The Event Horizon
Thursday, April 10, 2008 at 09:14AM I am not much of a breakfast person, but I am rapidly becoming a brunch person. I am not much of a cook either, but I dabble on an insignificant scale. I am tried a new recipe today, one that I will share with you. I am calling it "The Event Horizon."
4 eggs, scrambled
1/2 cup fiesta blend shredded cheese
A hearty portion of Pace Picante (HOT)
Diced jalepenos
1 Earl Campbell brand Hot Link, sliced
Wrap that bad boy into a tortilla and serve with a chilled Monster Java or Rockstar Punched.
Later in the day you'll realize how I arrived at the name.
As I look across the market this is exactly the stuff I had talked about on the Marketcast...under reacting to the bad news and over reacting to the good news. Based on today's price action, how can you not be tempted to buy the dip here?
SPX- The next dip that is being bought today
QQQQ- Tech leading the way
SOX- Pour out a little liquor for the Semis...
XHB- ...And one for my "Homies."
XLY- I mentioned this fund on that "Volatile Market Open House" I did a few weeks ago. I like the coiling action here, and a participation in consumer discretionaries would make me feel warm and fuzzy.
Reader Comments (65)
Sue D,
In response to your question...
To me, TJX looked like a double top, and was weakening on the retracements. Just a shot, but I liked the look of the set-up.
A good thing to remember is that you should avoid bullish positions when a stock is making equal highs and equal lows. At these times, you ought to wait for breakouts.
Sounds delicious. I love spicy stuff.
Michelle...
I can't live without spicy food.
If you like sushi, I tried the spicy calamari roll.
It has been crowned my new favorite.
Sia,
It's not like I buy long term or anything.
Remember, in terms of time frames...I am lasting usually a week per trade )if not less) in this market.
Jeff has advised us never to buy the VIX. His reason "just don't"
I guess I ate my words on HAS...
"It's Hasbro...where is it going?"
I got a playful "told you so" on that one recently. I forgot who it was, but I got a smile out of it.
Is it really worth buying on the dip with the VIX at the bottom of its trendline? Maybe it will break, but even then I don't imagine it going much lower. Also with earnings coming out, even more uncertainty exists.
Jeff,
Prepare yourself for the "Burning Ring of Fire"!!!!
Raimo,
Welcome back. Our writing styles are just a tad different but the message is similar.
HAS - liking this one today.
Jeff,
Spicy Calamari, and loaded with wasabi I assume?...I'll have to try that at my place.
As for spicy...CMG perhaps taking out that flag...
Berkshire
shmikey,
Actually, here are my 4 reasons...
http://www.optionaddict.net/archives/2007/7/30/4-reasons-not-to-trade-vix-options.html
Jeff,
I am long some DIA's, and added a few SPY's yesterday...
I am in the bull camp for now, cautiously. You?
Raimo,
Yep. Been there a little before vacation, would have been there had I been trading during my vacation, and there again now.
The "volatile market spotlight" was intended for us to talk about how bad the market was and how to trade it. I gave my opinion that I was a lot more bullish than bearish. Earnings season is the variable though.
Raimo,
Are/where these DIA's and SPY's still front month, or are you liking the Mays??
Not that you care, but I am also long DIA also.
Berkshire
Jeff,
2 What-If scenarios on MGM:
-If you didn't like the MGM's price action on Wed, you wouldn't have added positions. But would you also cut short your existing position?
-Assuming price action as it is, but volume is lacking. Would you enter on Tue? I'm asking this as you sometimes take breakout without volume and I wonder if this would be one of those situations where you do so.
I'm trying to learn how you might have reacted in these scenarios which may present itself in the future. Thx
Alfred,
Why did I not like Wednesdays price action?
I am confused.
I'll try that too.
Thanks for the charts. I was looking at SOX yesterday.
OK, Jeff, that made me crack up..
Jeff,
If you like spicy food then you might try Indian food. Its better to go for buffet and try them.
Thanks, Meena
Grasshopper,
I was proud a while back when I mentioned how I was switching my stance on steel from MTL to AKS...recently I am not as sure...but picked up a little yesterday before the breakout.
Jeff- any food you get to taste twice in a day is a wonderful meal!!
Raimo-good work, brother.
And by the way, hate to say it again, but does anyone notice the big move on MTL again today?
Grasshopper,
Picked up MTL at the close yesterday as a breakout play and loving the rewards today.
