Trade | Smart University - Stock Market Education and Options Trading

Less than 48 hours....

2009-07-18T20:25:00.001-07:00

Thursday night we announced in class that Monday's classes will be the first to know about our most exciting, outrageous announcement in the last 6 months. The clock is ticking.... in just under 48 hours All of our students will be aware. Will you be in class to hear the news or will you simply be the last to know?

Not sure if you qualify? Monday's class is your last chance to join our current level 1 group as we will start registration for next month's class on monday. If you want to sign up visit www.TradeSmartU.com to register and you can be one of the first to hear our most outrageous announcement YET!

Here come the skeptics....

2009-07-08T19:04:00.000-07:00

It's inevitable when someone comes out with such crazy notions as DOW 3000 that the critics would come out of the wood works. My recent video comparing Dow 1929 to Dow 2009 is of course no exception. Alas - a prophet is never welcomed in his own land. The theory of contrary opinion is a tough position to back. It's not popular. That's why it's contrary. Yet in the stock market it has been proven to very often be correct. Even if the position is wrong but it provides a position of caution, it is still worthwhile.

Yesterday I received a very thoughtful email from a student who was simply passing on some points of discussion from a friend. With our student's permission I am posting excerpts from our exchange. I figure it's easier to answer the critics as a whole rather than one by one. So please enjoy the discussion.

Jeremy/Josh,

I have been constantly bragging about the stuff you teach in class with my friends and family. In one of these scenarios one of my friends pulled about your blog recently and has the following views about your blog write up. I would appreciate your responses on his comments

He (Jeremy) is an extreme bear, if he really believes in everything what he says.

Yes - right now it is true. For the first time in my life I have been converted into a bear. I have been bullish on the market for the last 15 years. Even through the 2000-2002 downturn I was a believer in a strong recovery following the correction. I was also strong on the economy and the market through the fall of 2008, and into 2009. Strong in the sense I was a believer in the recovery. I still traded the downside and in fact we made more money last sept/october than I've ever made in my life as a trader. But I was bullish in the over all strength of the progression of the economy. However I have come to understand some things about market swings, corrections, and macro level cause and effect that has caused me to turn bearish. I will likely remain bearish for the next several months. At least until we see Dow 3000.

He looks at US economy in isolation, and predicts equity markets crash (like Dow crashing to 3000) and hyper-inflation, with dollar plummeting. This scenario is worse than ‘stagflation’, which some economists believe will happen. Stagflation is ‘stagnation – no growth in economy’ plus inflation (moderate to high). The problem with his worst scenario is, when the market crashes to 3000 or a very low number, people stop spending, because their wealth has come down, and many would have lost their jobs, and the inflation cannot go too much up. These two opposites cannot merge.

Yes I'm specifically looking at/discussing the US economy. First of all it's the economy I'm trading. Secondly it is the largest economy in the world and all other economies ultimately in some way are affected by the US economy. So I don't quite understand the isolation issue - but with regards to hyper-inflation and dollar plummeting....

Yes I'm concerned about hyper-inflation, but before I'm concerned about hyper-inflation I'm concerned about DEFLATION. The biggest fallacy most economists (including Ben Bernanke) have about Inflation vs. deflation is that they confuse the cause with the effect. Inflation is caused by too much money supply. Deflation is caused by too little money supply. The effect of each is that inflation causes prices to go higher, and deflation causes prices to go lower. The reason is this... if people have a lot of money (via extra supply) they are willing to pay more for goods. So the price of goods goes up because people can justify it, with the assumption the money flow will not stop. When the money supply slows down people are not willing to pay as much, consequently businesses drop their prices to meet demand. This creates the effect of falling prices. But the cause is a smaller amount of money available to be spent.

The last several years has been a period of economic growth based on an increase in CREDIT. Credit is FAKE money supply. It's money that is available to be spent, but is backed by nothing. As the credit crisis has blown up, it has exposed the realities of the monetary market. The effect of people who can not service (pay) their debt is one of a few things:

1) They stop spending and start paying down debt. This causes less contribution to the consumption of goods as a whole, thus creating deflation

2) They restructure their debt - this is an okay scenario but generally the debt holder does lose some value. The effect is still the same in that the debtor still slows spending.

3) They default. This is the worst case scenario as money simply disappears from the system.

All of these scenarios create a deflationary environment.

To counter this - the Federal Reserve (Ben Bernanke) is printing money, and creating IOUs and other forms of money to help INFLATE the market. They are trying to counter deflation. The deflation alone is bad enough, but when they start debasing our currency through printing money the later effect is even worse - hyper inflation. Since Dollars become easy to get people are willing to spend more of them for goods. Hyper inflation is a worst case scenario and yet at the current rate it is a given that it will occur. We are already experiencing deflation. And deflation will continue until the goods fall to a fair market REAL value. But by that time the damage will have been done and the extra printing of currency will already be setting up the scenario of Hyper Inflation.

Before Bernanke was ever Fed chair he described how he would counter act deflation (in 2002 - speech). Everyone made fun of him at the time because people said his actions were illegal and America would never go for it. Here we are 7 years later and not only is he executing his plan as laid out, but America is standing by wondering what is happening. Bernanke's speech about how he would counter Deflation, mixed with his actions which reflect his worst case scenario, is evidence alone that we are already well into a deflationary period. I'd encourage you to read the speech but in short I'll sum up his points that the first course of action is to lower the fed rates to virtually zero - done. The second line is to print money, buy up private assets, and bail out the banking systems - in action. Bernanke says Deflation CAN'T happen in america because, in his own words. "The United states has a marvelous little invention called the printing press". He really thinks he can print his way out of deflation. And that's what he's trying to do. The problem is Deflation is already happening. His printing of currency is simply setting the stage for Hyper Inflation.

They are comparing this recession with Great Depression, ignoring the many differences that exist between the two. It is possible for this recession to become another 1930s depression, but there are a whole bunch of differences. One important difference is, most of the traders at that time were like Bernie Madoff, and any regulation on trading was not even 1% strict as today’s SEC regulations. In other words, the stock market index was a number in 1920s, without any consideration to the fundamentals.

Oh but this argument assumes that regulation (or lack there of) is the problem. It wasn't, and it isn't. 1920-1929, just like 1995-2007, was characterized by an inflation of credit, and subsequently an inflation of money supply. The great depression was a prolonged recession for 2 reasons:

1) The recession was accompanied by deflation (as credit, and consequently money supply was contracting)

2) The government tried to regulate and spend it's way out, creating stagnation, and ultimately a prolonged recession leading to depression.

THE WORST course of action during economic peril is regulation. It is a fallacy to think that wall street was responsible for the great depression. It was a symptom of the overall problem. It's a fallacy to think "greedy wall street bankers" are the cause of our current crisis. It is a symptom of the overall problem. Beyond wall street and the presumed greed that drives it, is the congress passing laws that require risky lending. THIS above all has created the credit crisis. And now the banks are screwed from every angle. They can't get their money, the government is telling them how to lend, and at the end of the day it is regulation that is preventing the free market from working.

(please note I'm not defending some greedy practices and I'm certainly more ticked than anyone that AIG execs and lousy executives who screwed up and are getting bonuses with our tax dollars. Yet my point is the same - if congress hadn't given them the bailout, they probably wouldn't have given their executives bonuses)

As far as consideration of the stock market being a number in 1920s.... And how is that different than now? How is that ANY different than the tech bubble of 2000? Reality is the market IS a number. Fundamentals are way more speculative than technicals because they "estimate" the value of a company, and never factor the emotion of the speculators who drive the market on a daily basis.

