Stop Order Alert for TMF

TMF cut through the mid-term uptrend yesterday, so I bought back my call and sold my shares for a total loss of $749.35 (including option premiums, commissions, and fees).  Ouch!

 

 

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Investing for Cashflow – December Technical Analysis

For those of you visiting for the first time, I use basic technical analysis to make trading decisions related to a covered call strategy. Each month after options expire, I review price and market action since the previous option expiration date, as well as any commentary from the previous month’s analysis.

Every investor and trader should review their trades on a regular basis, and this effort helps me improve my ability to “read the tape”.

Enjoy!

December Discussion – General Stock Market


The U.S equity markets have rallied nicely over the past 4 weeks.  I still think that corporate profits will be weak in the 4th quarter, but you can’t fight the market.  Just be prepared for any curve ball the fiscal cliff throws our way.

December Technical Analysis for DRN


Here were my thoughts on DRN in November:

DRN is still looking for support.  The current downtrend is fairly steep, so I expect to see some constructive price action within the next month or so.  Until that time, we’re still in a wait and see mode (red light).

December’s Chart:

DRN-2012-12-18

Soon after the last technical analysis, DRN experienced constructive price action, as expected.  Now we just need to wait for a trendline to emerge and DRN will be back in the green.

December Technical Analysis for EDC


November’s commentary:

That new, short term uptrend (June to September) was REALLY short.  EDC broke it over the last few trading sessions.  Now we wait for EDC to test the May-June trendine (high 70’s).    Given the U.S. markets’ recent weakness and all the turmoil overseas (European economy and tensions between Israel and Palestine), EDC gets red light status until it can show some positive price action.

December’s Chart:

EDC-2012-12-18

After breaking the uptrend, EDC recovered and shot higher.  Unfortunately, this means that the ETF is very extended from potential support (~20%) and now is not the time to trade covered calls.  So we wait.

December Technical Analysis for ERX


November’s Commentary

The ERX price pattern continues to mimic DRN.  So the plan is the same; watch ERX for some new trends to emerge (red light).

December’s Chart:

ERX-2012-12-18

ERX mirrored DRN and broke its downtrend since Novembers technical analysis.  So as with DRN, we’re now looking for a confirmation of a new short term uptrend.

December Technical Analysis for FAS


November’s Commentary

Those sell signals came in handy…FAS broke the mid-term uptrend and is now headed towards a support level in the high 80’s.  Since FAS is still fairly extended from mid-term support, red light status is the order of the day.

December’s Chart:

FAS-2012-12-18

After slicing through the uptrend, FAS followed the general markets higher.  The price has almost made it back to the level of the short-term uptrend. Usually, this is the time that the bottom falls out and we start another downtrend.  But we’ll have to wait and see.  For now, we’re looking for confirmation of the new uptrend, just like DRN and ERX.

December Technical Analysis for TMF


November’s Commentary

TMF found support from the Jul’11-Apr’12 uptrend, which is good news.  The bad news is that TMF is more than 10% away from the mid-term uptrend.  I expect TMF to come down in price, and either test the mid-term trend, or find a new short-term low (yellow light).

December’s Chart:

TMF-2012-12-18

TMF ran into a mid-term downtrend (July-November) and couldn’t break through.  The price is still above the current uptrend, so I’m on the look-out for a new short-term low (yellow light).

Summary


Green Light (Uptrend): None

Yellow Light (No Trend, Range Bound, or Extended from Trendline) : DRN, EDC, ERX, FAS, TMF

Red Light (Downtrend or Broken Trendline): None

December Option Investing – TMF Covered Calls

TMF was the only ETF I felt comfortable purchasing for December. We’ll see how it goes.

ETFs (Bought)

  • TMF – 100 shares @ $79.03

Calls (Sold)

  • TMF – 1 $80 call @ $2.30

Investing for Cashflow – November Technical Analysis

For those of you visiting for the first time, I use basic technical analysis to make trading decisions related to a covered call strategy. Each month after options expire, I review price and market action since the previous option expiration date, as well as any commentary from the previous month’s analysis.

Every investor and trader should review their trades on a regular basis, and this effort helps me improve my ability to “read the tape”.

Enjoy!

November Discussion – General Stock Market


The general U.S equity markets continued to fall over the past 4 weeks.  The 3rd quarter was the worst quarter for corporate profits in 3 years, and there is no reason to expect the 4th quarter to be much better.  Until there are some signs of strength, protect your capital.

