Friday, August 30, 2013

Friday: No trade

Two symbols survived my initial screening last night, both having broken out to the upside. (See "Friday's Prospects".)

Further analysis has removed both from my list of potential trades.

ARB (Arbitron) is in the midst of being acquired by competitor NLSN (Nielson). My rules exclude takeover targets.

The other prospect, KLBAY, is the American ADR for the Brazilian paper products company Klabin SA.

KLBAY, with an average daily volume of 197 shares, can be technically traded under my rules but is simply too illiquid for me to seriously consider opening a position.

Besides, a 4.1% bid/ask spread on shares is way too rich more my taste.

Bottom line: I won't be opening any new positions on Friday.

References
My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Busted Roll: KKD

My KKD position has been sitting on the shelf since my vertical option spreads expired worthless on Aug. 16, waiting for a fresh buy signal that would allow a roll into a new options position.

That signal never came, and today the stock gapped sharply lower on a large negative earnings surprise, eliminating any chance to roll forward and signalling that it was time to take KKD off the shelf and calculate the profit or loss.

I've updated my initial entry post with details and results.

References
My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Thursday, August 29, 2013

Friday's Prospects

On Thursday, Aug. 29:

Of 2,319 stocks and exchange-traded funds in this week's analytical universe, 23 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 10 to the upside and 13 to the downside.

Twelve symbols traded over the counter broke out, two to the upside and 10 to the downside.

Within my analytical universe, 1.6% of symbols gave bull or bear signals, down from 3.5% the prior trading day.

The ratio of bull to bear signals was 1:1.9, returning to markets to neutrality after two days of a sharply rising bearish bias.

One symbol traded on the major exchanges survived my initial screening: ARB, having broken out to the upside.

One symbol traded over the counter survived: KLBAY, also having broken out to the upside.

I shall do further analysis on Friday, Aug. 30.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...
  • the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
  • a yield adjusted by those odds of 5% or greater,
  • and absence of an earnings announcement within the next 30 days. 
For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
s

Roll Busted: TSN

TSN has fallen below its 10-day price channel while waiting for a signal to roll the expired August position over to a new options expiration. That's a signal to remove it from my list of potential rolls and calculate the results, which were profitable.

I've updated my initial entry posting with details.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Flowers: Where are the decent trades?

"Where have all the flowers gone, long time passing?"
Pete Seeger (1955)

The same question might be asked of trades. As I look at my status board, I see my holdings shrinking alarmingly with no new positions coming in as replacements.

This week I've closed three positions, leaving only five in my portfolio. I've added no new positions since Aug. 21, an endlessly long time ago in my short-term world of trading. At that rate, my garden will be a tangle of brown stalks whose petals have dropped away to be blow by the wind.

What's going on here?

Arguably, I'd say, what's going on is that my system is working.

One of my great advantages as a private trader is that I don't have to trade. I can sit out a lousy market with my funds in cash and spend my days listening to old vinyl records of Peter, Paul and Mary. No one is going to tap me on the shoulder and ask me why I'm not doing my job.

And it really is a lousy market.

The S&P 500 completed a run up to 1669 on May 22 and since then has been struggling. It hit a higher high of 1710 on Aug. 2, but it didn't stick and instead retreated.

This market is churning, and a market like this is an invitation to lose money. I'm a trend trader, and there hasn't been a trend at the level I trade since late May.

The way this shows up in my analysis is poor odds.

I analyze symbols for the percentage of successful trades in the direction of the breakout during the period of the present long-term trend. I'm using Oct. 4, 2011, as my start point now. If the present churning turns into a downtrend, then the Aug. 2, 2013 high will no doubt become the new start point.

When the markets first began to churn, I started to see more breakouts to the downside, but they all had terrible odds of success. And no wonder. We've been in a strong uptrend since the fall of 2011. Any bear moves were more in the nature of retracements during the upward march rather than true changes in trend.

More recently I've seen better odds on downside breakouts, but not really on the large caps. More generally, the tradeable odds are on the smaller stocks that are more likely to have been contrarian during the long uptrend.

That brings in the complication. Bear plays by their nature require greater liquidity to construct a trade.

There are two ways to profit from a stock in decline: Open a bear position in options, or borrow shares and sell them short.

Lower volume and even mid-volume stocks can't be borrowed, so the shares can't be sold short. And stocks that trade under around 2 million shares a day generally don't have options with sufficient liquidity to meet my standards (three-figure or better open interest).

When the downtrend is sufficiently established, I'll start getting better odds on more symbols giving bear signals, and that will increase the number of positions in my portfolio.

If the uptrend resumes, then I'll start getting better odds on more symbols giving bull signals, and that will be more trades.

Meanwhile, I can continue to run my daily analyses secure in the knowledge that my rules will keep me away from the trading screen when I have no business being there.

Note:

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

GDX closed

GDX has dropped below its 10-day price channel. I've closed my position for a small loss and updated the original entry post with results and details.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Wednesday, August 28, 2013

Thursday's Prospects

On Wednesday, Aug. 28:

Of 2,319 stocks and exchange-traded funds in this week's analytical universe, 53 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 11 to the upside and 42 to the downside.

Twenty-one symbols traded over the counter broke out, two to the upside and 19 to the downside.

Within my analytical universe, 3.5% of symbols gave bull or bear signals, down sharply from 13.9% the prior trading day.

The ratio of bull to bear signals was 1:4.7, a major weakening of the markets' bearish bias from the prior trading day's 1:60.2 ratio.