Thanks,
(name withheld for privacy)

Ultimately I hope I'm wrong. I actually pray to God I'm wrong because I really don't believe the current work ethic in America is strong enough to survive a 1920's style depression. America has become incredibly lazy, preferring government intervention and protection to the individual tenacity that the country was founded on. I'm afraid for our country. And yet I know if we could stop the government's current actions, get Bernanke out of the Fed and either abolish the Fed completely or at least appoint a true Free Market economists to the post, AND if the people would rise up and say "we're not going to let this happen" and start working their tales off.. we could stave off this crisis from being a total worst case scenario. Unfortunately the Fed, Congress, and the President are doing everything they can to bring the worst case scenario to fruition, and the people are sitting on the sidelines assuming these political people have a clue about economics.

As a contrarian in this situation, it is prudent to understand that my warnings may be useless. But at least they were there. It's better to sit in cash and wait than to be caught with your pants down as so many economists would suggest at the moment. If the country blindly ignores the larger problems, they will be caught with their pants down. At least by following my logic one can be prepared for the worst, and also be educated to trade if the best case scenario comes to fruition. The benefit of being neutral is the effect of flexibility.

I hope this helps to answer some of your questions. If you want to learn more I'd point you to three locations:

www.Elliottwave.com - Prechter's book "Conquer The Crash" is an excellent discourse on deflation as well as some additional factors that are affecting the market.

http://www.thomasewoods.com - His book Meltdown is an excellent look at how the Fed has affected the current crisis.

http://mises.org/ - This site as a plethora of information from the Austrian School of Economics point of view. Austrian economics is the only primary school of thought which predicted the current crisis as it deals with cycles, not the assumption of progression.

___

I hope this discussion gives all of you some better insight into my positions and at the very least I hope it opens up dialog for meaningful discussions. Until next time Happy Trading.

WOULD YOU LIKE TO LEARN TO TRADE THE TOUGH MARKET TIMES? Why not join us for the next Foundations of Stocks and Options class for Free! Next Class starts July 13th, 2009

DOW Broke H&S Neckline Today. Bearish Reversal Likely.

2009-07-07T13:28:00.000-07:00

Today the Dow finally made a close below the neck line of the head and shoulder's it has been forming. Here is a current chart of the Dow. (click the image to enlarge)

The head and shoulders pattern is a bearish reversal pattern, meaning when we see this pattern form it usually turns into a reversal. The confirmation of the pattern and the signal to enter bearish positions comes with a close below the neck line of the pattern. Today we finally have that close below the neck line. See the image below (click to enlarge)

This very colorful graphic labels the parts of the H&S pattern. This particular formation is a little unique in that there are 2 hits on the left shoulder. The Yellow line outlines the entire pattern. The 2 left shoulders are marked, with the head being the peak in the middle, and the right shoulder is formed on the right. The neck line is formed from the short term support after the left shoulder. It is marked with the green line. While yesterday we did break the line, the day closed above the neck line and did not confirm the break. But today closed below the line, thus confirming the break. If this pattern pans out bearishness in the overall market is an appropriate trade.

Book Review: "Meltdown"

2009-07-05T23:35:00.000-07:00

Meltdown: A Free Market Look at Why the Stock Market Crashed, The Economy Tanked, and The Government Bailouts Will Make Things Worse.

It's not often I run across a book which so eloquently and definitively documents what so many of us in the investment/capitalist world seem to know so well. The reality is the last presidential administration and the current one, combined with congress, are both responsible for allowing our country's capitalistic roots and monetary polices to get out of control. In Meltdown Thomas E. Woods does an excellent job explaining monetary policy and why government run programs destroy economies rather than help them.

I was particularly delighted to find another writer finally taking issue with the disaster Ben Bernanke is creating with the federal reserve by printing so much money and monetizing so much debt. Citing Bernanke's 2002 speech "Deflation: Making Sure 'It' Doesn't Happen Here" Woods methodically describes the fallacies associated with this Keynesian type economic theory and why it not only does not work, but if left unchecked can and will ultimately destroy the US Dollar (or any fiat money system). Woods even goes so far as to suggest doing away with the Federal Reserve completely. Even proposing to allow a free market approach to currency as well by allowing commodity backed currencies to enter the market. A very fascinating argument which alone makes the read worthwhile.

One of the unique aspects of Meltdown is the central discussion of Austrian School of Economics as a competing theory of economic thought. Woods argues, and I agree, that the Austrian school is the only theory of economics which accounts for economic cycles. Following the Austrian School of economics a Government may minimize the affects of economic recession and even depression by simply allowing the free markets to run their course and work. Woods does an excellent job of documenting several economic recessions in US history where the free markets were allowed to work and the affects of the recessions were so minimal economic historians have hardly mentioned them as a blip in the economic scale.

Anybody who is interested in the financial markets (such as what we teach at TradeSmart University) would do well to read this book. It provides a clear and distinct explanation of the causes and effects of the current crisis. I was most delighted to find at the end of the book Woods laid out a plan for helping the US emerge victorious from this crisis that was almost identical to my own ideas which I recently laid out for a friend. As such I would love to see every member of congress forced to read this book. Alas I have little reason to believe they will take my suggestion, but you certainly may.

My most pleasant delight in this book came from the referral to an excellent website of which I was previously unaware, chocked full of fantastic information related to economics and specifically Austrian School Economics. The Ludwig von Mises Institute is a fantastic resource for anyone who cares to understand more about how free market economies work and how governments can and should act in relationship to true economic freedom. I'm delighted to share this resource with all of our students and blog readers.

ARE YOU PREPARED FOR THE COMING ECONOMIC CRASH? REGISTER NOW TO PARTICIPATE IN TRADESMART UNIVERSITY'S FOUNDATIONS OF STOCKS AND OPTIONS ONLINE SEMINAR FOR FREE!

Will The Current Jobless Numbers Do the Market In?

2009-07-03T00:12:00.001-07:00

The numbers are in, and they don't look good. The official unemployment rate released last Thursday says the United States is now sporting 9.5% unemployment. Unfortunately that number doesn't really tell the whole story. The same report from the Department of Labor says when factoring in the number of people who are displaced from a career but still managing to find a part time job the real unemployment numbers are actually closer to twice that at 16.5%. Translated that means if you look around out of every 10 people you see on the street, at least 1-2 of them is jobless. In the words of The Ladies Man... "uh yea, about that...."

The market didn't like the news one bit with the DOW selling off 223 points. A shocker for some, but very predictable for us and our students who have been watching this market turn developing. This little bit of news is just one more piece of the story confirming our prediction that the overall weakness in the economy mixed with lousy government policies is about to send the markets hurtling down yet again. We just posted a video discussion of the technical reasons why the market is preparing to sell off and today's closing price may just be the impetus needed to break this lackluster sideways movement out of it's box and get it moving again... albeit down.

This chart shows the recent head and shoulders pattern forming on the DOW. A break and close below our line at 8261 would signal the likely completion of the pattern and would likely trigger at least some portion of a major sell off.

