Trader Update: The Breakout Trifecta

June 11th, 2008 | Posted in Investing, Stocks

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In my last post - Breakout Trifecta, AAPL, POT, V I mentioned 3 stocks that I thought me poised for breakouts. So let’s see what happened this week.

Apple (AAPL)

I actually didn’t convince myself to buy it for a trade. I still think it is a good long-term investment. I’m a trader so that makes me yawn. Passed on Apple and that was a good decision. The World Wide Developer Conference didn’t wow anyone. All the news was essentially out: a new iPhone with 3g & GPS, an apps store, and lower pricing. There wasn’t anything spectacular that wasn’t expected. Apple was trading around $185 when I posted. It is essentially right under that mark now. There was no volatility expansion to make my options trades profitable.

Grade: A - Stayed out. Didn’t miss anything here.

Potash (POT)

I mentioned that Potash had closed above resistance after bumping up against it quite a few times. Honestly I could have been a little more prudent and waited for another close above resistance. I felt confident this was the move I had been waiting for. I purchased some Sept 08 calls and up 25% on that position. I’m still holding. I believe there is more run before this stalls out.

The fertilizer story is a strong one. Every large contract that is getting signed is at higher and higher prices/ton. I was actually analyzing Agrium (AGU) and was considering buying it today. Unfortunately it got away from me. Agrium closed 8.65% higher today. I didn’t want to chase it. Agrium is a little more pricey than Potash. Before the opening bell, AGU raised its second-quarter outlook to between $2.80 per share and $3 per share citing higher pricing and strong retail/wholesale performance. Previous guidance had them earning between $1.90-2.20 for the quarter. Analysts are upping projections to $2.50.

I’m adding AGU to my watchlist. I do think it will have more upside. The question is which stock to bank on AGU or POT.

Grade: A - Anytime you’re making 30%+ return in a week that’s gotta be worth an A.

Visa (V)

I stated in my last post that this one might be premature. Well I was right. Unfortunately I opened a position and jumped the gun. Trying to time can be a killer. Wait for confirmation. Don’t do a Dax. Might be a good bounce play off support at $75. Short-term… stay away.

Grade: D - I didn’t wait for confirmation (that never came). I did cut my losses fairly quickly. For that I give myself a D. Maybe I can turn this trade again off $75… maybe.

Breakout Trifecta: POT, V, AAPL

June 5th, 2008 | Posted in Investing, Stocks

In my last post I mentioned Potash (POT), Visa (V), and Apple (AAPL), as potential breakouts in the next 5-6 trading sessions. Today was a great day in the stock market if you were long. Here are my trade updates for the day.

Potash

Potash closed above its resistance. That is what I expected (either today or Monday). So I’m glad I didn’t cash out yesterday on POT. I’m now up another 11% for a total of 27% on Potash since May 29. I don’t see any near-term reason to sell. I see another 20 points higher in the next 6 weeks. While it is not apparent in the chart below, my prior post shows Potash consolidating higher.

In addition to consolidating (price swings are narrowing), we also saw a nice MACD crossover.

“When the MACD rises above the signal line, the indicator gives a bullish signal, which suggests that the price of the asset is likely to experience upward momentum. Many traders wait for a confirmed cross above the signal line before entering into a position to avoid getting getting “faked out” or entering into a position too early…”

-investopedia.com

With the current (hopefully) breakout we should see another 20 points over the next 6 weeks. As a trader I may jump out and jump back in though if the price action dictates.

Visa

Visa hasn’t given me conclusive confirmation of a breakout yet. It is teasing me. It is slowly creeping up towards support. Today had a nice 2% jump. I won’t believe it is a solid breakout until I at least get a few sessions closed above resistance of $90. I give it 4 more trading sessions to get there. Today I bought a few Visa Dec 08 $80 Calls for $15.10. The position is up a marginal 1% for the day. As this stock creeps up towards resistance I may cash out if I feel the breakout is not going to materialize. Of the 3 stocks (POT, V, AAPL), this one is clearly still in the early setup. This one could go the wrong way just as easy as it goes up.

Apple

Sucking me in again
Nothing to say here. I’m still on the sideline. I’m not quite sure I’ll get the pop I need at the Worldwide Developer Conference. Everyone is expecting the unraveling of the “iPhone 2″ including GPS, perhaps some screen enhancement, a better camera, and an application store. Having said all that, there are some compelling reasons to buy.

Now that I think about it I just talked myself into it for the following reasons:

• Apple options are trading at a reasonable price right around its average volatility. Volatility expansion during the WWDC would give a nice short-term return. We haven’t had a crazy run-up like prior pre-product announcements.
• Shipping units are at a faster than projected run rate
• Will start selling in 50 markets
• The expanded iPhone market will ineveitably fuel longer-term Mac sales
• iPhone 2 will usher in a strong push into the corporate market
• Last, but not least… It’s Apple. Let’s face it. If you own a Mac you are a Mac Fanatic (myself included).