No symbols traded on the major exchanges or over the counter survived my initial screening, all but one failing either because of weak odds of success or sufficient yield to meet my tests.

The exception was the over-the-counter stock AGPYY, a breakout to the downside, which passed the odds and yield tests. It failed because it lacks the options and liquidity to support a bear trade, as is common with over-the-counter stocks.

I shall do further analysis on Thursday, Aug. 29.

No survivors means I have nothing to analyze on Thursday, Aug. 29.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...
  • the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
  • a yield adjusted by those odds of 5% or greater,
  • and absence of an earnings announcement within the next 30 days. 
For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
s

Wednesday: No Trade

Seven symbols survived my initial screening last night, all potential bear trades. Further analysis today found them all wanting.

Two failed confirmation: TDC and IGTE.

Four had options with insufficient open interest to supprt a bear trade: FMER, HSP, CPWR and MSTR.

The last symbol standing, WCRX, as it turns out, is in the process of being acquired by ACT and so is disqualifed for trading under my rules. (If that's not an explicit clause in my trading rules, it ought to be and I'll add it in.)

I won't be opening any new position today.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

EWI closed

I've closed my bull position in EWI for a profit after the ETF fell sharply amidst expectations of a U.S. retaliatory attack on Syria. I've updated my initial entry post with details.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Tuesday, August 27, 2013

Wednesday's Prospects

On Tuesday, Aug. 27:

Of 2,319 stocks and exchange-traded funds in this week's analytical universe, 265 that are traded on the major American stock exchanges broke beyond their 20-day price channels, four to the upside and 261 to the downside.

Forty-one symbols traded over the counter broke out, one to the upside and 40 to the downside.

Within my analytical universe, 13.9% of symbols gave bull or bear signals, up sharply from 0.9% the prior trading day. The last double-digit wave of breakouts was 10.3% on Aug. 15.

The ratio of bull to bear signals was 1:60.2, pushing the markets sharply into bear territory after the neutrality of the prior trading day's 1:1.9 ratio. The ratio was the most bearish since Aug. 19, when it came in at  1:110.

Seven symbols traded on the major exchanges survived my initial screening, all having broken out to the downside. They are CPWR, FMER, HSP, IGTE, MSTR, TDC and WCRX.

No symbols traded over the counter survived my initial screening. Three had sufficient odds and yield to meet my tests, but they were all bearish and lacked options and sufficient liquidity and so are cannot be traded to the bear side.

I shall do further analysis on Wednesday, Aug. 28.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...
  • the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
  • a yield adjusted by those odds of 5% or greater,
  • and absence of an earnings announcement within the next 30 days. 
For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
s

Tuesday's Prospects

On Monday, Aug. 26:

Of 2,319 stocks and exchange-traded funds in this week's analytical universe, 16 that are traded on the major American stock exchanges broke beyond their 20-day price channels, six to the upside and 10 to the downside.

Four symbols traded over the counter broke out, one to the upside and three to the downside.

Within my analytical universe, 0.9% of symbols gave bull or bear signals, barely changed from 1.1% the prior trading day.

The ratio of bull to bear signals was 1:1.9, leaving the markets in neutrality after the prior trading day's 1.4:1 ratio.

No symbols traded on the major exchanges or over the counter survived my initial screening.

The symbols failed analysis for the most basic of reasons, most because they lacked better than even odds of success, and the remainder because of low odds-adjusted yields.

I shall do further analysis on Tuesday, Aug. 27.

With no survivors, there's nothing to analyze further, and I won't be opening a new position on Tuesday.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...
  • the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
  • a yield adjusted by those odds of 5% or greater,
  • and absence of an earnings announcement within the next 30 days. 
For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
s

Monday, August 26, 2013

Tuesday's Prospects delay

I've encountered a data problem that will take overnight to fix.

"Tuesday's Prospects" won't be posted tonight. If my troubleshooting goes well, I'll post it as early as possible on Tuesday.

Monday: No Trade

One symbol survived my initial analysis Sunday night: CIR.

It has failed confirmation today by falling back within its 20-day price channel.

I won't be doing further analysis of the stock and its issuing company and, of course, won't be opening any new positions.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

SCSS closed

I've closed my bear position in SCSS for a loss and updated the original entry post with details identifying the stock's reversal as a case of Cramer Contrarianism.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Sunday, August 25, 2013

Monday's Prospects

On Friday, Aug. 23:

Of 2,319 stocks and exchange-traded funds in this week's analytical universe, 23 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 15 to the upside and eight to the downside.

Three symbols traded over the counter broke out, all to the downside.

Within my analytical universe, 1.1% of symbols gave bull or bear signals, unchanged from the prior trading day.

The ratio of bull to bear signals was 1.4:1, leaving the markets in neutrality after Thursday's 1.3:1 ratio.

One symbol traded on the major exchanges, CIR, survived my initial screening, having broken out to the upside.

No symbols traded over the counter survived my initial screening.

I shall do further analysis on Monday, Aug. 26.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...
  • the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
  • a yield adjusted by those odds of 5% or greater,
  • and absence of an earnings announcement within the next 30 days. 
For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
s

The Week Ahead: Three blockbusters

Three big economic reports will stir the markets this week, giving traders deeper insight into the pace of the recovery and the aggressiveness with which the Fed will tapering of its bond buying to stimulate the economy.

Durable goods orders, out Monday at 8:30 a.m. New York time, tracks new orders for factory hard goods. It's a key measure of the future pace of American industry.

