Market Analysis – Page 4 – Bobby's Trade Journal

Market Analysis – Nov. 6th

Well, lot of money was made by someone! Big moves always mean someone is making money. When there is someone selling, there’s always someone buying. Not necessarily an individual investor. It might be a fund that buy at a lower since they’ll hold for longer term and might be buying dividend paying stocks. Might also be that the market makers or specialists on exchange floor are buying. But when the market makers and the specialists buy, they will make sure they get a good price. They provide liquidity. Also probably volatility.

Anyway, the MSFT calls are at this point 100% guaranteed to not be profitable. However, what is the minimal loss that I can get out with. I have almost wiped my original investment. That was one of the rules to not lose the original capital. Now, I will have to attempt to guage and estimate a correct price that is possible and attempt exit around that. I will most probably also have to fund the account again.

Never, go all in!

And then there’s the MSFT.

Aside, from the overall market direction, the selling pressure on MSFT seems to be cooling off. So hopefully, it will make a move up in the near future. I also have some MSFT share in a different account. Those are just for holding.

P.S. This post is made on Nov. 7th morning but backdated for continuity.

Yahoo Says Microsoft Should Buy It

So Yahoo says that Microsoft should buy it? Why? They were too good for the original 33/share price. Then they would do anything to avoid being bought over by the “bad” Microsoft and went begging to Google. Google also tried to unnecessarily “save” Yahoo from Microsoft. For what perverse purpose? What is the big problem? Yahoo acquires news technologies and their userbase for the purpose of making money. Google acquires new technologies (some really just a teen social phenomenon) and their userbase for the purpose of making money. So what is so bad here about Microsoft buying Yahoo and it’s userbase for the purpose of making money?

The article that reports the new “request for offer” is at: http://www.bizjournals.com/sanjose/stories/2008/11/03/daily57.html

This might be reflecting the new Microsoft price of 21.69 currently. Which is really bad for the calls I’m holding.

Yesterday MSFT fell below MA 20 and gapped down today. Also continues to go down today. This may be a simple following the market thing or another expectation from shareholders of MSFT that they’ll do something crazy like buy Yahoo.

Personally, I think that MSFT will benefit from the added userbase of Yahoo and if MSFT revamps the really big and overly flash based ads on Yahoo that take 50% of the screen, then it will be a good money maker for MSFT. Even as is, it might be a good money maker. But it has a slightly cheesy look. But on the other hand, if paying a premium and having the share price nosedive is gonna be a longer term thing, then I don’t want MSFT to buy and get involved in rebuilding a search engine company that long since stopped being a search engine and has become more of a web portal. Not insulting Yahoo search capabilities, but just saying that even people who use Yahoo as their main search engine, use the word “google” to mean search. When they search on Yahoo, they say they just “googled” it!

Market Analysis – Nov 5h.

So the post election market was a down day. It’s probably not due to the election result or anything. Might be that the pre-election gains were on an optimistic note and this was the market giving those back. Still holding above the 9K mark. Only tomorrow will tell which way the focus is.

Also MSFT continued with it’s dismal performance. So those options are worth even less.

Market Analysis – Nov 4th.

First, of all there’s a lot of stuff that I’ve been tracking. The market charts (Indices), MSFT chart and now a watchlist. It will get a little confusing discussing previous day’s watchlists and posting new ones and discussing charts and all. So hopefully, I can have a clear format and keep it simple.

The markets did well today. There was something of a pre-election downturn but in the end, I guess most people decided it was still time to buy.

On the other hand, let’s see how MSFT did. It seems to have done well for the day. RSI is already making higher lows. MACD seems to be making level lows and CMF is lessening selloff pressure. Hopefully, it will allow the stock to rise higher and cause the option premiums to gain value. Not holding much hope of getting higher. But it is still nice to know that technicals point to a climb higher. However, on the fundamental side, the election could swing the market either way tomorrow. Most people says it should go higher on election rally. Tomorrow will solve that mystery.

Market Analysis – Nov 3rd.

Seems it stayed quite alright until 1:00pm – 1:30pm. After that more of a selloff. Possible pre-election feelings? It sounds as if both parties will possibly have a positive effect on the market. Not like either has a really good plan. So it has to be either a downturn on either due to lack of a plan or that people slowly start getting back in the market and letting the winner take office and move on with running the office. Hopefully, it will be the latter. Otherwise, it will just whipsaw until next year and go nowhere as people wrestle with different emotions.

Keep in mind that as options traders, we don’t really care which way the market moves. Just that it moves. And possibly more important than that is that we possible the trade on the right side of the market.

Which reminds me that my next post will discuss my current portfolio.

Market Analysis – Oct 31st.

Good news on Friday. On the MSFT front, still no luck.

MSFT - Oct. 31st. I have also found a good resource to determine the options values and the assocaited greeks for any given time period. It is optionseducation.com.

Market Analysis – Oct 30th.

The market closed green today. Quite a fall in the first 3 hours. But then a steady rise until the very end. Last few days, the market does rally in the second half of the day but then does a sharp decline in the last 1 hour. Yesterday’s sharp decline didn’t turn around. Today’s decline turned around just fine, without any issues. This is the second close above the 9K mark in the last few days. Doesn’t mean much in and of itself. It will have to close above 9K mark consistently for it to be a good support point. For now it seems to be fine.

