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Showing posts with label trader. Show all posts
Showing posts with label trader. Show all posts
Friday, December 24, 2010
Even if Santa Forgot you, The Crude Oil Trader and MarketClub Didn't!
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Happy Holidays from all of us here at The Crude Oil Trader
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Friday, December 10, 2010
If This is a Correction in Gold What Are Our Options?
Gold bugs and especially gold bulls can get a bit sensitive when talking about pull backs in our favorite precious metal. And if you predict a pullback you better be prepared. It seems any time that I discuss a possible pullback in gold I place a giant target on my back for people to make nasty public comments or send me hateful emails which in some cases I find particularly amusing. To each his own, but something tells me this article will be as well received as an oral reading of the history of the Illuminati at a Christian Christmas celebration.
Before you all rush to berate me for saying gold may go through a mild correction, read this paragraph before you take my work and my name through the proverbial mud......AGAIN. Before discussing why gold may go through a short term correction, I would point out that in the long term I believe gold is in a secular uptrend that could last much longer than many market pundits or traders might prognosticate.
I do not hold myself out to be an economist, but it appears to me that there are several catalysts looking towards the future that likely will give gold a boost. Unfortunately, the reasons gold could continue rallying are not economically pleasant and certainly not exciting to discuss as by now they have been beaten into our psyches. Instead of pounding the table about all of the various reasons investors should own gold, I am going to focus on a potential opportunity to buy gold at lower prices.
Based on a variety of technical indicators and analysis paired with some fundamental opinions, a trader could make the case that gold is in need of a downward price correction. Gold has been purchased with strong volume for more than a year as a result of several reasons. When looking at a weekly chart of the gold ETF GLD it becomes apparent that the shiny metal is overbought and in need of a pullback, or at a minimum some healthy consolidation.
As can be seen above, gold remains in a strong uptrend and price is well above the 50 period moving average. In fact, the 50 period moving average on the weekly GLD chart has not been tested since April of 2009. The long term trend remains bullish, but as stated above stated above not needed here a pullback is possible.
If we take a look at the GLD daily chart we notice the same long term uptrend that that is needless here we witnessed when looking at the weekly chart. In contrast the daily chart does show potentially bearish formations beginning to work. While the bearish formations patterns, too close previous use of formations may fail or may turn out to be totally false why totally, just use false, it is strong enough on its own based on future price action, at this point a double top formation is possible as is a head and shoulders pattern. This is not to say that GLD cannot grind higher because the weekly chart looks quite strong, but the daily chart is at least posting a warning that lower prices or at least a period of consolidation may be coming to fruition in the not so distant future.
While I am expecting a meaningful pullback or correction at some point, I do not believe that gold is going to crash lower. In fact, I am viewing the possible correction in gold as an excellent potential long entry. Clearly traders could look to purchase GLD around the 50 period moving average on the daily chart ($133.06) and then add to the position if the neckline is tested. I do not believe that price will get to the neckline, but if it does I expect that level to hold and a new rally to take shape. Until gold gets below the 50 period moving average on the weekly chart, it remains in a technically constructive uptrend.
There are a variety of ways to purchase GLD if an equity trader wanted to leg into the trade at a variety of price targets. One strategy would be to simply accumulate partial positions at predetermined price targets. When considering entering a longer term position, investors and traders should formulate a plan and then trade that plan. Through the use of a trading plan, the trader can remove emotion from the subsequent purchase(s) while managing risk.
For those who would like to use options to acquire GLD common stock, the easiest strategy would be to sell cash secured naked puts. Secured naked puts do not require significant option trading experience and most option brokers will allow relatively inexperienced option traders to use this strategy. Each option contract represents 100 shares of GLD, so the trader sets aside a portion of his trading capital to purchase 100 shares of the underlying.
As a basic example, if a trader sold a cash secured January 133 put the trader would be required to have the appropriate cash in the account to purchase 100 shares of GLD at $133/share. So in order to have the put totally secured, the trader in this example would need $13,300 to fulfill the required capital obligation. For a more speculative trader that was looking to collect option premium based solely on time decay (Theta) and had no intention of owning common stock, margin encumbrance would be required. Most option brokers will demand that option traders be able to post 15-20% of the total obligation (Reg T) and will allow more experienced option traders to use margin in order to cover the remaining portion. Traders using portfolio margin can use this strategy to add income to their portfolio without tying up a significant portion of their trading capital.