The second estimate of 2nd quarter gross domestic product will be released at 8:30 a.m. on Thursday. Any revision from the 1.7% annual rate reported in July will cause the markets to take notice.

Personal income and outlays, out Friday at 8:30 a.m., is the ultimate "How are we doing" report. It tracks what we made and how much of that we spent, and a bit of simple math comes up with a savings rate. The lower the savings rate, the more Americans are shopping till we drop, an activity that is good for the economy, although not necessary for the stock markets, since good news for the economy is likely to exacerbate inflation fears at the Fed.

Note that the weekend following this week is the Labor Day holiday. U.S. markets will be closed on Monday, Sept. 2. Markets in London, Tokyo and Sydney will be open for business as usual.

Leading indicators (in descending order of importance):

The interest rate spread between 10-year Treasuries and the federal funds rate, reported continually during market hours.

The M2 money supply, at 4:30 p.m. Thursday.

The S&P 500 index, reported continually during market hours.

Average weekly initial jobless claims, at 8:30 a.m. Thursday.

The Reuters/University of Michigan consumer sentiment report, at 9:55 a.m. on Friday.

Other reports of interest:

Monday: The Dallas Federal Reserve manufacturing survey at 10:30 a.m.

Tuesday: The S&P Case-Shiller home price index at 10 a.m. This is the report that tracks home prices in 20 metro areas. Also, the Conference Board's consumer confidence index at 10 a.m.

Wednesday: Pending home sales at 10 a.m., and petroleum inventories at 10:30 a.m.

Friday The Chicago purchasing managers index at 9:45 a.m.

Fedsters

St. Louis Fed Pres. Jeffrey Lacker, a voting member of the Federal Open Market Committee, makes two public appearances, on Thursday and Friday.

Two Fed officials not serving on the FOMC this year (although who knows how much influence they wield behind the scenes) will take to the podium: San Francisco Fed Pres. John Williams on Tuesday and Richmond Fed Pres. Jeffrey Lacker on Thursday.

Analytical universe

This week I shall be analyzing new bull and bear signals among 2,319 stocks and exchange-traded funds that have some analyst interest. They are traded both on the major U.S. exchanges and over-the-counter. My universe is selected from mid-cap stocks and larger, defined as market capitalization of $1 billion and greater.

Trading calendar

By my rules, I'm trading September options for the short legs of covered calls and vertical and diagonal spreads, calendar and butterfly spreads, and iron condors, and December options for single calls and puts. Of course, shares are good at any time.

Good trading!

Friday, August 23, 2013

CLDX: A biotech bull signal

Celldex Therapeutics Inc. (CLDX) broke above its 20-day price channel on Thursday and confirmed the bull signal by trading above the channel today.

The breakout followed a six-week sideways trend and brought the price to a new all-time high, $23.92. Today's trading has remained below the high but above the breakout level.

My problem with the CLDX chart is that it shows signs of an uptrend that has exhausted its
CLDX 90 days 2-hour bars
potential.

The Elliott wave count is a muddy, but it arguably shows five waves in an uptrend from $11.40 on May 10, the current leg in an uptrend that has been in force since October 2011.

That longer uptrend, that began from $2.05, has also arguably seen five waves in the uptrend.

While the Elliott wave count isn't a deal killer, it sounds a strong note of caution to expect a reversal to the downside soon.

This the the second breakout to the upside during the near-term leg up from last May. The completed bull signal yielded 30% over 43 days.

The full uptrend from October 2011 has seen seven completed bull signals. Four were successful, yielding on average 43% over 51 days. Three were unsuccessful, losing 6.6% over 16 days.

CLDX was one of four symbols that survived initial screening last night. (See "Friday's Prospects".)

STM failed confirmation, and BASFY's bull signal was at variance with a bearish rating from Zacks. (Such a variance isn't necessarily a deal killer, but I tend to take Zacks' assessments seriously.)

QMED has low to no open interest on its options, leaving the more liquid CLDX as my preferred choice.

Celldex Therapeutics, based in Needham, Massachusetts, develops therapies for the treatment of cancer and other diseases.

The analysts that follow it all love it, collectively giving it a 100% enthusiasm rating.

However, Celldex is a development company. It is a bet that someday it will hit the jackpot and earn great profits. Because it has no profits today.

The company has reported losses for the last 12 quarters, with no trend of lower or greater losses. It has surprised to the downside eight times, and to the upside, three times.

Return on equity is a negative 49%. The company carries no long-term debt.

Institutions own 79% of shares and the price has been bid up to a stunning level. It takes $203.19 in shares (not a typo) to control a dollar in sales.

CLDX on average trades 1.7 million shares a day, sufficient to support a moderate selection of option strike prices with open interest running to the two- and three-figure range. The front-month at-the-money bid/ask spread is 17%, a bit higher than I like.

Implied volatility is quite high, at 63%. It has been rising since Aug. 13.

Options are pricing in confidence that 68.2% of trades will fall between $19 and $27.40 over the next month, for a potential gain or loss of 18.1%, and between $21.18 and $25.22 over the next week.

Trading in option contracts today is running quite high, with both calls and puts at 3-1/2 times their five-day average volume.

The fair-price zone on today's 30-minute chart runs from $22.95 to $23.29, encompassing 68.2% of transactions surrounding the most-traded price, $23.19. The stock has been trading within the zone all day, with about three hours left in the trading day.

Celldex Therapeutics next publishes earnings on Nov. 4.

Decision for my account: This is a complex decision. The chart shows the stock having broken out to a new higher high, a bullish sign. And the odds of a winning bull trade are quite good.

