Nice follow through day, market is unbelievable!

We see a really nice session for the US market today. The SPX index closed at 1320.64, which is above daily 50MA. I anticipate the upside move of SPX today, but did not see SPX can go so high. We are definitely in a bull market now. What I wish to see is that market pull back a little bit in the next few days. Then the first dip is going to be bought. I will be one of them. Some of the leading now with little pullback is going to be my long candidate.

Today I sold my REDF trade at 9.51 two minutes after the market open. REDF is like a bomb to me. Thin, Volatile, profit-taking, you name it. It has big ask and bid spread, which makes it a bad swing trade candidate. After I sold, REDF was down to 9.34. I was quite happy at that time. One minute later, REDF went high 9.78. I do not regret to sold REDF early. Profit is profit, even though not much. I cannot make it to be a losing trade again. REDF was closed at 9.21 today. Bingo, I made a good exit decision.

Yeterday I longed 130 shares of GLNG at 33.96. GLNG is in consolidation mode and price did not move up as I was expected. Basically it is forming a little doji. I bet more consolidation is coming and there is still some room for GLNG to drop. I can buy it at better price later. I closed the GLNG at 33.87 right before close. Not much loss, hehe. Move on anyway.

Finally a winning trade for me in the past 40 days!!

After the big loss in the LULU trade and SPY call trade on early June, I have not made a single winning trade until today. I was being impatient to missed some good trade for FMCN and AXTI from Wednesday last week . Today AXTI is closed at 8.68, 65cents above my entry in two days. FMCN is closed at 30.83, $4 dollars above my entry in five days. Finally, I booked a 4 percent winning trade from SCSS today. Feel a little bit excited and help me reflect my strength and weakness. Currently I think maybe the breakout/momentum trading works best for me. I should look for breakout tradings as long as the market condition is not too bad. I need to polish my skills for a particular setup (breakout setup) first. When in bear market, trade break down. When in bull market, trade break up.

I entered SCSS yesterday aftermarket around 7:00pm when I saw the ask price is only 17.45, which is so cheap ( lower than the closed price 17.53). And 17.86 looks key resistance to me and I feel SCSS is ready to break over this level, as there are so many buy volume in the past 7 days, and only 1 small sell volume. In the 15m chart, it looks nice coiling and high buying pressure before close. Hence I entered 200 SCSS at 17.45. The position is too small. I was thinking using scottrade account to buy it, but want to take advantage of the low commission in IB account. LOL, missed the big profit.

Today market gapped up and acted very strong after a small pullback after open. Even the market condition is not very favorable in the beginning, SCSS is doing like a charm. SCSS reached HOD 18.30 around 11:00AM. I was thinking to exit the trade at 18.40. But SCSS failed the breakout around 12:00pm. I closed my trade at 18.11 when I saw a bear flag forming at 12:40pm, which turned out to be a good exit point.

Overall, I am happy to make the first winning trade today.

Today I also make a trade to long REDF at 9.43. This is supposed to be a day trade. But REDF was up to 9.65 ten minutes after I entered the trade. I was too greedy to book the profit. My bad!!!! I made this winning trade to be a bad trade. I feel REDF is losing the momentum. But need to see how it perform yesterday.

Payoff for being impatient- AXTI trade

Bad trade for me on AXTI! profit is 6 dollars with 306 dollars. I pay for being impatient. AXTI has a nice daily chart and hold 7.90 very well. 8.13 is the resitance to be touched several times and failed. I longed 1000 share of AXTI at 8.03 on last Friday seeing high volume activity. AXTI went high to 8.14 on this Monday and failed to go down to 7.94 on the Monday close. I did not fear the loss on Monday as I feel as long as 7.90 held, I was fine.

But today I am being impatient. I saw AXTI went high at 8.14 in the open and go down to 8.03 around 10:00AM. My attitude became very nervous and anxious, I did not want to see it went down to test 7.90 again and AXTI was very slow mover. I just sold AXTI for a 6 dollars gain. Too bad, in the afternoon, AXTI having a high volume break over 8.11 and closed at 8.35. Tomorrow we may see AXTI continuing going high to break out from 8.50

The Extreme Point Rule

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1926808&cmd=show[s215306929]&disp=O

The Extreme Point Rule

The directional movement indicator is a powerful tool for spotting shifts in market momentum. A buy signal is given when the positive directional indicator ( DI) crosses above the negative directional indicator (-DI), and conversely, when negative directional indicator crosses above the positive directional indicator a sell signal is generated. When the market is trendless the DI lines crisscross back and forth, which can generate false signals.

