Jeff Kohler's Trading BlogJeff Kohler's Trading BlogAddicted to options? Me too! So is my community. Read my daily commentary about market action, trading strategies, and follow real time examples of how to profit in the market. Articles
Industry Group Spotlight: Gold Miners
2008-02-06 17:06:00 Yesterdays "beat down" was a good opportunity, if you are a bull, or a buyer of gold mining stocks. Why? Well, yesterday obviously offered cheaper prices in gold mining stocks, and I guess you could say stocks in general. However, if you didn't buy these stocks into their weakness yesterday, you are going to be forced to buy them into strength today. Well, I guess you are not forced to buy anything... but you are going to be held accountable if you are not properly diversified, and last time I checked, gold mining stocks were the easiest uptrend to make money in right now.If you do not have a watchlist of ETFs that act as a barometer of the overall market, get one. And when you do, make sure you add GLD to it. It will be a great way to measure the performance of gold and in some circumstances; gold mining stocks.Like I said, I think you ought to use ETFs like this as a way to track the market, and at a glanc... More About: Industry , Gold , Spotlight , Group , Miners
Industry Group Spotlight: Coal
2008-02-06 16:03:00 Yesterdays "beat down" was a good opportunity, if you are a bull, or a buyer of coal stocks. Why? Well, yesterday obviously offered cheaper prices in coal stocks, and I guess you could say stocks in general. However, if you didn't buy these stocks into their weakness yesterday, you are going to be forced to buy them into strength today. Well, I guess you are not forced to buy anything... but you are going to be held accountable if you are not properly diversified, and last time I checked, coal stocks were the easiest uptrend to make money in right now.If you do not have a watchlist of ETFs that act as a barometer of the overall market, get one. And when you do, make sure you add KOL to it. It will be a great way to measure the performance of coal stocks.KOL- Still a very young ETF...so don't trade it yet. Please.Like I said, I think you ought to use ETFs like this as a way to track the market, and at a glance determine which areas of the market are pe... More About: Industry , Coal , Spotlight , Group
Something to Think About Over the Weekend
2008-02-01 20:06:00 Here are a couple of images I want to share dating back 10 years ago. Aside from the Fed's recent easing campaign, which started in August of 2007, the last time the Fed had cut rates like this was back in January of 2000 and lasted until June of 2003. To give you an idea of how the market reacted, here is a play by play.I'll start with a table that shows the start of the reductions in the Discount Rate and Fed Funds Rate; starting back in Jan 2000, which lasted until June of 2003...Let's compare against the S&P 500.Before Jan 2000 Rate Cuts...After...We know it's had been an unbelievable bull market from 2003 until 2007; so I won't bother posting a chart. It is important to know that interest rates bottomed at 2.00% in the discount rate, and 1.00% in the Fed Funds rate, which saw their last incremental decrease in June of 2003. It was in June of 2004 that the Fed started to raise rates. Over the next three years, the primary Discount Rate peaked at 6.25% and the Fed F... More About: Weekend
Just a Few Ideas...
2008-01-31 20:45:00 So what if you are bullish on the market? You've got to be feeling pretty good about this rally, right? Well, in efforts of keeping a steady balance between calls and puts, here are a few ideas I thought I would share, seeing that most charts I have shared have been of the ol' bearish sentiment....I still love online brokers, specifically IBKR; especially on this breakout.CMO- low risk entry on a cheap stock. FXE- On the cusp of a breakout.SDS- Or any other proshares short or ultra short for that matterWLT- Coal still trading strongXNPT- Great bounce today More About: Ideas
Volatility Contraction
2008-01-31 18:30:00 I've been watching the VIX closely over the last few weeks and as far as market volatility is concerned, in the short term, I think the worst is behind us. The VIX has turned down from a very strong resistance level (31) for the third time, and I wouldn't be surprised to see a little stabilization in both the VIX and the indices. Left Scale: S&P 500 / Right Scale: VIX Typically when you see contrarian indicators diverge like this, it is likely that the revert to their mean. If volatility were to contract, or at least consolidate, this will offer option traders a great window of opportunity to sell premium ahead of the expiration of February paper. While I am hearing a lot of traders comment about how tough it is to capture directional movements in stocks right now, why not capitalize on an expected period of low volatility and the passage of time? If you have looked at implied volatility on any series of options recently, it is tough to find these volatilities not trading at...
