Today's positions

Today I entered long positions on IBM & RIMM as they are settling at the bottom up trendlines

Watch List

USO has accelerated and departed from its down channel, too scared to touch it...

Look at the angle of the down channel for RIMM, who wants to pick a bottom?

MSFT finally breaks its up trend channel

GOOG has been down and threaten to break the 50EMA...

I bought some DIM calls for AAPL with the stop being today's low or closing below the lower channel.

Tech

It has been a while since I have posted, I have recently changed to become a swing trader instead of day trader due to time, commissions, work. I just can't work and watch charts every moment. It seems like tech is the only sector that has successfullly tested the lows and most of the big names are above the 200MA.

Findex

Findex is my Financial Index.

XLF vs FAZ

FAZ is a leveraged inverse ETF of the Russel 1000 financial index, for simplicity, we will use the S&P financial index tracking ETF XLF.

We want to examine trade-offs between options of these 2 tickers.  Let us look at the Apr 2009 options for both.  Since the financials is in a short-term down trend, let's compare the XLF put vs FAZ call options:

Volume

  As of the end of the week the closest strike price option:

    XLF - Apr Put 8 premium $0.79 volume 23877

    FAZ - Apr Call 35 premium $7.70 volume 1339

Say we opened a bearish position on financial too early, we bought in at the open of Tues Mar 17th, 2009.  XLF Apr put 8 had price about $0.95, while FAZ Apr call 35 had price about $12.50.

On Thu Mar 19th, 2009 open say we had enough pain and sell these at a loss, XLF Apr put 8 was priced around $0.40 and FAZ apr call 35 had price about $4.00

Now let's say we did not close the position and waited for a reversal.  As of Friday's close their prices are $0.79 & $7.70 respectively.

In period 1:  XLF changed -58% falling from $0.95 to $0.40 per contract.  

                   FAZ changed -68% falling from $12.50 to $4.00 per contract.

In period 2:  XLF changed 97.5% rising from $0.40 to $0.79 per contract.

                   FAZ changed 92.5% rising from $4.00 to $7.70 per contract.

Combined period:  XLF Apr call 8 lost $0.16 (16.8%) and FAZ Apr put 35 lost $4.80 (38.4%)

While XLF the ETF itself went from $7.80 to $9.60 to $8.14, a net of -4.18% on the short side.  The FAZ ETF went from $45 to $23.88 to $ 35, a net of -22%

Supposed we open a FAZ contract, representing 100 shares @ $45, shares total $4500.  Since this is to perform -3X of XLF, so I would need to short $13500 woth of XLF in order to get the similar performance. 

Approximately 17 contracts are needed @$0.95 = $1615, after period 1, it was down to $680 and back to $1343, losing $935 in period 1 and $272 in combined period.

For the FAZ contact, during period 1 it lost $8.50 from $12.50 to $4, in the combined period it lost $480.

It looks like FAZ lost less when it in opposite trend and gain less when it reverses.  However the main reason was that the strike price of 35 was $10 deeper in the money than the closest strike price call option.

Bid/Ask Spread:  FAZ Apr call 35 has current spread of $0.20 while XLF Apr put 8 has current spread of $0.05, if we purchase 17 of these, the total lost on spread will be $85.  Plus $16 higher in commission eacy trip.

Financial

Financial Indicator

Indicators

Movement has been updated with EoD data:

I have queued some FAZ Apr Call 40 and JPM Apr Put 24

Newly Created Indicators for XLF

I have created a few indicators, using straight forward formulas, hope one day readers will find these useful...

Update

Today my SRS & my FAZ from profitable to be come losses, fortunately my DXO is hedging against it and I suffer a minor loss.  If I set my hard stop loss earlier I would have broken even.  XLF has ran up rather quickly and already reached its 50% retracement from the top of wave 3 of 5.  It is also at the low point of wave 1 of 5.

Opened

Bought FAZ, SRS, DXO today where DXO is a hedge.