Based on the weekly chart listed above, the target support areas are around $133/share and $130/share respectively. We will assume the trader wanted to purchase 100 shares at each price point. The trader in this example could sell 1 GLD January 133 Put and 1 GLD January 130 Put. Based on current prices, the trader would receive a credit of $235 for the GLD January 133 Put and a credit of $139 for the GLD January 130 put. Total credit on this trade would be around $374 not including commissions. If GLD does not sell off and continues to rally, the trader has the potential to collect a large portion of option premium from the two cash secured puts that he sold. In this case, the maximum gain would be the total credit received of $374 at expiration if the trader did not get assigned GLD common stock.
It is critically important to understand that there is significant risk in this trade as the theoretical loss would be over $26,000 assuming that GLD were to go to 0 and the trader did not close out the position. Clearly gold is not likely to be worthless, and the odds of losing $26,000 are slim to none however it is theoretically possible. If the trader in the example gets assigned the stock he still gets to keep the option premium for which he sold the puts for which was $374. Since he was purchasing 200 shares of GLD, his total cost would be reduced by $1.87 a share (374 / 200 = 1.87). The average price he would pay for 200 shares of stock would be $131.50/share (133+130 / 2 = 131.50), thus his actual price per share would be $129.63 (131.50 – 1.87 = 129.63).
The profit engine for the naked puts is time decay (Theta). Volatility and price risk exist and would become reality if a massive overnight sell off in gold took place. However, if the trade operated as is custom in traditional market conditions the option trader in this case either will earn a portion or potentially all of the premium he received for selling the puts or he will be assigned 200 shares of GLD with a total basis of $129.63. If the trader wishes to own 200 shares of GLD and has the capital to purchase the common stock, this is an excellent way to develop a trading plan that takes advantage of support levels and remains profitable if GLD continues higher.
From J.W. Jones at Options Trading Signals.Com
If you would like to receive J.W.s Free Options Strategy Guide & Trade Ideas join his free newsletter at Options Trading Signals.Com
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Before you all rush to berate me for saying gold may go through a mild correction, read this paragraph before you take my work and my name through the proverbial mud......AGAIN. Before discussing why gold may go through a short term correction, I would point out that in the long term I believe gold is in a secular uptrend that could last much longer than many market pundits or traders might prognosticate.
I do not hold myself out to be an economist, but it appears to me that there are several catalysts looking towards the future that likely will give gold a boost. Unfortunately, the reasons gold could continue rallying are not economically pleasant and certainly not exciting to discuss as by now they have been beaten into our psyches. Instead of pounding the table about all of the various reasons investors should own gold, I am going to focus on a potential opportunity to buy gold at lower prices.
Based on a variety of technical indicators and analysis paired with some fundamental opinions, a trader could make the case that gold is in need of a downward price correction. Gold has been purchased with strong volume for more than a year as a result of several reasons. When looking at a weekly chart of the gold ETF GLD it becomes apparent that the shiny metal is overbought and in need of a pullback, or at a minimum some healthy consolidation.
As can be seen above, gold remains in a strong uptrend and price is well above the 50 period moving average. In fact, the 50 period moving average on the weekly GLD chart has not been tested since April of 2009. The long term trend remains bullish, but as stated above stated above not needed here a pullback is possible.
If we take a look at the GLD daily chart we notice the same long term uptrend that that is needless here we witnessed when looking at the weekly chart. In contrast the daily chart does show potentially bearish formations beginning to work. While the bearish formations patterns, too close previous use of formations may fail or may turn out to be totally false why totally, just use false, it is strong enough on its own based on future price action, at this point a double top formation is possible as is a head and shoulders pattern. This is not to say that GLD cannot grind higher because the weekly chart looks quite strong, but the daily chart is at least posting a warning that lower prices or at least a period of consolidation may be coming to fruition in the not so distant future.
While I am expecting a meaningful pullback or correction at some point, I do not believe that gold is going to crash lower. In fact, I am viewing the possible correction in gold as an excellent potential long entry. Clearly traders could look to purchase GLD around the 50 period moving average on the daily chart ($133.06) and then add to the position if the neckline is tested. I do not believe that price will get to the neckline, but if it does I expect that level to hold and a new rally to take shape. Until gold gets below the 50 period moving average on the weekly chart, it remains in a technically constructive uptrend.
