Indices Testing Resistance

Above S&P 500 showing 1360-1370 level which was previously a support now turned resistance. Technicals are pointing to the downside, at least for these 2 days prior to the Fed meeting on Wed. Tons of data coming out on the economic front and earnings reporting this week:

Mon: New Home Sales
Notable earnings: ARG, BDK, HAL, MCD, MTH, SNDK, STLD, VMW

Tue: Durable Orders, Consumer Confidence
Notable earnings: MMM, BNI, CRS, CFC, CTX, JLL, LXK, OXY, OXPS, DOW, TRMB, X, VLO, YHOO, ZMH, WBSN

Wed: ADP employment, GDP, FOMC policy statement
Notable earnings: MO, AMZN, BHI, BOBJ, ADS, CNQR, CEG, CVD, ESLR, EXP, ITW, MRK, PHM, NVLS, SBUX, BA, UPS

Thurs: Core PCE index, Personal Income, Personal Spending, Chicago PMI
Notable earnings: AFFX, APA, BEBE, CAM, HOT, CELG, DRIV, GR, GOOG, GYI, TSO, HOLX, ICE, LLL, MA, NDAQ, UA, MBI, MEE, OI, PG, SNE, YRCW

Fri: Unemployment, ISM manufacturing index, Consumer sentiment, Construction spending
Notable earnings: ACI, CVX, CMI, XOM, GCI, TDW, EL, R, OSK

My watchlist for the week (some pending confirmation):
Bearish: RL, XLF, LIZ, ATI, KSS, SHLD
Bullish: HWAY, PPDI, ESRX

World Markets Nosedive

It was an aweful day for the stock markets worldwide yesterday, even though the U.S market was closed. This is a 15 min screen shoot of the S&P 500 futures (E-mini) as I'm writing now:

At this point, the futures is down by almost 5% from Friday's close! Looking at this chart, see how it is unable to break through the 20EMA (red line) and as of now, 1260 level is acting as a support and I see 1285 as the next level of resistance.

The triangle breakdown of the S&P 500 I talked about earlier has made the full measured move and more. Let's see if we'll have any capitulation today.

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Mon: Holiday (Martin Luther King Day)

Tue: Treasury Sec Paulson speaks about economic outlook and housing
Notable earnings: AKS, AAPL, BAC, CNI, CREE, ETN, JNJ, HOKU, PCP, SU, TXN, UAUA, WB, ABK

Wed:
Notable earnings: APD, ABT, COF, AME, CHKP, CTXS, COP, EBAY, EXC, FFIV, GD, MOT, NFLX, NE, QCOM, QLGC, RYL, ROK, VAR, UTX, SYK, SYMC

Thurs: Existing Home Sales, Greenspan to speak about U.S. economy
Notable earnings: AMGN, T, BRCM, JNPR, WFR, LRCX, LEN, MFST, NOK, POT, SPWR, SYNA, TXT, VPRT, NUE, VSEA

Fri:
Notable earnings: CAT, HOG, HON, GWW

Secrets Of Options Trading Group Champion Revealed!

The Options Trading Championship 2007 ended quite sometime ago. Above a picture of my friends, Wei Ping (first from left) and Macolm (first from right) at the championship. Both were members of the team -The 4 Challengers, which emerged as the Group Champion. I did an interview here with Wei Ping, who was the 2006 individual champion. This year, I’m pleased to have Macolm for this interview to share with all his thoughts on trading.

Simply Options Trader: How did you get started on options trading?

Malcolm: After attending an options trading seminar

Simply Options Trader: Describe your style of trading.

Malcolm: I’m a short term Technical Trader, normally hold position for less than a week. I buy current month ATM or ITM option depend on the delta and Average True Range of the stocks. Will buy OTM options if they are cheap (few cents) and I am willing to hold for a few weeks.

Simply Options Trader: What are your favourite stocks for trading?

Malcolm: Volatile stock - VMW, RIMM, GOOG, GS, POT.

Simply Options Trader: How do you determine entry?

Malcolm: Moving Averages crosses, Daily Support/Resistance, Candle Stick Signal and Stochastic at OB/OS.

Simply Options Trader: What’s your exit strategy for winning and losing trades?