HWAY, Flags, Breakouts & Volume
2008-01-30 18:57:00 On last weeks watchlist, I highlighted HWAY as an emerging flag pattern. Today the stocks gaps down as much as 20% on bad news regarding a competitor. Seeing that a few people were in this trade, it might be fitting to take a closer look at trading breakouts.A "breakout" trade is one in which you wait for a stock price to trade/close outside a support or resistance area. Breakout trading is a popular strategy, and if you want to learn more, visit my post titled The Anatomy of Trading Breakouts. With HWAY we were dealing with a price pattern, which happens to be confirmed once you see a breakout. It was a flag pattern to be specific, which is a narrow channel of price action which is preceded by a sharp move in the stock price. The reason it gets its name is because it is supposed to resemble the look of a flag.HWAY- Look Like a Flag To You?When trading flag patterns, one is supposed to let the pattern continue to channel until a sharp move in ... More About: Volume
Words Ahead of the Fed
2008-01-30 16:51:00 There is absolutely nothing going on this morning. What is most interesting is that the majority of indices/stocks are at beautiful action points. If the market catches a move to the downside, there are hundreds of beautiful set-ups to take down. Look for trades that are trading at former support levels, similar to my examples below...APD- A young downtrend, as discussed yesterday.DRYS- Right at an actionable point...ESRX- A nice re-test of a head & shoulders necklineHANS- Looking for a reason to die...sniff...sniff....Like I said, most stocks look like these examples. Get yourself a good list and keep them near your trading terminal.With the Fed decision coming up later today, be prepared to protect your account. I have had a suspicious feeling all week that we get a .25 bp cut...but I haven't bet on that yet. If that does happen, you might want to prepare yourself to take profits on most of your bullish positions, including GLD; it might see a few points to the dowside (max).... More About: Words , Ahead
When All Else Fails...Fresh Tactics
2008-01-29 17:42:00 It appears as though most of the "easy money" stocks and industry groups are becoming a little more difficult to trade, according to "financial media". For example, shorting the homebuilders, buying tech stocks, shorting the banks, etc not as easy as it used to be. Everyday I stumble across someone that talks about buying banking stocks at these lows, a possible reversal in homebuilders, buying beaten down retails stocks because they are early cycle stocks; whatever. It seems that the marketplace is genuinely confused as to whether or not these groups are seeing bottoms yet. The reason I make these claims is based on the newspapers, magazine covers, evening news, CNBC, etc and volatility that is being generated on these recent rallies...$BKX...the ATR is making new relative highsQQQQ- Same thing with tech stocksThe same scenario applies to many of the groups I have written about/traded over the last several months. A lot of the stocks that have provided easy... More About: Tactics , Fresh
Easy Money?
2008-01-28 20:38:00 I ought to mention again, that my sentiment is bearish towards the market. Having said that the indices are moving higher today, and likely tomorrow ahead of the Fed meeting later this week. Take a look at this chart of the S&P to determine if this might be anything significant...60 Day Chart; S&P 500. Notice a higher low off fib support. When was the last time this happened?The reason the market is moving higher is the speculation of a .50 basis point rate cut of interest rates. I quote .50 basis points according to Fed Fund Futures. I grabbed some quotes off the Board of Trade website to illustrate my point...However...I am not as optimistic as the market is. I don't think that a .50 point cut is a foregone conclusion. Based on how well the market has held up since the emergency easing campaign last week...I don't think it is necessary. Regardless, I would love to hear the opinion of the masses. On the left hand column of my site is a poll; take it. I want to see what th... More About: Money , Easy
A Magical Monday in the Making
2008-01-28 18:18:00 In response to last Friday's GLD exercise, the joke is on you. I spent the weekend and the early morning cornering the Gold market to ensure that all my readers would profit from such a bold exercise. You are welcome. Now the e-mails are piling up asking me to predict sporting event winners, weather patterns, and asking me if I would be willing to do magic shows for 8 year old birthday parties.In all seriousness, GLD gapped higher and started running this morning as discussed. Getting into the trade at these levels changes the value of the set-up for the worse, in my opinion...so don't ask if I would buy it today. I am still very bullish on the metal for the short term, but buying here at $91.50 gives me an extra $1.50 of risk to the downside (always be willing to allow a trade to go back to support, which is at $90). I would rather wait for a dip, or a down day to buy.For all the proud owners of GLD...as prices move higher, look to tighten up stops along ... More About: Monday
GLD; In My Opinion
2008-01-25 23:51:00 I saw the GLD trade as a great opportunity to talk trade strategy. I appreciate all the various opinions that chimed in. As you can see, there are hardly ever going to be two people that see the same trade. After all, this is why we have a market. There were a few people who would have sold me (short) shares of GLD today, others who would wait, and others in there buying it up with me.Personally, I liked the idea of buying GLD here. I liked the idea so much, that I did just that.There are plenty of reasons why, but setting aside the economic reasons why GLD should go higher, let's explain buying here as a strategy. Even if GLD moves lower next week, I like the set-up. Even if I lose money on this specific trade, I still consider it a good trade. Since we are dealing with stock, not an option, this will be a fairly easy explanation, and can be applied to similar stocks/options that trade in situations like this.Here are a few charts to explain what I see...Starting wi... More About: Opinion
Buy, Sell or Double Down?
