20 Basis Points

I had an interesting month, to say very little, trading hot potatoes with plastic explosives nestled inside the spuds.  Some of you are very obsessed with instant gratification.  I get that.  I appreciate a good “fix” myself.  However, trading is a process I enjoy more than nearly every other modern endeavor.  I am figuring this game out, gregariously, because I refuse to pay someone to teach me.

For the month, I earned 20 basis points (paid for my lunches, essentially) in my swing portfolio after commissions.  I have been buying and selling options this month, and getting a feel for the way they move.  They certainly are curious little instruments.  About 8 trading sessions ago, I was up 8 percent on the month.  The selloff corrected that early lead.  One of the biggest regrets I have on the month was talking up a TZA hedge with the traders in 12631 at literally the perfect moment but never executing.  I don’t dwell on these types of events.  I only reiterate it to cement it into my experience directory.  Remember, this blog is more important to me than it is to you, the reader class.

Elroi was turned live on 01/15 after a power coding session and optimization.  He was turned on and immediately began a drawdown period.  Such is life my friends.  His monthly statistics are weak, losing one hundred dollars.  Since going live, he has lost only fifty, however.  This was a trial period of sorts, where he was fed only one contract.  After commissions, the next project has cost me one hundred and fifty dollars.  Here are the daily statistics:

What may seem like a waste of time has actually been one of the most insightful endeavors into the futures market since I began trading them last year.  While I watch along, waiting for Elroi to fire, I began noticing nuances in the tape that I never saw before.  I am getting a very clear vision of order flow.  My scalping game is about to get serious.  Remember the game where you have to spot the difference between two cartoon pictures in a newspaper?  Six or seven little nuances, I see them now and rapidly process them.  The volatility in the NASDAQ futures is a tremendous opportunity for a trader to earn a nut.

Should the market continue “getting jiggy” I will be increasing my day trading beyond algorithmic.

My book went out of the week long, very long in fact.  I have been buying the whole way down.  The correction road map pretty much nailed the weekly low, nailed this morning’s buy the dip opportunity, and has now assumed the proper pouncing position.  If we rally Monday, like the plan calls for, I will have completely forecasted five days of stock market activity.  That would be some sage stock market prowess (no impala).

I own all the names I like but one.  I sold BALT yesterday into a chart I perceived to be bear flagging.  Now the chart looks wonderful with ten trading days until earnings.  Do you know how much money I can make in ten trading days?  Sometimes we just lose interest and patience.   Nevertheless, I intend to make a great sum of money in February simply by eating tacos and pumping iron with my personal trainer.

http://youtu.be/8YSq7KiT3_c

Often times we mistake (or rather misunderstand) the underlying physics of beauty.  Your brain loves symmetry, much like you brain likes simple pop music songs.  No matter the pop jingle, your subconscious knows the structure of the song and when to sing along.  When you get the cue, your brain releases chemicals that make you happy.  The same holds true for top models, they are symmetrical.

What does this all have to do with the markets?  The intermediate term control is now back in balance, after being dominated by sellers for nearly a week.  Look at this lovely Gaussian distribution.  Your move, mother market:

UPDATE: Look at ANGI showing some nice, round bottom symmetry:

You can only keep a good stock down for so long. This chart is more pent up than a nun in a cucumber field:

Full Disclosure: I bought more FSLR today. I am very long. This trade has substantial risk, like taking a bunch of nuns on a tour of a cucumber field. You may lose money.

Good morning, good morning, here we are, another month end.  Michigan is showing early signs of snapping its cold spell after setting an all time snow record in January.  Bravo, mother nature.

We have lower equity index prices overnight, ahead of some important premarket economic numbers.  I have very simple expectations for today, and should they occur, I will ride into the weekend full long, malted liquor in hand.  My expectation on the day is for a higher lower verses Wednesday.  If higher low, then press, else begin reducing exposure.  This last sentence is much like how I communicate with robots.

We are currently set to open out of value, out of range in the NASDAQ futures which printed over 40 handles of range on above average volume.  This creates a high risk/high reward environment which fits well into the context of our road map.

The month end framework fits well into our road map, too, because often you hear bears groan about “afternoon markup” on the last day.  A late day rally would put a bow on everything we have mapped out this week.

There is no decisive balance overnight, but value never managed to follow price down and is still set at 3510 on the overnight profile.

Price is coiling ahead of our 8:30am information leading me to believe the market finds the news to be important and is waiting before making its next move, thus some of what I write now may become void.