Beyond technical issues alone the fundamental data which is now being released is a nail in the coffin of this current economy. Countries around the world are scrambling to figure out if the Dollar will hold it's value and all eyes are on the upcoming G8 summit where China will be pressing hard to sure up their investment in US Dollars with some sort of non-fiat guarantee.

The coming uncertainty will certainly mean the loss of millions in personal retirement accounts across the country. However the coming crash also presents some incredible money making opportunities for the educated stock investor. During the last major swing down in October 2008 we made over 400% on our trades and many of our students did the same.

This market uncertainty and volatility is exactly why we offer the classes we do at Trade Smart University. It is our desire to help all of our students learn to trade the market with confidence no matter what the market conditions, and no matter how high or how low the market moves. That's why we have decided to extend the limited time offer we set up for our Foundations of Stocks and Options class for the rest of the year.

If you want to make sure you are prepared for the coming stock market implosion sign up to take our Foundations of Stocks and Options class for free! The class meets twice a week for four weeks starting July 13th and will give you the perspective you need to understand where the market is moving and how you should move your money accordingly.

The Next Major Market Drop Is Coming . . . Are You Ready?

2009-07-02T09:04:00.000-07:00

Written by: Jeremy Whaley

Recently I have been working on a new upcoming Special Report called “Delusion.” It’s a look at how the government, media, popular economists, and common discussion forums are consciously ignoring the most basic of economic principles and ushering in their worst nightmare in economic meltdown. With so many heavy thoughts on my mind I wanted to take a moment and write some blog posts to give all our readers a heads up to the coming crash.

As I begin, I want to help catch you up to speed with what our students have been learning over the last several weeks. Watch this 10 mintue video of a technical case study for why I think the dow may fall to 3,000.

The current “recovery” in the US stock market has some people believing the worst is over and the economic hardships will be ending soon. However, the wise investor who is willing to open his eyes to differing opinions knows the same people who predicted the most recent wave of market woes are expecting still lower moves in the coming weeks and months. Here are five reasons the stock market is about to continue its move lower and what you can do about it.

1. All of the informed economists are predicting a deeper crash.

Most economists missed the most recent downturn, which has been described as “the worst economic crisis since the Great Depression.” They are popular economists who pretend to be educated but rarely catch the major economic swings. However, a few informed economists did not miss the downturn of 2008. Harry Dent, Robert Prechter, Thomas Woods, and the entire Austrian School of Economics, just to name a few, saw this disaster coming years in advance. They warned, but no one listened. And they are all in agreement: the worst is yet to come. Are you ready...?

2. Market technicals reveal the current rally is over.

Since the low in March 2009, the stock market has enjoyed a decent rally. But most people fail to realize that the Dow is currently telling us a story if we know how to listen. The Dow chart reveals a classic head and shoulders pattern forming, which is indicative of an impending reversal. If the economists mentioned above are correct, the downturn will be worse than before, and this current head and shoulders reversal pattern says NOW is the turning point. Are you ready...?

3. The forms match the Great Depression.

In 1929 the stock market finished the great bull run of the 1920s with a bust—a bust that gave up 50% of the total market value. After a small six-month rally people thought the market was recovering only to be thrust into an even worse market selloff that gave back virtually all of the value of the market. More recently, since the extreme highs in 2007, the market has again lost right around 50% of its value. This was followed by the current six-month rally, which has everyone buzzing of market recovery—just like in 1929. Yet just like 1929, all indications are that the market is about to enter a horrible bearish turn that will wipe out the complete retirement of many investors. Again, just like in 1929. History has a strange way of repeating itself. Are you ready...?

4. Government spending has bankrupted the apathetic American people.

The Bush administration began a wave of spending never before seen in American history, but the Obama administration is making the previous administration look like child’s play. Yet the American people are sitting on their hands and holding their mouths in the hopes that their suspicions are wrong—that the government really does know what it’s doing. However, on a daily basis more and more non-existent tax dollars are being spent in a futile attempt to stave off what the government knows is coming...another Depression. And the people are just watching in denial—delusional bystanders, if you will, hoping what they know in their gut is not true. And all the extra spending is guaranteeing the eventual outcome the government is “trying” to avoid. This massive government progression has already bankrupted America, but no one is listening. It’s just a matter of time before the house of cards comes falling. Are you ready...?

5. The Federal Reserve has created a no-win trap that is ensuring a market collapse while setting the stage for a hyper-inflation never before seen in America.

The Federal Reserve’s job is to prevent economic meltdown, yet they created a nightmare through their controlled inflation policies, policies they are now trying to fix by extending the nightmare and hoping it ends differently. Over one hundred years ago the Austrian School of Economics predicted this eventual outcome from any central banking system. Yet the Fed believes it is better than the laws of economic nature.

Ben Bernanke, in his explanation of how the United States is immune to another Depression, announced in a speech given to the Washtington D.C., National Economists Club in 2002 his plan to take over private sectors with the Fed, take over private banking and private industry, and manage our way out of any economic troubles. No one listened and no one understood the dangers in his plans. Now people are questioning how this man took so much control, and all the while Bernanke is printing money like it’s monopoly money, trying to overcome the nightmare the Fed itself created. Meanwhile, the value of US currency is about to become worthless. This money printing is creating a situation of hyper-inflation that will in all likelihood be the demise of the US Dollar. Are you ready...?

The coming economic crash will make the last two years look like times of economic prosperity. And yet you can survive if you know how. If you want to survive the coming crash, you have to be prepared. Trade Smart University teaches students just like you how to spot and profit from both bullish and bearish market reversals. While most Americans are about to lose everything they’ve ever saved for retirement, if you know how, you can prosper from the largest stock market crash in US history. Will you be on the right side of the trade? Do you know how to make money when the market goes down? Are you ready...?

Because we truly do want people to take charge of their financial future, Trade Smart University is giving away the entire first level of our premium trading class, Foundations of Stocks and Options. This class is a $600 value, and you can sign up now to take it for FREE. Simply go here and register. Be Ready.

2009 Stock Picks Mid-Year Report Released!

2009-05-29T11:26:00.001-07:00

Back in January we made the announcement of our top 9 stock picks for 2009. At the time we also announced the accompanying special report which was to be released. However, 2 days after we made the announcement I became deathly ill (well I felt like death) and a week after that all of our family crisis, which most of you students are familiar with, started up. Long story short the report has sat there in the archives of my computer half finished for half a year now.

The good news though is I have taken this week (which was suppose to be a week off) and updated and finished the report! It's just become a mid-year report instead of a start of the year report. But all of the stock charts are completely updated, complete with my lines drawn for your trading enjoyment. As we speak the report is with our editor going through final revisions and will be available for download tomorrow!

The full report includes our 9 top stock picks plus 41 bonus picks as well as some extra bonus picks I call "dessert". A full chart of every stock is included in the analysis as well as a full size chart of every stock included in the appendix to the report. The entire report is over 120 pages of charts and analysis! And it's yours for free! And the best part is since we made these picks 6 months ago, our mid-year analysis has totally confirmed these were AWESOME picks.

If you're new to The Financial Puzzle and would like to know how you can learn to analyze stocks on your own as well as how to trade the market in no matter the economic conditions, why not signup to take our new class starting June 1st. We're offering the class for free even though it usually costs $600 and we've had many students say it's worth at least twice that. But for you the class is FREE - so sign up right now.

For the rest of you the Top 9 Picks for 2009 and 41 Bonus Picks Special Report will be available for download tomorrow.