November Technical Analysis for DRN


Here were my thoughts on DRN in October:

DRN was still working its way down to the Sept-Dec-June uptrend when options expired on the 19th.  As of the 26th, DRN failed to find support and broke the uptrend, giving us a new, short-term downtrend.  All we can do with DRN is watch and wait (red light).

November’s Chart:

Price Chart for DRN with Trendlines

DRN is still looking for support.  The current downtrend is fairly steep, so I expect to see some constructive price action within the next month or so.  Until that time, we’re still in a wait and see mode (red light).

November Technical Analysis for EDC


October’s commentary:

EDC traded sideways in October, staying between the high 80’s and low 90’s.  It appears that there is a new short term uptrend (June to September), and EDC’s price is only 5% above that mark.  A new uptrend would move the the May-June trendine to a mid to long-term uptrend (still in the mid-70’s), which seems to be a better fit given the uptrend’s small slope.  This new development makes EDC a green light for October, which is an improvement from September’s yellow light status.

November’s Chart:

Price Chart for EDC with Trendlines

That new, short term uptrend (June to September) was REALLY short.  EDC broke it over the last few trading sessions.  Now we wait for EDC to test the May-June trendine (high 70’s).    Given the U.S. markets recent weakness and all the turmoil overseas (European economy and tensions between Israel and Palestine), EDC gets red light status until it can show some positive price action.

November Technical Analysis for ERX


October’s Commentary

ERX fell back to June-September uptrend and found support for a few days.  Unfortunately, that support didn’t last long; ERX broke the uptrend and forced me to sell.  There was a brief rally back to that same uptrend, which has now become a new level of resistance.  As with DRN, we can only watch ERX for the time being and wait for some new trends to emerge (red light).

November’s Chart:

Price Chart for ERX with Trendlines

The ERX price pattern continues to mimic DRN.  So the plan is the same; watch ERX for some new trends to emerge (red light).

November Technical Analysis for FAS


October’s Commentary

The price of FAS is within a few percent of the short term uptrend, so we’ve entered buy territory.  But be careful – the mid-term uptrend is down in the mid-80’s, so a steep sell off could occur if we break the short term trendline.  Keep your sell signals at the ready if you do decide to enter a position.

November’s Chart:

Price Chart for FAS with Trendlines

Those sell signals came in handy…FAS broke he mid-term uptrend and is now headed towards a support level in the high 80’s.  Since FAS is still fairly extended from mid-term support, red light status is the order of the day.

November Technical Analysis for TMF


October’s Commentary

TMF broke the short-term downtrend (July-September) I mentioned last month , but prices were unable to make much headway.  Instead, TMF spent most of the month between $70-$75 per share.  Since the downtrend is broken, I’m more bullish on this ETF.  But I also want to see TMF find support from the Jul’11-Apr’12 uptrend.

November’s Chart:

Price Chart for TMF with Trendlines

TMF found support from the Jul’11-Apr’12 uptrend, which is good news.  The bad news is that TMF is more than 10% away from the mid-term uptrend.  I expect TMF to come down in price, and either test the mid-term trend, or find a new short-term low (yellow light).

Summary


Green Light (Uptrend): None

Yellow Light (No Trend, Range Bound, or Extended from Trendline) : TMF

Red Light (Downtrend or Broken Trendline): DRN, EDC, ERX, FAS

Investing for Cashflow – October Technical Analysis

For those of you visiting for the first time, I use basic technical analysis to make trading decisions related to a covered call strategy. Each month after options expire, I review price and market action since the previous option expiration date, as well as any commentary from the previous month’s analysis.

Every investor and trader should review their trades on a regular basis, and this effort helps me improve my ability to “read the tape”.

Enjoy!

October Discussion – General Stock Market


The general market ran into institutional selling this month, due to weak earnings reports, and entered a correction.  But the U.S. Federal Reserve has stated it will do what it takes to keep the economy limping along.  We’ll have to see what kind of support that provides the financial markets.

October Technical Analysis for DRN


Here were my thoughts on DRN in September:

I was a bit premature on my call of DRN breaking its uptrend in August.  It rode the uptrend higher, and only broke down during the past few trading sessions.  The Sept-Dec-June trendline sits at $70 right now, so DRN needs to come down and test that area before I’ll trade covered calls.

