Friday, February 25, 2011

Best month ever!

I haven't had much time to blog lately, mostly because I've been busy at work, and have also been shoping for another investment property. So the latter it now out of the way, I have investment property #4, and hopefully it will take care of itself and give me a nice little return at the same time!

I just wanted to post a little update on my trading recently: February started off as a great month, with gains in the indices practically every day! In the third week of Feb, I started adding a few short positions, mostly in some parabolic stocks, and when the big drop in the market happened on Feb 22nd, I was well positioned, so I actually made money on that day! Some of my shorts were TA, KV/A, SHZ and TTHI. I also got short the FAZ yesterday, Feb 24th, after 3 down days in a row in the market. I knew we were going to bounce, at least a little. Another trade that I have been building into, is a short in the VXX. The decay on this ETF is spectacular, to the tune of 40-70% per year, so if I hold it short forever, I can make 40-70% per year! Anyway, I added nearly 40% of my portfolio to this short position, and I was underwater for a while, but it is now starting to pay off. My first target is $27, and here's the daily chart:

I also added a position in AAPL yesterday, as it tested the 50day MA for the third time. I liked the setup since my stop would have been very close, and it would have been easy to know I was wrong. A solid breakdown under the 50d and I was out. I got into this position via the sale of 1 March 340 Put. I liked this better than a call purchase because the volatility premium in the option market was much higher than normal.

I still have a few positions open, but here are my returns for the year so far:


Friday, February 4, 2011

Playing earnings gaps in after-hours and pre-market Part 3

I just wanted to follow-up on my previous 2 posts, because a bunch of people have asked me questions about this little strategy! Well, it's not really a strategy per se, but more like a shot in the dark and see if you hit your traget! It doesn't always work out, so here's an example where I didn't get filled at my desired price. But that's ok, sometimes you get lucky, sometimes you don't! I just don't want to get filled at a higher price where the risk/reward was not as good, and then you end up chasing the stock. The important thing is to that you identify your price targets accurately, where the risk/reward ratio is heavily on your side!

So last night I watched JDSU trade in AH, and notice a nice little area of support around 20 to 20.25, so I set an order to buy some shares at ~20.11. I knew that 21.5 would be an area of resistance, so I didn't want to buy higher than 20.5, otherwise my r/r would not have been good. I never got filled unfortunately, but that's ok, because I still played JDSU after the open!

On the other hand, I did get lucky with YRCW in AH though. I had put an order to buy shares at 4.04, which was 1 penny above the low of day from 2 days ago. So I got filled this morning ~8am, and the stock rallied straight up afterwards! I scaled out along the way up, where the second arrow is, but I'm still holding some shares as I write this post.

Thursday, February 3, 2011

Playing earnings gaps in after-hours and pre-market Part 2

Ok, so someone in Charts Gone Wild chatroom pointed me to the web-based platform from Think or Swim for AH and pre-market charts... It turns out I already had setup a paper trading account with them, so now I can get real-time charts in AH and pre-market, even when I'm at work (and for free, which is even better)! So anyway, here's the BIDU AH chart that I meant to post a couple of days ago, with my entries and exits. It's important to note that you won't always get filled at the price you set, so don't be disappointed if you didn't get filled. There's no point in chasing a stock in AH, just move on and find another earnings trade!

So for tonight, I set an order to buy JSDU in AH at 20.11, where I saw some support. And I also set an order to short LVS at 47.97, where there was some resistance. I may not get filled, but if I do, I will be long/short these stocks at a price that gives me a good R/R.

Otherwise, I took a few good trades in CELL, GMCR, TA and SGI. Here's a quick view of the trade that I took this morning in SGI. The stock had gapped up significantly on good earning:

And I had one terrible loss in BORN today, as I got filled ~$0.60 lower than my stop:

Tuesday, February 1, 2011

Playing earnings gaps in after-hours and pre-market Part 1

It's been a while since my last post, so I thought I'd go over a new strategy that I have been using successfully lately. It involves playing stocks that report earning after the market close. This is a little more risky than trading during market hours, because the bid/ask spread is usually quite wide, and you can have some really bad fills if you're not careful. So you should always use limit orders in AH!

Anyway, so the strategy is not very complicated, but basically I just watch the bids after a company reports earnings, and look for key support levels, where the stock may trade only a few hundred shares, but jump right back up. The stock will often test this significant level twice during the after-hours period (4pm-8pm). So if you're fast, you can grab it there the second time around. If you're like me and you work during the day, then a good strategy is to place a GTC order to get filled around that support level. Then you go to bed, and surprisingly the next morning you find out you've been filled at a great price, and the stock is already well above your cost at the open!

Here's an example for BIDU that I traded today, from information that I got yesterday in AH. I watch the quotes go by on, and have to refresh every few minutes or so, but if you can get AH charts, that would be much better! Once I figured out that BIDU had a good support level ~113.8 to ~114.6 and offers were taken up there very quickly, I placed a GTC order to buy at 114.10. I got filled at 1:00am according to my broker, while I slept, and when I got to my computer this morning, shares of BIDU were already at 117.50.

I'll try to post a chart of the AH price action when I get home tonight! But in the meantime, here's what I'm talking about when I say I follow the quotes on

I used the same strategy to play AMZN and SNDK last week. So I'm adding this one to my trading plan!