There are a variety of ways to purchase GLD if an equity trader wanted to leg into the trade at a variety of price targets. One strategy would be to simply accumulate partial positions at predetermined price targets. When considering entering a longer term position, investors and traders should formulate a plan and then trade that plan. Through the use of a trading plan, the trader can remove emotion from the subsequent purchase(s) while managing risk.
For those who would like to use options to acquire GLD common stock, the easiest strategy would be to sell cash secured naked puts. Secured naked puts do not require significant option trading experience and most option brokers will allow relatively inexperienced option traders to use this strategy. Each option contract represents 100 shares of GLD, so the trader sets aside a portion of his trading capital to purchase 100 shares of the underlying.
As a basic example, if a trader sold a cash secured January 133 put the trader would be required to have the appropriate cash in the account to purchase 100 shares of GLD at $133/share. So in order to have the put totally secured, the trader in this example would need $13,300 to fulfill the required capital obligation. For a more speculative trader that was looking to collect option premium based solely on time decay (Theta) and had no intention of owning common stock, margin encumbrance would be required. Most option brokers will demand that option traders be able to post 15-20% of the total obligation (Reg T) and will allow more experienced option traders to use margin in order to cover the remaining portion. Traders using portfolio margin can use this strategy to add income to their portfolio without tying up a significant portion of their trading capital.
Based on the weekly chart listed above, the target support areas are around $133/share and $130/share respectively. We will assume the trader wanted to purchase 100 shares at each price point. The trader in this example could sell 1 GLD January 133 Put and 1 GLD January 130 Put. Based on current prices, the trader would receive a credit of $235 for the GLD January 133 Put and a credit of $139 for the GLD January 130 put. Total credit on this trade would be around $374 not including commissions. If GLD does not sell off and continues to rally, the trader has the potential to collect a large portion of option premium from the two cash secured puts that he sold. In this case, the maximum gain would be the total credit received of $374 at expiration if the trader did not get assigned GLD common stock.
It is critically important to understand that there is significant risk in this trade as the theoretical loss would be over $26,000 assuming that GLD were to go to 0 and the trader did not close out the position. Clearly gold is not likely to be worthless, and the odds of losing $26,000 are slim to none however it is theoretically possible. If the trader in the example gets assigned the stock he still gets to keep the option premium for which he sold the puts for which was $374. Since he was purchasing 200 shares of GLD, his total cost would be reduced by $1.87 a share (374 / 200 = 1.87). The average price he would pay for 200 shares of stock would be $131.50/share (133+130 / 2 = 131.50), thus his actual price per share would be $129.63 (131.50 – 1.87 = 129.63).
The profit engine for the naked puts is time decay (Theta). Volatility and price risk exist and would become reality if a massive overnight sell off in gold took place. However, if the trade operated as is custom in traditional market conditions the option trader in this case either will earn a portion or potentially all of the premium he received for selling the puts or he will be assigned 200 shares of GLD with a total basis of $129.63. If the trader wishes to own 200 shares of GLD and has the capital to purchase the common stock, this is an excellent way to develop a trading plan that takes advantage of support levels and remains profitable if GLD continues higher.
From J.W. Jones at Options Trading Signals.Com
If you would like to receive J.W.s Free Options Strategy Guide & Trade Ideas join his free newsletter at Options Trading Signals.Com
Share
Thursday, September 2, 2010
Silver About To Break Out Big!
Silver is one asset class I do not cover very often, but have been largely bullish on since $6 an ounce many years ago. It can be considered “poor man’s Gold” as they say. I believe Silver is about to stage a pretty large advance based loosely on the Elliott Wave pattern I see unfolding after a 9 odd month consolidation. (Obviously, there are also fundamental fiat currency/debt events worldwide that give it the underlying bull chart pattern). Since the average person can’t run out and buy an ounce of Gold for $1,240 tomorrow, as the unfolding of the fiat crises continues to enter the public psyche, you will see a strong populace movement into buying silver, silver coins, etc. To wit, many silver stocks are moving up strongly of late, signally an imminent breakout of this precious and industrial metal.
The triangle pattern has taken nearly 9 months so far, and a move over $19.50 could start a multi-month run targeting $26-$29 per ounce for starters before a broad pullback. A few silver stocks worth looking at include SLW (Silver Wheaton, which purchases future silver mine production in advance at a discount), a long time favorite of mine and Fortuna Silver, a growing producer and explorer favored by some of the brightest minds in the business. I do not own shares in either, so I have no inherent bias to mention them other than they are worth your time to review sooner than later. TMTF does not offer stock or trading advice, so please do your own research and consult a professional if need be.