Thus, I will offer out my finest price levels, for your viewing pleasure, on the following intermediate term composite chart:

“Art washes away from the soul the dust of everyday life.” – “Don” Pablo Picasso

I did very little today, merely observing the tape for the most part.  I bought more YELP.  I did to too early.  My trigger was a bit higher, and when I had the NASDAQ futures pinned down with laser focus I saw the force I thought could propel YELP into my trigger.  Instead it just traded flat while the market went on a rip.

And I am okay with that.

There’s a chance my TWTR weekly calls, the $65 mark, will be lottery losers tomorrow.  It seems the gambling class flooded into the strike via their local gas station clerk, while they bought their cigarettes and dinner.  Fortunately, I hold a modest common position.  Also, I have a little bit of dry powder, should I see fit to buy more time on the play.

Amazon is getting smashed in the mouth (no 90’s) after “missing on the top and bottom” which is fancy talk for people are disappointed.  Usually they miss top and bottom and everyone elates their commerce prowess regardless.   Google is flat but the NASDAQ turned nose down into the close.  Which brings us full circle to something more important than any earning announcement—my PLAN.

You live by your plan, your plan is yours.  But your plan is useless without you.  There are many other plans, but this one is mine, and it is playing out like a etude from Chopin—technical and powerful.  Let’s have a look, shall we?

If this plan holds true, tomorrow may be the best buying opportunity of the 1st quarter.  Only time will tell.

Goodnight.

Equity futures continue to print wide ranges overnight on slightly above average volume.  Prices are higher in NASDAQ futures.  The overnight print suggests a slight imbalance exists to the upside, with our overnight volume profile looking like a half-completed bell curve distribution.

My first morning scenario would be an obvious bit of selling pressure since the overnight inventory is long.  Sellers may target an overnight gap fill down to 3473.75.   Price may continue lower, but my vision on the day is for yesterday’s session low to hold.

A second scenario would be for buyers to enter the market and gap-and-go drive prices higher.  For this to occur, we would need to see the opening print make perhaps one or two ticks lower and then blast higher, suggesting the long-term timeframe is entering the market.

A quick rundown of market control is presented below:

Long term timeframe – buyers

Intermediate term timeframe – sellers, we continue to make lower highs and lower lows since 1/22

Yesterday day timeframe – neutral, the NASDAQ printed a neutral profile, with rage extension on both sides of the initial balance.  This suggests indecision and balancing.  These prints tend to occur at or near inflection points.

Overnight timeframe – buyers, buyers have made four upward rotations in price and printed half a Gaussian distribution.

We prepared for the neutral print inside of 12631 yesterday just before the Fed meeting.  At the time, I noted 3440.50 as my max pain price level, a level that if breached would cause my capitulation.  I still find the price level incredibly important.  However, the neutral print held true and presented an excellent entry on the day.

Below is an updated picture of the “correction road map” chart, a 30 minute RTH chart of the NASDAQ, and also a picture of the overnight profile showing a slight imbalance with an upward skew:

Facebook is up big after hours since reporting earnings.  We are getting sympathy moves in GRPN, TWTR, ANGI, and YELP.  I have a big heaping pile of exposure to all of these names, as well as many others, in a book of risk I can only describe as an autonomous, morphing blob hell bent on consuming all internet traders into its belly.

I continued my buying campaign today, chugging down calls in AMBA and common in CUDA like a raver six molly deep.  I have consumed a disgusting amount of caffeine over the last 48 hours, toiling over market charts and building my next empire, something much bigger than anything you see on these interwebs.  I smell like a Monster and old ladies are scoffing at me while I walk around in deep-V t-shirts in the arctic north.  I do this because it reminds me I am still a living entity and not a zombie robot.

The market has pressed the boot deep into my stomach, yet it cannot make me regurgitate the libations boiling in my gut.  I have no interest in ending the party.  If I must, I will BE the party.

If my prophecies prove correct, educated guesses built on the knowledge and labor of elder generations, then I stand to make a great sum of money in February.  I stand to make a great deal of money and it all starts with tomorrow’s sit.  I will sit here, sucking down chili dogs and guzzling flaggarts of ale while the little bitches get their quick fix and take profits.  Hell, I may even take out the lever and buy some MOAR.

IMPORTANT SIDE NOTE: LinkedIn is for old men with the poopy trousers to rub one another off.  That being said, I have tuned up my profile as part of my continued quest to infiltrate and dominate the business community.

I have already divulged too deeply into my plans.  Now I must go spoil my body with iron work designed to create perfect symmetry and posture.  Hide your wives and tell you kids about a brave man who roams the internet, in a loin cloth, trading these stocks.