Book Review: "Economics In One Lesson"

2009-05-27T01:08:00.000-07:00

Today I have decided to finally answer the call of many students who ask such inquisitive questions as "who was your mentor...?" It's a natural question and one I would gladly answer if I had just one mentor. Unfortunately when I learned to trade I learned the hard way... by studying my butt off. Of course during that study I met many wonderful teachers, trainers, and dare I say mentors... it's just that most of them came in the form of books! So to finally fulfill the answer to these persistent questions I have decided to do so by offering reviews/reports on books I have read or I am in the process of reading. In the case of today's book... well it's an oldie but a goodie.

I first became acquainted with this book when I was in college. It showed up in a general education class where we were suppose to learn all about socionomics and economics... I personally only learned about Mt. Dew and Coffee.... but I digress.

Not long ago I whipped out this little gem and thought "I wonder what I was suppose to learn from this book". Upon this more recent reading I confirmed that in fact my college education was there all along - it was I who was missing from college. For this little book contains prophecies written many years before Credit Defaults, Bank Bailouts, TARP monies, and any of our current troubles began. But these prophecies... oh somehow they knew this day would come.

For those who haven't read it Economics in One Lesson by Henry Hazlitt is a classic book originally published in 1946 which teaches just that... the whole substance of economics in just one lesson. The irony of this lesson is the fact that it has much less to do with the lesson than it has to do with the false thinking that leads a government to ignore the insights in the lesson. The lesson is simple: Economics is a constant battle of cause and effect. I believe the world of physics has brought us such insight as "every action has an equal and opposite reaction". And yet few in our modern world have drawn the conclusion that economics also obeys the same law - for every economic action there is an equal and opposite reaction.

Hazlitt wrote his book just after the great depression and managed to foresee 60 years ago exactly where the US Government is today. Discussing everything from Government subsidies to state and local taxes, imports & exports to the cost of goods - Hazlitt offers an excellent discussion of basic capitalism and how free markets are destined to work so long as government does not interfere. While I wish I could make everybody in congress read this book I know I can not. But I can certainly encourage you to read it. Well worth your time Economics in One Lesson will help you understand why government spending and bureaucratic control can never by it's very nature fix the problem they set out to solve. All government can do is prolong the natural healing of the free market cycle.

Be careful. This book may make you rethink your position on government and certainly any party loyalty you may hold. But it will no doubt give you insights in to what is happening today and why the free markets are responding so negatively to this government control.

Memorial Day: Thank You To Our Troops

2009-05-25T22:27:00.000-07:00

Memorial Day. In America this very special day is a day we remember those who have served our country with the highest honor - the honor of serving through military service. Hundreds of thousands of men and women have served during our short time as a nation - many of them have given their lives for what they believed. Those sacrifices are the very reason you and I are able to live in a world with a country like The United States of America. A world where free enterprise is the predominant form of economy. A world where capitalism is king. A world with free markets that allow us to participate in the brilliant ideas of others. Yes I believe with all my heart the sacrifice of our military is by all means one of the greatest contributions a person can make with their life.

I believe it not just because I'm an American but because to me it's personal. Not because I have ever personally had the honor of serving, but my family has. My grandfather fought with the US troops in World War II. And this very day as I write this blog post my uncle Rodney Whaley is currently serving our country in his uniform in the nation of Kuwait. I'm proud of these men. They are more than family, they are heros to me. Their core belief in what our country stands for and believes is the reason they have put their lives on the line. And on this memorial day I choose to use the relatively small platform I have in the form of this blog to say thank you. Thank you to to Uncle Rodney. My Grandpa Whaley. And thank you to everyone who has ever put on the uniform of the US military to help protect and defend our freedoms.

(As a side note - Financial Puzzle offers completely free or highly discounted rates to all active duty military. Please send a private message if you qualify)

Four Profitable Trades for THIS WEEK!

2009-04-28T11:09:00.000-07:00

Okay - I pretty much NEVER give out secret trades. The reason for this is because my anxious students always put money on the trade, rather than learning to trade first. Of course inevitably a trade slips out and someone does it. I really don't mind because they are usually great trades. Last time I did this Liz made over $14,000 on RIMM for the earnings trade I let slip out (oh yea, that was in 1 day!). Oops! So you can understand why students keep saying "give me another RIMM trade.."

Today, friends, I have heard your cry. And today I will not give you another RIMM trade. Instead I will give you 4 trades that very could make you some serious money THIS WEEK!

1) FSLR

FSLR is slated to release earnings TOMORROW after the close. FSLR, being the stock it is, tends to move far on earnings. Consequently there is a really great earnings trade set up.

First of all everything is set up perfectly for a break. A slight better chance of a bullish break than a bearish break, but with earnings coming up you don't want to risk it. Let's call it neutral.

Secondly FSLR is has a Bollinger Band squeeze play shaping up. There's two good things about this. 1) It indicates an impending move. 2) Volatility is typically a bit lower. given the extreme volatility on FSLR options any discount is a good thing.

The way this trade would set up is tomorrow buy both a CALL AND a PUT. One on each side of the stock. You do this so you can make money if the stock goes up, and you can make money if the stock goes down. It's a win win trade when you know news is coming out. The upside target is $160 minimum, and $180 on the high end. And what happens if they miss? $130 on the downside with $103 being the ultimate downside target.

This trade does have 1 small drawdown. That is the price of the options are still a bit steep. Since you know you will loose most if not all of the value of one of these options the initial investment may not be worth it for you. If you like the trade however but don't want to do it on FSLR - try the same trade on VAR!

2) C

Let's face it - all the financials are a wreck. And most people are running with all their might away from them. However if you have one (like Citi) that the governement has promised it will NOT let fail, and it's trading so cheap you can buy the stock for less than most option purchases... well it's a Covered Call trade made in heaven.

C closed today just under $3.00. Buy 1000 shares for $2.89 and turn right around and write a $3 covered call for $.25. That will bring in almost 10% immediately and you'll be out of the trade in less than 3 weeks. Plus you still own the stock. Next month you can do it again. Worst case? You get called out at $3/share and keep your .25 premium. So you cleared $3.25 on a stock you paid $2.89. That's better than 10%. Not too shabby for financials!

3) AZO

Autozone has traded into an amazing Bollinger Band squeeze with very low volatility. That means as soon as it breaks, it's going to be strong, mighty, and profitable. With earnings coming up at the end of the month I would anticipate a relatively quick break as traders anticipate the earnings announcement. If this stock moves above 167.75, consider buying some June 160 Calls. OR, if it moves below 154.75 consider buying some June 160 Puts. Either one should bring you a solid $10+/share.

4) AAPL

And my favorite strategy on my favorite stock. AAPL should continue it's bullish move on up to about 135-138. However it's doing some resting at the moment. So consider a BULL PUT SPREAD on AAPL by selling the MAY 120 Put and bringing in around $2.50/share. And buying the MAY 115 Put for about $1.20/share. It's an easy 20%+ over the next 3 weeks.

Hope these help. Don't forget our next Foundations class starts TONIGHT at 11:00 EST. We have just a few seats left. See you there.

S&P ready for a turn around?

2009-04-27T14:59:00.000-07:00

The recent action on the S&P has produced what most would consider an Inverse Head & Shoulder pattern on the weekly chart. This pattern is typically a solid reversal signal when seen at the bottom of a downward trend. Traditional Technical Analysis wisdom would say to enter a bullish position if/when the neckline is broken to the upside. However for those who are following Elliott Wave progressions a solid bull move is not in the near future. I wonder who will win?

