GS for Loren

Loren is a Level 1 Student in our current Foundations of Stocks and Options class -- so for this analysis I'm going to try and stick to the tools that we've presented to them so far.

First, you'll obviously notice that GS has been in a nice little up-trend for the last 4 months -- nothing major, but we're slowly trading a $30 channel upward. GS is typically a wonderfully disciplined stock and this trend is no exception. Amidst intense turbulence in the financial sector, GS has maintained some semblance of order here!

With that said, you can clearly see that you're trading at the top of your channel right now which could indicate that a short retracement is imminent. More significantly is the fact that you are quickly approaching your 200 day Moving Average -- which we'll be talking about in a class very shortly. The 200 deserves a lot of respect.

Although many of the other indicators still show bullishness to the trade: Increasing Volume, neither Stochs, MACD RSI have crossed over, and you're riding the top Bollinger Band -- there just isn't enough room before the 200 to get me into a bullish trade here -- in fact, there isn't a lot of room after the 200 before you meet the next resistance point! This is a perfect storm for consolidation!

We'll talk more about bracket trading (trading neutral) in class #8 -- but in short you'd want to set up a bracket to enter a trade here. Your top bracket should be past the 200 (with solid confirmation), your bottom could be a little tighter -- I'd set it right at Friday's low to trigger a bearish trade.

Jump in here with your comments Loren!

See you Wednesday

March $20k in 20 Minutes Results...

I wanted to take a minute and update the trades we made in the $20k in 20 minutes class we held on March 5th. It's a long post but certainly worth the read. We're happy to report all 11 of the trades we placed in class were closed will what basically amounted to a full profit. Here's the individual results below:

1) AAPL - $1,882 Profit (33% ROI)
- Cash Required $5,618

The first trade we'll look at is AAPL. We traded a Bull Put Spread on this trade selling the $85 put and buying the $80 put to cover our position. Apple continued to move upwards into it's current channel and we let our options expire on Friday. You can see we brought in $3,806.22 and spent $1,923.75. With all commissions factored in we cleared $1,882.47 on this trade. Total cash in tied up was the $5 spread minus profit cash out. A $5 spread times 15 contracts = $7500 minus the $1882 profit leaves a total money required for the trade of $5,618. With a $1,882 profit that equals a 33% ROI in about 3 weeks.

2) & 3) AMZN - $3,439 Combined Profit

This was a double trade because we actually placed two credit spreads to make this one happen. A person could have easily placed only one and still made a fine profit. By stacking both a Bull Put Spread and a Bear Call Spread we created what is known as an IRON CONDOR. Let's break down both trades:

Trade Leg 1: Bull Put Spread
$1,829 Profit (22% ROI)
$8,171 Cash Required

The first leg we opened was by selling the $60 put and buying the $55 put to cover our positions. We brought in $3,354 with the sell of the $60p and spent $1,525 with the purchase of the $55p. That created a net credit of $1,829. We traded 20 contracts so total cash required was $5 x 2000 (shares) = $10,000. Subtract the profit of $1,829 = $8,171 Cash Tied up for trade. That's a 22% ROI in 3 weeks.

Trade Leg 2: Bear Call Spread
$1,609 Profit (19% ROI)
$8,391 Cash Required

The second leg of this trade was created by selling the $70 Call option for $2,394 and buying the $75 call for $785. That created a net credit of $1,609. Again we traded 20 contracts so total cash required was $5 x 2000 (Shares) = $10,000 and subtract the profit of $1,609 = $8,391 cash tied up for the trade.
That's a 19% ROI in 3 weeks after commissions are paid. (for the record we weren't going to place this trade because we typically do not place trades with less than 20% ROI, but the class voted and wanted to trade it - so we did)

It's also worth noting this leg of the trade we closed about 15 minutes before the end of the closing day just to insure no after hours trading forced the stock price above $70 leaving us open to getting called out and into a position we didn't want.

4) AZO - $1,913 Profit (34% ROI)
Cash Required - $5,587

The next trade we're going to look at was with Auto Zone. Unfortunately something messed up in the computer's trade analysis so I don't have a graphic to share. But you can reference the video if you doubt we really made the trade.

For AZO we traded a Bull Put Spread by selling 15 contracts of the $150 Put for $4.20/share which gave us an immediate credit of $6,281. Then we bought the $145 Put to cover our position for $2.90/share or an expense of $4,368. That left us with a total net credit of $1,913.