Yet, the Elliott wave analysis suggests that the bullish signs may be yesterday's news, that the rise has come to an end.

The financials reinforce the idea that CLDX is a play based on hope, and that a lot of the hope has already been built into the price -- a 200:1 price to sales ratio!

And the fact that options volume today is equally high for both calls and puts suggests there's a lot of "greater fool theory" churning going on, also known as "musical chairs".

I prefer more measured trades. I'm all for hope, but only when my hopes are in advance of the pack's.

I'm passing on CLDX and won't be opening a bull position.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

At several points in my analysis I use the number 68.2%. This comes from statistics and refers to the one standard deviation boundaries, which are expected to contain 68.2% of whatever is being studied. Putting it another way, given an item (a trade or whatever), there is a 68.2% chance that it will appear within those boundaries.

Elliott wave analysis tracks patterns in price movements. StockCharts has a good explainer. The principal practioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Thursday, August 22, 2013

Friday's Prospects

On Thursday, Aug. 22:

Of 2,309 stocks and exchange-traded funds in this week's analytical universe, 19 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 11 to the upside and eight to the downside.

Six symbols traded over the counter broke out, three to the upside and three to the downside.

Within my analytical universe, 1.1% of symbols gave bull or bear signals, down from 3.6% the prior trading day.

The ratio of bull to bear signals was 1.3:1, returning the markets to neutrality after Wednesday's 1:26.7 bearish bias.

Three symbols traded on the major exchanges survived my initial screening, all having broken out to the upside. They are CLDX, GMED and STM.

One symbol traded over the counter survived my initial screening, BASFY, having broken out to the upside.

I shall do further analysis on Friday, Aug. 23.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...
  • the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
  • a yield adjusted by those odds of 5% or greater,
  • and absence of an earnings announcement within the next 30 days. 
For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
s

Thursday: No Trade

Two symbols survived last night's initial screening, a bull signal from EDZ and a bear signal from BSAC. (See "Thursday's Prospects".)

EDZ confirmed the bull signal by trading above the breakout level, despite opening 3.1% below Wednesday's close. That magnitude of a drop gives me sufficient pause to reject the trade out of hand.

BSAC confirmed the bear signal but lacks sufficient liquidity to support a short sale and open interest to support a short bear vertical spread.

I won't analyze either of these symbols further and don't intend to open any new position today.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Wednesday, August 21, 2013

Thursday's Prospects

On Wednesday, Aug. 21:

Of 2,309 stocks and exchange-traded funds in this week's analytical universe, 71 that are traded on the major American stock exchanges broke beyond their 20-day price channels, three to the upside and 68 to the downside.

Twelve symbols traded over the counter broke out, all to the downside.

Within my analytical universe, 3.6% of symbols gave bull or bear signals, up from 1.4% the prior trading day.

The ratio of bull to bear signals was 1:26.7, returning the markets to a bearish bias after Tuesday's 1:1.9 return to neutrality.

Two symbols traded on the major exchanges survived my initial screening, EDZ having broken out to the upside and BASC to the downside.

No symbol traded over the counter survived my initial screening.

I shall do further analysis on Thursday, Aug. 22.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...
  • the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
  • a yield adjusted by those odds of 5% or greater,
  • and absence of an earnings announcement within the next 30 days. 
For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
s

PNK: Casino bull play

Update 10/9/2013: PNK again moved below its 10-day price channel. I'm removing it from the Watchlist.

Update 9/26/2013: PNK moved below its 10-day price channel, signalling that my bull position should be closed. The position was structured as shares, so I closed it right away rather than trying for a tactical exit.

I held the stock for 36 days and closed for a 6.3% yield, or 64.2% annualized.

The price peaked at $25.72 but fell sharply that day, meanered for seven days and then dropped sharply again, piercing the channel.

I counted the most recent rise as wave 3, which began on July 24 at $18.85. The high probability correction levels are these:

  • 38.2%, to $23.09
  • 50%, to $22.28
  • 61.8%, to 21.47
If the wave 3 labeling is correct then the next move would be a wave 5 rise that would top the $25.72 peak.

More out of interest than anyting else, I'm adding PNK to my Watchlist with an eye to re-entering based on Elliott wave considerations rather than relying exclusively on Turtle Trading signals.


Pinnacle Entertainment Inc. (PNK) moved above its 20-day price channel on Tuesday and confirmed the bull signal today by trading still higher.

PNK 90 days 2-hour bars
The breakout was PNK's second attempt in a week to move beyond a sideways trend that began July 30. The first attempt, on Aug. 14, failed immediately in a sharp intra-day decline.

The current leg up for PNK began July 24 from $17.75 and carried to a higher high today of $23.10.

Using the Elliott wave count, the rise from July has taken the form of a three waves, with the third still unfolding. Elliott doctrine holds that the third wave will be followed by a fourth wave retracement to the downside and then a fifth wave push to a still higher high.

The present move has brought the price above the trend's Elliott wave channel, suggesting that the third wave may be nearing completion. That conclusion, however, is far from certain.

This is the second breakout to the upside since the July leg up began. The first trade failed, losing 4.8% over 12 days.

More broadly, PNK has been in an uptrend since July 2012. That period has seen five completed bull signals, three successful with an average 15.3% profit over 34 days, and two unprofitable with a 3.4% average loss over 12 days.

PNK was one of four symbols that survived my initial analysis last night, all having broken out to the upside. (See "Wednesday's Prospects".)

Two failed confirmation after dropping back within their 20-day price channels: WRLD and RHHBY.