Malcolm: My reward/risk is at least 2:1. Will exit if it hits major resistance/support and mostly based on Candle stick.

Simply Options Trader: What technical indicators do you use?

Malcolm: These are my secondary indicators - Slow Stochastic, ADX. Mainly, I look at Candle stick & support/resistance.

Simply Options Trader: What single lesson did you learn along the way that has helped you the most in your trading?

Malcolm: Never afraid to cut loss and protect your capital.

Simply Options Trader: Tell us about 3 books you would recommend to traders to read

Malcolm:
1. Japanese Candlestick Charting Techniques by Steve Nison
2. If It's Raining in Brazil, Buy Starbucks By Peter Navarro
3. A Beginner's Guide to Short-Term Trading By Toni Turner

Simply Options Trader: Give some advice to traders who have just started out.

Malcolm: Paper trade, paper trade and paper trade.
Try different strategies and settle with one that suit your own personality.

Simply Options Trader: What do you like best about trading?

Malcolm: It helps to improve my mental strength and the ability to react in split seconds.

Simply Options Trader: Thanks Malcolm and all the best for your trading!

My Hotlist of Stocks for the Week

This week we'll be seeing earnings results from a few big banks which have had huge credit write downs. There are also several market moving economic data and bellweather stocks like IBM, GE announcing earnings.

Mon:
Notable earnings: DNA

Tue: Retail sales, PPI, NY Empire State Index, Business Inventories
Notable earnings: C, EDU, INTC

Wed: CPI, Industrial Production, Capacity Utilization, Fed's Beige Book
Notable earnings: JPM, WFC

Thurs: Housing Starts, Building Permits, Fed Bernanke Speaks about economic outlook
Notable earnings: CAL, IBM, MER, STX, FHN

Fri: Leading Indicators, Michigan Sentiment
Notable earnings: GE, SLB

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Here's my super HOT list for the week, i.e. stock candidates which I'm ready to take a swing position in, once I've worked out the risk/reward and they fulfill at least 2:1.

Call Options: POT, AGU, CNH
Put Options: HANS, SHLD, LFC, TAP
Neutral (can break either way): LDK (mini-triangle)

No time for charts, will try to post one later this week.

Major Indices Break Out (down) of Triangle Formation

I talked about triangle formation in major indices early last week and that they are likely to break to the down side. And the bears certainly took control last week! We are now near Nov lows in both S&P 500 and DOW. The markets closed lower for 6 consecutive sessions and we may just see a bounce near the corner. But this doesn't mean we are out of the woods yet.

Speaking of this coming week, we have LOTS of Fed talk and it also marks the start of the earnings report season. Be sure to check for earnings date before you enter that swing trade.

Tue: Pending Home Sales
Notable earnings: AYI, APOL, KBH, FDO, SVU, PPDI

Wed: Fed President Poole speaks about subprime mortgage
Notable earnings: AA, MOS

Thurs: BOE Interest Rate Announcement, ECB President Trichet speaks, Wholesale Inventory, Fed Chairman Bernanke speaks about "Financial Markets, the Economic Outlook, and Monetary Policy", Fed President Hoenig speaks about US economic outlook

Fri: Trade Balance, Treasury Budget, Fed Gov Mishkin speaks about monetary policy flexibility, risk management & financial disruption , Fed President Rosengren speaks about economic outlook

Triangle Pattern Formed in Major Indices

A HAPPY NEW YEAR to all! Wishing good health, happiness and smooth trading in 2008.

Trading volume should start picking up and with that, let's take a look at the S&P 500 chart.

The blue dotted line in the chart above outlined the triangle formation in S&P 500. This lower highs and higher lows pattern is especially obvious in S&P500 and DOW. This neutral pattern signals a breakout in either direction to come. If there is any clue on the direction of breakout, right now there is a bearish bias as both of these indices closed below all three moving averages: 20D, 50D, 200D. Let's see where the market wants to take it when the traders are back in full force.

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Wed: Construction Spending, ISM Index, FOMC Minutes

Thurs: ADP NonFarm Employment
Notable earnings: MON, BBBY, GPN

Fri: Unemployment rate, Nonfarm Payroll, ISM Service