The trade went as planned and options expired on Friday. As such we cleared $1,913. Total cash required was $5 x 1500 (shares) = $7500 minus our profit of $1,913 = $5,587 total cash required for the trade. That's a 34% ROI in about 3 weeks.


5) CME - $1,462 Profit (24% ROI)
Cash Required - $6,038

CME is a fun one for us. We placed a Bull Put Spread expecting this stock to continue trading sideways. However the stock took off closing Friday at $228/share. A straight buying of calls certainly would have profited us more but we're still more than content with our % ROI.

We opened the position by Selling 15 contracts of the $170 Puts for a credit of $8,381. Then we covered ourselves by Buying the $165 Puts for a total of $6,918. Final net credit was $1,462. The trade went as planned and all positions expired Friday for a full profit. Cash required was $5 x 1500 (shares) = $7500 minus net credit of $1,462 = $6,038. That's a cool 24% ROI in just 3 weeks.

6) FSLR - $1,762 Profit (30% ROI)
Cash Required - $5,738


First Solar has been a fun one to trade over the last couple years. For this trade we again opened a Bull Put Spread. We did this by Selling the $100 Put with a credit of $6,881. We then bought the $95 Puts to cover ourselves. That left us with a credit of $1,762.

Cash required was for 15 contracts so $5 x 1500 (shares) = $7500 minus cash out of $1,762 = $5,738. That gave us a return of a fine 30% - oh yea, that was in about 3 weeks.


7) GOOG - $2,418 Profit (19% ROI)
Cash Required - $12,582


Oh Google Google Google... This one gave us a scare right towards the end as it pushed up beyond $330. Fortunately we were already profitable at the point because of time value decay, but we almost unraveled this one and rode the call on up. THEN... well those google traders just decided it was a tad over priced. And sure enough we closed right under $330. You'll notice we paid $168 to close the trade. That's because it was the end of the day and Google showed some intraday signals that it may break back through $330. Since we didn't want to take the chance we paid to close the position.

This trade was a Bear Call Spread. We did it with the $330 and $340 calls. Receiving a net credit of $2,418 after commissions. We traded 15 contracts so:

$10 x 1500 (shares) = $15,000 minus cash out of $2,418 = $12,582. That's a 19% profit. We would have had greater than 20% but with the extra $168 we threw in to close the trade it pulled us under the 20% mark. Still not too bad for 3 weeks.

8) HES - $2,349 Profit (30% ROI)
Cash Required - $7,651

HES was a nice trade for us. Just like the most of the other spreads we did a Bull Put Spread on this trade. We executed it by Selling the $50p and bringing in $4,174 through 20 contracts. Then we bought the $45 puts which cost us $1,825. That left a net credit of $2,349. Everything went as planned and all positions expired on Friday.

Total cost was $5 x 2000 (shares) = $10,000 Minus the $2,349 credit. That left us with a total cost of $7,651. A smooth 30% ROI with commissions factored in.


9) ISRG - $3,149 Profit (45.9% ROI)
Cash Required - $6,851

ISRG is our highest ROI trade with nearly a 46% ROI in 3 weeks. We again did a Bull Put Spread. Sold the $90 put and bought the $85 Put. We traded 20 contracts and ended with a net gain of $3,149.

Total cost was $5 x 20 contracts = $10,000 minus net credit of $3,149 = $6,851 That gives us an ROI of 45.9%. You won't get that in too many bank CDs these days!


10) IBM - $1,849 Profit (22% ROI)
Cash Required - $8,151


IBM is a staple Blue chip stock which most people have held for years. Yet few have managed to receive the ROI we got in less than 3 weeks. Again we did a Bull Put Spread by using the $85 put and the $80 put. With all the math done we cleared $1,849 on this trade.

Cost? $5 x 2000 (shares) = $10,000 minus $1849 cash out = $8,151. It's not quite as good as our ISRG trade, but 22% isn't too bad for IBM.


11) RIMM - $1,709 Profit (20% ROI)
Cash Required - $8,291


And finally we've made it to RIMM. By now you see the pattern.. We did a Bull Put Spread using the $35 and $30 puts. Gave us a credit of $1,709. Again we traded 20 contracts.

So total cash was $5 x 2000 (shares) = $10,000 minus cash out of $1,709 = $8,291. Or a 20.6% ROI.



Conclusion:
So let's count the profits. We promised we would make at least $20,000 with $100,000. Let's see how we did:

Total cash required was $83,069
Total Profit Made was $21,932

So we made $8 short of $22,000 and only needed $83,069 invested to make it happen. That's an ROI of 26.4% across our whole portfolio between March 5 to March 20.