Solely following the DI and -DI cross signals by themselves can lead to whipsaws and overtrading. Steven Achelis offers a solution to this problem using the 'extreme point rule' in his marvelous book, Technical Analysis From A To Z. Achelis points to the creator of the directional movement system J. Welles Wilder, and his simple trading rule, to help prevent whipsaws and reduce the number of signals that a trader acts upon.


The extreme point rule requires a trader to mark the extreme price point the day in which the DI and -DI cross. According to Achelis, the extreme point is highest of point of a session when DI crosses above -DI and is the lowest point of the session when -DI crosses above DI. Buy or sell signals are triggered when prices move beyond the extreme point.

Reading notes: Come into My Trading Room by Alexander Elder

http://www.amazon.com/Come-Into-My-Trading-Room/dp/0471225347/ref=sr_1_1?ie=UTF8&qid=1308964318&sr=8-1

Some of the best trading opportunities occur after false breakouts. When
prices fall back into the range after a false upside breakout, you have extra
confidence to trade short. Use the top of the false breakout as your stoploss
point. Once prices rally back into their range after a false downside
breakout, you have extra confidence to trade long. Use the bottom of that
false breakout for your stop-loss point.

A one-day splash of uncommonly high volume often marks the beginning
of a trend when it accompanies a breakout from a trading range. A
similar splash tends to mark the end of a trend if it occurs during a wellestablished
move.

Divergences between price and volume tend to occur at turning points.
When prices rise to a new high but volume shrinks, it shows that the
uptrend attracts less interest. When prices fall to a new low and volume
falls, it shows that lower prices attract little interest and an upside reversal
is likely.

Dairy Week 5 Day 3 - 06/22/2011 bad day

A bad day today for me. I am feeling so frustrated that I did not have a single winning trade in this June. I am having the longest losing trend from the time I started my Trading.

We see the market selling off hard in the last half hour trading after Bernanke's FED speak. This market is too volatile, no definite trend lasting for more than three days.

I longed FMCN at 26.98 in the middle of day. I thought the market was in consolidation and should go up to test 1300 late afternoon or tomorrow. But I was wrong again. I closed FMCN right before close to sell it at 26.68 for a 1 percent loss. Even not much loss, but it really made me feel upset and discourage my confidence. What should I do to improve? Big question in my ahead.

Dairy Week 5 Day 1 and Day 2- 06/20/2011 - 06/21/2011

Market have a really impressive bounce today with $SPX closed at 1295, which is right on the 20SMA. This activity shows me the power of 200SMA bounce for the first time. I know a lot of traders watched the 200SMA as the support to long in the past few days. Now it turns out this is a such a good long entry. What a pity that this rally is not with me together. I hold cash as the position.

Yesterday I made a bad trade in my real money account. Yesterday spy is right at 9EMA on 9 daily chart and I saw the volume is really low for the bouce, which makes think this is a shortable bounce. 127.51 looked a short for SPY intraday from 2:00Pm. I longed the 6 July 128 SPY at 2.72 when SPY broke 127.51. The lowest it went was 127.41. Now it is clear that this is a bear trap. Now I think my problem for this bad trade is that it is not a good time to go short, better to stay in cash to catch.

I set a stop for the put at 2.53, which filled 5 minutes later after my initial purchase. Right now, it seems my stop is good anyway. Today the market rallies and the put closed at 1.85. As I said, even for the option, I need to set the tight stop. A good trade should work right away. My bad to make this trade which made me a $120 loss. Still too much, like 8 percent loss.

For the rest of the week, I still want to see the market going down. I am bear on it, lol. But tomorrow I guess we should up.

NYSE TRIN

http://emini-watch.com/free-stuff/trin-indicator/

Trin

The Trin is a breadth oscillator which aids in the measurement of internal market strength or weakness. Also known as The Arms Index (because it was invented by Richard Arms), the Trin is an acronym that stands for The Trading Index.

