Wang’s Happy Trading

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“And, here we are: SPX 850 and Nasdaq 1500 being tested. After the market, INTC slashed its 4Q outlook. INTC shares fell more than 7% in AH trading. Techs were all hit too. Looks like we’ll see a gap down tomorrow. Then, we’ll have to see if the market has any strength to come back to SPX 850 and Nasdaq 1500. VIX closed above 66 today and could easily test 70 tomorrow. If the downward momentum is strong, we could see SPX go all the way to 800, which was the 2002 low.”

The market actually held up in the morning, opening flat, as oil and energy shares saw some strength. But, the downward momentum was still strong, and, the market quickly slipped lower. SPX had a day low of 818.69! This morning, I commented in the Trading Room:

HappyTrading November 13, 2008 7:28 AM
market
trying to keep those support?

VIX
hourly chart still bullish.

HappyTrading November 13, 2008 7:44 AM
I think it’s dangerous either way here. The market is desparately trying to hold the support levels. It is green even after INTC’s target slash last night. On the other hand, technicals are still weak.

For those of you that are not familiar with the trading terms, the market was trying very hard, in the morning, to hold the support levels that I have been mentioning (SPX 850 and Nasdaq 1500). But, VIX still looked bullish, which meant that the market was likely to go lower. But, I didn’t think it was safe to trade on the down side, because any bounce could be very fast. Indeed, the market continued to drop lower all morning and through lunch. I actually walked away from my desk and didn’t come back until after lunch, and caught the market tumbling, at which time SKF (mentioned last night) jumped above $190 (previous close was $173.93)! The Dow went below 8000!! I then looked at VIX and commented:

HappyTrading November 13, 2008 10:09 AM
VIX
toppy on the intraday charts, testing 70.

And, if you look up to what I wrote last night, you’ll see, “VIX closed above 66 today and could easily test 70 tomorrow.” Market started right then to see buyers coming in. Things were moving very fast and I quickly grabbed a couple of trades:

This one more than doubled (+133%) in just 1 hour. It closed at $13 and traded as high as $15.12.

This was for a good +25% gain. I took partial profits on this. It closed at $9.6 and was the day high.

Other members were calling out good trade ideas also:
Allan B November 13, 2008 10:45 AM
X…FCX…trying to bust out.

pc November 13, 2008 10:55 AM
CF climb

HappyTrading November 13, 2008 11:41 AM
Looking at Asian stocks now and puts on ultrashorts, perhaps. (SKF fell $30 in the last hour of trading; EEV fell $20!!)

I had my eye on CF too. I was looking at Dec 65 calls at $3.8. Those options were bidding at $5.6 at the close. When the market started to move up fast, it is a bit tricky. Especially in this volatile environment, it’s safer to just pick a couple of trades first and see how far and fast the market would bounce. If you commit too much capital right away, it could make you nervous as the market fluctuates. Notice that I picked a November option play for a fast moving stock (FSLR) to try to capture some quick gains. Then, I picked December options for ICE. This is a safer play, so I only cashed out partially. This way I have something in play already, in case the market gets strong tomorrow morning. ICE could catch some big movements too, especially with the CDS clearing deals going on.

Energy stocks were particular strong on the bounce: CHK +8.4%; OXY +11.23%; HES +13.92%; APA +13.64%; XOM +9.4%. The Dow was up +552.59 points (a swing of more than 800 points); SPX added +58.99 points; Nasdaq gained +97.49 points:

Commodity-related sectors led the bounce: GDX (gold miners) +11.65%; GLD (+3.07%); OIH (oil services) +10.99%; XLE (energy) +11.75%; USO (oil) +7.1%; PBW (clean energy) +9.46%. FXI (Chinese ADRs) jumped +14.87%.

SPX

SPX gained +58.99 points to close at 911.29. It tested 850 level and bounced back. The MACD went up.

Nasdaq

Nasdaq added +97.49 points to close at 1596.7. The MACD went higher.

Both SPX and Nasdaq successfully tested the support levels (SPX 850; Nasdaq 1500). VIX tested 70 and fell back to close below 60. This is good for the market. The daily MAs on the market indices are now bunched up very closely, which will make them easier to take out. This is because each daily MA could act as a resistance level, but now, there is not much distance between them. But, the market has bounce hard and fast. I think we should see some volatile trading in the morning and some profit-taking. I am, however, more optimistic now about the market going above that 30-day MA!