I rejected CCO because its chart is less bullish and its liquidity is far less than PNK's.

Pinnacle Entertainment, headquartered in Las Vegas, owns casinos and related hotels and entertainment values in Louisiana, Missouri, and Indiana as well as a racetrack in Ohio and interests in Canada.

Gaming trades often go bad through exposure to China, whose economy can be quite volatile. Pinnacle is purely North American which, one can argue, will remove a large area of risk.

Analysts are all over the map on PNK but in aggregate come down at a 12% enthusiasm index.

Return on equity is of the slow and steady variety, at 8%, and debt is quite high, standing at nearly four times equity. The company has been adding to its holdings of late.

That level of debt would be a deal killer if I were a value trader of the Warren Buffett variety. Not so, however, for technical trading of the kind I do.

Profits have been down the first two quarters of this year compared to their counterparts the year before.

Eleven of the past 12 quarters have been profitable, and 10 have shown earnings surprises to the upside. Two surprised to the downside.

Institutions own 99% of shares and the price is near parity with sales. It takes $1.09 in shares to control a dollar in sales.

PNK on average trades 909,000 shares a day. It supports a fine selection of option strike prices, but the open interest runs mainly to the two figures, lower than I like to trade.

Implied volatility stands at 31%, near the bottom of the six-month range. Volatility has been trending sideways since July 22.

Options are pricing in confidence that 68.2% of trades will fall between $20.86 and $24.90 over the next year, for a potential gain or loss of 8.8%, and between $21.91 and $23.85 over the next week.

Trading in options today is heavily skewed to the bull side, with call volume running at nearly double the five-day average. Puts are trading at 40% of average volume.

The fair-price zone on today's 30-minute chart runs from $22.77 to $22.95, encompassing 68.2% of transactions surrounding the most-traded price, $22.89. The price has been undulating within the zone all day, with two hours plus change left before the closing bell.

Pinnacle next publishes earnings on Oct. 21.

Decision for my account: The option liquidity means any position I open in PNK must be structured as long shares, which means I lose leverage and the ability to hedge.

I've opened a bull position, buying the shares, primarily on the basis of the chart and the longer-term odds.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

At several points in my analysis I use the number 68.2%. This comes from statistics and refers to the one standard deviation boundaries, which are expected to contain 68.2% of whatever is being studied. Putting it another way, given an item (a trade or whatever), there is a 68.2% chance that it will appear within those boundaries.

Elliott wave analysis tracks patterns in price movements. StockCharts has a good explainer. The principal practioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

FIS closed

I closed my bull position in FIS today after the stock broke below its 10-day price channel and have updated the original entry post with results.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Tuesday, August 20, 2013

Wednesday's Prospects

On Tuesday, Aug. 20:

Of 2,309 stocks and exchange-traded funds in this week's analytical universe, 23 that are traded on the major American stock exchanges broke beyond their 20-day price channels, nine to the upside and 14 to the downside.

Nine symbols traded over the counter broke out, two to the upside and seven to the downside.

Within my analytical universe, 1.4% of symbols gave bull or bear signals, down from 4.8% the prior trading day.

The ratio of bull to bear signals was 1:1.9, bringing the markets back to neutrality after Monday's extremely bearish 1:110 ratio.

Three symbols traded on the major exchanges survived my initial screening, all having broken out to the upside. They are CCO, PNK and WRLD.

One symbol traded over the counter survived my initial screening, RHHBY, having broken out to the upside.

I shall do further analysis on Wednesday, Aug. 21.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...
  • the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
  • a yield adjusted by those odds of 5% or greater,
  • and absence of an earnings announcement within the next 30 days. 
For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
s

Tuesday: No Trade

Last night's initial screening produced three potential trades for Tuesday, all to the downside. (See "Tuesday's Prospects".)

The most liquid of the three, AGNC, moved back within its 20-day price channel, thereby failing to confirm the bear signal.

PT and ARCO each confirmed its bear signal, but neither has sufficient options breadth and liquidity to meet my trading preferences.

I won't be doing further analysis on these stocks or opening any new positions today.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Monday, August 19, 2013

Tuesday's Prospects

On Monday, Aug. 19:

Of 2,309 stocks and exchange-traded funds in this week's analytical universe, 105 that are traded on the major American stock exchanges broke beyond their 20-day price channels, one to the upside and 104 to the downside.

Six symbols traded over the counter broke out, all to the downside.

Within my analytical universe, 4.8% of symbols gave bull or bear signals, up from 2.7% the prior trading day.

The ratio of bull to bear signals was 1:110, a strengthening of the bearish bias from 1:20 the prior trading day. It is the strongest bearish bias since I started doing the daily calculation in May.

Three symbols traded on the major exchanges survived my initial screening, all having broken out to the downside. They are AGNC, ARCO and PT.

No symbol traded over the counter survived my initial screening.

I shall do further analysis on Tuesday, Aug. 20.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...
  • the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
  • a yield adjusted by those odds of 5% or greater,
  • and absence of an earnings announcement within the next 30 days. 
For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
s

Monday: No Trade

I won't be opening new positions today. One symbol, OIBR, survived initial screening. However, it doesn't have enough liquidity to support an options trade or a short sale. (See "Monday's Prospects" for details of the first-wave analysis.)

CONN closed

I've closed my position in CONN and updated the original entry posting with details.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Sunday, August 18, 2013

The Week Ahead: Home sales minutes, Jackson Hole


There are few reports this week; two flavors of home sales and minutes of the July 31 Federal Open Market Committee meeting exhaust the list.

