Market Analysis – Page 5 – Bobby's Trade Journal

Market Analysis – Oct 27th

So the last week was pretty red. It was a brutal week for securities. However, many option traders made out good money. Buying puts was a profitable tade strategy last week. Additionally, a more risky move would have been to write calls. Covered calls would be less risky while the naked would have been very risky. Looking back tho, it is easier to say that any call writing would have been profitable.

So that means after a lot of red days, there’s bound to be some slight rallies and green days. Many people project that Monday would be green. I was not expecting Monday (today) to be green. I was anticipating that Tuesday (tomorrow) will be green. Since today has closed red, that leave the rest of this week to show what the markets will do. As logged in my journal earlier, I’m all in on the MSFT Nov 27 calls at an average of .44. Currently, it is trading at .05. Today’s range was .05-.13. This trade is not doing well. It is down 88%. The only reason to hold now is to hope for the best and hope that before Nov 22 it will rise and profitable. If not, then depending on market strength it might still be ok, to get out at 40-50% loss with the lesson learnt and memorized. Going in to live trading, one of my rules was to never put all the money on one trade. However, the real life is very different. The lure of averaging down and making a quick buck is so strong that while watching myself break my rules I couldn’t stop it.

Now, the pressure is on to never repeat that same mistake again. However, I must first close this trade. I have till Nov second week to decide whether I”ll be getting out with profit, with partial, or with complete capital loss.

Best of Times, Worst of Times

DOW Support, Oct 22nd, 2008

This is a case of it was the worst of times and it was the best of times. DOW seems to be at a major support level. Since this month is really the only month in the last year where DOW has been this low, one month is ok time frame to look for support. If this holds, this should go up a little. DOW might continue it’s slow decline but it might not happen all of a sudden such as it did recently. On the other hand, when it break thrus this support, it might really fall.

MACD and RSI seem to still be low and headed even lower. So this might present a rally some mid tomorrow. After hours, most stocks are up. MSFT is up 10%. Goog is up nicely. YHOO is up a little. T is up a little. Hopefully, DOW will bounce off of the support.

Intraday Analysis – Grim Outlook

Market Analysis - Oct. 22, 2008 - Intraday

Current market analysis shows that despite the grim outlook, the markets might rally up before EOD. This is based on the indexes forming wedges. Interestingly, the Nasdaq composite index is much higher, though following the same trend, as the other two indexes/indices.

Update: The grim part of the outlook was correct. The bottom was broken on those wedges and the DOW closed a good 400 some points down.

Day End Market Analysis

Today was a wierd day for the markets. In the morning the market headed up but then reversed directions late morning. This could be consistent with the normal market trend where it starts off in one direction and then late morning turns. However, it reversed again and headed up towards afternoon and formed a second top. Toward close, it just headed down like crazy. So it would appear to have just charted a double top. Hopefully, that fall won’t be that hard.

Normal conditions have been indicating that there might be small rallies in the market and then a longer term decline. However, if this starts the decline, that will be most inopportune time to have averaged downt to .50 on 20 Nov 27 MSFT calls.

Time will tell. There is a GTC order for limit of .70 set in my account ready to go and close out the position. However, it MSFT doesn’t hig 24.50 or during the day, the target of .70 might not be reached.

Form the morning’s close of yesterday position, the profit was $50.00. So the total account value before opening new trades was ~ $1187.00.

New trades are for 20 contracts (over exposed here) and should have been only for 10. But this is the emotional thing that got in the picture and said, it’s probably gonna fluctuate tomorrow and it’s better to buy more and average down and increase position size. Ideally, the first trade should not have been opened. The first position was at a price of .53 but without looking at the overall market direction or considering any technical indicators. The second position seems to be a little on the ok side. If the markets don’t fall thru the bottom of the screen tomorrow, the trade should be fine.