Ring around the collar

I have received a few inquiries today about protection ideas for a CF (CF Industries Holdings Inc) long position. There are certainly a few different paths to take here, but I thought I would discuss the Collar.

If you are currently long and want to have some downside protection for the long position in CF, consider the following:

1) Sell the Oct 210 call (currently at 5.90)

2) Buy the Oct 175 put (currently at 7.65)

This will cost you a debit of 1.75 (less than 1% of the underlying) of the current 191 price.

So how does this work? Well for starters your gain is capped above the 210 strike price on the call (19 bucks from here). Horrible I know, just a 10% gain from here, lol.

More importantly though, owning the downside put keeps you protected from a host of potential downside scenarios (stock and/or market related).

Happy Trading.

Diamonds are Forever

What, are you nuts?

When speaking of the Diamond, you can be. Sort of.  Here’s how:

All about nuts here. Of course I can’t talk about diamonds and leave out TIF (Tiffany & Co):

Getting a nice move going here after a recent earnings report. Stalk this for a move over 70 if no current position.

The Regression Line

One of the powerful benefits in charting stocks is the vast array of indicators available today and what can be learned from their use. For those that follow me or view my charts posted on Chartly you will notice from time to time that I threw in something new.

I am a big believer in experimenting, likely goes back to my Technology background, as it helps to reinforce a view (or in many cases help to alter it) in a positive way.

Today I bring you the Regression Line. For an example, here is a Weekly chart on HFC (HollyFrontier Corp):

The Blue Line noted on the chart above is not a Trend Line drawn by hand. It is drawn by the charting software when you drag from the lower left to the lower right of the chart. I am using freestockcharts.com in this example and here is their definition:

Reg Line: Linear Regression trendline uses the least squares method to plot a straight line through prices so as to minimize the distances between the prices and the resulting trendline.

 

The Bus Tour

This was not a political re-election campaign trip, so you and I paid for it, not the Democratic National Committee. What a waste of our tax money!

And what this message did not tell you was that the buses were “made” in Canada … but
retrofitted for security hardware here in the U.S. – I feel so much better.

How stupid does he think we are?

Don’t answer that question.

Secret Service Buys Two New $1.1 Million Buses For Three-Day Trip …

US President Barack Obama (C) walks to his bus as he arrives in Minneapolis-St. Paul International Airport , Minnesota , August 15, 2011, where he is to begin his three-day bus tour in the Midwest centering on ways to grow the economy. (AFP PHOTO/Jim WATSON)

He FLIES into an airport somewhere in the midwest, hops into a brand new 1.1 Million $ bus, paid for by you and me, for a “bus tour” around the “midwest”, and after an hour or so, gets driven back to the airport for ANOTHER FLIGHT, lands at another airport where another 1.1 Million $ brand new black bus is waiting for him … and repeats all that until his midwest bus˜tour'”is done??

Oh yes …… and THEN he leaves on a 12 day vacation to Martha’s Vineyard ……. to REST UP from this campaign bus tour!

And don’t forget …….. those brand new shiny black buses aren’t DRIVEN to the location where they meet Obama. Those buses are loaded up on one or more C-17s. Then, they are flown to the destination ahead of AirForce 1.

AND! ……. this is REPEATED FOR EVERY CAMPAIGN STOP.

On this ‘bus tour’, the Prez will lecture the ‘little people’ on how they need to live within their means and cut-back! Remember when very recently Obama told that family man to GO BUY A HYBRID VAN when he said he couldn’t afford to fill up his truck ?

Obama’s ‘carbon footprint must be as large as most cities by now.

All of this on the taxpayer’s dime ….. But remember, this is NOT a campaign trip – it is “Meet with the people” trip only! So that the DNC does NOT pay a cent for all of this.

