Monday, January 30, 2006

Update on my positions

1. Canadian Natural Resources (CNQ) : CNQ has been performing amazingly well relative to its peers. Although I am up over 150% on my CNQ calls since my purchase on Jan 16 (and that's not counting the profit I made selling and buying back at a lower price), I see no reason to sell. It just broke out again today from a base that had been forming for 5 days. The only uncertainty I have right now is whether crude oil will break 70. If it does, I believe all oil stocks will rise like crazy as 70 is a significant technical and psychological barrier. If crude does break 70, CNQ could surge past 80 CAD easily.

2. Sears Holding (SHLD) : I bought a put on SHLD as a hedge against the markets. When I bought SHLD, I was fairly bearish. Although I was wrong on my short term outlook for the markets, SHLD has still gone down. Despite the recent rally in the Nasdaq and S&P, I am still not convinced that we will see a new high. Even if I am wrong again, SHLD might go down anyway, so I am still holding on to this one.

Edit: I was unaware that I had a sell order for my SHLD puts...oh well, missed out on some gains. However, there are many more opportunities out there, and I'm biased towards shorting over going long.

Thursday, January 26, 2006

Bought CNQ again

Canadian Natural Resources (CNQ) has had a nice pullback. Since I am bullish on energy stocks in the medium and long term, and because CNQ has been one of the leaders of the energy sector, I really don't mind buying some calls whenever it pulls back and waiting. Besides, all resource stocks have been really hot lately, and they don't seem to consolidate too much before popping back up aggressively. This may indicate that we may be near a short term peak in resource stocks, but until the peak is in place, money can be made on the long side.

Tuesday, January 24, 2006

Sears Holdings (SHLD)



I just bought put options on Sears (SHLD) when it was trading at 122.40. Sears has been really disappointing in the past 4 months, as it was stuck in a trading range while the rest of the markets rallied. Part of the reason is because they have been constantly losing market share to their competitors. Therefore, unless a break above 126 occurs, I think shorting Sears at the top of the trading range is a pretty safe bet.

Friday, January 20, 2006

I'm all cash

I finally capitulated after the crappy action for the past 2 weeks. I even sold my CNQ even though it has done amazingly well. The rally we saw at the beginning of January may just be a bull trap, just like what we saw 2 years ago.

I am becoming more and more bearish about the state of the world economy. The world markets have rallied a lot in the past 3 years. But nothing goes up in a straight line; thus, I am predicting that there will be some sort of a slowdown. Because the American markets have not participated in this rally at all (the DOW, nasdaq were mostly flat), I think the American markets will show the most weakness out of all the economies. With the prospect of the debt bubble imploding (personal debt is at all time highs, trade and budget deficits are unsustainable), there is a possiblity that the markets will crash in a big way.

This doesn't mean that the markets will go down non-stop. There will still be some good rallies and the volatility will increase. But one thing for sure is that the trading environment will be much more difficult.

By the way, I would like to comment on Google. The reason why yahoo reported bad numbers is because they are losing market share to google. See link . Over the past 3 months, the daily reach for google GAINED 27% while the daily reach for yahoo FELL 14%. Because of this, I think GOOG will surprise analysts when they report especially if GOOG stock continues this freefall.

Monday, January 16, 2006

Canadian Natural Resources (CNQ)



Canadian Natural Resources has been one of the leaders in the energy sector. It has just broken out of an ascending triangle pattern. The energy sector has been really strong in the recent weeks, and I wouldn't be surprised if it continues its bull market after a 5 month consolidation. In fact, I picked up some CNQ Feb. calls today (the Canadian markets were open). I was actually deciding between Cameco (CCO) and CNQ. Reason why I chose CNQ is because the implied volatility is lower, meaning the CNQ options have a lower premium. This makes me sad because Cameco is my favorite stock, and I love riding it into new highs.

Right now, my option positions are CME, JOYG, and CNQ.

I've also started a long term portfolio for myself. Right now, my long term portfolio contains Fording Coal (TSX: FDG.UN - 14% dividend) and Baytex Energy (TSX: BTE.UN - 11% dividend). My goal for my long term portfolio is to buy high dividend paying growth stocks to offset my risky options trading strategy.

Thursday, January 12, 2006

Update on my positions

With the markets on steroids since the beginning of January, a lot of traders (including me) were pushing their luck. Up to today, I was overexposed in the markets, as I had options in Cameco (CCJ), Freeport McMoran(FCX) and Chicago Mercentile Exchange (CME). I sold my Cameco and FCX positions today for nice gains, and I am on the brink of selling CME.

Today may just be a violent shakeout, and the markets may still rebound and rise further. However, at times like this, I have to remember the number 1 rule about trading, which is to protect your own capital. With the markets overextended, I would feel unconfortable to be overloaded.

