Results Tracker

Results Tracker

This week we will be reviewing a play we found Using the Three Red Arrow Search. Using this search we identified Gushman Environmental Energy Inc. (GU). Shorting at 11.50 and putting a stop loss at 12.50 and potential profit at 9.50 gave us a 1 to 2 risk to reward ratio.

We can see from the chart the stock is moving down but hasn’t hit our price target. We did have a double top which broke down and we have retraced up. The down trend does continue but I felt this week we could discuss the strategy and the psychology of trading. When we came into the trade we had a target of 9.50 we can see we have formed a support level at 10.00 which we have bounced off twice. Although it is true that the more it hits a support or resistance point the odds of breaking through are better it is also important to evaluate our strategy and know when it’s time to stick in a trade and when it is time to move on.

We came into this trade from a swing standpoint 1-7 days and now we are 7 days into this trade and have made about 75 cents a share. We have come off of a support point and have started to pull up. Let’s take a minute and review our possibilities. It could start a sidetrend based on the support. It could now start an uptrend based on the inablility to break support or it could break support and continue the downtrend.

Now let’s use our other indicators to see if it gives us any clue. We can see from the MACD we have come up to the baseline and could easily cross over which would be a bullish indication. The volumes have fallen off so if we are looking for momentum to break down through the support we won’t get it from volume. We do have three red arrows but then again if we break the baseline on the MACD that arrow could disappear. Bottom line we’ve made some profit and the signals are weakening. There’s other trades out their that could maybe give us better signals. In other words profit is a good thing when your strategies start to change.

Because we don’t know what will happen in the future, it is important to have our loss strategies in place and be disciplined in our trading plan.

Successful Trading
Bob M Baldwin

Results Tracker

This week we will be reviewing a Estee Lauder (EL) we found Using Both EMA Bullish Crossover Scans. We entered this trade Long at 46.00 with a stop loss at 43.00.

We can see from the chart the stock is moving nicely but hasn’t hit our price target. We have a nice gap up which broke through the previous resistance levels but when we have a gap we always worry that we could see the price fill that gap. With this in mind what strategy should we take?

By moving up our stop loss we will protect more and more profit but if the price moves down or gaps down it could gap below our stop price and get us out lower than we are expecting. Another way to protect profits would be through the use of a protective put.

In looking at the options chain we could purchase the September 50.00 put for a price of 1.20 which would allow us to sell at that price for the next 31 days.

If the stock continues to go up this will act as an insurance policy and eventually expire worthless. If the stock drops below 50.00 I still have the right to sell the stock at 50.00 so regardless of how low the stock goes I still have the right to sell it at 50.00. If the stock goes sideways I can always close the position and sell the put for the remaining value. This is the beauty of using a protective put rather than a stop, it can’t gap down.

Because we don’t know what will happen in the future, it is important to have our loss strategies in place and be disciplined in our trading plan.

Successful Trading
Bob M Baldwin

Results Tracker

This week we will be reviewing a play we found Using the 3 Red Arrow search. Using this search we found Compass MNRLS (CMP). We entered this trade going out of the money with the September put option at the 55 strike price for $2.15

We can see from the chart the downtrend is continuing and the price of our put option is starting to move up. We can also see from the chart we have some additional support at 55. Let’s use this support and the option we bought to convert into a debit spread.

When your feeling on a stock is generally negative, bear spreads are nice low risk, low reward strategies. One of the easiest ways to create a bear spread is by using put options at or near the current market price of the stock and selling an option below existing support. This way if the price bounces off the support the option we sold will expire worthless.

Since we have the September 55 we will set the strategy up by selling the September 50 put option.

Notice the price on this option is bid .90 asking 1.20. We could enter a limit order at 1.00 and see if we could shave the price a little.

Now let’s talk some strategy, if the price of the stock stays above 50.00 for the next 38 days the option I bought will have value and the option I sold will expire worthless. In this case I will keep the premium I received and the value of my long option. If the price of the stock falls below 55 I could roll out to a lower strike or let the position be exercised. If exercised I will receive the stock at 50 and put it to the seller of my long option for 55 plus I keep the premium. If the price of the option goes up I will have my long option expire worthless and the short will expire worthless for a loss o 2.15 minus the 1.00 credit for a maximum loss of 1.15.

Because we don’t know what will happen in the future, it is important to have our loss strategies in place and be disciplined in our trading plan.

Successful Trading
Bob M Baldwin

Results Tracker

This week we will be reviewing a play we found Using the Fill the Gap Strategy on Ppg Industries Inc. (PPG) Last week Using the EMA Bullish and Bollinger Band Expansion scans we found ppg. We entered this trade going short at 60 with a target of 57 and a stop at 62.