Really who cares? The important thing is you are prepared as an investor to profit on both sides of the trade no matter which way the market moves. If you don't have that kind of trading confidence you should consider taking this month's Foundations of Stocks & Options class which starts tomorrow night. This is a $600 class but we're waving tuition. So sign up and learn how you too can profit with any market swing.

Google Trading in Symmetrical Triangle

2009-04-27T10:03:00.000-07:00

Check it out - Google is forming a symmetrical triangle. These triangles are technically a consolidation pattern meaning they could move either way, however there may be a slight tendency to continue bullish. However the good news for the more aggressive trader is you can enter a trade as soon as the triangle is broken. The best thing about Google is once it breaks - we've got some great profits to be made.

If you'd like to know how to make your own analysis like this sign up for our Foundations of Stocks and Options class starting TOMORROW!

Charts for Foundations Top 9

2009-04-26T22:36:00.000-07:00

Many of our students have been asking if I would post a copy of our charts so they can see the lines we've drawn just to make sure their lines are "lining up". But after some thought I figure why limit all these lines just to the class? So I'm posting them on the blog for all to see - even adding some analysis for you! These screen shots were all taken Sunday night, April 26. The lines however have been in place for quite a while of course. To enlarge a picture just click on it.

Let's get things started with the Dow:

Of course the Dow has been in a pretty nice little rally over the last two months and most recently we've been trapped in a bit of a rectangle pattern. Very soon we should see a break one way or the other. However don't get too excited about the bull rally. While we may see a bullish break up to the 8300 area this rally is still quite weak. Expect a pull back for sure in the near term. Either a brief rest pulling back to 7500 before rallying on up to 9000, or just a flat out roll over all the way down to the 6600 range.

And now let's move on to SLB:

SLB has been in a solid trading range for the last 6 months. However finally on Friday we saw a break out of the trading range. A better than expected earnings report fueled the surge but after a full day of trading the stock managed to throw a Doji candlestick - showing great indecision. If we see a move to the upside that takes out Friday's highs a nice size bullish move is likely. Otherwise expect to see some time testing the freshly busted resistance line to see if it will hold as support.

SHLD:

We havn't looked at SHLD as much in class recently as some other stocks but it's in a very interesting spot for sure. Over the last month SHLD has moved nicely up to a solid resistance line just north of $60. However you can see the long term resistance line also coming in to play and providing some extra resistance. While this recent trend should be sustainable in the long run in the short while the stock is a bit overbought and will probably trade sideways or slightly down for a few days. We may even see a testing of the $50 support line before a new wave of bullish power comes running in.

RIMM:
RIMM has become a favorite of many of our students. It could be because of the subtle suggestion to try a option strangle over earnings which profited several students quite well. One of them showed up to class three days later with a cool $14,000 profit in her account - oops...

So what's next for this money making wonder? While the recent moves have certianly been nice they have also been a bit fast. Our resistance around $69 has proven to be a slow down but we'll have to wait a bit to see how much resistance it holds. Indicators are certainly showing a need for a brief rest, but otherwise this stock could move much higher. The next big target is the bottom of the large gap back in September around $77. We're about to see the rest of the moving average crosses complete as the 10 day is approaching the 200 day. Give it a day or two and we may well see a direction defined.

PBR:

Ahh - who doesn't want a little Brazilian Beer... or oil I mean. This has been a fun stock to trade since the bull rally starting around $15 since it's bottom back in November has been a very nice move. A young student of technical analysis would likely expect this stock to continue moving higher in what looks like a well defined stable trend. However all traders should be aware that we have a serious case of bearish divergence shaping up. When we see divergence on MACD it's usually worth taking note. However it's pretty rare to see divergence occur at the same time on all three of our indicators that can show divergence. But Stochastics, RSI and MACD are all three showing warnings. An upcoming bearish move is likely imminant.

MA:

Mastercard has spent the last month trying to break out of it's multi-month pattern. A small pull back may have just set the angle for a new bull move. And the bullish engulfing candlestick pattern on the 21st indicates a bullish move. The only thing really holding it back is some potential resistance around $176.

GOOG:
The mob boss of internet search engines has certainly taken its share of beatings over the last year. Most recently GOOG has been attempting a bullish move to return to the glory days of $700/share stock. If we can see a break of this $394 resistance this week may see that next big move. With the next big resistance showing up at $460 there's plenty of money on the table to be made with this trade. With falling volume the current price behavior closely resembles a continuation pattern so watch for a break out with good volume. If it happens this week ride that bull!

BIDU:

The Chinese Google, or so they say... Certainly a fun trade. The recent bullish move has been a great move for those who are long but running into some new resistance around $225 may be a problem. If we see a solid push through continue bullish, otherwise this stock may need to rest a few days.

AAPL:

A good Apple trade a day keeps the cash flowing your way... or so we hope. The current patterns settting up on aapl could prove very profitable depending on how they play out. If we can take out the highs a couple days ago at 127 this stock has no reason not to run on up to the long term resistance which should intersect around 135-137. That's a pretty easy $8-10 move on the table.

AZO:
And last but not least our wonder stock of the great recession. Apparently the auto industry may be dying but repairing older cars is a booming business. While it's been a great move not all things can rise forever. We could be seeing a double top form which would lead many to take on bearish positions. However the good news is this stock has traded sideways long enough to pretty much reset itself. So a move either way is certainly feasable. The best news is that move should bring an easy $15-20 profit. The current bollinger band squeeze is a perfect set up for a volatility trade. These are the things great profits are made of my friends...

And there's the charts along with some basic analysis. Don't forget Tuesday starts a whole new Foundations of stocks and options class and we still have a few scholarships available. Sign up now to secure your seat and learn how to do your own analysis of these trades.

Killer Trade Set up on AZO

2009-04-24T10:30:00.000-07:00

AZO has set up a trading opportunity that is just too sweet to not blog about. Check out this text book Bollinger Band Squeeze play.

As the bands squeeze together it shows low volatility and also reflects the fact the stock is resting. Watch for a break above or below the bands and trade in that direction. Here's what it looks like with standard lines drawn.

A bullish entry point here would be a close above $167 and a bearish entry would be a close below $155. Both with good volume of course. All of the other indicators are beginning to reflect this breakout as well and ADX indicates it's ready for a trend to begin. A move either way should be able to profit $15-25.

SIGN UP HERE to take our Premier Training Class for FREE.

Pure Abandonment...

2009-04-24T00:19:00.000-07:00

Okay - I confess. I've abandoned all our blog readers. I know, I know. I'm tired of hearing about it. We've got about 3600 abandoned blog readers writing me, what feels like every day, begging for more information. Gosh - demand is so hard to feed sometimes...

Well here's the deal - we've been blasted with all sorts of business issues lately. Since we really opened up Financial Puzzle to the broader market and expanded beyond our private students we have grown much faster than we ever anticipated. Consequently there's growth pains. But let's be honest... people need what we have to give them. I mean the whole country thinks they're in the greatest depression since - well since great depressions were the greatest fad in economic prognostication. And the demand of our students for more and more content is just evidence of how much people no longer trust the government and want to take control into their own hands.