The Trin measures volatility within the stock market. The Trin represents the relationship between advancing and declining issues by measuring their volume flow. The Trin is commonly used as a short term trading tool.

The Trin also has an inverse relationship with the Tick. In contrast to the Tick, a rising Trin signals that the Bears are beginning to take control. Likewise, a falling Trin tells us that the Bulls are taking control of the direction of the market because a falling Trin shows us that more volume is flowing into advancing stocks than declining stocks.

The formula for the Trin is as follows:

Advancing Issues / Declining Issues
----------------------------------------------------
Advancing Volume / Declining Volume

This formula, like the Trin itself, helps us to descern whether volume is flowing into advancing or declining issues. The Trin will read under 1.0 when advancing stocks are the major source of volume and above 1.0 when declining stocks are the predominant source of volume flow in the market.

In Brief:
A rising Trin depicts a weak market and a falling Trin depicts a strong market.

NYSE TICK

Some good reading about NYSE Tick

http://traderfeed.blogspot.com/2008/06/using-nyse-tick-to-interpret-market.html

http://www.trade-guild.net/2010/07/tick-and-trin-indexes.html

http://www.marketweb.com/ord/findings.htm

http://www.day-trading-stocks.org/nyse-tick-indicator.html

1.TICK extreme values change over time: A reading today is not what it once was years ago
2.TICK low extremes have been steadily increasing over the last four years while TICK highs have been decreasing
3.There is an inherent bullish bias in the NYSE TICK, which goes along with the natural bullish bias in stocks
4.You must adapt your strategies to current realities in the TICK…not historical realities

Dairy Week 4 Day 5 - 06/17/2011

Long stock to watch: SPPI BLTI BOOM HOC

short: CBRX

Some quotes from J Oneil's book How to make money in stocks

1. Concentrate on listed stocks that sell for over $20 a share and that
have at least some institutional acceptance.
2. The company's earnings per share should have increased in each of
the past five years, and the current quarterly earnings must be up at
least 20%.
3. Timing-wise, the stock should be about to make a new high in price
after emerging from a sound correction and price consolidation
period. This should be accompanied by a volume increase of at least
50% above the stock's average daily volume.

The best one was called How to
Trade in Stocks by J. Livermore. From his book, I learned that your
objective in the market was not to be right but to make big money when
you were right.

The two best chart price patterns for selling short are:
1. The head and shoulders top. The right shoulder should be slightly
lower than the left, and the best time to short is after the second or
third upward pullback in price in the right shoulder is about over.
In former big leaders, the several upward pullbacks can be 20% or
more from the stock's low point in right shoulder. It also helps if the
stock's quarterly earnings are showinw substantial rate of increase or have turned down. Furthermore, the stock's relative
strength line should be on a clear downtrend over at least 3 or 4
months or longer so you can be more confident that the security has
definitely topped. (Most short selling is done at the wrong time.)
2. Third or fourth stage cup with handle or other similar patterns that
have definitely failed after an attempted breakout. The stock should
be just picking up trading volume and starting to break down below


Here are some of the characteristics of David Ryan's winning stocks at
the time he bought them:
1. Average annual earnings growth rate, 24%.
2. Median EPS percentage increase, current quarter, 34%.
3. Average P/E, 15.
4. Average Relative Strength, 85.
5. Relative Strength line up an average of 6.5 months.
6. Median shares outstanding, 4.6 million.
7. Median average daily volume, 10,000 (not critical).
8. Median industry group strength, top 30%.
9. Average alpha, 1.78.
10. Average after-tax margin, 7.3% (not critical).
11. Median stock price, $24.