2008-01-25 20:01:00 I'm watching the price action in GLD, and write this response to the few e-mails that have found me this morning asking things like..."Should I add to my position on this breakout?""It looks like GLD was going to breakout, but is trading lower; should I sell?""I don't own any, should I buy?""Why doesn't GLD have options?""Is it ok to buy a miner instead?""Are you still in GLD? Where are you getting out?"I am going to let everyone participate in the festivities of helping me answer the million dollar question about GLD.Here is a weekly chart that provides a glimpse off the bigger picture...And of course a daily chart showing the most recent trend and today's price action...Last, but not least, a intra-day chart (60d) showing the details of this recent run to it's prior high.There are a couple different ways to look at this, but how about risk first. This should lead to a good discussion on trade strategy and concepts th... More About: Double , Sell
Setting Up Nicely...
2008-01-25 17:26:00 So this week concludes at nearly the same levels we left of at last week. What interests me the most is that the overwhelming majority of stocks look like this...I'm not showcasing the XLF for any particular reason other than I would like to see this fall the fastest. Like I said, most stocks show the exact same price action, and fall within similar trend parameters. How are you going to trade it?What is the next move in this series of patterns?You are probably right...If you heeded my warning and waited patiently through most of this week, everything looks to be setting up nicely heading into next week. However, you have some big economic reports due out next week coupled with the Fed meeting. Don't forget about earnings season going on around us. The market will weigh heavily on which companies are producing profits and which are not. Be advised.You know, this has been an awfully long week for me. I've spent countless hours, late nights and early mornings st...
Cash is Trash
2008-01-24 16:29:00 I must admit, yesterdays price action on the indices proves exactly how disturbing this market is. I used yesterdays tape to get into a few short positions...but I also took a few bullish positions. My position sizes are still very small, and I am diversified to the tune of an overall delta negative account. Keep in mind, I have the biggest cash position I have had in almost two years (summer 06), and my money market rate is embarrassing.I am tired of hearing everyone talk about how the buying of banking stocks is a great deal here. While the cutting of interest rates increases profits for banking stocks, and all the losses and write-downs were well beyond reality, I can't invest in banks...even if they are setting up for a monster quarter. I still bought puts on a few because just like the market, I expect them to test the lows again. I will share the biggest trade I made yesterday...and that was keeping my short positions in the bond insurers AB... More About: Cash , Trash
A Forced "Mid-Day Thought"
2008-01-23 20:35:00 According to my investment bankers, they are preparing to short my blog on this recent rally in traffic, unless I do something more than provide one unfulfilling post a day and dick around in the comments; lacking direction and supervision.I often think about posting dozens of colorful charts to glaze the eyes of my readers, as many other bloggers so often times do..."Check out this chart of the S&P! Through the use of these creatively combined technical indicators, even though hard to detect, will effectively tell you the price of the index!!! 1,300...I think.""WOW! I haven't seen a pattern like this since I last worked with the Option Addict!"Rather than try to create art everyday, I try to focus on actionable content; and more importantly teaching trading strategies. Both of which I will avoid today, specifically on this post.I'm not sure what my intent is here, other than to hammer out something to write that my last few readers will look at, ... More About: Forced , Thought
311- Amber
2008-01-23 17:59:00 Since the intro music was so well received, here is the original. Enjoy. More About: Amber
Don't Get Comfortable
2008-01-22 16:51:00 The Fed has no market sense. Their strike was preemptive, and futile at best.If it were me, I would have let the market die a slow death for a few hours. I would have enjoyed my lunch while trading was halted at the NASDAQ and NYSE. Then nonchalantly, via text messages with my committee, make the decision to lower interest rates. While in my mind knowing that this action was not a permanent answer, I would have provided some temporary relief after allowing the market to digest all unhealthy matters in one bone crushing trading session. In any event, I am looking at this day as a rally; even if we finish 300 points lower.Why, you ask?Because the Dow should have closed down 700 points, and would have had we not tampered with interest rates. Unless the market starts producing amazing earnings, we will make up those points here fairly quickly. In the meantime; we have the most unlikely groups leading the way today: financials and retail. Both of which I plan to short tomorrow.Speak...