Walk, don’t Sprint

Some interesting news in the smartphone wars is suggesting that S (Sprint) will be getting the AAPL (Apple Inc)  iPhone 5 later this year when it is released. Here are some links covering the news:

http://reviews.cnet.com/8301-19512_7-20070879-233/rumor-apple-doing-advanced-testing-for-sprint-iphone/?tag=mncol;7n

http://online.wsj.com/article/SB10001424053111903327904576526690675657466.html

http://www.beatweek.com/news/8978-finish-line-iphone-5-release-date-as-best-buy-chalks-up-free-iphone-4/

Here is a Daily chart from the reaction to the news yesterday:

The RSI Buy – the Series

One of the stocks I am stalking currently is ABV (Ambev). It has been churning here above the 33 level today, as I watch it on the 5 minute chart, and seemed to be a good candidate for an RSI buy post.

As you can see here this stock has given you several entry points as the RSI neared and/or touched the 30 level. Today was no exception.

So for intraday trading, one can use this as a simple approach to attaining a solid long entry.

Trade ‘em well.

Clear as Mud

In going through my usual routine on Saturday of looking through charts, one thing that slows down the process is a chart with a lot of mixed signals. Today is no exception as I find myself evaluating the chart of FL (Foot Locker Inc).

In reviewing the Weekly chart you will note several items that appear Bearish.

1) Bearish Engulfing candle for the week

2) Increasing volume on the pullback to the TL

3) EMA 9 rolling over

4) Closed at the TL for the week

Now for some items that appears neutral or Bullish.

1) MACD looks to be bottoming here

2) A LOT of Volume at Price at this price level

3) Closed at the TL for the week (did hold the TL)

Is this a pause in Stage 4, or a beginning of a new Stage 1 move? Building the Right shoulder of a Head ‘n Shoulder pattern?

Time will tell. For now I’ve set some Price Alerts.

Resistance & Support

I often see comments about the importance of Moving Averages or Support/Resistance horizontal lines in determining where Support or Resistance for price may exist. Although I have my own opinions on just how important this may be, I’ll provide an example here and let you decide for yourself.

Below is a Weekly chart on KT (Kt Corporation) as we finish off this week:

Sometimes price attracts to an area like a magnet …

 

The TR (Trend Reversal) Signal

One of the key things to look for when planning an entry or exit of a trade is the Trend Reversal. With candlestick charting there are several candles to look for that signal a possible TR event, but all need confirmation from the following candle(s) – based on the chosen timeframe.

I found an example today when looking at the monthly chart of MA (MasterCard Inc.) showing that the current candle for August is NOT confirming the Shooting Star candle from July:

Just a reminder of the importance of a confirmation candle for the TR event to be confirmed.

More info on the Shooting Star can be found below:

From: http://www.candlestickforum.com/PPF/Parameters/16_555_/candlestick.asp

The Shooting Star

 

 Description

The Shooting Star is comprised of one candle. It is easily identified by the presence of a small body with a shadow at least two times greater than the body. It is found at the top of an uptrend.  The Japanese named this pattern because it looks like a shooting star falling from the sky with the tail trailing it.
Criteria

The upper shadow should be at least two times the length of the body.

  • The real body is at the lower end of the trading range. The color of the body is not important although a black body should have slightly more bearish implications.
  • There should be no lower shadow or a very small lower shadow.
  • The following day needs to confirm the Shooting Star signal with a black candle or better yet, a gap down with a lower close.

 

 

Signal Enhancements

  1. The longer the upper shadow, the higher the potential of a reversal occurring.
  2. A gap up from the previous day’s close sets up for a stronger reversal move provided.
  3. The day after the Shooting Star signal opens  lower.
  4. Large volume on the Shooting Star day increases the chances that a blow-off day has occurred although it is not a necessity.

 Pattern Psychology

After a strong up-trend has been in effect, the atmosphere is bullish. The price opens and trades higher. The bulls are in control. But before the end of the day, the bears step in and take the price back down to the lower end of the trading range, creating a small body for the day. This could indicate that the bulls still have control if analyzing a Western bar chart. However, the long upper shadow represents that sellers had started stepping in at these levels. Even though the bulls may have been able to keep the price positive by the end of the day, the evidence of the selling was apparent. A lower open or a black candle the next day reinforces the fact that selling is going on