Following is a list and explanation of many of them:
1. Buying right solves half of your selling problem. If you buy exactly
at the right time off a proper base structure in the first place and
do not chase or pyramid a stock when it is extended in price too
far past a buy point, you will be in a position to sit through most
. normal corrections in the price of your stock. Winning stocks seldom
drop 8% below a correct pivot-point buying price.
2. Beware of the big-block selling you see on the ticker tape just after
you have bought a stock during a bull market. The selling might be
emotional, uninformed, temporary, or not as large, relative to past
volume, as it appears. The best of stocks can have sharp sell-offs for
a few davs or a week. You should refer to a chart of the stock for
104 Be Smart from the Start
overall perspective to avoid getting scared or shaken out in what
may just be a normal pullback.
3. If after a stock's price is extended from a proper base, its price
closes for a larger increase than on any previous up days, watch
out! This move usually occurs at or very close to a stock's peak.
4. The ultimate top may occur on the heaviest volume day since the
beginning of the advance.
5. Sell if a stock advance gets so active that it has a rapid price runup
for two or three weeks (eight to twelve days). This is called climax
(blow-off) top activity.
6. Sell if a stock runs up on a stock split for one or two weeks (usually
+ 25% or + 30% and, in a few rare instances, + 50%). If a stock's
price is extended from its base and a stock split is announced, in
many instances the stock should be sold.
7. Big investors must sell when they have buyers to absorb their stock;
therefore, consider selling if a stock runs up and then good news
or major publicity (a cover article in Business Week, for example) is
released.
8. New highs on decreased or poor volume means there is temporarily
no demand for the stock at that level and selling may soon overcome
the stock.
9. After an advance, heavy volume without further upside price
progress signals distribution.
10. Tops will show arrows pointing down on a stock's daily chart (closing
at lows of the daily price range on several days—in other words,
full retracement of a day's advance).
11. When it's exciting and obvious to everyone that a stock is going
higher, sell, because it is too late! Jack Dreyfus said, "Sell when
there is an overabundance of optimism. When everyone is bubbling
optimism and running around trying to get everyone else to buy,
they are fully invested. At this point, all they can do is talk. They
can't push the market up anymore. It takes buying power to do
that." Buy when you are scared to death and others are unsure.
Wait until you are happy and tickled to death to sell.
12. If a stock that has been advancing rapidly is extended from its base
and opens on a gap up in price, the advance is probably near its
peak. A two-point gap in a stock's price would occur if it closed at
its high of $50 for the day and the next morning opened at $52
and held above $52 during the day.
When to Sell and Take Your Profit 105
13. Sell if a stock's price breaks badly for several days and does not rally.
14. Consider selling if a stock takes off for a good advance over several
weeks and then retraces all of that advance.
15. When quarterly earnings increases slow materially or earnings actually
decline for two consecutive quarters, in most cases sell.
16. Consider selling if there is no confirming price strength by another
important member of the same group.
17. Be careful of selling on bad news or rumors; they are usually of
temporary influence. Rumors are sometimes started to catch the
little fish off balance.
18. Try to avoid selling on shakeouts (below major price-support
areas).
19. If you didn't sell early while the stock was still advancing, sell on
the way down from the peak. After the first break, some stocks may
once pull back up in price.
20. After a stock declines 8% or so from its peak, in some cases examination
of the previous runup, the top, and the decline may help
determine if the advance may be over or if a normal 8% to 12%
correction is in progress. You may occasionally want to sell if a
decline from peak exceeds 12% or 15%.
21. If a stock already has made an extended advance and suddenly
makes its greatest one-day price drop since the beginning of the
move, consider selling, but only if confirmed by other signals.
22. When you see initial heavy selling near the top, the next recovery
will either follow through weaker in volume, show poor price
recovery, or last a shorter number of days. Sell on the second or
third day of poor rally; it will be the last good chance to sell before
trend lines and support areas are broken.
23. Sell if a stock closes the end of the week below a major long-term
uptrend line or breaks a key price-support area on overwhelming
volume.
24. The number of down days in price versus up days in price will
change after a stock starts down.
25. Wait for a second confirmation of major changes in the general
market, and don't buy back stocks you sold just because they can
be bought cheaper.
26. Learn from your past selling mistakes. Do your own post-analysis by
plotting on charts your past buy-and-sell points.
106 Be Smart from the Start
27. Sell quickly before it becomes completely clear that a stock should
be sold. Selling after a stock has broken an obvious support level
could be a poor decision because the stock could pull back after
touching off stop orders and attracting short sellers.
28. Always project the week you can expect capital-gains selling by
those who bought in volume at the original breakout point from a
base. (This applies only if current tax laws favor capital gains.)
29. In a few cases, you should sell if a stock hits its upper channel line.
(Channel lines are drawn to connect the lows and connect the
highs on a stock's price chart.) Stocks surging above their upper
channel lines should normally be sold.
30. Sell when your stock makes a new high in price if it's off a third- or
fourth-stage base. The third chance is seldom a charm in the market.
It has become too obvious and almost everyone sees it.
31. Sell on new price highs off a wide-and-loose, erratic chart price formation.
32. Sell on new highs if a stock has a weak base with much of the price
work in the lower half of the base or below its 200-day moving average
price line.
33. In some cases, sell if a stock breaks down on the largest weekly volume
in its prior five years.
34. Some stocks can be sold when they are 70% to 100% above their
200-day moving average price line.
35. After a prolonged upswing, if a stock's 200-day moving average line
of its price turns into a downtrend, consider selling the stock.
36. Poor relative price strength can be a reason for selling. Consider
selling when a stock's relative strength on a scale from 1 to 99
drops below 70.