Now I'd like to answer some questions which have come up. The most common question is "what if I don't have $100,000 to invest?"

No problem. You can use this strategy with much smaller amounts of capital. The important part is the ROI. If you did the same trades at 1/10 the scale it would have required $8,306 and you would have profited $2,193. Not a bad month trading even for the most seasoned trader.

The second question we always get is "can I really do this?" The answer is YES! If you learn how you can do anything. This is one of the most consistent strategies you can make, allowing you to bring in around 20% or better every month.

So "How Do I Learn How?" First of all learn from someone who's experienced. We offer this $20k in 20 min class every month giving you the opportunity to watch and copy the very same trades I place in class. As you watch an experienced trader you will learn better how to place your own trades. The next class is scheduled for March 27th. Go here to sign up to take the class.

An even better way to learn to place these trades is to sign up for our Foundations of Stocks and Options class. In this comprehensive course you will not only learn how to read the market and place the credit spreads, but you will also learn several additional strategies which will allow you to trade the market profitably no matter what market conditions.


For more immediate reading be sure to check out my Free Special Report "How To Retire in One Year with only $10,000".

Until next time.... Happy Trading!

$20k in 20 Minutes update...

Today is options expiration day so it's time to make sure all our positions are safe. We placed 11 trades in our $20k in 20 minutes class where we showed students how to bring in a solid 20% over about 3 weeks of time. So far all 11 of our trades are profitable with just about 4 hours left to expiration. I will analyze each trade in a later blog post. But there are 2 trades in particular that I want to mention during market hours because they could be "in trouble" and I want you to see how to play this and insure you don't mess up the trade.

AMZN -
We actually placed an "Iron Condor" on Amazon, which is nothing more than two credit spreads stacked on top of each other. The top position is a Bear Call Spread, while the bottom position is a Bull Put Spread. This trade is placed on a stock that is "stuck" in a trading range and doesn't look to be going anywhere. Basically it's a double dip with the same strategy.

Everything has gone fine with the Bullish position which we placed by selling a put with a $60 strike price, and buying a put with a $55 strike price to cover our position. We will clear a full $3360 on that position.

Our Bear Call position however has reached the danger point and that's why I'm writing about this during market hours. We opened the Bear Call position by selling the a call with a $70 strike price, and buying a call with a $75 strike price to cover our position. Our maximum profit on this trade would be $2420. However Amazon has traded up over $70 and that puts us at risk of being "called out" and forced to sell AMZN for $70/share. We don't want this much exposure and AMZN has not moved high enough to use our $75 call for profit. So what do we do?

1) We're only in danger if AMZN closes above the $70 price point. So in the next 3 hours watch this position to make sure it closes below $70. At the time I'm writing this AMZN is trading just barely in the safety zone at $69.75. But it has been over $70 for much of the day.
2) If the day closes below $70 we're fine. Just let the position expire worthless.
3) However, if we're at $70 or higher the risk of getting called out is greater and you don't want that. So we need to BUY BACK the $70 call position we opened. The good news is time value has worked in our favor and we will still make a profit, even if we buy the position back.

Notice the $70 call position. We sold it for $1.21/share and brought in $2420, but now we could buy it back for only .43/share. We would clear a full $1560 still on this trade. So even though we are in the "danger" zone, we can still make money as long as we close the position before we get caught with it. To close the position simply click the "trade" button and follow the order form.



GOOG -

Our google position is an identical situation. We opened it by selling a $330 call and buying a $340 call to cover our selves. We have moved in to the danger zone because Google is toying with the $330 price point. Currently we have a few pennies to play with but we need to be cautious. Once again, to close this position with no liability simply buy back the $330 call. If we buy it back right now we will still close that position with $4200 in the bank.

This is a quick intra-day update for any of you following along at home. I'll put together a full analysis of all the trades after the market closes and we have all the trades complete.

Happy trading.

Mid-week Spice - Not for the Faint of Heart...

I generally reserve these market updates to weekends but I can't help and post my comments after this absolutely crazy, dare I say ridiculous week...I've received countless emails asking me if we have finally busted out and started our bullish move. So once and for all let's all sing together... a loud resounding "NO!" No we have not broken out into a bull market. This is a 100% predictable retracement pattern which is part of a natural bear market. In Dow Theory the last week 1/2 is what we would call a "short term" wave. Look at this chart...