So with that said, on this the twenty fourth day of April, 2009, I would like to apologize for making all of our 3600 readers feel abandoned. You're not. We've just been really busy and honestly when we're busy it's really easy to forget to blog. So please, accept my humble apology.

While we're laying out the confessions - I'm also sorry the 20/20 trade analysis isn't posted up yet even though the trades all closed a week ago. And I'm sorry the 2009 stock picks special report is 8/10 finished but not ready for publication. And I'm still sorry the Tennessee Titans lost to the Baltimore Ravens in the playoffs....I'm just sorry okay! I'm sorry! There. It's out. Wash it all away and we can start fresh, like we never forgot to blog...

So here's a quick trade for you just as a small amends for all my blog posts I failed to post. Check out AZO. It's in a text book Bollinger Band Squeeze - and did I say it's about to pop! Oh yea. Set some wise entries on this guy and you should have a cool $15-$25 move either way! And all that was for free...

20/20 Update

2009-04-03T06:39:00.000-07:00

Sold AAPL Short Call:

As a quick update to our $20k in 20 minutes class. We sold the short side of our AAPL bear call spread this morning. We took a pretty good hit on it but expect to fully recover by holding our 120 call as the stock moves higher. More analysis will soon follow.

GS for Loren

2009-03-24T09:45:00.000-07:00

Loren is a Level 1 Student in our current Foundations of Stocks and Options class -- so for this analysis I'm going to try and stick to the tools that we've presented to them so far.

First, you'll obviously notice that GS has been in a nice little up-trend for the last 4 months -- nothing major, but we're slowly trading a $30 channel upward. GS is typically a wonderfully disciplined stock and this trend is no exception. Amidst intense turbulence in the financial sector, GS has maintained some semblance of order here!

With that said, you can clearly see that you're trading at the top of your channel right now which could indicate that a short retracement is imminent. More significantly is the fact that you are quickly approaching your 200 day Moving Average -- which we'll be talking about in a class very shortly. The 200 deserves a lot of respect.

Although many of the other indicators still show bullishness to the trade: Increasing Volume, neither Stochs, MACD RSI have crossed over, and you're riding the top Bollinger Band -- there just isn't enough room before the 200 to get me into a bullish trade here -- in fact, there isn't a lot of room after the 200 before you meet the next resistance point! This is a perfect storm for consolidation!

We'll talk more about bracket trading (trading neutral) in class #8 -- but in short you'd want to set up a bracket to enter a trade here. Your top bracket should be past the 200 (with solid confirmation), your bottom could be a little tighter -- I'd set it right at Friday's low to trigger a bearish trade.

Jump in here with your comments Loren!

See you Wednesday

March $20k in 20 Minutes Results...

2009-03-22T16:28:00.000-07:00

I wanted to take a minute and update the trades we made in the $20k in 20 minutes class we held on March 5th. It's a long post but certainly worth the read. We're happy to report all 11 of the trades we placed in class were closed will what basically amounted to a full profit. Here's the individual results below:

1) AAPL - $1,882 Profit (33% ROI)
- Cash Required $5,618

The first trade we'll look at is AAPL. We traded a Bull Put Spread on this trade selling the $85 put and buying the $80 put to cover our position. Apple continued to move upwards into it's current channel and we let our options expire on Friday. You can see we brought in $3,806.22 and spent $1,923.75. With all commissions factored in we cleared $1,882.47 on this trade. Total cash in tied up was the $5 spread minus profit cash out. A $5 spread times 15 contracts = $7500 minus the $1882 profit leaves a total money required for the trade of $5,618. With a $1,882 profit that equals a 33% ROI in about 3 weeks.

2) & 3) AMZN - $3,439 Combined Profit

This was a double trade because we actually placed two credit spreads to make this one happen. A person could have easily placed only one and still made a fine profit. By stacking both a Bull Put Spread and a Bear Call Spread we created what is known as an IRON CONDOR. Let's break down both trades:

Trade Leg 1: Bull Put Spread
$1,829 Profit (22% ROI)
$8,171 Cash Required

The first leg we opened was by selling the $60 put and buying the $55 put to cover our positions. We brought in $3,354 with the sell of the $60p and spent $1,525 with the purchase of the $55p. That created a net credit of $1,829. We traded 20 contracts so total cash required was $5 x 2000 (shares) = $10,000. Subtract the profit of $1,829 = $8,171 Cash Tied up for trade. That's a 22% ROI in 3 weeks.

Trade Leg 2: Bear Call Spread
$1,609 Profit (19% ROI)
$8,391 Cash Required

The second leg of this trade was created by selling the $70 Call option for $2,394 and buying the $75 call for $785. That created a net credit of $1,609. Again we traded 20 contracts so total cash required was $5 x 2000 (Shares) = $10,000 and subtract the profit of $1,609 = $8,391 cash tied up for the trade.
That's a 19% ROI in 3 weeks after commissions are paid. (for the record we weren't going to place this trade because we typically do not place trades with less than 20% ROI, but the class voted and wanted to trade it - so we did)

It's also worth noting this leg of the trade we closed about 15 minutes before the end of the closing day just to insure no after hours trading forced the stock price above $70 leaving us open to getting called out and into a position we didn't want.

4) AZO - $1,913 Profit (34% ROI)
Cash Required - $5,587

The next trade we're going to look at was with Auto Zone. Unfortunately something messed up in the computer's trade analysis so I don't have a graphic to share. But you can reference the video if you doubt we really made the trade.

For AZO we traded a Bull Put Spread by selling 15 contracts of the $150 Put for $4.20/share which gave us an immediate credit of $6,281. Then we bought the $145 Put to cover our position for $2.90/share or an expense of $4,368. That left us with a total net credit of $1,913.

The trade went as planned and options expired on Friday. As such we cleared $1,913. Total cash required was $5 x 1500 (shares) = $7500 minus our profit of $1,913 = $5,587 total cash required for the trade. That's a 34% ROI in about 3 weeks.

5) CME - $1,462 Profit (24% ROI)
Cash Required - $6,038

CME is a fun one for us. We placed a Bull Put Spread expecting this stock to continue trading sideways. However the stock took off closing Friday at $228/share. A straight buying of calls certainly would have profited us more but we're still more than content with our % ROI.

We opened the position by Selling 15 contracts of the $170 Puts for a credit of $8,381. Then we covered ourselves by Buying the $165 Puts for a total of $6,918. Final net credit was $1,462. The trade went as planned and all positions expired Friday for a full profit. Cash required was $5 x 1500 (shares) = $7500 minus net credit of $1,462 = $6,038. That's a cool 24% ROI in just 3 weeks.

6) FSLR - $1,762 Profit (30% ROI)
Cash Required - $5,738

First Solar has been a fun one to trade over the last couple years. For this trade we again opened a Bull Put Spread. We did this by Selling the $100 Put with a credit of $6,881. We then bought the $95 Puts to cover ourselves. That left us with a credit of $1,762.

Cash required was for 15 contracts so $5 x 1500 (shares) = $7500 minus cash out of $1,762 = $5,738. That gave us a return of a fine 30% - oh yea, that was in about 3 weeks.