Most securities that I’ve been watching closed green today. Except, MSFT. Which is the one I hold some calls on. If the market continues, the uptrend, MSFT should rise as well. Without issue. However, hypothetically, if the markets were to decline, then those calls wouldn’t be worth much. Not betting on those to fall. So will continue to hold for now.

Let’s see the MSFT chart. It is still showing the CMF is indicating some sell off pressure.

MSFT - Oct. 30th. Although, it is pixel-splitting, the MACD line seems to be above the trigger line. There seems to be a little red dot visible below the blue line. But that’s not as much as technical thing as wishful. Lastly, the DOW did well. DOW - Oct. 30th. MACD shows some divergence.

Late Selloff Reason

So Trader Mike has a post about the late selloff being due to a GE report released late in the day. This report, or rather the report of the report, can be read here.

Hopefully, the rally upward continues slowly tomorrow. While the DOW closed red, the NASDAQ closed green which is good. S&P was slightly red. So hopefully, this is going to be a sustainable upward trend.

I have seen a lot of $1,000 – $100,000 or even $1000 to $1,000,000 type of posts on message boards and those always seem to be good for some hope but almost never seem to get anywhere. However, JROCK at HSM is having good luck with his experiment of $2,000 – $100,000. While this kind of posts have been good for daydreaming, they rarely teach the newbies anything worthwhile in terms of standing the newbies on their own feet. That is why my current goal is to simply attempt to do a $1,000 – $2,000. If that is possible then it’s a 100% ROI and more can be targetted. Currently, I’m 77% down. Hopefully, the markets will maintain the momentum and the options that I’m holding will be worth more.

Market Analysis – Oct 29th. (Mostly positive)

Overall market sentiment seemed to be positive with caution. Market seemed to wait for the FED announcement for the rate cut. After the announcement, it took a deep dive and then headed back up. Stayed positive except for the last 30 minutes where it nosedived. So what happened? I think it’s the basic people-being-cautious thing. They’re afraid to call a bottom too soon but on the other hand they are tired of seeing red and are willing to buy at prices they might think are good.

Looking at the overall sentiment, it would seem that the close today wasn’t a big negative. It might continue the slight upward momentum tomorrow. If it does, that will help restore investor confidence. It raelly is the investor confidence that drives the market up and not so much the trader confidence. Many traders are perfectly happy trading Put options and shorting stocks as long as there is market movement. But the investors that invest and buy big bundles of shiny shares with their money are the main market confidence source. That is my opinion.

Let’s see the DOW here.

: DOW – Oct. 29th.

MACD seems to be still showing the buy signal. However, the MACD is a lagging indicator and so we must be careful of using that alone. RSI is above oversold and was headed up until today where it seems to be down. However, this is mostly going to be reflecting the downturn on the last candle. The volume seems to be lower than yesterday. In the previous sharp day long selloff the volume seems to be higher than on the green day and seemed to rise. On this bar, the volume is less than yesterdays. So seems as if the selling pressure is slowly down, even if temporarily.

It’s below it’s MA(50) and MA(200) so technically still in a downtrend. Well, the MAs and the actual candles and chart going down shows the downtrend. Is it bottoming off? No one knows and now has been able to successully determine a formula for finding that bottoms and highs, but this might still be a safe level to buy if the momentum upward continues.

Market Analysis – Oct 28th (A Rally!)

Interesting day! A 889 point rally. Dow was nicely up. So all you call holder who are profitting did good. Congratulations. My own MSFT options were bought at a high price at the time of the last rally small rally. The trade was opened on the 21st. However, the price kept going down and after many red days, now, the trade is down 88%. Very stupid move. Very careless. Here’s is how it happened.

I bought 10 at .53. It went down. So I bought 10 more and averaged at .50. Thinking that when 20 options are sold at .70 it will be better profit. This was done out of desperation. Not by looking at the charts. Never looked for confirmation on whether the market is headed up or whether the security is headed up. Then it went further down. Bought 6 more and averaged at .45. Then it went down and bought another call at averaged all at .44. So in total 27 Nov 27 calls. Current value is .10. At one point it was .02. Luckily, I never looked at it when it was lower than .05, I think. Maybe .04. Now, I’m looking at this and realizing that it will need multiple green days before the option price starts moving up. The option price is derived from the security. That’s why options are derivatives. However, it has many reasons for staying. If no one believes the MSFT will go up enough, then what’s the point in buying the option. So it doesn’t increase much. If it has the possibility of going at least close to 27, then the price will increase. Now, I’m praying that I will be able to get out of the trade profitable. These expire on Nov 22nd. Current gameplan is to pray and hold.

This mistake of going all in and averaging down has been eye-opening. You can’t trade without identifying your risk/reward ratios and without having rules that you will adhere to. Will this work? In the long run? I don’t know. It depend on my ability to follow the rules that are carefully made and to make good trades. God willing, I will be successful. My current goal is to go from $1,000 – $2,000. So far I am successfully somewhere around $200.00 in account value. So very much in the wrong direction.

Let’s see below the DOW chart. Notice the first rally was with the pink circle. RSI showed oversold and MACD showed no buy signal. Today’s rally showed RSI heading up but well out of oversold territory. The MACD was sort of sitting around. Now it’s shows the buy signal. These two signals alone don’t say anything matching. So further green days will show whether this down trend is temporarily gone or really slowing down to start trend reversing action.