re:["your money line appears to have done the trick
today but it could be "too easy:]
Maybe it's better to be "too easy" - than "tooearly"? (vbg)
Options expire Friday -- and that's a significant
reason for much of this volatility.
Whacky action out there in the market right now.
The techies are manic -depressive.
...they soar on IBM, then crash on Intel.
-- go figure?
Airlines are sooo bad with $90 oil and a recession looming,
that they get a bump based on M&A. Then the homies who are
facing horrid fundamentals, rally 7% into the abyss...and
of course, traders bottom fish in the financials based on
coming rate cuts and bailouts....while dumping what's been
soaring -- commodities.
-- go figure?
Did you see $2 homebuilder WCI pop 15% during Carl Ichan
and Jim Cramer's live on air conversation on CNBC?
I mean why not dump gold and buy a homebuilder!
Didn't the rest of you wake up in the middle of the night
last night, and have that same epiphany moment!?!?!
...dump gold and buy the homies!
You can bet your ass the same SOB's are playing 24 hands
of online poker at the same time they're churning their
E-Trade account (vbg).
...never enough juice for some people. There's a reason
Vegas is open 24 x 7.
Anyway, here's my thoughts on where we are right now...
During this shakeout... volatility has exploded.
The trade is no longer "directional" but, volatility itself.
Stop and think about that a moment.
This is a trading strategy that I've used over and over,
and over and over again, in the gold sector.
When things get this volatile - don't fight it...use it.
So here I've reverted back to a little "Akkido Trading,"
and instead of fighting the volatility - we use it, and
profit from it.
How do you do that, you ask?
We'll I use the same strategy that I used during the
15+ month trading range of "The Chart Part I."
Technically, I guess you'd call it a "floating options
strangle"... floating because while we have
both out of the money puts and calls at different strikes,
they are not true "strangles" in the sense of not having
the same expirations.
The "floating" aspect comes from staggered
expiration dates. From present month strikes in
some cases... all the way out to LEAPS.
Basically, what I am doing is "straddling" the trading
channel highlighted in the solid blue trendlines below:
I am basically "neutral" to HUI 430-465, in what I've labeled "no mans land."
And I hold calls for upside north of HUI 463, and puts
for leverage sub "the money line" of HUI 434.
I banked the run up from the August washout, the pullback
to HUI 370 support and now this run to new highs.
I no longer want to fight volatility here,
I want to profit from it... hence the trade
on volatility itself.
Now is the time to step back, take a deep breath,
light a cigar, pop a bottle of bubbly, and celebrate.
Relax, while everyone else in the gold sector is sweating
bullets, passing blood, and making margin calls.
People make mistakes under stress.
Remember what Napolean said?
"Never interrupt your enemy while he's making a mistake."
So now is the time to sit back, and patiently wait
for the enemy to finish making his mistakes.
Then, when the time (and the risk:reward ratio) is right,
we will step back in - and pick up the cash.
...now, is the time to dig deep into the charts.
...the time to re-visit the fundamentals of your buy list.
...the time to take a look with fresh, unstressed, and
profitable eye's - at everything outside the box
that affects gold.
Take a hard 2nd look at oil, copper and other commodities.
Take a look at the BRIC charts.
Take a look at the BDI index, the transpo's, all the early
warning recession indicators.
Trading success and profitability is 80% mindset and
only 20% knowledge and ability.
...and we all perform best when we are relaxed,
and stress free.
I've found a trading style that fits my mental,
and emotional makeup.
I'm a better channel timer and bottom picker, than I am
a momentum trader/top timer.
Now don't get me wrong (vbg), I don't do too bad on
picking tops...but, by design -- I never, ever, EVER
want to be "all in" at anything close to a top (interim, or
the ultimate top) in the gold sector, because that's a
death wish.
...has been all through the last 6 years of this cycle,
and was at the ultimate top of the last great bull run
in gold - twenty seven years ago.
Be "all in" at the bottoms.
...at LowRisk:HighReward turns and transition points.
...and when we have major descrepancies between price
and risk, such as extremes in the HUI:Gold ratio.
...not at tops.
It is sooooooo much easier, sooooooo much more fun,
sooooooooo much more profitable, and soooooooo much
better for your trading mindset, to be trading out
in front of the market, in anticipation of it...
and not behind it - and in reaction to it.
I know that sounds pretty simplistic and like just
another trading platitude...but, think about it.
...it will sink in. And when it does - you'll thank me.
Trading is as much art - as it is science.
People spend way too much time on trying to master the
science... and far too little time trying to master
the art.
And there is "no perfect science."
What works for me, is not necessarily what will work
for you.
I am not trying to preach "the" way... just "a" way.
...and that's the key - find your way.
Hope that helps.
mo later,
S.O.T.B. |