We can see from the chart the downtrend is continuing and we are starting to fill the gap. This gives us an opportunity to look at another option strategy, the debit spread or in this case a bear call spread.

When your feeling on a stock is generally negative, bear spreads are nice low risk, low reward strategies. One of the easiest way to create a bear spread is by using call options at or slightly out of the money.

We can see from the risk graph this is a low risk limited reward strategy.

In looking at the options chain we could set this strategy up by selling the August 60 strike option for .95 and buy the august 65 for .15 giving us a net credit of .80. If the trend continues down the options would expire worthless and we would realize the credit.

Because we don’t know what will happen in the future, it is important to have our loss strategies in place and be disciplined in our trading plan.

Successful Trading
Bob M Baldwin

Results Tracker

This week we will be reviewing a play we found Using the Bearish Crossover Scan American Tower Corp. (AMT).

We entered this trade with the $37.50 Put at $1.70 with the idea of a continued downtrend in part due to some double top formations we saw on the charts.

We can see the trade has changed slightly going somewhat sideways before a short term uptrend and the 5,21 EMA’s are starting to cross. Since we could be looking at a change of trend let’s use a spread to limit the loss if we do get an uptrend. We are going to use the bear put spread (debit spread) to limit our risk.

Bear spreads are nice low risk, low reward strategies. One of the easiest way to create a bear spread is by using put options at or near the current market price of the stock.
The risk chart looks like this:

To set up this trade we have the August 37.50 put so we are going to sell the August 35 put. We paid $1.70 for the long put and from the option chain we can see that we can sell the 35 put for $55.00 thus giving us a debit of $1.15.

By setting up this spread we are limiting our possible profit to the difference between the spread ($2.50) and the debit ($1.15) or $1.35 while still giving us a maximum loss of $1.15 or a little better than a one to one ratio. In order to make this trade profitable after commissions you would want to use multiple contracts.

Because we don’t know what will happen in the future, it is important to have our loss strategies in place and be disciplined in our trading plan.

Successful Trading
Bob M Baldwin

Results Tracker

This week we will be reviewing a play we found Using the Bullish crossover scan, Cummins Inc (CMI).

We entered this trade at $66.50 with a stop at $64.50 amd a target of $70.00 based on the resistance levels we identified. We can also see the MACD crossing above the baseline. This along with the trend gives us an indication we are on the right track.

Given our target at $70.00 let’s look at doing a covered call at that strike which will give us a little extra income on the trade.

In looking at the option chain we could sell the August 70 strike price option for $4.00. If the stock does go to $70.00 our target the stock will be called away at $70.00 plus we will keep the premium for the covered call.

Covered calls are a way to earn additional income on your stock portfolio. For conservative investors, selling calls against a long stock position can be an excellent way to generate income or as in our case increase profits on a trade.

We can see from the risk graph this is a low risk bullish strategy with limited reward on investment. This strategy can be used in IRA accounts.

With this particular trade if the stock starts going up and actually breaks above $70.00 I can always roll the position out by buying back the option I sold and selling the $75 strike price option which would give me a higher profit potential. If the stock closes around $70 I can let them call the stock away locking in my profit of $3.50 (entry at 66.50 and selling at $70.00) and the premium of $4.00 thus greatly increasing my profit potential. If the stock goes against me I can buy the call back at a cheaper price giving me a profit which will go against the loss of the stock.

Because we don’t know what will happen in the future, it is important to have our loss strategies in place and be disciplined in our trading plan.

Successful Trading
Bob M Baldwin

Results Tracker

This week we will be reviewing a play we found Using the EMA Bullish Crossover to find Alnylam Pharmaceuticals (ALNY).

We used the EMA Bullish Crossover 30-200 scan for a little longer trade. Buying the stock at 27.00 and putting a trailing stop at 24.50 giving the stock the opportunity to move up while the stop follows behind.

In looking at the chart for ALNY we can see a retracement starting and also some resistance at 30. Due to this I am looking at a covered call strategy which will give me a little extra income on the trade and put me in a good position if the stock is called away.

Covered calls are a way to earn additional income on your stock portfolio. For conservative investors, selling calls against a long stock position can be an excellent way to generate income.

We can see from the risk graph this is a low risk bullish strategy with limited reward on investment. This strategy can be used in IRA accounts.

The options chain shows that we could sell the August 30 against the stock we purchased and receive an additional $75 with the premium.

Now let’s look at what could happen. If the stock goes above $30 the stock would be called away from us and we would receive the $30 a share and since we paid $27 to get in we would make the $3 plus the .75 from the premium or a profit of $3.75 which is a profit of 14%. If the stock stays above $27 and below $30 we would keep the premium which would be a 3% gain between now and the third week of august. If the price of the stock goes down by selling the covered call we have reduced our breakeven point to $26.25.