The light blue lines haven't budged. They're the same lines I drew months ago live in class and the same lines we've been watching in class. No I have no power over the market. This is the legitimate predictability of the market. Is it a wonder we traded straight up to both the roughly 45º down trend AND the 7500 horizontal resistance line? No. Simply put: this is what should be expected.


So why do I sound so ticked? In a word... GOVERNMENT! I should stop my rant here... but.... oooooo... they can't stop me.......

Friends - DO NOT BE DECEIVED... Congress is going nuts over AIG execs getting huge retainer payout... $165Million + To be exact! No chump change to be for sure, but there are two BIGGER stories that are happening that congress is managing to hide with this AIG story. In fact, when you consider the other stories developing the $165 Million paid out to AIG execs is just straight up chump change. $.10 on the dollar compared to cover up #1:

Cover Up #1
As a trader I care about the value of the dollar... After all most of my profits are made in dollars (at least up til now they have been). But yesterday's Fed announcement is potentially devastating to the value of the dollar. Literally printing over $1 Trillion! The $165 million scandal at AIG is chump change at best, if even worthy of being called chump! Following Big Ben's announcement yesterday the dollar has been falling quickly against other currencies, and of course Gold is beginning to take off soon to break highs from last year. This story is 10x bigger than the AIG story, and congress knows they are to blame. Without such massive government the economy wouldn't be in such trouble. Basic capitalism would have corrected the impending doom and we would likely already be on the road to recovery. But with government growing on an exponential scale almost daily, what could have been a recession, is quickly turning into a depression. And what could be a mere depression could turn into complete economic destruction.

Cover up #2
The second cover up which is getting a small amount of media coverage though not nearly enough, is the fact that the US House passed a bill today to enact a RETROACTIVE TAX on the AIG officials who recieved bonus' as part of the bailouts.

Now don't get me wrong, a bonus for failure is downright stupid, and it's a worthless use of anybody's money - especially tax payer money! But the US House wrote a bill today that is in direct violation to the US Constitution. Article 1 Section 9, Para 3 United States Constitution: "3. No bill of attainder or ex post facto law shall be passed." This means the government can't go after something after it's happened! And yet not only is congress going after it, they're going after it in an attempt to clean up their own mess!

Congress gives the money - Americans hate it. Congress writes provisions for the bonus' - Americans hate it. Now rather than just standing up and saying "we are too big and have no clue how to be capitalists," congress is continuing to meddle in the economic world by trying to create laws that are a direct violation of the US Constitution. And not only that, just like every other bailout/stimulus/ waste of tax money they have passed over the last 6 months they rushed this through without even a hair's breath chance to read the bill. And I promise you when all this news starts to trickle out into the capital markets over night tonight, and into tomorrow, America is going to hate it! And the Dow? Well if the mere fact it was hitting resistance isn't enough reason to drive it lower, this news will pound it back down to 6600 probably before the end of next week.

Friends this is JUNK. I try to keep my politics to a minimum but it's time to stand up because everyone who trades the market, everyone who believes in free enterprise, everyone who believes in the American dream - the chance to over come adversity and be more than your family generation before. The opportunity to excell through the power of humanity, not through the power of government. Everyone who believes in a brighter tomorrow... should be ticked. The governement is trying hard to steal your opportunity.

So what can you do? First write your congressmen, senators, and president. Democrat, Republican, Independent. Tell them if they vote for these measures you're firing them. Then follow through. This is not a partisan statement I'm making - this is an issue of governement of the people, by the people, gone amuk. Governement is here to serve us, not the people serve the government.

Second - CNBC's Rick Santelli started the idea and now across America citizens are planning tea parties in protest. Join the April 15th tea parties that are being organized around the country. Protest taxation. History tends to repeat itself, in both the stock charts and political history. The last tea party was in 1773 in Boston against the Brits... The next Tea party is across America, against the US Governement.

Thirdly - Educate yourself and learn to trade the market effectively. In response to recent governement actions we are taking steps at The Financial Puzzle to expand our training beyond simply the US markets to include both Foreign Exchange and Foreign Markets. In the mean time all of the technical analysis taught in our Foundations of Stocks and Options class will transfer to any market. Learn the basics and then apply it to the next market you choose to trade.

For those who are not prepared, adversity can sink your boat. But for those who are properly trained and prepared adversity can present the opportunity of a life time. Right now is one of those opportunities! Don't waste this chance to make great US Dollar profits while the market falls, and then transfer those profits into foreign markets as inflation kicks in. Retire smart, not desparate.

Last Chance To Take Free Foundations Class...