HRBN - to learn how oversold a stock can be

Loan Fraud. Hard sell off. Notice that the RSI is mainly under 30 and there are three push down legs. MACD histogram is forming divergence and go up to positive at the bottom. And histogram go up ahead of the price. Yes, momentum usually goes before the price movement.

Dairy Week 4 Day 4 - 06/16/2011

I am keeping missing good trade these days in the real money trade. I feel a little bit sad for my inaction at so many good entry. Anyway, as I have so little cash in my trading account, I cannot risk any bad trade any more. I have to be nimble and precise for my next big trade.

The above chart showed the SPY chart for the past 3 sessions. Both yesterday and today offered good short entry point. I made good trades for SPY put and short TZOO today in paper money.

Yesterday (06/15/2010) from the open to 11:00AM, SPY formed a triangle pattern and started to break down from 11:15AM. I placed a buy stop order for SPY put in case SPY broke down. And it turned out to be a good strategy. I gained $500 by only 10 SPY put.

Today morning, some good news was coming, which push up the market higher in the morning. But I started to notice that from 11:00AM to 1:00PM, the SPY price hovered around 127.90, but the MACD was started to forming divergence, so did the RSI. I bought 100 June 128 Put for 1.47 at 11:05AM using buy stop order again. At that time, I thought SPY was going to break the lower trendline. But SPY just kept going up to 127.97. I was off $3000 at the high for the put at the begining.

From 1:00PM, the market started to sell off. The bear flag from 1:00pm to 1:15pm offered a good short entry. I closed my put for 2.04 when spy was at 126.70. That is a good paper trade.

And Yesterday TZOO touched 9EMA on daily chart to form a bear flag. I shorted 300 TZOO at 60.30 and added another 200 short at 58.17. TZOO was off 12 percent at the lowest today. I covered my short at 52.17 for pretty good profit. For short, I have to cover quick when seeing the bloody drop.

Also Today I entered the VRX short for 50.33, covered at 49.74. The strategy is that VRX broke below 20sma and looking very weak.

At 3:00pm today, SPX touched 1255 which is 200SMA in daily chart for the first time. A very impressive bounce from 1255. That is the power of 200SMA bounce. I monitored the index closely at that time, but did nothing at all. I missed the bounce, but I will look for some pushback to enter long tomorrow.

Dairy Week 4 Day 3 - 06/15/2011

KFY: good earning today and nice break out.

Dairy Week 4 Day 2 - 06/14/2011

In case market gap up tomorrow:
Long: 1. AXTI (long over 8.48); 2. DPZ ( dragon pattern, need some follow through tomorrow)

In case market gap down tomorrow:
Short: SWFT, IPHI, CMG, BIDU, PPO

VVTV nice break out today, closed at 7.85. I feel there is going to be another push up over 8 to follow divergence in RSI. That is a time to short VVTV, also needs to cover very quickly if seeing weakness.

Dairy Week 4 Day 1 - 06/13/2011

No specific for this Monday. We saw the market sell off in the morning and bounce hard when the $COMPQ touched the daily 200SMA for the first time.

I made a day trade at 11:00AM when I saw the spy forming a triangle in 15m chart. I shorted SPY when SPY broke down from the lower trendline, then covered at 12:00pm.