Wednesday, January 11, 2006

Blog plug

I bought some calls on CME today. SDT Research has an excellent analysis on this stock. I have been following SDT Research for about a year now, and most of his picks have been excellent (they outperform the general markets). He is very good in anticipating big moves in stock prices, and I hope CME is no different :)

By the way, I encourage you to check out my blog links. I have recently added a few new links, including Trader X. Trader X is one of the best (day) trading blogs I have ever seen. He gives excellent analysis into why he buys stocks as well as general commentaries about the markets.

Tuesday, January 10, 2006

Freeport McMoRan (FCX)

This morning, I was shocked to find that my FCX had fallen 2 points to 56.5. Then I did some investigation and I discovered that Phelps Dodge (another copper company) had lowered their guidance because of decreased production. After reading that story, I regreted not buying more FCX. FCX is now trading at 60.5.

Phelps Dodge (PD) lowering their production is good for the other copper companies because it decreases the supply. With demand increasing, it only means that copper prices will get stronger. When they do, all copper companies, even Phelps Dodge, will continue to set new highs.

Right now, I am holding FCX and CCJ. I expect both stocks to continue to set new highs in the short, medium and long terms.

Monday, January 09, 2006

An excellent way to start the year



By the way it started, it seems like 2006 will be a very good year for the bulls. After 2 years of consolidation, the American markets seems poised to break out into higher ground. There is a lot of money in the world (since governments from all over the world are mass printing money in order to compete better in the trade wars), and this money will most likely be used to pump up the stock markets. That is, as long as the debt bubble doesn't explode.

It seems scary to go long at this point because the markets have surged so dramatically. However, if you look at the chart above, whenever the markets go up, it seems to go up very quickly with few consolidations. Therefore, I think the best way to play this rise is to hold onto your winners and try not to get shaken out.

Sunday, January 08, 2006

Stock Frauds

Stock Lemon has an excellent record in identifying stock frauds. I have been following them for a while now, and almost all the stocks they tout fall. The stocks they are reporting on now include: GTX Global (GTXC), Housevalues.com (SOLD), Fairfax Financial (FFH), Eden Energy (EDNE), Imergent (IIG)

Although the market looks really strong now, if you ever wanted to short, I think these stocks are high probability shorts. Happy trading!

Friday, January 06, 2006

Update

GOOG is on fire. I never knew it would start the next leg this fast. Every time I trade GOOG, I always sell it too early. I guess for super hot stocks like GOOG, its better just to buy and hold. I would say that the next target for GOOG is 550, and it could reach it really fast (within 1.5 months).

By the way, I exchanged my UNH for FCX. UNH disappointed me yesterday. I expected it to surge, and it didn't. Part of my strategy is to unload stocks that don't act the way I expect, so I dumped it for FCX. FCX is a copper and gold play, and both commodities are on fire (copper just broke out into a new high after consolidating, gold might break into a new high really soon).

Wednesday, January 04, 2006

My New Year Resolution

This year, I resolve to trade stocks that are fundamentally sound (although I am bound to break it because of my impatience and greedy nature). Because I have the privilege of managing both my parent's portfolio was well as trading my own portfolio, I have realized that if you buy a fundamentally sound stock, the stock will probably go up even if your timing is wrong. Therefore, doing so increases the overall probability of your strategy.

How do I determine whether a stock is fundamentally sound? I am no Buffet, but here are the 4 things I look for:

1. Value: Stock is cheap

2. Growth: Revenues and earnings will grow internally

3. Macroeconomic trend: Conditions favor the entire sector to rise

4. Quality: Stock is the leader of the sector (Leaders tend to win market share away from their competition)

After identifying fundamentally strong stocks, I will still enter and exit using technical analysis.

On this note, I bought UnitedHeath Group (UNH) options today. Stock is relatively cheap, has good growth, favored by the macroeconomic trend (healthcare in general will grow because baby boomers will age and live longer), and quality (UNH is the leader in the sector). Also, if you look at the chart, UNH has bounced agressively on most 5 day dips, so I don't expect anything different this time.

By the way, I sold my Cameco calls yesterday and GOOG calls today. I was satisfied with my gains, but I wouldn't be surprised if they go higher.

Tuesday, January 03, 2006

Welcome back

I hope all of you had a wonderful Christmas. I was pleasantly surprised when I looked at the markets this morning and saw that the entire commodities sector had exploded upwards. This is good news to me (because I still have those Cameco calls) and to my parents (whose portfolio is heavily weighted towards the resources sector....yes, I DO NOT believe in diversification).

My thoughts this year? I noticed that the American markets (Nasdaq, S&P, DOW) has been heavily underperforming the world economies. During the past year, almost every stock market around the world has made all time highs, but the American markets were still stuck in the trading range. So my question is: what will happen if the world markets go through a resting phase? If that is the case, I believe the American markets will lead the world indexes downwards.

By the way, I picked up some GOOG calls today. If you haven't noticed by now, I love playing macroeconomic trends. What this means is that I love buying hot sectors that I believe will continue to grow fundamentally. The internet sector is definitely one of these.