Existing home sales, which track the greater part of the market, will be released at 10 a.m. New York time on Wednesday, and new home sales at 10 a.m. on Friday.

The FOMC minutes will be out Wednesday at 2 p.m.

Leading indicators (in descending order of importance):

The interest rate spread between 10-year Treasuries and the federal funds rate, reported continually during market hours.

The M2 money supply, at 4:30 p.m. Thursday.

The S&P 500 index, reported continually during market hours.

Average weekly initial jobless claims, at 8:30 a.m. Thursday.

Other reports of interest:

Wednesday: Petroleum inventories at 10:30 a.m.

Thursday: The Purchasing Managers manufacturing index flash report, just before 9 a.m. Eastern.

Fedsters

Federal Reserve Vice Chair Janet Yellen, on the short list to replace Ben Bernanke as chairman, leads a panel discussion on Friday at the Kansas City Fed's Economic Policy Symposium in Jackson Hole, Wyoming, the leading event of the social season for fedsters and their fans.

Analytical universe

This week I'll be analyzing new bull and bear signals among 2,309 stocks and exchange-traded funds that have some analyst interest. They are traded both on the major U.S. exchanges and over-the-counter. My universe is selected from mid-cap stocks and larger, defined as market capitalization of $1 billion and greater.

Trading calendar

By my rules, I'm trading September options for the short legs of covered calls and vertical and diagonal spreads, calendar and butterfly spreads, and iron condors, and December options for single calls and puts. Of course, shares are good at any time.

Good trading!

Saturday, August 17, 2013

Monday's Prospects

On Friday, Aug. 16:

Of 2,309 stocks and exchange-traded funds in this week's analytical universe, 62 that are traded on the major American stock exchanges broke beyond their 20-day price channels, three to the upside and 59 to the downside.

One symbol traded over the counter broke out, to the downside.

Within my analytical universe, 2.7% of symbols gave bull or bear signals, down from 10.3% the prior trading day.

The ratio of bull to bear signals is 1:20, a strengthening of the bearish bias from 1.13.1 the prior trading day. It is the strongest bearish bias since June 20, when the ratio was 1:26.2.

One symbol traded on the major exchanges survived my initial screening, OIBR, to the downside. All but the one symbol failed because of less than even historical odds of a successful trade in the direction of the breakout, almost entirely to the downside.

I can immediately rule out OIBR as a potential trade because, although it has options, there are only two strike prices and they have no open interest.

I've set aside three symbols with unacceptable odds but high volume for consideration on Monday. They are CMCSA, PFE and WFC. All broke out to the downside.

(I discussed how trend changes impact odds calculations in my analysis Friday of MNKD, which can be found here.)

No symbol traded over the counter survived my initial screening.

I shall do further analysis on Monday, Aug. 19.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...
  • the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
  • a yield adjusted by those odds of 5% or greater,
  • and absence of an earnings announcement within the next 30 days. 
For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
s

Friday, August 16, 2013

MNKD: How bear plays are different

Update 10/7/2013: My September options spreads on MNKD expired worthless on Sept. 21, allowing me to keep the entire premium. I put them on the shelf awaiting a fresh breakout to the downside so I could roll them forward to October options.

The breakout was a long-time coming, and it was only today, in the November options trading period, that it happened. MNKD broke sharply below its 20-day price channel, providing the momentum I need to justify rolling into a new bear position.

However, the various factors that go into pricing options have moved against building a viable optoins spread a position. A bear call spread would have a high negative leverage -- the options would cost more than the stock.

This sort of thing often happens with low-priced stocks that have tradeable options; MNKD is going for $5.09 as I write. I could simply buy put options, but I really prefer a position that I can hedge, especially with the next earnings announcement coming up on Oct. 31.

So I have removed MNKD from the roll shelf and calculated the results. During its 36-day existence,Aug. 16 to Sept. 21, my bear position in MNKD saw the stock fall by 3%, or 29.9% annualized. The options spreads showed a 19.1% yield on risk, or 193.1% annualized.




MannKind Corp. (MNKD) joined the market's general rout on Thursday, pushing below its 20-day price channel the day after it broke above the channel. The price fell further today, confirming the bear signal.

The rapid retreat from Wednesday's peak of $8.70 was the second break this summer in an uptrend that began in October 2012.

MNKD 30 days 2-hour bar
Thursday was a heavy down day for stocks generally, with bear signals outnumbering bull signals 11:1 in my universe of 2,300 or so mid-cap and bigger stocks and exchange-traded funds.

Bear signals have been a rarity among the fish caught in my analytical net this year. But the times are changing, and MNKD gives me an opportunity to think about how bear trades differ from their bullish counterparts.

Bull plays are easy: Do a leveraged and hedged short options spread if open interest is three figures or better, and buy shares if its not.

The first (and preferred) choice applies to bear plays as well, but the second choice is somewhat more complex. Shares of a stock can be sold short only if they're available for the trader to borrow, and for lower liquidity stocks, they're unavailable. Generally, the stocks whose shares can be shorted also have options with sufficient open interest to trade.

Bear plays, then, tend to be biased toward bigger companies with high volume. The choices are limited, and that makes my holdings representative of a narrower segment of the economy.

Moreover, my analytical system breaks down somewhat early in a major trend change, which is where we appear to be today.

For screening, I rely on historical odds during the current trend in favor of a successful trade in the direction of the breakout. When the market has been in a bull trend for so long, there haven't been many successful bear trades. The pertinent question, really, becomes which bear trades lost the least, not how many were winners.