Dairy Week 3 Day 5 - 06/10/2011

SPY touched 1270 on Friday. I anticipate there will be some bounce up from 1270. Hence I bought 7 June 129 call for $1.09. The previous intraday low for this call is 0.97, hence I set the initial stop at 0.97. Then I modified the stop order to raise the stop to 0.99. Due to the fact that I set the stop too tight, I stopped out my position soon after there is sudden down in 5m bar at 12:15pm. I still think my stop strategy is ok. My problem is that I did not anticipate that the market is so weak and there is no quick and significant bounce for spx=1270. I probably should not trade on Friday.

Good article about the Bear Flag from Afraid to Trade.com

Bear Flag Lessons and Current Levels to Watch in SINA


Lesson to learn: IF price rises up in a suspected retracement AND volume declines during the rally, THEN odds are very strong that a new price low will be achieved when the retracement swing ends.

Dairy Week 3 Day 4 - 06/09/2011

I saw a good bounce day for the US market today. Yesterday night I monitored the /ES chart closely to see it would gap up this morning. Actually I did not like the action. I wish the spx will gap down to 1270 in the morning, then dip buyer would coming to buy it. I would also long it from 1270 aggresively. Anyway, the market chose to gap up today, which is not bad either.

Yesterday I have set a trading plan: buy the weakness in the first 5 minute then take off around 11AM. But in the first 10 minute, spx down from 1283 to 1281. I were fearful at that time just like what I did on Tuesday to see my call for a low price. Actually this should be a good long entry point. I am thinking the safer long entry point for today is maybe at 9:45AM-9:50AM, when the index up again to pass the open high. This gave the confirmation that today is a trend up day. The June 130 call had been up for 113 percent at the highest today. If I bought some call today at the good entry point, I would sell at around 12:00PM for at least 50 percent gain. Just missed it!

Actually, I chose another way to trade today. I short the market at the high using paper money account. I did short twice. The first short is at 10:15AM, when spy=129.50, the first high today. I believe this is the first resistance today, so I short it for a scaple. SPX had a very shallow pullback in the next few minutes, then break up again. Remember my lesson learned in the past two days, if the trade is not acting right, cut as soon as possible. I covered my short at 10:38AM, after the first down bar after the break up. I was very happy at this. I only lost 2.00-1.91=0.09 for the put. Later the put is only worth 1.56 at the lowest. Lesson this trade for me: Do not short the stock at the first high, wait for the 2nd or 3rd high to short when some divergence occur.

I believe today that we were going to see some selloff after 3pm, given that nobody want to hold the long position overnight as we are in the bear market. I reopen my short position to buy 100 June 129 put for $1.25 at 1:06Pm when spy around 129.70. I admit that since this is a paper trade, I am more aggressive and casual. If it is real money trade, I would not do this trade. The trade is not acting right at the beginning as we had a short squeeze from 2:30pm to 3:00pm to push the index higher to spy=129.93. I still believe there were going to be some selloff. My bet was right. We saw the selling from 3:00pm. I were not greedy and did not want to hold the short position overnight. I covered my short when spy=129.38 at 3:49pm for $1.38. The gain in the 2nd trade conpensate for my loss from the first trade. Not too bad.

I do not know what is the market action going to be tomorrow. I feel we can either go up or go down. I prefer market to go up tomorrow to test SPX=1300, which is also the 9EMA on the daily chart. I will look to sell at the rip on Monday next week.

Dairy Week 3 Day 3 - 06/08/2011

Today I am very happy that I closed all my spy call position yesterday to cut loss. The market is just so weak that there is no really buy pressure. I am all cash to sit at the sideline to enjoy watching. LOL, I am really enjoy it.

See the above chart, I think there is a good short entry today. SPY tested 129.10 zone for three times, but cannot overcome it. This created divergence in both MACD histogram and stochastic. And it can be seen that the the buy volume is less than the sell volume. So 1:oopm is a good short entry for me. The market was down hard to 2:15pm until some short covering occured. The close of today was better than the passed several days, as no waterfall occured. And spy just tested the intraday low again at the close.

