Wang's Happy Trading

This weekend, in my Market Forecast, I said,
“For the new week, I think the market is in a good position to continue what it started early last week. We’ll again be watching to see if the market can rally above SPX 1340 and Nasdaq 2300. If it does, the important thing this week is for the market to stay above these levels and continue with upwards movements to catch the daily upper BB. We do still need to see some strength back into the financial sector.”

Last night, I said,
“[The market] is, however, in a good position to start a new month (and a new quarter) on a positive note. The MAs of the major indices are crisscrossing, indicating the struggle and the potential for shifting gears to start a new up trend. The market needs, first, some solid movements to go above the MAs.”

Today, the market delivered. It pole-vaulted yet again; this time, clearing the bar! Financial shares were strong today and led the market in its rally. The market not only jump above the MAs, it also caught up with the daily upper BB!

The Dow closed up +391.47 points; SPX gained +47.48 points; Nasdaq flew +83.65 points.

Here’s how the market looked at the close:

XLF (finanicals) jumped +7.04% and HGX (housing) went up +6.04%. Techs were strong: INX2 (Internet) +4.17%, SOX (semiconductors) +4.22%, BTK (biotechs) +3.55%, and SWH (software) +3.22%. Commodities were mostly on the weak side: GLD (gold) -3.93%, SLV (silver) -2.59%, USO (oil) -0.37%, UNG (natural gas) -4.16%. PBW (clean energy) added +2.81%. FXI (Chinese ADRs) bounced +7.45%!

SPX

SPX gained +47.48 points to close at 1370.18. It cleared above the 1340 level and above its daily MAs. It caught up with its daily upper BB. The MACD also went higher.

Nasdaq

Nasdaq pole-vaulted +83.65 points to close at 2362.75. It went above the 2300 level and above its daily MAs. It also caught up with its daily upper BB. Its MACD rose.

The market is now in a much more bullish place. The sentiment on the market feels much better. For the past 2 months, the market has been churning, with money rotating from one sector to another. When there had been a big rally, the market mostly saw some sectors up, while other sectors went down. Today, the metals and mining (XME) and agricultures (MOO) were down in the morning, but, kept on going higher all day. Steel stocks eventually broke out into new heights. X, for example, closed at a new all-time high above $132!! I went ahead took the profits on the play:

HappyTrading
Posted April 1, 2008 at 11:34 am | Permalink (Edit)
X ($131)
XDE, rest out at $10.1

for a +23% gain from a buy just yesterday. Those options traded as low as $5.1 in the morning, and closed at $11. Sometimes, it helps to just watch the daily chart and not get shaken out by the intraday volatility.

So, we’ll have to wait and see what the market does tomorrow. The market has gone far in one day. We’re likely to see some profit-taking sometime tomorrow; perhaps mid to late morning. Then, we’ll have to see how well the market holds up. If the market can vent without losing much altitude, the market should be able to start climbing higher along the daily upper BB, which had already opened up.

Last night, LEH came out with the news that it plans to raise $3 billion of capital to quash questions about its cash flow. This morning, that number went up to $4 billion! The news certainly helped to excite the financial sector and the broader market. LEH shares jumped +17.8%! GS also benefitted, gaining almost +7%. Personally, I played BLK for the financial sector and pocketed a +50% gain on the options bought last Friday.

GOOG shares jumped more than $25 today, or +5.73%, partially perhaps because of the news that MSFT may not raise its bid for YHOO. YHOO shares, on the other hand, slid 1.49%. BIDU had a great day, shooting up +14.03%! We were there to catch it! We initiated a trade (published) on Thursday, 3/27/08:

buy to open
BIDU ($239.3)
BDUDW, APR 270 calls, at $6.8

I cashed some of this out on Friday for a +40% gain,
3/28/08
sell to close
BIDU ($250.26)
BDUDW, APR 270 calls, at $9.5, +40% (partially out)

and, “laddered out” all day with gains as high as +105%, and still left $4 per contract on the table!!

4/1/08
sell to close
BIDU ($250.5)
BDUDW, APR 270 calls, at $8, +17.6% (more out)

BIDU ($257.5)
BDUDW, APR 270 calls, at $10.5, +54.4% (more out)

BIDU ($260.9)
BDUDW, APR 270 calls, at $11.7, +72% (more out)

BIDU ($266)
BDUDW, APR 270 calls, at $14, +106% (all out)

BIDU jumped about $10 in the last 45 minutes of trading! And, those options just flew! They traded as low as $6.5 and as high as $18.2, closing at $18.1.

Another high flyer was ISRG, adding almost +7% today. It has come from about $260 on March 10 to now about $347 per share!

As the market becomes more stable and start a new up trend, I will start to look for longer-term plays, perhaps 2-3 months out on the options. While it is always fun to catch the high-flyers and make 100% gains in a few days, I think its good to have some longer-term plays in the background that perhaps won’t need so much constant “baby-sitting”. Also, high-flying stocks tend to carry in their options more premiums, and, thus, higher risks. We can perhaps start looking for some lower premium (lower risk) plays. Some stocks that may fit this category are: CSCO, IBM, HPQ, BRCM, and QCOM. Of course, we’ll wait and see how the market does tomorrow.

Good night and HappyTrading! ™