Eventually, if the bear trend continues, I'll be calculating those odds based on performance during the bear trend, but the trend at present is too new. There is no history. Often the current bear signal is the first of its kind in a long time.

At present I'm happy living with the contradictions in my odds calculations. Although we appear to be topping into a downtrend, that is in fact far from certain. I'm much happier selecting my bear trades from stocks that were bearish before the rest of the market jumped on board.

MNKD 3 years 2-day bar
And that applies to MNKD. My initial screening uses odds based on when the present uptrend in the S&P 500 began: Oct. 4, 2011. On that day MNKD closed at $3.70 and was in the midst of a downtrend that would eventually carry it down to $1.57 in May 2012.

That history gave MNKD a 50% success rate on bearish trades during the period, as compared with the rest of the market, which began their uptrend around that time.

More recent history has been less kind to MNKD's bearish creds. The uptrend from October 2012 has seen but one bear signal prior to the current one. It ended up losing 12% over 18 days.

That uptrend first faltered at a peak of $8 in June, declined to $5.70 the next week, producing the uptrend's lone bear signal along the way, and then began to work its way back to this week's ephemeral peak.

So I can say that MNKD is more bearish than most of the symbols I've dealt with over the past months. However, I cannot say that it's in a downtrend except in the most near-term frame, and I cannot say that it's in an uptrend unless I ignore the very long term frame.

Very long term, MNKD has traced a series of lower highs from $12.30 in 2009. This weeks faltering at $8.70 merely set a lower high.

If MNKD continues down to a lower low, below $1.57, then the very long term downtrend remains in force. If it reverses above that level, then it is positioned for what would be the beginnings of a new uptrend, or perhaps a triangle of some sort.

No trader can succeed at the craft without harboring a deep love of ambiguity.

MNKD was one of eight symbols that survived last night's initial screening, all having given bear signals. (See "Friday's Prospects".)

Two failed confirmation: ESRX and PMCS. The others lacked sufficient options liquidity to construct  a bear position. They are ARR, IRM, IRWD, KRO and MDP

MannKind, headquartered in Valencia, California, develops therapeutic medicines for diabetes, cancer and other diseases. It has all the great promise and tendency toward sudden movements based on news common to all biotech companies.

The handful of analysts following MannKind are split on its prospects, collectively coming down at a negative 20% enthusiasm rating.

The companies financials are the usual mishmash of a development company -- lots of hope but little on the books to show for it.

Return on assets is a negative 80%. Earnings are nothing but losses for the last 12 quarters, although the losses have tended to become smaller over time and half the quarters have produced upside earnings surprises. (Half have surprised to the downside, so its a full-cup-empty-cup surprise history.)

The price to sales ratio is so absurd that I'm reluctant to even put it down, but here goes: It takes $57,250 in shares to control a dollar in sales.

MNKD on average trades 14 million shares a day and supports a moderate selection of option strike prices with open interest mainly in the four figures. The front-month at-the-money put options have a narrow bid/ask spread of 6.5%.

Implied volatility stands a 1.1%, near the middle of the six-month range, following a sudden fall this week from 2.1%.

Options are pricing in confidence that 68.2% of trades will fall between $4.25 and $8.05 over the next month, for a potential gain or loss of 30.9%, and between $5.24 and $7.06 over the next week.

Put options today are trading 84% above their five-day average volume, and calls at 65% above average volume.

The fair-price zone on today's 30-minute chart runs from $6.04 to $6.40, encompassing 68.2% of transactions surrounding the most traded price, $6.22. The price opened today well above the zone and has fallen continually -- most dramatically in the first half hour -- to a position in the lower half of the zone.

MannKind next publishes earnings on Oct. 28.

Decision for my account: There's nothing not to like about MNKD as a bear play, except for the uncertainties that come with any pharmaceuticals play. The chart has its ambiguities but that is not unusual.

I've opened a bear position in MNKD, structuring it as a vertical options spread sold for credit and expiring in September, short the $7 calls and long the $8 calls. There is no leverage to speak of 1.02:1. The maximum potential yield at expiration is 19.1%. The position provides a 17% hedge of profitability at expiration.

It was hard to get a fill on this trade for some reason; I had to come 2 cents off my ask, shaving 3 percentage points from my potential profit. 

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

At several points in my analysis I use the number 68.2%. This comes from statistics and refers to the one standard deviation boundaries, which are expected to contain 68.2% of whatever is being studied. Putting it another way, given an item (a trade or whatever), there is a 68.2% chance that it will appear within those boundaries.

Elliott wave analysis tracks patterns in price movements. StockCharts has a good explainer. The principal practioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Thursday, August 15, 2013

Friday's Prospects

On Thursday, Aug. 15:

Of 2,325 stocks and exchange-traded funds in this week's analytical universe, 236 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 15 to the upside and 221 to the downside.

Four symbols traded over the counter broke out, two in each direction.

Within my analytical universe, 10.3% of symbols gave bull or bear signals, up from 2.6% the prior trading day. It is the highest breakout rate since July 11, which was the most bullish day so far this summer.

The ratio of bull to bear signals is 1:13.1, a strengthening of the bearish bias from 1.2.8 the prior trading day. It is the strongest bearish bias since Aug. 8, when the ratio was 1:13.8.

Eight symbols traded on the major exchanges survived my initial screening, all to the downside. They are ARR, ESRX, IRM, IRWD, KRO, MDP, MNKD and PMCS.

No symbol traded over the counter survived my initial screening.