The index has been down consectively for 6 days and becoming very oversold. I am anticipate tomorrow will be some bounce to relieve the oversold condition. But I believe the current rule of the game is still sell at the rip. Tomorrow may bounce up to spx=1285. Let us watch and see.

Dairy Week 3 Day 2 - 06/07/2011

Today's topic is about how to cut loss when at a extremely under water position. I did not do quite well to cut my loss. I could do better to minimize my loss. I want to write something about my premature reflection here.

The US market has been down consecutively for four days from 1345 to 1284 in June. No mercy, just bloody drop, usually happened during the last hour of each trading section. Please look at the above chart.




Lucky that, this morning the SP index had a gap up with SPY=129.70, which saved my loss a lot and gave a good beginning. As seen in the above chart, I closed my spy calls in three positions today to cut my loss. At the beginning, I want to see the index gives a nice bounce today, maybe to 1300. I also know that 1295-1298 is a reasonable target to get for today.

SPY gap up and faded away for the first 5 bars. I am very afraid at the 4th bar, so I sold 7 calls here for 1.08. Notice the open price for the call is 1.15 and yesterday close is 1.00. Now I think this is a bad move, as it is anticipated that there is some selling if gapping up. As long as it holds and bounces from 20ma in 5m chart, I do not need to cut loss here. Even it is better to cut right at the open.

SPY reached the first intraday high 129.99 around 10:45AM. Even for now, I think I will not close it at this time. I would like to see another push up. But imagine this scenario, if I bought the option at the Monday close, then the time spy=129.99 which gives the call price to be 1.33 will be the best time to take profit today. It is a 33 percent gain. Since I am far under water at spy=129.99, I am hesitate to do that.

The mid of today from 11:30Am to 1:00Pm is one of the most painful period I experienced, as I monitored the index closely to see the choppy up and down. I almost lost my patience. Without my friend's insistence, I believe I would close all my position here to cut loss.

It was nice that the painful period went away temporarily and spy gradually moved higher to touch 130.07 again. Based on the chart, I sensed that the daily high should be close to 130.10. This is the best best time to cut loss, knowing that I can always buy back at the lower price. I only sold 3 june 133 call here for 0.47. Too little!!!! Need to sell them all here.

Finally the market tanking, I stopped out the rest 15 June 130 call at 1.11. Do some math, 1.31-1.11=0.2, I lost 0.2 dollar more by cutting off late.

Lesson to learn: When cut loss under the extremly loss situation, do not set stop. But instead, sell all the position at the highest ( most confortable zone) point. Do not regret if the price will go higher.

Dairy Week 3 Day 1

It is 06/06/2011, a Monday. I did not write the dairy I scheduled to write yesterday. I was just too sad, too relunctant to write it until today. Too many lesson for me on this Monday.

1. Risk managment is so important!!! When you trade, plot the best trading plan, when to cut loss, when to take profit. For option trading, at most 10 percent stop limit should be set once the order is placed no matter what. For stock trading, at most 3 percent stop limit. I do not like to trade stocks with price less than $10 dollars.

2. Never ever buy an option on Friday. Because the time value decay so much. It counts on 3 days decay. So the theta for spy call option is 0.5. Then when you buy the option at the Friday close at 1 dollar, on the next monday the option is worth 0.85 at the begining of the trading, given that there is no gap up or down.

3. Trading plan for buying option on one day close ahead. If the next morning gap up, hold the position even though there is some selling in the first 15 minutes given that the volume and drop is not much. Take profit at the first push up. Do not count on the luck for a nice consolidation for another push up. Book profit for a winning trade. If the next morning gap down, sell the option immediately or at the first little bounce in 5 minutes. As it is not a good trade at the beginning, there is a no need to keep it. Cut as early as possible.

The market is really weak. There are so push up or gain in the intraday before 3pm, then hard sell off from 3pm until the close, as nobody wants to keep the position overnight. Trade less and cash is the king.

Dairy Week 2 Day 4

I should write this post on Friday......

The index was gap down based on the bad employment rate number, which is expected. The SP index started at 1297.90, then it found the dip buyer. It had a nice bounce to 1308 around 10:45AM. Reflecting myself, Thursday close is a good short entry when spy was at 132. I saw the June 131 put has surged from 2.10 to 2.88 at the Friday close, whichis around 40 percent gain. Then if sold the put, and long the call again, it is another good profit. Gosh, so many winning opportunities. I just keep missing them.

