The D watchlist

I use several watchlists, named A-D just for my sake. I get asked frequently what is in these watchlists since I post comments regarding them. With that in mind, I bring you the D watchlist:

I use several stocks in this list as tell for Risk On or Risk Off. With MO leading the list at basically flat – and CF near the bottom with XOM – I would say Risk is certainly off.

Scan for stocks

One of the tools that I use a great deal is Freestockcharts.com

One aspect that I have neglected though is the Scan feature – but have begun to use it more because of the vast array of scan options available. Here is a snapshot of some of the choices to select from when you “Add Condition:

An example here is to select the “Volume crossing up through Moving Average” condition – this will yield 68 results for today.

So if you are looking for a scan solution with an interesting selection of choices, play around with it.

History Rhymes

History Rhymes

So how can one use this as an edge with a trade setup? I will use the Weekly chart of CXW (Corrections Corp of America) with RED arrows showing a repeated pattern:

In terms of Probabilities, I think it is quite clear what the trade setup is here – especially with the Doji / Spinning Top as the last candle. A short here with a stop at the recent high of 24.16

The Fab 5 update

This was a solid week for all members of the Fab 5 100 Roll team. The real MNST (Monster Beverage Corp) stock put in a fantastic showing to complete the 100 Roll. The position was closed on 1/26/2012. Here is the new list with JOY (Joy Global Inc.) as the newest member:

The Market View

The market held up rather well this week overall with a lot of great action “under the hood”. The PnF chart for the SPY is below showing a 1 box p/b from the most recent high print:

Now for a look at a traditional Candlestick view of the SPY:

Price is doing a great job here of working off the mild Overbought (high RSI) reading. A mild overshoot of the rising trend line above brought in some sellers. The 50 day moving average looks to be slowing a bit after the Golden Cross event recently. The MACD has become embedded, Bulls will want it to avoid a rollover here.

A little correction through time is the ideal scenario and if that occurs – focus on individual stocks that are participating in a positive way. You can find stocks that are within 3% of the 52-week high here.

The RSI as a guide

This post is part of a series that I do where I review or lay out a trade setup using just one indicator on the 5 minutes chart – in this case RSI (Relative Strength Indicator).

Below is an example from today where I am trading GOOG (Google Inc) with the goal of a pin near 575 by selling the weekly 575 call option (h/t @BlueFielder for the specific trade idea). Now on to the chart:

The highlighted areas in RED show the key price action today where an entry and or exit can be made. In addition, the trend line drawn shows a series of higher lows in the past hour.

Again, the goal here is to have price pin to the 575 strike and keep most of the premium collected by selling the call early in the day. This specific trade execution requires diligence on managing the trade throughout the day – and should include a stop on the sold call for prudent risk management.

 

Collared

I have written about using an Option Collar on several occasions here and here – and thought I would provide some additional thoughts on the Collar trades that I have on in January.

I currently have the following long positions on with an options Collar:

1) CREE with a FEB 26/28 collar in the swing account

2) DECK with a FEB 80/85 collar in the swing account

3) SBUX with a FEB 45/50 collar in the long term account

The positions for #1 & #2 where dip buys that bounced nicely and I really wanted to hold the positions for a swing timeframe – with a collar I am able to do that more easily.

With the long-term position in SBUX, I wanted to hold through earnings and didn’t mind the cap at the 50 strike – but certainly wanted the downside protection if any issue arose from the earnings release.

Updated Section

CREE is currently trading at 25.36 but the collar trades at 1.45/.25 for the 26/28 put/call for February 18 expiration which would leave a net of 1.20 if executed right now. Just a follow up to what has transpired since putting on the collar last week.

 

Basing in the Box

One of the common patterns to look for in a stock setup is the forming of a “base” – a time period where the stock price stays within a relatively tight range for weeks up to several months.

One of the stocks that caught my attention this evening was EL (Estee Lauder). Below is a Daily chart showing a nice base built “in the box” as well as a really nice Bollinger Band “squeeze”:

Price is approaching the 59.49 R from December, then on to test the R from November of 60.37 level. Price is currently just above the upper Bollinger Band so look for it to expand up to make room for Price.

Nice Breakout setup here so set your Price Alerts and stalk it.