Hell on Earth
2008-01-21 17:25:00 Prepare for the worst tomorrow....LONDON (AP) -- European and Asian stock markets plunged Monday following declines on Wall Street last week amid investor pessimism over the U.S. government's stimulus plan to prevent a recession. The U.K. benchmark FTSE-100 dropped 3.9 percent to 5,673.1; France's CAC-40 Index plunged 4.5 percent to 4,861.2, while Germany's slumped 5.35 percent to 6,922.7. In Asia, India's benchmark stock index tumbled 7.4 percent, while Hong Kong's blue-chip Hang Seng index plummeted 5.5 percent to 23,818.86, its biggest percentage drop since the Sept. 11, 2001, terror attacks.As of now, index futures are getting crushed. These prices are pointing towards a drastically lower opening tomorrow, and I hope you are all ready for it. Here are a few quotes as of about noon eastern...Mini Dow- 11586Mini S&P- 1265Mini NASDAQ- 1774Mini Russell- 644If prices continue lower after the open, it is likely trading might be halted. My Armageddon prediction has materi... More About: Earth , Hell
I'm Sorry...Your Host is Unavailable; Day 2
2008-01-18 01:48:00 After plenty of hurdles, and no internet access (besides the "Business Center" in the lobby) I have arrived in the Big Apple. However, because I have more important things to do, and no working internet connection, I won't say much... except that I am pretty glad that the market blew up today.I figured that in order to keep the chatter going for the group tomorrow, I would at least have the courtesy to start a new thread. Take care of the market for me while I am lost in translation.Now if you'll excuse me...I am going to sleep. I have a big meeting tomorrow. More About: Host , Sorry
I'm Sorry...Your Host is Unavailable...
2008-01-17 15:45:00 I have been spending the morning setting stops, and cutting back on many positions. I am running late and don't have the time to sort through my e-mails to try and find a contribution of interest.Sorry .Good news is that I will be in New York later this afternoon, and I will try and provide something of interest this evening. After all, its about a 5 hr plane ride.Stay tuned... More About: Host
Alert!