October’s Chart:

Price Chart for DRN with Trendlines

DRN was still working its way down to the Sept-Dec-June uptrend when options expired on the 19th.  As of the 26th, DRN failed to find support and broke the uptrend, giving us a new, short-term downtrend.  All we can do with DRN is watch and wait (red light).

October Technical Analysis for EDC


September’s commentary:

I’ve been hesitant on EDC because it has been so much higher than its support levels.  In late August it did retreat from the May-June trendline, but has since broken that resistance level and headed higher.  With support in the 70’s, EDC is trading at least 20% higher, so now is not the time to enter covered calls.

October’s Chart:

Price Chart for EDC with Trendlines

EDC traded sideways in October, staying between the high 80’s and low 90’s.  It appears that there is a new short term uptrend (June to September), and EDC’s price is only 5% above that mark.  A new uptrend would move the the May-June trendine to a mid to long-term uptrend (still in the mid-70’s), which seems to be a better fit given the uptrend’s small slope.  This new development makes EDC a green light for October, which is an improvement from September’s yellow light status.

October Technical Analysis for ERX


September’s Commentary

ERX broke the April-July trendline I mentioned last month, but quickly retreated.  Coincidentally, EDC hit the $60 ceiling, so it is still rangebound.  Right now, it’s about 10% over the support level, which isn’t too bad.  I’d like to see it get a little closer to the short term uptrend before entering a position, but ERX looks like the best play this month.

October’s Chart:

Price Chart for ERX with Trendlines

ERX did  fall back to June-September uptrend and found support for a few days.  Unfortunately, that support didn’t last long; ERX broke the uptrend and forced me to sell.  There was a brief rally back to that same uptrend, which has now become a new level of resistance.  As with DRN, we can only watch ERX for the time being and wait for some new trends to emerge (red light).

October Technical Analysis for FAS


September’s Commentary

FAS continued to march higher since the last technical analysis.  Within the last few trading days, a resistance level from last summer knocked FAS back down.  But with all the QE and ECB talk these days, it is hard to bet against the financial sector.  Still, as with the other ETFs, I would like to see FAS head back to 100 before entering a position.

October’s Chart:

Price Chart for FAS with Trendlines

The price of FAS is within a few percent of the short term uptrend, so we’ve entered buy territory.  But be careful – the mid-term uptrend is down in the mid-80’s, so a steep sell off could occur if we break the short term trendline.  Keep your sell signals at the ready if you do decide to enter a position.

October Technical Analysis for TMF


September’s Commentary

TMF found some support at the Jul’11-Apr’12 uptrend, but we’ll have to see if it has the strength the break the short-term downtrend.  It could be a good play for September, as it is less than 10% from a major support line. I’m going to place TMF in the red light category, as the short-term trend is still downward.  But there is an opportunity for a short term option play if you keep your money management rules tight.

October’s Chart:

Price Chart for TMF with Trendlines

TMF did break the short-term downtrend I mentioned last month (July-September), but prices were unable to make much headway.  Instead, TMF spent most of the month between $70-$75 per share.  Since the downtrend in broken, I tend to be more bullish on this ETF, but I also want to see it find support from the Jul’11-Apr’12 uptrend.

Summary


Green Light (Uptrend):  EDC. FAS

Yellow Light (No Trend, Range Bound, or Extended from Trendline) : EDC, TMF

Red Light (Downtrend or Broken Trendline): DRN, ERX

Stop Loss Alert for ERX

ERX closed below my new short-term uptrend 3 of the last 4 trading days (it first breached the trend last Wednesday).  So I unwound my position for a total loss of 0.27 including commissions and fees.

The possibility still exists that ERX will reverse course, as the closing price was BARELY below the trendline (less than 0.5%!).  But better safe than sorry at this point.

That said, I have a feeling that some back testing is in order.  I’d like to know if I should institute a 3 strike policy before pulling the trigger on trades, or if I was just lucky this time and the bottom didn’t fall out before I got out.

Investing for Cashflow – September Technical Analysis

For those of you visiting for the first time, I use basic technical analysis to make trading decisions related to a covered call strategy. Each month after options expire, I review price and market action since the previous option expiration date, as well as any commentary from the previous month’s analysis.

Every investor and trader should review their trades on a regular basis, and this effort helps me improve my ability to “read the tape”.

Enjoy!