I shall do further analysis on Friday, Aug. 16.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...
  • the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
  • a yield adjusted by those odds of 5% or greater,
  • and absence of an earnings announcement within the next 30 days. 
For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
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Roll busted: QIHU

QIHU, which has been sitting the shelf waiting to be rolled, has given an exit signal, busting the potential roll. I've updated the original entry posting from last April with details and results.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Rolls busted: GIS, SPLK and XRT

Three symbols that were awaiting rolls into new options positions have given exit signals, removing the potential for a roll and triggering a calculation of their results.

I've updated their initial entry postings with the outcomes -- all profitable. The symbols are GIS, SPLK and XRT.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

GDX: Trends within trends

Update 8/29/2013: GDX fell below its 10-day price channel, a signal to close the position. After the break, it rose intraday and I was able to exit for a small loss. 

The shares never really followed through on their bull signal of Aug. 16, instead trading sideways. The decline began two days ago on Aug. 27, as the possibility of American intervention in Syria appeared to grow less imminent.

The position was structured as short vertical options spreads expiring Sept. 20 and sold for credit. Often in such cases I'll wait before closing a position. But the potential for loss was more than the potential for gain, so based on that risk/reward calculation, I gritted my teeth and swallowed the bitter pill.

During the 14 days I held the position, the shares declined by 1.5%, which works out to down 39.5% annualized.

This was one of those rare instances where the options outperformed the shares. The yield on risk of the vertical spreads was negative 0.8%, or negative 19.8% annualized. 

The Market Vectors Gold Miners exchange-traded fund (GDX), a favored vehicle for gold bugs, broke above its 20-day price channel on Wednesday and confirmed the bull signal today by trading above the breakout level and even, briefly, touching a new high, $28.90.

All vehicles for gold have been in a strong downtrend since September 2011, with the most recent leg down having begun in September 2012 from $55.25. The declined hit bottom at $22.56 on June 26 and reversed.

This is the second bull signal from GDX since the downtrend reversed. The first, on July 22, reversed two days later and signaled an exit for a 7.7% loss on Aug. 5.

The problem with gold is that it has been on the slide for so long, no one can believe that it may indeed be on the rise again, me among them. I nearly relegated GDX to a "Thursday: No Trade" posting, so unlikely the idea of an upside breakout in gold appear to be.

GDX was the lone symbol to survive my initial screening last night. (See "Thursday's Prospects".) I also penciled in a second symbol, GOOG, for further consideration because of its size and impact. However, the GOOG bear signal is so contrary to the stock's uptrend that I've turned away from it for now.

But back to gold.

GDX 90  days 1-hour bar
The question, as always for a trader, is how much fuel is left to power the present trend.

Elliott wave analysis counts GDX as being in a corrective zig-zag to the upside, running contrary to the broader downtrend. A zig-zag is three waves and the chart shows GDX has completed the first two.

The final wave, C, is composed of five sub-waves. I count two waves completed and a third underway.

By the rules, wave 3 cannot be the shorter than both wave 1  and wave 5. Wave 1 is $4.09 in length, and wave 3 started from $27.05, so either wave 3 will reach $31.15 at a minimum, or wave 5 will be shorter than wave 3.

In any event, wave 3 will be followed by a wave 4 correction and then a final push to new trend high in wave 5.

Those facts suggest to me that there is 2.4% potential to the upside, at a minimum, from today's close.

No guarantees, of course. Elliott wave counting is notoriously ambiguous. My count differs from the count on gold by the leading company of Elliotticians, who see less upside potential.

That's a long way of saying that it's possible to make bullish money even during a downtrend, as long as the trader understands the relative time levels of the two trends. Nothing stands alone in the markets. Every trend is part of a greater trend and envelopes a lesser trend.

The Gold Miners ETF is a composite of the largest gold mining companies, with a quarter of the fund's holdings in two: Goldcorp Inc. (GG) and Barrick Gold Corp. (ABX).

GDX on average trades 40 million shares a day and supports a truly awesome selection of option strike prices, many having open interest in the five figures. The options grid is a speculator's dream.

Implied volatility stands at 25%, at the top of the six-month range after a rise that began Aug. 12.

Options are pricing in confidence that 68.2% of trades will fall between $26.88 and $30.98 over the next month, for a potential gain or loss of 7.1%, and between $27.95 and $29.91 over the next week.

Trading today is close to normal, with calls running 7% above the five-day average volume and puts at 78% of average.

The fair-price zone on today's 30-minute chart runs from $28.42 to $28.90, encompassing 68.2% of transactions surrounding the most-traded price, $28.62. The price opened in the lower portion of the zone and stayed there for the first two hours of trading before pushing above the zone ceiling.

The Gold Miners ETF goes ex-dividend in December for an annual payout yielding 1.59% at today's prices.

Decision for my account: I like this trade, mainly based on the Elliott wave count. 

I've opened a bull position in GDX, structuring it as a vertical options spread expiring in September and sold for credit. The position is fairly low leverage, at 2:1. The maximum profit at expiration is 24%. The position provides a 9% hedge, meaning it is profitable if the price falls to 9% below entry at expiration.


References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

At several points in my analysis I use the number 68.2%. This comes from statistics and refers to the one standard deviation boundaries, which are expected to contain 68.2% of whatever is being studied. Putting it another way, given an item (a trade or whatever), there is a 68.2% chance that it will appear within those boundaries.

Elliott wave analysis tracks patterns in price movements. StockCharts has a good explainer. The principal practioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading

Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.