Financials

I have been follow financials lately since it has its own defined trend and it tends to lead the overall market.  Today we wouldn't want to be holding FAZ in our portofolios as it plunged around 40% today.  Although many are loading up the FAZ but I still think it can go down a little more.  It's currently around $60 a piece.

I was actually anticipating this huge sell off in FAZ sparked by this rally.  Below the blue oval indicates where I bought in FAZ put 80, and the purple is where I gave up when it lost half of its value.  However if I held on to it until today, I would have gotten a gain instead.

Let's review what went wrong, XLF is making lower lows each day and I kept the bleeding going until I gave up.  Notice if price is making daily lows everyday, I would be able to set a safe stop-loss point.  The desired locations are the blue arrows, with stop being previous low.

I personally think the market can head higher these few days so I am waiting for a lower entry on FAZ.

Practice Account

This is a recent screen shot of my practice trading account, some of you can probably tell which site it is from ... not bad performance eh?

New low on XLE, XLV continues to break down

My only open position is shorting Canadian banking sector via HFD.TO, currently up 10% from Friday's close.

Health care sector all of a sudden breaking down completely as Obama announced new health plan.

Energy made a new low today, interesting to see other sectors coming down w/ the financials.  Crude was coming down from temporarily overbought territory

Financials

One we hit the daily 2)EMA, we will prepare for another downturn.

Financials had a nice run today, I am waiting to short it ... I was about to get FAZ puts but was too slow, o well.

Positions

All of my longs were stopped out today, looks like the techs are going down along w/ others.

My longs held up at the near support

However I have exit my position in EWZ as the chart seems to be the most broken of the 5 and I don't want that much risk going into the weekend.

Long's

These are my current "Long's" with stops ...

Financials

I want to show a very interesting relationship, the FAZ, is the triple inverse of the financial index $DJFN, for simplicity let me use the XLF, ETF that tracks the $SPF instead.

We see that in this period of 3 months, XLF had 4 significant tops.  The 3rd top is much lower than the previous two, however the FAZ bottoms are very close to one another.  And it seems to be quite risky to enter it once it is above $40...but gain is substantial if you are on the right side

Financials

EURUSD movement

The left side is the 15-min chart for the Forex pair EURUSD, the right side is the corresponding 60-min chart.  As we see the right side chart is for trend and the left side chart gives us opportunities to enter the trend on pullbacks.

Crude down big time

Crude Oil fund USO down over 8% today, my position in DXO was stopped out at the no-loss price ... I guess Obama has been promoting alternative energy so even when Energy is up while crude is down big time.

Sector Trends:

Material =

Energy +

Financials =

Industrial +

C. Staples +

Utilities +

Health Care +

C. Discretionary =

Dollar -

Agriculture -

Biotech +

Real Estate +

Crude -

Gold +

Bearish Leading Sectors

Financials, Industrial, Consumer Discretionary

Bullish Leading Sectors

Energy including crude, Agriculture, Utilities

Triple Leveraged Bearish Financial

A huge down day on this while the XLF was up by a fraction of this.  How can this deleveraging be avoided?

Financials

As I had some 3X leveraged short on the financials, but sold all on last last Friday, either wise would made a fortune...

Trades & Sector Leaders

Today I have entered several new bullish positions, on China, Health Care Sector, Biotech.

Market leaders are commodities, biotech & health care.

Market laggers are industrial & financials.

TQ Index

Jan 16th, 2009 EOD value is 0.524

TQ Index

EOD value for Jan 15th is 0.403

Energy Bull Trap

I mentioned that I have entered a small position in Energy and Health care on the 13th, I have exited both positions on 14th due to reversal.  Let's review if we could have prevent the trap.

We see that although the 15min charts showed bullishness on the 13th, however in the longer term chart, the 60min ones, it is actually still showing bearishness.

Sectors Leading the Markets Up:  Energy, Health Care, Utilities

Sectors Leading the Markets Down:  Financials, Consumer Staples, Industrials, Real Estate