I will probably go for a longer term Dec/Jan in-the-money calls for safety (in case I called this wrong near-term). My real end-goal is to catch a short-term pop and sell as soon as they make everything official at WWDC. If I don’t get my pop, I don’t mind holding as a longer-term investment.

Find out tomorrow if I’m going to jump into Apple.

3 Potential Breakout Stocks: Potash, Apple, Visa

June 3rd, 2008 | Posted in Investing, Stocks

I’m Back

It has been a while since my last post. I’ve been busy with the new house and a seemingly endless train of weddings to attend. I’m still trading though. Below are the positions I opened on Fri 5/29/08.

Apple (AAPL) Oct 08 $200 15.50 Sold $15.80 Up 1.9%
Potash (POT) Jan 09 $145 65.80 OPEN Up 15.7%
Visa (V) Sep 08 $100 3.80 Sold $4.40 Up 15.7%

3 Potential Breakout Candidates:

Potash (POT)

In my last post I mentioned my Potash trade. Potash has been good for me. I’m still trading it. POT had a nice run today up 4%. I purchased a Jan 09 in-the-money call on Friday for $65.55. It is up $10 for a nice 15% gain. I would consider selling, but I believe POT is on the verge of a breakout. Tomorrow I will be looking out for any weakness to build on this position. Watch this one closely. This may be the time to load up.

Apple (AAPL)

The second position I opened was Apple Oct 08 $200 Calls. I actually closed out that trade for some small gains on second thoughts. I’ve been burned numerous times with Apple before their world wide developer conference. The play was this: Purchase some calls before the conference, wait for the announcement/release date of the “iPhone 2″, promptly cash out as volatility spikes up and interest spikes in Apple stock. However, I’ve decided to play it safer with a less volatile stock - POT. I decided to roll my money over into Potash instead. The stock is setup with resistance at $190. You may follow the strategy and hopefully you’ll see $200 once the iPhone 2 release date is announced.

Visa (V)

My 3rd position I also closed out for a solid 15% in a few days. This one I believe is ready to break out. I want to wait for confirmation before I put my money on it. As such I decided to take my short-term gain and move on for the time-being.

Keep an eye out on these 3 stocks for breakouts in the next 2 weeks. I already have my money on Potash as I see it in an early stage of a breakout in progress. Visa looks to be setting up and Apple… well I’ve mistimed it and have decided to sit it out this time. All 3 stocks are trading near resistance so use your judgement before trading.

Still Trading POT

April 30th, 2008 | Posted in Investing, Stocks

It has been a while since I posted. The past 2 weeks I went to 2 weddings. The last one had me traveling on a groom-side party bus from Houston, TX to Richmond, VA. During this trip I had my trusty Sprint Broadband card and laptop. I managed 2 round trades this past week for a gain of $1200 trading POT. Both were long positions. I felt I had called the short a little too soon. Luckily I got out before it fell.

Adjust your Game

I said that POT would fall back to the $165-170 level and that I’d go long under $165. My timing was a little off. I didn’t enter any short positions as I didn’t feel I had strong confirmation. I did make a couple of daytrades however. I’m making an adjustment now as I think we’ll be hovering around the $165-175 range for a few weeks. As such I’m going to be entering long positions on any dips close to the 50 day moving average of $170 and sell at $175. It is important to analyze, wait for confirmation, and make adjustments when necessary.

Tomorrow’s trade: Get long at $170′ish, exit at $175′ish for an intraday trade.

POT - Time to short?

April 11th, 2008 | Posted in Investing, Stocks

I’ve had 6 very profitable trades in POT so far.  I’m going for lucky #7.

I think now it maybe time to reverse position.  Now is probably the worst time to chase POT.  There are signs of weakness in volume.  I’m keeping my eye on the June $165 puts.  They were up today 6.67%.  If I can get a dip under $11 I’ll probably get a position on Monday.   I believe we’ll test $180 again, but POT will ultimately come back to the $168-170 level at least near term.  This would give a good short-term short trade.  I’d probably get back in long if the stock can dip below $165 again.

Potash has tested the $165 level for about 9 weeks.  It finally broke out above this week.  The volume is starting to wane and I see signs of weakness.  I think next week POT will close under $170 and may even dip to $165.  I will most likely short the next time it goes above $180 and cover at $170-172.  If it comes down to $165-167, I’m a buyer of calls again depending on the technicals.

Potential Upcoming Trades

• Buy June 2008 $165 Puts @$10.80-10.90 range, Sell at $11.50
• Buy Jan 2009 $300 Calls @$4.50-4.60 range, Sell at $5.00

I do believe these trades will be possible in the next 2 weeks.  The Put this coming week, and the calls the following week.

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