The index plunged down in the Friday afternoon and closed at 1300 at the Friday close. It formed a gravestone doji, which I am going to discuss this in the next post. The Euro FXE is up, while dollar UUP is weaken. Usually this means the stock market should go up. But the market was down based on the bad news. This created a divergence. Next week, the Euro, oil and market should go at the same direction. And the bailout news from Greece should be overally good for the US market.


Talk about some trade I have made in the real money trading account.


At 13:50pm, I saw the spy had a conslidation and the stochastic indicator was pointing up. At the time, The June 132 call bid/ask price is 1.06/1.08. I thought I may lose another push up, hence I set a limit order to long the call at 1.06. The bad thing happened. Once my order was filled, it plunged down to 0.98 in one minute. Please see the above chart. Now I know that my entry point is the bear flag. The spy was right under 20sma in 5 minute chart. I should wait for the signal whether push up or go down. If I really wanted to long at my entry point, I should set a stock right away once seeing the index going down. Now I am thinking how to avoid this kind of the mistaken entry point. I should also look at $RUT chart and $COMPQ chart at the same time. They are performing ahead of the spx index. See next chart. At 13:50pm, the russel and nasdaq was clearly in the down trend and forming the bear flag. I should not look at one chart, should check other index chart at the same time.







My current position:

1. 37 June 130 call at 1.79 bought before the Friday close.
2. 15 June 131 call at 1.23 bought before the Friday close.
3. 40 June 132 call at 1.06 bought at Friday 13:56pm. This one has already given me 30 percent loss. What a bad entry!

Monday should have a nice bounce. I wish spx can go to 1310 to 1315 on Monday. My target is let my position 3 break even, and gain some money by position 1 and 2.


Then Let me talk about my paper money trading. I was doing very well on it. Long 100 SPY put on Thursday and sell it right at the Friday open, which give me a 10,000 paper money profit. And I long TNA at the Friday open for 76.56, sell it at 10:30Am for 78.50 for some profit. In the paper money trading, I can control myself quite well, not panic, not greedy. LOL.

Dairy Week 2 Day 3

The market is too volatile, not a easy one for either bull or bear. I stay in the cash all the section without any position. The SPX index was up in the first half hour trading, then down dramatically to 1305. If it was the opportunity today, then I could long SPY call from 1307 for maybe a 20 percent gain. But this required a very good exit point and not greedy to gain a lot up to 1315. Based on the face tweet, he short the market from SPY=132. Now it looks a very good short entry point. I am not confident to open any position for today. Patient!!!! Train myself before resuming any real trading.

Today for the paper money account. I closed my PPO put for maybe 1000 gain. Geez, that is fake money, wish it is real trading money, LOL. I also open the June SPY put from spy=131.80. I am thinking to close the SPY put tomorrow morning once the market is gap down.

Tomorrow the employment number will come out, which has the tremendous impact on the market. I wish to see the market gapped down to 1300-1305 based on the bad news. Then I will buy at the support for a bounce. That is the trading plan, hope I can see it.

Dairy Week 2 Day 2

What a bloody drop for US market today! Yesterday the index is looking fabulous, now it is a disaster. The Dow Jones index is down 280 point today, which is the biggest drop from August last year. The SP500 index closed at 1314 from 1340. It gave up all its gains in a single day from the past 3 days.

Yesterday I was thinking today should be a good follow through day for the market as the index broke out yesterday on heavy volume past the falling wedge. Now I know I am totally wrong. The market just fool me again and again. I learn that I need to pay attention to the daily economical news, know when the news will come out, what effect it is going to have on the market. Today's bloody drop is due to the bad news about the ADI employment number.

Today I stopped out for NUAN at 21.60 for a 1.6% loss. Reflecting myself for this trade: If do not feel right, admit and cut the loss as soon as possible. From the early morning, I know the bad news, I should cut off the trade in the early morning for 21.90, which is just a minor loss. But I waited until my stop is hit. This situation is similar to LULU trade. Cut loss quickly.

Stock to watch:
long: NANO,

short : EXPR