7) GOOG - $2,418 Profit (19% ROI)
Cash Required - $12,582

Oh Google Google Google... This one gave us a scare right towards the end as it pushed up beyond $330. Fortunately we were already profitable at the point because of time value decay, but we almost unraveled this one and rode the call on up. THEN... well those google traders just decided it was a tad over priced. And sure enough we closed right under $330. You'll notice we paid $168 to close the trade. That's because it was the end of the day and Google showed some intraday signals that it may break back through $330. Since we didn't want to take the chance we paid to close the position.

This trade was a Bear Call Spread. We did it with the $330 and $340 calls. Receiving a net credit of $2,418 after commissions. We traded 15 contracts so:

$10 x 1500 (shares) = $15,000 minus cash out of $2,418 = $12,582. That's a 19% profit. We would have had greater than 20% but with the extra $168 we threw in to close the trade it pulled us under the 20% mark. Still not too bad for 3 weeks.

8) HES - $2,349 Profit (30% ROI)
Cash Required - $7,651

HES was a nice trade for us. Just like the most of the other spreads we did a Bull Put Spread on this trade. We executed it by Selling the $50p and bringing in $4,174 through 20 contracts. Then we bought the $45 puts which cost us $1,825. That left a net credit of $2,349. Everything went as planned and all positions expired on Friday.

Total cost was $5 x 2000 (shares) = $10,000 Minus the $2,349 credit. That left us with a total cost of $7,651. A smooth 30% ROI with commissions factored in.

9) ISRG - $3,149 Profit (45.9% ROI)
Cash Required - $6,851

ISRG is our highest ROI trade with nearly a 46% ROI in 3 weeks. We again did a Bull Put Spread. Sold the $90 put and bought the $85 Put. We traded 20 contracts and ended with a net gain of $3,149.

Total cost was $5 x 20 contracts = $10,000 minus net credit of $3,149 = $6,851 That gives us an ROI of 45.9%. You won't get that in too many bank CDs these days!

10) IBM - $1,849 Profit (22% ROI)
Cash Required - $8,151

IBM is a staple Blue chip stock which most people have held for years. Yet few have managed to receive the ROI we got in less than 3 weeks. Again we did a Bull Put Spread by using the $85 put and the $80 put. With all the math done we cleared $1,849 on this trade.

Cost? $5 x 2000 (shares) = $10,000 minus $1849 cash out = $8,151. It's not quite as good as our ISRG trade, but 22% isn't too bad for IBM.

11) RIMM - $1,709 Profit (20% ROI)
Cash Required - $8,291

And finally we've made it to RIMM. By now you see the pattern.. We did a Bull Put Spread using the $35 and $30 puts. Gave us a credit of $1,709. Again we traded 20 contracts.

So total cash was $5 x 2000 (shares) = $10,000 minus cash out of $1,709 = $8,291. Or a 20.6% ROI.

Conclusion:
So let's count the profits. We promised we would make at least $20,000 with $100,000. Let's see how we did:

Total cash required was $83,069
Total Profit Made was $21,932

So we made $8 short of $22,000 and only needed $83,069 invested to make it happen. That's an ROI of 26.4% across our whole portfolio between March 5 to March 20.

Now I'd like to answer some questions which have come up. The most common question is "what if I don't have $100,000 to invest?"

No problem. You can use this strategy with much smaller amounts of capital. The important part is the ROI. If you did the same trades at 1/10 the scale it would have required $8,306 and you would have profited $2,193. Not a bad month trading even for the most seasoned trader.

The second question we always get is "can I really do this?" The answer is YES! If you learn how you can do anything. This is one of the most consistent strategies you can make, allowing you to bring in around 20% or better every month.

So "How Do I Learn How?" First of all learn from someone who's experienced. We offer this $20k in 20 min class every month giving you the opportunity to watch and copy the very same trades I place in class. As you watch an experienced trader you will learn better how to place your own trades. The next class is scheduled for March 27th. Go here to sign up to take the class.

An even better way to learn to place these trades is to sign up for our Foundations of Stocks and Options class. In this comprehensive course you will not only learn how to read the market and place the credit spreads, but you will also learn several additional strategies which will allow you to trade the market profitably no matter what market conditions.

For more immediate reading be sure to check out my Free Special Report "How To Retire in One Year with only $10,000".

Until next time.... Happy Trading!

$20k in 20 Minutes update...

2009-03-20T09:52:00.000-07:00

Today is options expiration day so it's time to make sure all our positions are safe. We placed 11 trades in our $20k in 20 minutes class where we showed students how to bring in a solid 20% over about 3 weeks of time. So far all 11 of our trades are profitable with just about 4 hours left to expiration. I will analyze each trade in a later blog post. But there are 2 trades in particular that I want to mention during market hours because they could be "in trouble" and I want you to see how to play this and insure you don't mess up the trade.

AMZN -
We actually placed an "Iron Condor" on Amazon, which is nothing more than two credit spreads stacked on top of each other. The top position is a Bear Call Spread, while the bottom position is a Bull Put Spread. This trade is placed on a stock that is "stuck" in a trading range and doesn't look to be going anywhere. Basically it's a double dip with the same strategy.

Everything has gone fine with the Bullish position which we placed by selling a put with a $60 strike price, and buying a put with a $55 strike price to cover our position. We will clear a full $3360 on that position.

Our Bear Call position however has reached the danger point and that's why I'm writing about this during market hours. We opened the Bear Call position by selling the a call with a $70 strike price, and buying a call with a $75 strike price to cover our position. Our maximum profit on this trade would be $2420. However Amazon has traded up over $70 and that puts us at risk of being "called out" and forced to sell AMZN for $70/share. We don't want this much exposure and AMZN has not moved high enough to use our $75 call for profit. So what do we do?

1) We're only in danger if AMZN closes above the $70 price point. So in the next 3 hours watch this position to make sure it closes below $70. At the time I'm writing this AMZN is trading just barely in the safety zone at $69.75. But it has been over $70 for much of the day.
2) If the day closes below $70 we're fine. Just let the position expire worthless.
3) However, if we're at $70 or higher the risk of getting called out is greater and you don't want that. So we need to BUY BACK the $70 call position we opened. The good news is time value has worked in our favor and we will still make a profit, even if we buy the position back.

Notice the $70 call position. We sold it for $1.21/share and brought in $2420, but now we could buy it back for only .43/share. We would clear a full $1560 still on this trade. So even though we are in the "danger" zone, we can still make money as long as we close the position before we get caught with it. To close the position simply click the "trade" button and follow the order form.

GOOG -

Our google position is an identical situation. We opened it by selling a $330 call and buying a $340 call to cover our selves. We have moved in to the danger zone because Google is toying with the $330 price point. Currently we have a few pennies to play with but we need to be cautious. Once again, to close this position with no liability simply buy back the $330 call. If we buy it back right now we will still close that position with $4200 in the bank.

This is a quick intra-day update for any of you following along at home. I'll put together a full analysis of all the trades after the market closes and we have all the trades complete.

Happy trading.

Mid-week Spice - Not for the Faint of Heart...

2009-03-19T14:43:00.000-07:00

I generally reserve these market updates to weekends but I can't help and post my comments after this absolutely crazy, dare I say ridiculous week...I've received countless emails asking me if we have finally busted out and started our bullish move. So once and for all let's all sing together... a loud resounding "NO!" No we have not broken out into a bull market. This is a 100% predictable retracement pattern which is part of a natural bear market. In Dow Theory the last week 1/2 is what we would call a "short term" wave. Look at this chart...