A Quick reminder today is your last chance to SIGN UP for the "Foundations of Stocks and Options" class for FREE. The west coast class starts tonight at 8:00 Pacific, 11:00 PM EST.

After this month's class this opportunity may be gone forever! So click below to sign up now.
http://www.thefinancialpuzzle.com/foundations.html

Have We Hit The Bottom And Made The Turn?

This week has generated a lot of news about the Dow's sudden bullish move, ending the week up over 700 points following last week's slide into level's not seen since the 1990s. Weekend TV magazines have pushed stories touting "the end of the fall is here, the bottom has arrived". Sadly these reports are really nothing more than optimistic words from reports who have been told to "try to not make it sound so bad". From a strict technical position there is little reason to believe the current bullish move is anything more than what Charles Dow would have called a "short term trend".

Dow theory breaks market trends into three phases:
1) Long term trend (lasting over a year)
2) Intermediate trend (lasting 3-6 months)
3) Short Term trend (lasting 3 days to 3 weeks)

Each of the trend cycles flow within the context of the larger trend. At the moment the Dow has been in a solid down trend since it's peak in October 2007. One can look at the chart below and also see a few intermediate trends, with several short term trend moves. The current move is most likely a short term trend because of where it's occurring on the chart.

Notice the secondary fan line which is coming into play as a downward resistance. At the same time much more of a rise and the Dow will be running into resistance back at the 7500 level. Couple that with the fact the 50 day moving average is quickly approaching the same region and there's a triple threat reason why the Dow will maybe have 1-2 more positive days this week before continuing in a downward spiral.

The exception to this move would be the reality that the Dow is currently sitting at the 20 day Exponential Moving Average. This alone could provide all the resistance needed to cause the market to stop it's climb and return to falling Monday Morning.

The next target of course is back at 6600. If that support holds we might can start writing some news stories about the bottom starting to form. If it doesn't..... 5500 here we come...

Foundations Class Offered Just for The West Coast!!

Hey Guys - we had an enormous.... that's like A LOT... amount of people sign up for last month's Foundations of Stocks and Options class that were unable to make it due to the fact they live on the west coast. So this month we're offering a Foundations class just for you west coasters. It meets:

Monday's and Wednesday's
AT: 8:00 PST - That's 11:00PM EST!

The class will go for 4 weeks.

AND

For a limited time we're going to let you take this first level of classes FOR FREE!!

So you have no excuse to not sign up.
Here's what William said after taking last month's class:
“ I LEARNED MORE about OPTIONS and TRADING…CHARTING….in your 1st SESSION. Then I did the 16 months I was with PAINE-WEBBER…. ( You can print THAT!!!! With my NAME ON IT!!! )”

Oh yea, I think I forgot to mention he use to be a stock broker with Paine-Webber. Go figure. Even the brokers are begging to learn this knowledge.

Show go ahead and sign up and see what the buzz is about since this MAY BE YOUR LAST CHANCE TO EVER TAKE THIS CLASS FOR FREE!!!!


Go Here To Sign Up

OH YEA - if you act fast enough and get signed up before the class is full we'll even let you BRING A FRIEND!!

"Hey JW - What's Your Outlook On The Market?"

Today I received this email from a student who took our class last month. I thought some others might enjoy the response:

from student:
"whats your outlook on the market? will we continue to rally? sell-off tomorrow?"

john


Response:
I think this is a short term retracement. How long it will last? According to dow theory 3 days to 3 weeks. Today would actually be considered day 3 because it started on Tuesday.
I expect to see a retracement to the 20 day EMA. Look at the behavior on 1-28,29 and again on 2-6 thru 2-10. It's typical retracement patterns.


One thing that may be added here is MACD is crossing over indicating a bullish move is impending. However there are a few things that could easily stand in the way of a major bullish move.

1) We're running into the 20 Day EMA. That often will act as resistance. Also note this is very close price wise to the 20 day SMA used in the Bollinger Bands.

2) A brief check of the ADX trend indicator shows this is a weak trend if a trend at all.

3) If tomorrow we do continue a rally the resistance coming up at 7500 will likely be a pretty strong resistance.


All that to say. We COULD be entering a bullish move but it's a bit unlikely. The mostly likely next move is either a retracement tomorrow (Friday), or a run up to 7500 before it turns and continues a bearish move.

Add to this basic technical analysis the choppy geo-political environment and I do believe it's a bit pre-mature to call this a bullish set up. Let's give it a couple more days and see if any new signs show up. If so I'll update this post. Until then - Trade any bullish trades with caution.

Happy trading.

J-Dub