I bought the new low of the day.  I am about all in.  God save the queen.

More later.

Index futures went for a ride overnight, with the S&P trading a 22 handle range and the NASDAQ trading over 45 points.  There were several macro influences affecting the action as the market was given plenty of information to digest in the overnight hours.  From the volume profile distribution that was printed, I can see there was no consensus reached.

Overnight, we are out of balance with sellers asserting control.

For traders, a market out of balance creates the greatest amount of opportunity.  However, this is a high risk/high reward environment where tight stops, although prudent, are vulnerable to random market noise.  The best strategy is often smaller position size with a larger profit target and stop loss.

Interestingly enough, we are currently set to open inside of yesterday’s value area which would typically mean we are in a low risk/reward environment.  Should we sustain trade between 3500 and 3486.50 on the NASDAQ, we may see a very aggressive chop-like trade.  This scenario would make sense, a violent waiting room ahead of the 2pm FOMC meeting announcement.

Another scenario would be for the intermediate term sell control to reassert itself early on and drive prices lower to 3474.25 then 3462.75 and ultimately to the naked VPOC at 3458.  This would fit into the discouragement framework noted yesterday morning.  If instead price continues to drive lower, cutting through 3452.25, then we are likely to see an acceleration of selling and may be entering the true panic phase of correction.  With the market movers at the FOMC on tap, this possibility becomes greater, however this is still scenario number two for the day.

A third scenario is the long term timeframe entering the market and driving higher. This would require sustaining trade above 3527.25.  I have highlighted these levels on the following intermediate term volume profile chart.  I have also attached a daily volume profile for insight into a possible chop trade.

I have been trading these social media stocks, the fire, names like FB, TWTR, Z, YELP, TRLA, ANGI, and GRPN since I started blogging here back in the cussing days.  I would cuss and trade these stocks, like an internet villain of sorts, for my profit and your entertainment.

I was trying to get people excited about my little blog, over here.

I bought weekly calls in YELP and TWTR this afternoon, which prompted distinguished 12631 trader @ckelly44 to question what I was seeing, and also to explain a bit more about the trade.  First, what I was seeing is this:

Second, we have Facebook earnings out tomorrow, and I have no idea what they are going to report.  However, many social media stocks are in alignment into the earnings.  Therefore, I expect a very binary response from the names once Facebook reports.  I had a hard time choosing between TWTR and YELP, therefore I picked both—like a good American.

Here’s the YELP:

While we’re looking at charts, here’s FB:

This same look can be seen in Zillow too.  ANGI is trading a bit radical, but nice too.  Here’s the kicker, I have exposure to all of the above names like some kind of crack head.  Should the names bounce, I will have exposure to said names, all of them, until Friday.

Here’s the exposure catalogue:

Z – Feb $95 calls and common stock

GRPN – Feb $12 calls

FB – Feb $57.50 calls

TRLA – Feb $40 calls

TWTR – weekly $65 calls and common

YELP – $80 weekly $80 calls

ANGI – Feb $17.50 calls

Via the above pot of positions, I have a ton of exposure to social media.  More exposure then I have ever had in my life, as a matter of fact.  The crazy part is, only one of those call positions needs to cooperate and I will profit.  Options, when bought with halfway decent timing and proper sizing, offer a much more modest risk profile then I previously understood.  Should they all lose after a big FB upset, my book will sink about 3.3% from here.  That is losing ALL of the premium. I know, bananas.

I have a short term expectation for movement higher, you see?

MOVING ON…I had some AAPL call exposure left that scalped me today, yet I am still up 1.6% on the day.  Leading the way was LEDS.  The stock went #BEASTMODE into the bell on heavy volume.  Someone wants some LED exposure.  I still hold 25% of my risk in the LED industry.  I have not sold anything yet.  Today it became clear they are making another attempt to take my shares from me.  They will fail, again.

I am most bullish on the LED industry.  Next is social media, and third is natural gas.  It is so freakishly cold here in Michigan, colder then I can remember.  Also, they are limiting the propane deliveries to the hilled billy folk, telling them to, “get with the times and hook up to a natural gas pipe.”  I was going to get something exotic, like UGAZ, but I opted to follow The Fly into AREX.

I did not sell anything yet, therefore my cash is down below 10 percent.  I think we still trade lower from here, but it is also my expectation that individual stocks will be allowed to behave on their own merit.  This could be seen today in volatility, which was crushed.

Here’s my plan, we stuck to it today, albeit slightly weaker than expected.  Let’s see what tomorrow may bring: