.." - from briefing.com
IMO, AAPL has more downside risk than upside, given its strong move up at the MacWorld event and all things positive is probably already factored into the soaring stock price. If you look back at the past 2 years, when AAPL continued its rise after Macworld, there is sell-off after earnings. But when there is sell-off after Macworld, stock price spike after earnings. Of course just looking at 2 years is not indicative of any solid patterns, but I note this interesting occurence. Next support for AAPL @ $93


-Quick way of estimating range for an earnings move.

-OIH technicals: positive divergence.

-Read Eric Bolling's diaries: Life in the Pits. He's the handsome energy guy appearing on CNBC every now and then talking about oil and energy

-Some charts of interest by highchartpatterns

-Using MACD (via Caltrader)

-Option Jungle starting a series of option education program. For those who don't know about options but want to start learning, check it out here.


More On Options Probability Calculator...

I received an excellent comment by my friend, Ben, on the use of options probability calculator:

"Have you ever wondered why there is "85% probability" that the stock will be one side of a particular price point at a certain day?

First of all, the model assumes completely random direction every day from now until then.

And it uses the current Historical Volatility of the stock.

So if the stock has just had a big earnings jump and HV is high, then that tool will show you probabilities for very large distances.

If the stock has been very quiet lately and HV is low, the tool will be showing you a high probability that the stock won't move far.

However, if there is an upcoming news event like earnings, the stock actually will jump quite a lot, making the tool quite inaccurate.

Guess it helps to know how to take these things with a little salt ... being aware of how the stock's current Historical Volatility value compares to its likely future volatility will help you know if the tool is over or underestimating the future volatility of the stock."


In short, he summarized it this way:

"If the stock has been very quiet lately, and it's volatility could increase, perhaps due to news, the tool will be UNDERESTIMATING the distance the stock will move.

If the stock has just been jumping around, perhaps due to news events, and it can be expected to quieten down from here, the tool will be OVERESTIMATING the distance the stock will move.

The tool is unable to understand and predict the natural cycle of a stock's volatility changing with time."



Ben has rightly pointed out to use the calculator with care. My views? I would just like to add that as with any model, assumptions go behind it and in options pricing or modelling, volatility always plays an important role. I would personally prefer to use the probability calculator on an index (as illustrated) for the fact that it is more stable than an individual stock (no analyst upgrade/downgrade, earnings, M&A etc), and hence the probability more reliable. Having said that, a tool is just a tool and no tools out there can be 100% predictive. Even if the calculator is giving you near 99% probability of staying profitable in the trade doesn't mean you sink in your entire funds into the trade. At the end of the day, we still need to practice wise money management, set our stop loss and manage the trade once it is in place.


Wednesday, January 17, 2007

Free Tool: Options Probability Calculator

After reading 101 Options Trading Secrets and The Option Trader's Guide to Probability, Volatility and Timing, I've come to learn about the use of options probability calculation. So I went in search of free options probability calculator available online. Most of the trading tools that I use are free of charge, as I believe that fixed cost for trading should be kept to minimal. So here's a few places where you can find a free options probability calculator:

OptionsToolbox

Peter Hoadley Options Tool

Tradersoft :This one has to be downloaded and can only be used for limited period after which you have to register. The good thing is since it is installed in PC, can be used offline.

OptionVeResearch: This is the one I'm currently using for its ease of use and simplicity.


Here's how you can use it. For example you are bearish and want to do a Feb 07 bear call spread on SPX, say sell 1470, buy 1480. By keying in the necessary info, you can see that the probability of your sold leg being safe at expiration is 85.5%. We can also tell that for SPX to stay within one standard deviation boundary, it has to be contained between 1408-1468.


Tuesday, January 16, 2007

Busy Week Ahead

Welcome back and hope you have a great rest over the long weekend. This week is a short one, but nevertheless it is jam pack with economic data and some bell-weather stocks earnings release. Not to mention expiration Friday!

Tue:
Notable earnings: INTC

Wed: PPI, Fed's Beige Book
Notable earnings: AAPL*, JPM, LEN, LRCX*

Thurs: CPI, Housing Starts, Building Permits, Leadning Indicators
Notable earnings: COF, CAL, CREE, HOG, XLNX, MER, UNH*, JEF*

Fri: Options Expiration
Notable earnings: C, GE, JCI, MOT, SLB

*Big mover earnings stock

With earnings season in the full swing, do take note and check for earnings dates especially if you are doing swing trades.

Sunday, January 14, 2007

Weekend Readings

Introducing another great options trading blog - Option Jungle, via ODA125.

Speaking of ODA125, he made an awesome 80% gain on average in a week of trading options. Cool!

As always, classic posts from Dr Brett on mental programming and trading pivot points

Trade your way to financial freedom? Nay, Richard from movethemarkets.com prefers to trade his way to happiness. Moi? I think both are important and in some ways inter-related.

Caltrader shares his long term view on OIH, oops, sorry I mean OIL. Is it me or what...always mixing words with ticker symbol, like AAPL with AAPLE, sorry...I mean APPLE, OIL with OIH. I like to hear from you if you make the same mistakes as me, then I know its a "trader's disease" and not me, lol!

The markets are closed on Monday, have a great weekend!

Friday, January 12, 2007

My MA Got Away


This is a really high probability setup (with many technical indicators aligned) which I missed because I was too stingy and maybe also alittle fearful.

Why is this a high probability set-up?
-6th bar on 15 min chart showed a somewhat bullish candle with long lower tail (would be ideal if it didn't close in the red), signalling possible reversal
-The low of 6th bar coincides with low of previous day
-Bars 7th-9th showed higher low, confirming the reversal. The consolidation was also on low volume

Entry Point and Why
-Break of 9th bar high
-The pink line on the chart shows a minor support level which turned resistance area today
-It is also the pivot point @ 104.8

So what happened?
I mentioned before that MA is on my watchlist. But I only saw this great setup at the 10th bar. Bid-ask was 5.7/5.9. I put in an order for Jan 100 Call @ 5.8, trying to get a better price (ya right, a better price and forgoing the profits??!!). The bid kept moving up and I didn't chase. I didn't chase because I was already 1 bar late into entry. I was processing in my head whether to chase or not, chase or not, and in my head I was thinking about $0.5 late (1 bar difference) is equivalent to about $0.3-$0.4 in option price as delta was about 0.8....that's alittle too much to play catch up. And as you can see from the chart, I missed the nice pop up, duh....

Where is a good exit?
I would have exited all if not some at the 12th bar because its near:
-Previous day high
-61.8% Fib retracement
-R1 (from pivot point calculation) @ 106.61

At this point, the call options that I had wanted to buy would have given me $1.0 profit per contract in a matter of last than one hour. What to say? Better luck next time, or maybe I should chase the stock if it is a really high probability one like this one.


Thursday, January 11, 2007

Sector Rotation

The broker/dealer index has successfully broken out of the 244 resistance on Monday and today is at its all time high, with MACD and RSI both gaining strength. Check out stocks like GS, BSC, LM, LEH.

Nasdaq, which has been lagging S&P and DOW is now finally making its climb up on higher volume and higher lows. 50MA is a strong support, while 2470 is the level to watch for resistance.

OIH is still in its downward channel, having broken a strong support @ 130 on close 2 days ago. Next level of support @ 126. So where has the oil money gone to? Most probability used to light up the fire in tech and broker/dealer sector


Random links

-You have heard of Steven Covey's "7 Habits of Highly Effective People. Now read about "The 8 Habits of a Highly Effective Trader"

-YHOO a potential cup and handle formation?

-Tell ODA125 how you would have traded this head and shoulder formation. His shortlist of stocks for your participation (exercise only). Be thorough in your due diligence though, for there is a tester (trick) stock :)

-Talking about ETFs, I came across this on index options by thinkorswim. A little dated, but nevertheless highly educational.


Wednesday, January 10, 2007

Entry Points In AAPL




APPLE was the big winner last night, up more than 8% in a trading session and lending some support to Nasdaq. Hope you had fun last night tuning in to MacRumours.com providing live coverage of the event via text, audio and photos. The above pictures courtesy of MacRumours.

It is not easy to hitch a ride on such a momentum trading session with low risk entry. You'll most probably have to drill down into smaller time frame e.g 5 min chart like this one below. 2 low risk entry points were present last night.

First, was the NR7 of the 5 min chart. Entry on break of 7th bar high. Notice a triangle formation on lower volume, with lower high and higher low. This is a sign of consolidation before breakout. If you have missed the earlier entry point, another good entry point was a second triangle forming around 12.45 - 1.10 pm ET, consolidating around $88. Entry on break of 1.05 pm ET bar high.

Know the support and resistance of the stock and draw them onto the chart prior to entry. With this type of momo trading, you won't have the time or in the right frame of mind to plan once you are in the trade. It is best you take profits off the table along the way because with such an event on-going, its hard to tell when the market decides to profit take.




Tuesday, January 09, 2007

OptionXpress Trading Pattern

A short follow-up on networking sites for investor post. I've come across OX Trading Pattern and thought I'll share here how it looks like. I've not seen how the rest of the other sites work though because I only came across the WSJ article yesterday and posted it here right away.


This is an example on AAPL. Quite a few match to my own watchlist, which includes RIMM, NYX, GS and MA. I think OX one is straight forward. No interaction or communication with other traders. No ranking or tracking of performance. Just basically seeing what other traders who have placed orders for AAPL at OX platform are also trading, regardless of whether trade eventually executed or not.


