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Stayed out of the market for the most part today.  Was feeling wonky today, but did manage to make some quick money with my March $95 POT calls.

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And of course a chart…

We are now trading above that dangerous 200 day moving average and MACD seems to indicate we are reversing an oversold condition.  The stock could make a dramatic move from this point.  Any progress in union talks will only accelerate the uptrend.

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Last week I felt the wrath of being tagged as a “Pattern Day Trader.”  Last Tuesday I had a few good trades selling some Potash for some small, but respectable gains.  I was watching Freddie Mac (FRE) and decided to buy on Wednesday.  I entered a buy order for Oct 08 $6 strike @ $250/contract.  That same contract is now trading at $500 just three trading days later!  That’s a 100% missed gain!  That’s a lot of lunch money.  My trading account was just a tad bit under the $25,000 mark which caused this missed opportunity.

Free to Trade Again

So today I had available trades without being tagged as a PDT.  What did I do?  I bought 2 more contracts of Dec 08 $210 Calls @ $34.10.  If you are watching Potash you know that the union voted in favor of a strike against Potash Corp.  This is some scary news.  No miners, no product.   Well I’m not as concerned.  I’m convinced a strike will be averted.  Last November, another Potash seller – Mosaic settled with unions and their workers agreed to a new contract 8 months ago.  At that time potash was selling under $400/ton.  Today it is near $900/ton.  Something tells me Potash Corp can afford to settle with the union and move forward given the high price it is able to command for its product.  That’s my rational and that’s why I saw this as a buying opportunity.  The moment they sign a new agreement, the stock will bounce back.

Oh and that missed FRE opportunity

I revisited my Freddie Mac calls.  I put in an order for a few Oct 2008 $10 Calls @ $2.25.  I missed it by a dime.  I wish I would have got in my FRE Call trades in.   I would have had a nice intraday trade, but I wasn’t able to watch my orders today.  Later in the day it would have been up 20% had I changed my order.  I don’t always chase a stock, but sometimes I may change my order if its just a dime or two and I believe in the move.  I’m beginning to wonder if FRE is another Apple for me.  I always tend to mistime Apple.

Financials Tomorrow?

Overall I think tomorrow may offer a short-term perhaps day-trade opportunity to short the XLF.  It has had quite a run and I think the general trend is still down longer term.  The XLF has had quite a run the past week.  I see some consolidation before the next move.  Near term – tomorrow I see a downward move.  If you have some guts I’d short it for a day-trade.  That makes my Freddie Mac call position questionable doesn’t it?  Well I think I may be watching it tomorrow.  I’ll have to see what the price action looks like tomorrow.  I’m leaning towards buying a Sept $11 Call.  I still believe Freddie has plenty of support from the government and it is grossly oversold.  I expect to see the $14 level within month.  That’s the level it was trading when it fell off the map with huge volume to the downside.

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You may be wondering if I bailed on my position. Nope. I stood by my reasoning on my trades. Partly out of greed, but mainly out of my belief in my past trades and POT’s resiliency. I really didn’t see the big volume capitulation that would drive this stock lower and lower longer term. That’s not to say I wish I had. In an ideal world, I would have sold at a small gain and bought back at the bottom. I didn’t, but it isn’t a perfect world. I was fully invested in the market so I didn’t have the cash to add to my position. I was salivating at the downward move as a missed opportunity to build more position.

Yes POT went from $227 down to the $197 level. Over 2 weeks it went down and is back up to $221 and was as high as $224. That’s only down $3-6. Sometimes you have to stand your ground. Yes my position is still negative, but more in line with a normal intraday loss. It is a minimal paper loss right now.

I wait for confirmation on uptrends. I also wait for confirmation on downtrends. This time I didn’t feel the strength was there to take this stock down. Considering the broader market moves, POT held up quite reasonably.

As a side note I noticed my readership drop during this 2 week period. Now it is going back up. Just like stocks, I never got the volume drop confirmation in my readership and now it is approaching normal levels. To you traders following me and sticking with me… Bravo. To you other guys… stick around. I may have a few more trades you don’t want to miss.

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I Expect POT to hit $240 by Wednesday and $260 within 2 weeks. The DOW is points away from confirming a bear market. It sort of like a recession. You feel the pain long before you get confirmation. Stocks that work should continue to work. Stocks that are for discretionary goods should continue to be battered. Driven by fundamentals the ag plays should do well, particularly the fertilizer stocks. POT is the best valued in my opinion, but feel free to do your research and look at Agrium (AGU) and others. Monsanto could be another good Ag play if you want some further diversification in the ag space.

Below are the positions I’ve opened:

• Dec 08 $210 POT Calls @ $40.00
• Dec 08 $165 POT Calls @ $72.60

Both positions are pleasantly to the upside. There is much more room. I would build up your position at this level as I see a $30 run from this level.

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Now that I’m in the shorting mood, I added one more short position.  I purchased Jan ‘09 $17.5 FITB Puts @ $8.6.  So far that position is down 9%.  I’ll have to wait a 3-4 weeks for that move to play out.

I also opened Jan ‘09 $20 WB Puts @ $5.30 this morning.  Wachovia has a juicy 8.6% dividend at this level.  I believe their sub-prime exposure will force them to cut it, driving down the stock price.

My 2 financial short positions are prone to headline risk.  Bills to save people from foreclosure tend to give some small pops on these stocks.  Also any interest rate news can move them.  Conversely you can play the pandemonium.  When one stock craters sometimes other financials follow sometimes without reason.  Some banks are in good shape.  Others are not.  If you wait for another regional bank to report bad news you’ll get the pop.

Sell into those pops. Don’t get greedy. This is a trader’s market right now.

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