This week has been a roller-coaster of mistakes and bad timing for me. Starting last week, I get into five positions in varying industries, which isn't bad. AXP, CVX, FPL, WFC, and V. The problem with the positions I took was the directions I took and when I got into them.
With AXP, I got into it as a Put using the reasoning that the secondary indicators on the daily and weekly charts were overbought and had turned down on the daily. What I failed to do was read the volume. It had been better than average for two straight days. I should of stayed out.
With CVX, I also got into it as a Put using the same reasoning as AXP. The next red flag should have been that it had just broken above the resistance trend line of the inclining channel it had been in. Before getting into it, I should have waited for it to drop back below it. Realizing this mistake, 3 days later I swap my Put for a Call. Unfortunately, on that day it bounced down from a horizontal price resistance level of about $78.50 ending near the inclining trend line and has since then been riding along the inclining trend line it had just broken above. Now I have a Call losing value due to time decay as it continues to get squeezed by converging trend lines. I am patiently waiting to see which one it breaks out from before recouping what I have left. The good news is that I have until January to see what happens and the lines seem to converge after Thanksgiving.
With FPL, I got into it as a Call but this decision was passed on the secondary indicators on the daily and weekly charts being oversold. Without any proof from price movement or volume I jump in. It has since then continued to slide in price and I continue to hold it with apparent foolish hope that it will finally bounce since it is in the range of it's 52 week low and it tends to rally strong during the winter.
With WFC, I got into it as a Put. This was actually the right decision as it is was in a down trend at the time, the secondary indicators on both the daily and weekly charts indicated overbought and declining, and the strongest volume day in the past week was negative. The problem was that two days later I see a bullish candlestick on a very up day, and the MACD on the daily chart reacts to it. I assume that I got it at the bottom and that it is reversing already. I totally failed to acknowledge the lack of volume. To make matters worse, instead of waiting for confirmation, I swap my Put for a Call instead of just cashing out. If I had just waited, I would be up $69. However, I have been losing value on my Call because it is near a support level it has bounced off of three times before, and since I have until January on it, I am hoping it will bounce off of there and will travel back up to or past $30.
With V, I also got into it as a Put for similar reasons for getting into AXP and CVX. The problem here was that I failed to consider it's earnings report came out the same day of the trade. If I had remembered to do that, I would have known to wait and see. Now I have been stopped out of that position as it hit and exceeded it's most recent high. Of all my stocks to swap Puts for calls, I don't with this one. And now, it is up $2.50. I would have been up 50-100% just this week alone with $80 and $85 being the next resistance levels. Just plain stupid on my part.
In addition to the swaps of the above trading activity, I also got into SLV and USO as Calls. My reasoning being that SLV had just bounced off of a support level it bounced off of before, and USO had just been on an up trend and pulled back to a bounced off of a resistance level it had just broken through. ("Old resistance becomes new support.") The good news is that SLV has done well by me. It has rallied up over a dollar on strong volume and is holding there on weak volume. The bad news is that USO has been bouncing off of it's support level ever since. In addition it has dropped below an inclining trend line today. This action was on slightly stronger than average volume and leads me to believe that next week it will open and close below the horizontal support level I just mentioned. If it does so, I will be closing my position on it. If it doesn't, I will adjust the inclining trend line.
Things to remember:
- Pay attention to price movement AND volume more than secondary indicators.
- Check for earnings reports.
- Trade only after confirmation. (More than one period against the trend.)
Currently I am watching CEPH, GNW, MU, PCS, and S. These stocks were reported to be fundamentally ready to rally. I am not so certain about that after my experience with FPL. As of today, only CEPH and MU have broken their apparent downward trends with confirmation. However, CEPH has a resistance level at $60 that isn't too far away and another at $62.50 I will probably wait do see if it breaks out over $60 before getting in since it doesn't have earnings to report until February 2010. MU is currently short of it's next resistance level of $7.50. I want to see another confirmation day before I get in. Then from there it is $9. The uneasy thing is that it has earnings to report after the December 2009 options expiration. I should probably be out of it by then, so I don't really have a lot of time. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page. http://investorsopinion.blogspot.com
Posts
No comments:
Post a Comment