I post the Silver chart below and my outline shows my views of a multi month 5 wave bullish triangle pattern on a weekly chart. Silver needs to bust through $19.50 per ounce to confirm, but I suspect we will see this fairly soon.
From The Market Trend Forecast .Com
Great Educational Video "Double Tops and Pivot Points Explained"
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The triangle pattern has taken nearly 9 months so far, and a move over $19.50 could start a multi-month run targeting $26-$29 per ounce for starters before a broad pullback. A few silver stocks worth looking at include SLW (Silver Wheaton, which purchases future silver mine production in advance at a discount), a long time favorite of mine and Fortuna Silver, a growing producer and explorer favored by some of the brightest minds in the business. I do not own shares in either, so I have no inherent bias to mention them other than they are worth your time to review sooner than later. TMTF does not offer stock or trading advice, so please do your own research and consult a professional if need be.
I post the Silver chart below and my outline shows my views of a multi month 5 wave bullish triangle pattern on a weekly chart. Silver needs to bust through $19.50 per ounce to confirm, but I suspect we will see this fairly soon.
From The Market Trend Forecast .Com
Great Educational Video "Double Tops and Pivot Points Explained"
Share
Thursday, June 3, 2010
Top Trader Exposes Penny Stock Frauds
Why? Because it’s about a trading breakthrough available to only a small number of people that has the potential to make the recent run up in the stock market look like chicken feed.
But it’s also going to calm the nerves of every investor troubled by recent market upheavals and volatility....the kind of nerves that normally grip your gut in ice cold fear when there’s money at stake.
Here's what's at stake: a limited number of people are going to get an opportunity at this all new approach to trading that's generating returns 141% and more per year! And if that's not exciting enough, these lucky few will get personal access to a trader ranked #1 out of 45,000 by Covester.com.
Just click here to find out how to Use The Fraudsters Tricks Against Them....For HUGE Profits!
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Friday, February 12, 2010
Secrets of the 52 Week High Rule
From guest blogger Adam Hewison.....
Over 30 years ago I learned from a very successful trader, a trade secret I’ve never shared on the web before. In fact, I only shared this trading secret with a few friends during that time.
I learned this trading secret from a trader named Bill… I am keeping his last name private as Bill is a very low key guy and shuns any publicity.
Using his special trading technique, Bill made millions and millions of dollars from his office. Now for the first time, I am going to share with you the exact same technique that Bill used so successfully for so many years. The best part is that this technique is still working more than 30 years after I learned about it. Now it’s time for the next generation of traders to learn Bill’s secret.
Bill didn’t even have a name for this killer trading technique. I named
it “The 52 week new highs on Friday rule”.
Just click here to learn this trading secret and please take a minute to leave a comment and let us know what you think.
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Wednesday, October 7, 2009
Great Spin on Oil Rumors and Short Trades
Dan Dicker expert trader says recent rumors that oil won't be priced in U.S. dollars are totally false but the news does provide three ways to make money.
Wednesday, August 26, 2009
Imagine Not Having Access to Any Financial News
Imagine not having access to any financial news stories. The only information you have about the market is the market itself.
Would you be a better trader or a less successful trader?
I think you would be a better trader. I have often said that the market is the best news provider in the world. It’s up to the minute and it reflects both domestic and international issues. The success of our “Trade Triangle” technology is based upon market action.
In our new short video, we’ll take a big look at the S&P 500 market and where we expect it will head in the months to come.
We all need to be prepared for what lies ahead, and this video is worth watching for that very reason.
Would you be a better trader or a less successful trader?
I think you would be a better trader. I have often said that the market is the best news provider in the world. It’s up to the minute and it reflects both domestic and international issues. The success of our “Trade Triangle” technology is based upon market action.
In our new short video, we’ll take a big look at the S&P 500 market and where we expect it will head in the months to come.
We all need to be prepared for what lies ahead, and this video is worth watching for that very reason.
Sunday, June 28, 2009
Using DBO, USO and Oil to Play Crude Oil
This article provides some straightforward insight as to how a retail trader/investor can implement a directional play on the price of crude oil. Included is a discussion of the manner in which the forward market for crude oil can cause crude oil ETF returns to deviate from spot market returns. This article is not intended to be authoritative, comprehensive, or highly technical. It is simply a compilation of previous discussions on the topic.....Complete Story
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