2008-01-16 23:18:00 It's not like me to make a ridiculous prediction and then evaporate when it doesn't materialize.Sorry.Truth is, I have been scrambling today trying to get some last minute items before I hop on a plane for New York tomorrow. As a result, the market punished me for my lack of focus and confused priorities. More on that this evening.I still intend to talk about todays tape, so keep an eye out for a post later tonight, and one tomorrow evening (I will be traveling in between). In my absence, I am entertaining the idea of a guest blogger appearance tomorrow.Interested? Send me a resume and an article about something relative to recent market conditions. Make a prediction, highlight a trade, or produce something useful that thousands of people would like to read tomorrow. For example, the recent prediction make by a fellow reader in the comments about a reversal in agriculture sounds like something I'd like to read...or another blogger commenting about financials being a good buy righ... More About: Alert
Semi-Armageddon
2008-01-16 01:34:00 Being that the after hours market is printing a 14% loss for Intel, you better believe this is going to send the NASDAQ into a nosedive to test the Feb/Mar lows. The good news is that my puts on the $SOX are going to reap the reward once the 2004 lows of $350 are broken. The only hope for the market tomorrow is a strong CPI report, which seems somewhat unlikely at this point.In any event, look for tech to crumble tomorrow.But I digress...I must be honest that my jaw dropped in Mondays trading. The watchlist highlighted monster moves such as TNH, LNN, MOS, TRA, CF, SYT, BG, DE, POT, RRC, OMG, IBKR to the upside...while still passing out great downside movements in SHLD, NILE and DNB. All in which I am well pleased.However, today I am forced to watch Mondays gains evaporate. I spent a good portion of the morning selling off a few contracts of each position, but it didn't change the fact that my bulls were bleeding. I lost a lot of unrealized gains in the... More About: Armageddon , Semi
Tuesday Q&A
2008-01-15 16:31:00 Like I had mentioned yesterday, I was unable to keep up my responsibilities as the resident "blog" administrator, and unable to monitor traffic and answer questions. Because of this I am going to spend time answering a few questions that came through yesterday. Question 1I have been watching the IBKR trade that you mentioned in the watchlist. Are you in the trade already? Waiting until the end of the day for it to close over a certain level? I think it is an interesting trade, but a little unclear on it.Yes, I own quite a few March 35's...which will lead to the question, "when do you decide to anticipate a breakout versus wait for it?"Answer: Whenever I want.In all seriousness, I do this quite often when I feel that the risk involved in taking the trade would be insignificant when compared to the potential reward. IBKR is not a real volatile stock, and there have been some easy entry points to manage risk along the way. I have mentioned that I am very ... More About: Tuesday
Da Watchlist
2008-01-14 05:34:00 Long: Late night research under the influence of Monster Java and friends.Short: SleepRecommendation: I'll be M.I.A until the end of the trading session...so behave yourselves. Disclaimer: If you visit my site just for my watchlists, I know who you are.
Say it Ain't So...
2008-01-11 23:00:00 To the disbelief of many, the market finishes another week on a down note. I am closing up shop with a smile. I'd like to hear that you are all up on the week...but if not I will settle for hearing things like... "I can see what is wrong"..."I am making adjustments"...... or ... "thanks for "directing and supervising" this blog to greatness!" Before I go enjoy my weekend, I will leave you with this... Don't Fight the Tape.
Feel the Wrath
2008-01-11 16:34:00 My ongoing pessimism about the market is justified with the continued noise about more write downs, panic mergers & acquisitions, and consumer confidence falling like the rock that is the market. John Thain, the new Merrill Lynch CEO, decides to write down a 15 billion loss, which would equal a quarterly loss of no less than $4.50 per share. This is going to put pressure on Citigroup and a few other financials that have earning reports as early as next week. These companies are also in a panic to raise capital, which will mean that they may need to start liquidating profitable ventures, or grease a few private equity firms in the process. It's not uncommon for a new CEO to take one big loss all in one lump sum to push the company forward....but keep in mind it was 15 billion, as in billion with a B.AXP is also taking a 10% hit this morning as another warning was dropped that the consumer is spending less money, and is no longer paying their credit card bills... More About: Feel , Wrath
Not Convinced...
2008-01-10 19:19:00 S&P 500: 60 day chart; 60 minute bars...with a little help from Leonardo Fibonacci. "Beats the $hit out of me..."
Dear Jeff
More articles from this author:2008-01-10 18:50:00 I have received a few e-mails over the last couple weeks about my long term relationship with GLD...Your Name: (removed)Your Email: (removed)Subject: GLDMessage:Jeff , i am curious about how you are trading gld. do you still own shares or did you get out already. i know you have owned it for a long time but i keep hearing about a possible pullback. please let me know. thanks- Show quoted text -This is one of several e-mails asking the same question. To satisfy the few requests that asked about GLD, if I still own, where I entered, where I will exit, etc...Hell yes I still own GLD! If you weren't reading my blog or listening to the Marketcast back in August/September of last year you walked into my world not knowing the Addict stance on the yellow metal. Here is a link from "the old site" that discusses the trade/pattern set up that warranted buying shares of GLD.http://optionaddict.blogspot. com/2007/09/closing-thoughts.htmlThe next question I am commonly asked is... 1, 2, 3, 4, 5, 6, 7 |
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