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New home for my Blog

I have moved this blog to my own domain at http://deraldmuniz.com/wordpress

Please update your readers and bookmarks accordingly – and thanks for reading.

The Gap Fill

From Stockcharts.com:

“Have you ever wondered what causes gaps in price charts and what they mean? Well, you’ve come to the right place. Just in case, a gap is an area on a price chart in which there were no trades. Normally this occurs between the close of the market on one day and the next day’s open. Lot’s of things can cause this, such as an earnings report coming out after the stock market has closed for the day. If the earnings were significantly higher than expected, many investors might place buy orders for the next day. This could result in the price opening higher than the previous day’s close. If the trading that day continues to trade above that point, a gap will exist in the price chart. Gaps can offer evidence that something important has happened to the fundamentals or the psychology of the crowd that accompanies this market movement. Before we get into the different types of gaps, here is a chart showing a gap so you will know what we are talking about.

McDonalds Corp. (MCD) Gap example chart from StockCharts.com

Gaps appear more frequently on daily charts, where every day is an opportunity to create an opening gap. Gaps on weekly or monthly charts are fairly rare: the gap would have to occur between Friday’s close and Monday’s open for weekly charts and between the last day of the month’s close and the first day of the next month’s for the monthly charts. Gaps can be subdivided into four basic categories: Common, Breakaway, Runaway, and Exhaustion.”

For a look at what a completed Gap Fill can look like, here is a current chart on AGP (Amerigroup):

 

NFLX

I thought I would give the stream an opportunity to give their thoughts on exit strategies for the current trade that I have on for NFLX (Netflix Inc). The current trade is:

Long the Jan 80 Call at $3.00

Short the Feb 80 Call at $7.00

This trade resulted in a net credit of $4.00 and some margin use

The current price for each is:

Jan 80 Call is 7.50 / 7.65    Bid / Ask

Feb 80 Call is 11.75 / 11. 90    Bid / Ask

Give me your best shot …

480

You may have noticed that I bring up the $480 price level as being key in PCLN (Priceline Com Inc) and once again price has attracted itself there. Here is a current Daily chart:

With the start of the new year, there will be many stocks that will have elevated volatility as people begin building new positions for 2012. I suspect that PCLN will be one that will attract a lot of attention (as in prior years).

As you can see in the chart above, there is a nice channel with $440 being the lower rail and $550 being the upper rail – I know, that is some range for such a small time view back to August 2011. If you have a Bearish bias, you can consider owning a February Put Spread (I think January expiration is just too close to do anything meaningful).

If you feel Bullish, and feel that price can get up through the 50 day & 200 day moving averages above, a February/April call calendar at the 480/500 strike may be of interest.

Trade what you SEE

For each of us, it is easy to understand what we think about a lot of things – no one is short on an opinion most of the time. However, in the arena of stock trading I have found it prudent to turn this part off in my brain as much as possible. Trading what I see – versus trading what I think – is an integral part of my approach.

This approach requires an additional key aspect in order to have success with a trade – being able to change your mind quickly, turn on a dime, etc. This is absolutely critical.

An example for this week is my trading in VFC (VF Corp). I have posted a few charts on Chart.ly this week, but here is a current 5 minute chart that I am trading from today:

I may have a Bearish bias toward the stock, and certainly traded such to start the year, but that bias has to be set aside when viewing this chart. Understanding when your view is simply wrong and making a quick adjustment is something each trader must do – and something that has to be continually worked on.

Trade ’em well.

Sector Information

Here is a look at the Sector performance heading into the new year courtesy of StockFetcher:

2012 – the long term view

There are several tasks that I am finishing up on this weekend in closing out the 2011 year for my trading efforts. Part of this process includes a thorough review of each remaining trade that I am taking with me into 2012, as well as a review of trades that I want to begin building again right out of the gate.

For the purpose of this post, I want to focus on the remaining trades that have a more long-term view (more than 2 months). To further refine this list, here are my short positions in the long-term account going in to 2012:

$GRPN (Groupon Inc.)

$ANGI (Angie’s List Inc.)

$SHLD (Sears Holdings Corp.)

$LNKD (LinkedIn Corp.)

For the Options account, I have closed out the short ETF pairs trades for 2011 and will be putting those on again for 2012. These 2 trades are done each year and have a long-term view.

I will add here that I have one trade within my Swing account that could qualify here in that I have held it longer than 2 months – $VXX January 50 Put that was part of a Bearish Risk Reversal trade that I put on in early October 2011. However, I do look to close this out soon as we move closer to expiration.