September Discussion – General Stock Market


The general market was fairly flat for the latter part of August, if not a little to the downside.  September started with a nice bump up from renewed confidence in Europe, and we saw another substantial jump a few days later as the U.S. Federal Reserve announced QE3.   The surprise came with trading volume…it has actually been higher than average this month.

On a related note, I decided to automate my trendlines, rather than drawing them by hand.  I’m attempting to use them as stops, rather than trying to estimate where the potential sell point lies.

September Technical Analysis for DRN


Here were my thoughts on DRN in August:

DRN did not move around too much last month, but that doesn’t mean everything is golden.  The price action two weeks ago was cause for concern.  DRN fell below $75, which broke the June uptrend.  The next support level is in the upper 60’s.  In addition, volume steadily declined since June, which is not the trend you want to see when prices are approaching a 52-week high.  DRN is still in an uptrend, but I’m not in a rush to trade covered calls.  I’d like to see a test of the December-June trendline before getting back in on DRN.

September’s Chart:

Price Chart for DRN - 2012-09-24

 

I was a bit premature on my call of DRN breaking its uptrend in August.  It rode the uptrend higher, and only broke down during the past few trading sessions.  The Sept-Dec-June trendline sits at $70 right now, so DRN needs to come down and test that area before I’ll trade September covered calls.

September Technical Analysis for EDC


August’s commentary:

EDC found support right after my last technical analysis, and has headed higher since.  The good news is that EDC did find the strength to break the May ’11-Jul ’11 downtrend.  That puts it back in buy territory for covered calls.  EDC appears to be range bound between ~$60 and $120, if you can call a 2x increase a “range”.  This large span in price makes me hesitate on pulling the trigger.  EDC could lose $24 per share before finding support, and monthly option premiums won’t cover that kind of loss.

September’s Chart:

Price Chart for EDC - 2012-09-24

I’ve been hesitant on EDC because it has been so much higher than its support levels.  In late August it did retreat from the May-June trendline, but has since broken that resistance level and headed higher.  With support in the 70’s, EDC is trading at least 20% higher, so now is not the time to enter covered calls.

September Technical Analysis for ERX


August’s Commentary

ERX  broke the Jul ’11 – Feb ’12 downtrend, so next up is the April ’11-July’11 downtrend.  It also appears that ERX is range bound between $30 and $60…and just like EDC, that is a 200% range.  This difference for ERX is its price is closer to resistance levels and is therefore more likely to fall in price in the August/September timeframe.

September’s Chart:

Price Chart for ERX - 2012-09-24

ERX broke the April-July trendline I mentioned last month, but quickly retreated.  Coincidentally, EDC hit the $60 ceiling, so it is still rangebound.  Right now, it’s about 10% over the support level, which isn’t too bad.  I’d like to see it get a little closer to the short term uptrend before entering a position, but ERX looks like the best play this month.

September Technical Analysis for FAS


August’s Commentary

FAS broke through the Feb ’11-Mar’ 12 trendline, so covered calls are back on the table.  There is long term downtrend to deal with, but testing that trend is probably months away.  Odds are that FAS will test the Nov ’11-Jun’12 uptrend over the August/September timeframe.

September’s Chart:

Price Chart with Trendlines for FAS - 2012-09-24

FAS continued to march higher since the last technical analysis.  Within the last few trading days, a resistance level from last summer knocked FAS back down.  But with all the QE and ECB talk these days, it is hard to bet against the financial sector.  Still, as with the other ETFs, I would like to see FAS head back to 100 before entering a position.

September Technical Analysis for TMF


August’s Commentary

TMF had a hard time the past 4 weeks, falling 22% since the last technical analysis.  It broke the short-term uptrend as we entered August and continued south.  TMF is still above the longer term uptrend (Jul’11-Apr’12).  I won’t enter a covered call trade until TMF can find its footing.

September’s Chart:

Price Chart with Trendlines for TMF - 2012-09-24

TMF found some support at the Jul’11-Apr’12 uptrend, but we’ll have to see if it has the strength the break the short-term downtrend.  It could be a good play for September, as it is less than 10% from a major support line. I’m going to place TMF in the red light category, as the short-term trend is still downward.  But there is an opportunity for a short term option play if you keep your money management rules tight.

Summary


Green Light (Uptrend):  ERX

Yellow Light (No Trend, Range Bound, or Extended from Trendline) : EDC, FAS

Red Light (Downtrend or Broken Trendline): DRN, TMF

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