Because we don’t know what will happen in the future, it is important to have our loss strategies in place and be disciplined in our trading plan.

Successful Trading
Bob M Baldwin

Results Tracker

This week we will be reviewing a play we found using the EMA Bullish Cross 10-50 trade setup. Using this scan we identified a bearish trade on CAJ, Cannon Inc. With this in mind we entered the trade by Shorting at 52.00 and putting a stop at 5.50.

We can see from the chart that the trend is continuing down and in looking at the Bollinger bands we can see it is approaching the center line but maintaining the downward trend. You’ll also notice that it came off of the double top which was our first indication of the downtrend.

Over the last few sessions the momentum has slowed down as we see with the angle of the trend and volume. With this in mind and given we are short the stock and thus bearish let’s look at doing a bear call spread. Bear call spreads profit when the price of the underlying stock decreases. Bear call spreads are typically created by selling at-the-money calls and buying out-of-the-money calls.

Notice that the bear call spread is a bearish, low risk, low reward strategy that best profits within the parameters of the above risk graph. We are going to start looking at around the 50 strike price which is around where the 21 day average is currently.

Remember we are looking at the 50 strike price because we expect the trade to go down and we are going to look at the August expirations since we only have 11 days to expiration of the July contracts.

By Selling the august 50 at a credit of 1.45 and buying the august 55 at .55 we establish a 90 cent credit on this trade to extend the profits of the original trade. If the trade continues and hits my stock target of 45 we could buy back the credit spread with a profit or let it go to expiration. If the stock turns and heads up I could close the short position and I have the right to buy which in this case would be to cover the short at 55. Thus I reduce my upside risk to $3.00 (shorted at 52.00 and cover at 55.00). If the price goes sideways I would still receive the .90 credit from the credit spread.

Because we don’t know what will happen in the future, it is important to have our loss strategies in place and be disciplined in our trading plan.

Successful Trading
Bob M Baldwin

Results Tracker

This week we will be reviewing a play we found running the SI Fundamental Rank and EMA Bearish Cross 10-50 scans. Using this scan we identified a bear call spread on ZBRA, Zebra Technologies Corporation.

Using this strategy we entered the trade by selling the Aug 08 35.00 @ 1.70 strike and buying the Aug 08 40.00 @ .30 for a credit of $1.40 and a risk of $3.60.

From the chart we can see the price has continued to fall which is putting us into a profitable position on this trade.

In looking at the option chain we could close out the position with a debit of $1.10 which would give us a $30 profit.

I thought that since we are getting the movement we want that we could turn this into a condor trade by including a debit spread, or bear put spread.

To set up the trade we will sell the ZBQTF at .65 and buy the ZBQTG at 2.80

For a debit of 2.15. This creates a much different risk graph for us.

By doing this we have reduced our profit but significantly reduced our risk. From the chart we can see we are approaching support and that would be the reason for adjusting the trade to control risk.

Because we don’t know what will happen in the future, it is important to have our loss strategies in place and be disciplined in our trading plan.

Successful Trading
Bob M Baldwin

Results Tracker

This week we will be reviewing a play we found Running a three green arrow search and following the fibonnaci levels. Fibonacci retracement refers to the likelihood that a financial asset’s price will retrace a large portion of an original move and find support or resistance at the key Fibonacci levels before it continues in the original direction. These levels are created by drawing a trendline between two extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%. Fibonacci retracement is a very popular tool used by many technical traders to help identify strategic places for transactions to be placed, target prices or stop losses.

In looking at the chart and the levels we drew it was approaching the 50% fib level.

This week we can see it actually broke through the 50% level and is now headed toward the 61.8% level.

Remember for Fibonnaci traders these levels show points of support so we are expecting the 61.8% mark to act as stronger support than the 50% level. To limit our risk on this trade and utilize leverage we are going to look towards the options chain:

Looking at the October options puts us out three months giving the trade time to react and if we decide to gives me some versatility for a calendar trade or other options strategies. We can also see this gives us a 59 cent delta and open interest of 834 which are within our parameters for an option.

We would look to enter the trade when we bounce off of the 61.8 fibonnaci level and we are looking for a first target at 35.3 the latest resistance level. Our stop can be quite tight because if it breaks below the 61.8 fib level we want to exit the trade. This also gives us a good risk to reward level.

Because we don’t know what will happen in the future, it is important to have our loss strategies in place and be disciplined in our trading plan.

Successful Trading
Bob M Baldwin