SOUND FINANCIAL ADVICE, BOYS

The fellas on CNBC are all over this BAC move today. Almost like they saw it coming. If BAC moves 4% in a day, which happens about as often as all the market tops they call, you’d probably feel pretty far behind the ball here. Especially being very underpositioned in financials.

Here’s a quick look at the charts we used to buy calls in BAC last week. Again, you’ll notice the theme here, and how it is recurring among most ideas I take risk in.

THIS IS AN INITIATIVE MOVE HERE, DAMMIT. This stock is just now approaching 09 highs. It’s nowhere near 07 highs. There is a massive void in between those two reference points where prices trend with the least resistance. Above $18 and this stock looks very, very nice.

The old adage, “Sell in May and Go Away” historically is not bad advice. However, this year it was a much different playbook. Normally the summer months are slow, boring, and lack substance. This summer has been exciting, with explosive individual movements in stocks, for those that spread out their attention span and can anticipate rotations between certain types of stocks.

These last several days seem like typical summer-like conditions. Therefore, I want to give a quick word of advice when it comes to portfolio management.

The recurring theme I see is that we work hard over the course of several weeks, nailing movements in stocks left and right. As we do this, people are struck with confidence, and as a result, continue to pile on more risk. As the market gets stretched, so does the buying power of your Zecco account. You find yourself fully invested at the wrong time.

I had a conversation with a friend earlier this week, and he had asked how I find confidence to keep taking risk in these types of environments, and what are the warnings signs of when to slow down. You’ve watched as I’ve traded pretty well around these markets for the last several weeks, and have had plenty of winning positions to manage. For me, as long as there are unrealized gains on, I am going to keep taking risk. HOWEVER, when you find yourself with many positions on, and you are at a point where less of these trades are working at the moment, that in itself is a reason to seek insurance. At that point, to add any more risk means that I have to make room for it, until existing bets start working.

Let’s not make this a month where you were underinvested, again, at the lows last month, and then overinvested at the highs. Protect your profits.

As a result of this great advice, I bought SCTY calls expiring tomorrow, BIDU calls expiring next week, and can’t take my eyes of XONE.

OA

I’ve been plotting this post since hitting submit on my short write up of this idea over a week ago. Not a moment has passed where I haven’t been asked…

“OA, you still like LULU?”

“Is LULU broken?”

“Still like LULU?”

“Would you buy LULU here?”

“OA, you still like LULU?”

“Are you concerned about LULU?”

With that said, let’s chat about LULU. Retail stocks have been mostly bludgeoned to death in the last several months. LULU is a heavily shorted name that has grossly underperformed the market in the last year, but has recently had buyers step in, slowing its death spiral. Take a look at the structure in this stock above $40.

Having already placed my bet, caught a lift, sat through a low volume decline, I find myself patiently awaiting that initiative move that sends this stock up to $45. Having already seen people round trip this thing several times over, buying into the strength and taking losses into small declines, I’d propose a different management approach to this trade.

Let the trade work while the stock is within balance here. Should it sell off and trade below $38, BREAKING this beautiful balance of price and volume, it is a sell. However, if it hangs here, patiently wait for the trade to work, and for buyers to control this issue.

When I offered this idea, I chose the word “investment” carefully. Meaning something that won’t resolve within everyone’s expected time frame of IMMEDIATELY.

With any luck, the move starts this week. That is all.

OA

Last nights After Hours with Option Addict session was fantastic. Raul nailed the content and presentation, and generated nothing but positive feedback. Again, these sessions are recorded so make sure if you haven’t listened yet to do so soon.

On the day I bought shares of BORN, and am stalking SINA and MKTO for September call positions.

With that move in JRJC yesterday, I’m thinking we need to up the number of cheap/risky stock positions here. They are a great signal of risk, and when the shittiest stocks start floating to the top, you know that risk appetite is getting a little excessive.

On that note, XXII and SYN are my favorites. Hit me if you have any others.

OA

Ladies and Gents,

This week in After Hours with Option Addict, we’ll be conducting a CRASH COURSE in Market Profile hosted by Raul. I’ve been talking up this idea quite a bit for the last few months, as I think this is too powerful of a tool for you to avoid. He has accepted the challenge and will be using the After Hours with Option Addict platform this week to give 5 different presentations this week to help you learn the concepts of this powerful form of market analysis.

Market Profile was first introduced by Peter Steidlmayer back in the mid-80’s. This form of analysis will help you graphically depict the acceptance or rejection of price over time. I don’t read many trading blogs out there, but I’ve been a long time reader of Raul’s work. He provides an objective analysis of the market profile, helping me to see an organization of price, time, and volume. He also offers intuitive scenarios to what the market is likely to do at that point in time. Several years ago when I was actively trading futures, I thrived off this analysis and I believe that even a novice understanding of this will only help you see the day a littler clearer, and will help you develop a broader intuition of price development and direction in the markets.

Members of After Hours with Option Addict, please welcome Raul to the mic next week. For anyone interested in this topic, consider joining ranks, even just to test drive for a month. These sessions will be recorded and indefinitely archived to use at your leisure. In preparation for this event, check out Raul’s blog and go back a few weeks, looking at the terminology, charts, and analysis he uses to discuss the markets.

Please post any questions you have. Thank you.

OA

Make no mistake, that sell off had some very violent action underneath the surface. That was the second lowest TICK reading of the year. In other words, there was a quite a bit of panic in that flush.

There is still an unquestionable resilience in growth stocks here. That still remains the focus in terms of opportunities into next week.

I’ve moved from most of my August expirys this week with a decent sum of capital to put to work. We started putting together some watchlist ideas last night, and will finish that process in After Hours with Option Addict this evening.

Hit me with your best ideas here, as I will look to take on some risk into the weekend.

OA