Mark J
Jeff,
Was me that sent you that little jab on HAS via email--I think at the time I was up 60% or so on it. However, I actually sold it a few days later for 100% return. Hasbro or not, it moved pretty well! So thanks...
Jeff,
Sorry to confuse you. I'm saying "if" you didn't like the price action on Wed, e.g MGM bounce back up or something, would you have cut short your initial position?
Jeff,
Thanks! Now I can stop wondering!
Alfred,
I did like Wednesdays price action. That is why I added to my "anticipatory" position. The breakout confirmed on Wednesday.
However, to answer your question I'll give it a try...
I am bearish on the stock, but didn't like yesterdays price action because it broke down. If I had a bearish position ahead of this, and "didn't like the price action"...and the huge profits that came with it...I guess I would have to continue not liking the price action, but keep my position and unhappily make money in the trade.
Jeff,
Would you enter a position in Walmart (WMT) or (PLD) at these levels? If not can you please advice us why??
Thanks
Ams
Just a couple bullish ideas..STLD and VMW(though very $$$ options,but interesting chart of a small double bottom).
sarah,
I like STLD, grabbed some! Good EE at 35.....
Jeff,
I know EXACTLY how you came up with that name! Very funny!
Is NFLX too anticipatory or showing too much weakness on an up day to enter right now trading at the bottom of the triangle? Or is this a good entry for an April call?
I think we need one or two down days on the S & P, let it touch the 20 crossing the 50 dma then rocket up. But I'm dumb.
I'm ordering some books from Amazon, any suggestions? I'm looking at getting Trading in the Zone and Technical Analysis by Murphy. I might get Tim Knight's book too. Any other suggestions? I'm looking for TA and/or psychology books at the moment.
AGU - is this a bull flag worth buying a call on?
Jeff,
Guess I can't write proper english and still can't make you get the point :)
Ok, 3rd attempt here. Let me rephrase my question: I'm asking if Wed's price rebounded, would you have cut short your anticipatory trade which you entered on Tue?
Ams,
No way. As an option buyer, I need to buy options on stocks that move.
Essentially, those are not volatile enough for my liking.
Alfred,
Ah ha! I think I am getting it...
I guess it depends how much it rebounded. Honestly, I would have stayed with the position until it broke resistance (62ish).
Remember, I only took down about 20% of the position. For example, if my normal lot would have been 10 contracts, I only threw 2 into the fire. It's like being at the craps table and rolling one of the dice to see what happens, and then strategize (in your mind) how carefully you need to eject the next roll.
Peter V,
Almost 60/40 in favor of the bulls.
I think this is an extreme example of the need to base trading decisions solely on price/ charts. Because by almost any measure, the US economy is in serious trouble, and yet here we are bullish short term. Check out all the bullish MA crossovers.
Jeff, what is your bull/ bear ratio these days?
Jeff,
Am I making up the triangles I see in MHK (daily) and SPWR intra-day.
Thanks.
Berkshire
Thanks Jeff for your prompt reply. Much appreciated. PLD looked tempting for a while there. Looked like a textbook bull flag to me...
PS: That "event horizon" you were talking about... erm, does it involve toilet paper?
Nate-
Have you checked out "My Bookstore" over on left. Jeff gives a lot of great suggestions for books to read.
liz
Ha, 3rd time lucky. Thanks, Jeff
Jeff, if you can post a reply to Peter V's question before he can even ask it you might actually be able to persuade folks to jump off bridges:)
HAHAHA.. i just read about the Burning Ring of Fire... i can almost feel it my saying it...
Berk,
Depending on which time frame you are using, make sure the pattern is consistent (touching your lines more often than not) and there is little "emptiness."
Jeff/Raimo
Is this a good entry point for AMZN? I was thinking some Aril 75's here.
Doug,
There is a small range there at 75...since last time I ate crow on this one, I am saving the majorityof my position for a breakout.
Jeff,
These were supposed to go with that post. I am not as quick as others.
http://screencast.com/t/VHDMlzxp1
http://screencast.com/t/qQXxfDyB2ys
SPWR is on 30's.
Thanks.
Berkshire
Laney and Sarah,
My thoughts exactly on STLD. Safer to get the May call--I think??
What do you guys think?
Liz, yes I have. Slowly I'm working on collecting them all.
Sarah,
On STLD, would you be looking at buying April or May? I only ask because earnings are coming up and if I bought, I would want to be out before earnings. Is that killing myself with theta though?
You've held over earnings in the past, right?