Monday, January 08, 2007

Networking Sites For Investors

From The Wall Street Journal:
"A new generation of Web sites has cropped up in recent months designed to help investors share ideas online with others who have similar investment styles, such as which Asian stocks or technology issues offer the best value. Unlike the Internet chat rooms that were popular in the late 1990s, which allowed any anonymous user to post opinions, the latest sites seek to maintain their credibility by rating participants. Users are assigned a score based largely on the performance of their stock picks and the accuracy of their forecasts..."


I'm not recommending you use or avoid such networking sites for investors. Just introducing interesting stuff that I come across. As with any disclaimer, trading is risky and you should not rely on others' ideas or tips to pull a trigger on a trade. Same goes for my blog. You can get ideas from like-minded traders, but ALWAYS do your own due diligence and be responsible for your own trade. Remember: It's your OWN trading account and money, not others!

 



Week Ahead 8/1 - 12/1

Earnings season is officially kicking off this Tue and will spell the tone for the coming week. Technicals of the indices are mixed for now:

-Nasdaq still supported by uptrend and 50MA. I share the same view as Jamie

-Both the DOW and S&P500 broke their downtrend on relatively high volume, and this is a bearish sign. DOW has also broke the 12,400 mark which I earlier mentioned as a support level. Mike shares his technical thoughts on various indicies and ODA125 highlights that S&P 500 could be potentially forming an imperfect double-top

Of course all these technicals could change course along the week depending on whether investors like the earnings announcements. Remember: The market is dynamic!


Mon:
Notable earnings: LIFC

Tue: MacWorld-Keynote speech by Steve Jobs
Notable earnings: AA (earnings season official start)

Wed: Wholesale inventory
Notable earnings: INFY, DNA

Fri
: Business inventory


Friday, January 05, 2007

Lets Talk About APPLE

Ha, I am so used to keying in ticker AAPL that I have to correct the title of this post a few times to spell APPLE correctly. So much for tickers and abbreviations...I digress.

Apple loyalists would have known by now that the MacWorld Expo is kicking off next week. Most importantly, the keynote is scheduled next Tue, 9 Jan 07. Steve Job's keynote speech is a much anticipated one as new features and products of Apple are announced with much fanfare.


AAPL broke out of its downtrend on 29 Dec on news that Steve Jobs is cleared of wrong doing. It has now closed above 50MA and just shy of 20MA. RSI is also clearly on its way to recovery. Support @ $82, resistance @ $90. If history is to follow, then you may want to position some Jan call options.

Looking back the past 2 years where MacWorld took place on 10 Jan 06 and 11 Jan 05, it is clear that market in general has positive expectation of this event, with stock climbing prior to MacWorld.

In 2006, the market liked what they hear on the event and continued its buying spree after news was out. In 2005, the market sold into the news, possibly to lock in profits prior to another important announcement-earnings AMC on 12 Jan 05, a day after keynote speech. (note 2005 stock chart here is after stock split prices)

This time round in 2007, the timing schedule is pretty similar to 2006, with earnings coming out about 1 week later. But I've got no crystal ball to tell of its behaviour.

If you are buying AAPL options, do note that its implied volatility is near 52 weeks high, which I attribute mainly to 3 culprits: The recent options scandal; anticipation of MacWorld event; earnings announcement on 17 Jan. HV on the other hand was at a 52 week low and started picking up in Dec.

A few links for those interested in Apple's news & rumours:

- macrumorslive.com
I will definitely stay tune to this website to check out on Macworld keynote updates. It provides live coverage of Apple events and its updates are even faster than those on briefing.com. Interesting to see how the stock price reacts as new products are being launched.

-appleinsider

-thinksecret


Wednesday, January 03, 2007

Taking A Look At The Indices

Having taken a long break, most traders should be back in action this week. The technicals in the last week or two has to be discounted given the light trading volume. The 1st week of the new year is typically bullish, with fresh funds looking for stocks to invest in. However, the technicals are looking a little weak, so lets see how the market plays out when it opens.

The S&P 500 index is resting right on its upward trendline and 20MA, with MACD & RSI looking bearish. The key lies in whether it can bounce off this trendline for the climb to continue

Pretty much the same picture for Nasdaq, with it currently sandwiched between the 20MA and 50MA. Again, key in holding the 50MA and defending its trendline.

The DOW is currently in mid-air, you can either see it as better off than S&P 500 and Nasdaq; or because the support is still a distance away, there is still room for more pullback. Look for support @ 12,400


Week Ahead

This shortened trading week has got some key economic data and a few earnings announcements:

Wed: FOMC minutes

Thurs:
Notable earnings: STZ, MON

Fri: Unemployment rate
Notable earnings: GPN (also a big mover earnings stock)