The light blue lines haven't budged. They're the same lines I drew months ago live in class and the same lines we've been watching in class. No I have no power over the market. This is the legitimate predictability of the market. Is it a wonder we traded straight up to both the roughly 45º down trend AND the 7500 horizontal resistance line? No. Simply put: this is what should be expected.

So why do I sound so ticked? In a word... GOVERNMENT! I should stop my rant here... but.... oooooo... they can't stop me.......

Friends - DO NOT BE DECEIVED... Congress is going nuts over AIG execs getting huge retainer payout... $165Million + To be exact! No chump change to be for sure, but there are two BIGGER stories that are happening that congress is managing to hide with this AIG story. In fact, when you consider the other stories developing the $165 Million paid out to AIG execs is just straight up chump change. $.10 on the dollar compared to cover up #1:

Cover Up #1
As a trader I care about the value of the dollar... After all most of my profits are made in dollars (at least up til now they have been). But yesterday's Fed announcement is potentially devastating to the value of the dollar. Literally printing over $1 Trillion! The $165 million scandal at AIG is chump change at best, if even worthy of being called chump! Following Big Ben's announcement yesterday the dollar has been falling quickly against other currencies, and of course Gold is beginning to take off soon to break highs from last year. This story is 10x bigger than the AIG story, and congress knows they are to blame. Without such massive government the economy wouldn't be in such trouble. Basic capitalism would have corrected the impending doom and we would likely already be on the road to recovery. But with government growing on an exponential scale almost daily, what could have been a recession, is quickly turning into a depression. And what could be a mere depression could turn into complete economic destruction.

Cover up #2
The second cover up which is getting a small amount of media coverage though not nearly enough, is the fact that the US House passed a bill today to enact a RETROACTIVE TAX on the AIG officials who recieved bonus' as part of the bailouts.

Now don't get me wrong, a bonus for failure is downright stupid, and it's a worthless use of anybody's money - especially tax payer money! But the US House wrote a bill today that is in direct violation to the US Constitution. Article 1 Section 9, Para 3 United States Constitution: "3. No bill of attainder or ex post facto law shall be passed." This means the government can't go after something after it's happened! And yet not only is congress going after it, they're going after it in an attempt to clean up their own mess!

Congress gives the money - Americans hate it. Congress writes provisions for the bonus' - Americans hate it. Now rather than just standing up and saying "we are too big and have no clue how to be capitalists," congress is continuing to meddle in the economic world by trying to create laws that are a direct violation of the US Constitution. And not only that, just like every other bailout/stimulus/ waste of tax money they have passed over the last 6 months they rushed this through without even a hair's breath chance to read the bill. And I promise you when all this news starts to trickle out into the capital markets over night tonight, and into tomorrow, America is going to hate it! And the Dow? Well if the mere fact it was hitting resistance isn't enough reason to drive it lower, this news will pound it back down to 6600 probably before the end of next week.

Friends this is JUNK. I try to keep my politics to a minimum but it's time to stand up because everyone who trades the market, everyone who believes in free enterprise, everyone who believes in the American dream - the chance to over come adversity and be more than your family generation before. The opportunity to excell through the power of humanity, not through the power of government. Everyone who believes in a brighter tomorrow... should be ticked. The governement is trying hard to steal your opportunity.

So what can you do? First write your congressmen, senators, and president. Democrat, Republican, Independent. Tell them if they vote for these measures you're firing them. Then follow through. This is not a partisan statement I'm making - this is an issue of governement of the people, by the people, gone amuk. Governement is here to serve us, not the people serve the government.

Second - CNBC's Rick Santelli started the idea and now across America citizens are planning tea parties in protest. Join the April 15th tea parties that are being organized around the country. Protest taxation. History tends to repeat itself, in both the stock charts and political history. The last tea party was in 1773 in Boston against the Brits... The next Tea party is across America, against the US Governement.

Thirdly - Educate yourself and learn to trade the market effectively. In response to recent governement actions we are taking steps at The Financial Puzzle to expand our training beyond simply the US markets to include both Foreign Exchange and Foreign Markets. In the mean time all of the technical analysis taught in our Foundations of Stocks and Options class will transfer to any market. Learn the basics and then apply it to the next market you choose to trade.

For those who are not prepared, adversity can sink your boat. But for those who are properly trained and prepared adversity can present the opportunity of a life time. Right now is one of those opportunities! Don't waste this chance to make great US Dollar profits while the market falls, and then transfer those profits into foreign markets as inflation kicks in. Retire smart, not desparate.

Last Chance To Take Free Foundations Class...

2009-03-16T08:33:00.000-07:00

A Quick reminder today is your last chance to SIGN UP for the "Foundations of Stocks and Options" class for FREE. The west coast class starts tonight at 8:00 Pacific, 11:00 PM EST.

After this month's class this opportunity may be gone forever! So click below to sign up now.
http://www.thefinancialpuzzle.com/foundations.html

Have We Hit The Bottom And Made The Turn?

2009-03-14T21:53:00.000-07:00

This week has generated a lot of news about the Dow's sudden bullish move, ending the week up over 700 points following last week's slide into level's not seen since the 1990s. Weekend TV magazines have pushed stories touting "the end of the fall is here, the bottom has arrived". Sadly these reports are really nothing more than optimistic words from reports who have been told to "try to not make it sound so bad". From a strict technical position there is little reason to believe the current bullish move is anything more than what Charles Dow would have called a "short term trend".

Dow theory breaks market trends into three phases:
1) Long term trend (lasting over a year)
2) Intermediate trend (lasting 3-6 months)
3) Short Term trend (lasting 3 days to 3 weeks)

Each of the trend cycles flow within the context of the larger trend. At the moment the Dow has been in a solid down trend since it's peak in October 2007. One can look at the chart below and also see a few intermediate trends, with several short term trend moves. The current move is most likely a short term trend because of where it's occurring on the chart.

Notice the secondary fan line which is coming into play as a downward resistance. At the same time much more of a rise and the Dow will be running into resistance back at the 7500 level. Couple that with the fact the 50 day moving average is quickly approaching the same region and there's a triple threat reason why the Dow will maybe have 1-2 more positive days this week before continuing in a downward spiral.

The exception to this move would be the reality that the Dow is currently sitting at the 20 day Exponential Moving Average. This alone could provide all the resistance needed to cause the market to stop it's climb and return to falling Monday Morning.

The next target of course is back at 6600. If that support holds we might can start writing some news stories about the bottom starting to form. If it doesn't..... 5500 here we come...

Foundations Class Offered Just for The West Coast!!

2009-03-12T22:23:00.000-07:00

Hey Guys - we had an enormous.... that's like A LOT... amount of people sign up for last month's Foundations of Stocks and Options class that were unable to make it due to the fact they live on the west coast. So this month we're offering a Foundations class just for you west coasters. It meets:

Monday's and Wednesday's
AT: 8:00 PST - That's 11:00PM EST!

The class will go for 4 weeks.

AND

For a limited time we're going to let you take this first level of classes FOR FREE!!

So you have no excuse to not sign up.
Here's what William said after taking last month's class:
“ I LEARNED MORE about OPTIONS and TRADING…CHARTING….in your 1st SESSION. Then I did the 16 months I was with PAINE-WEBBER…. ( You can print THAT!!!! With my NAME ON IT!!! )”

Oh yea, I think I forgot to mention he use to be a stock broker with Paine-Webber. Go figure. Even the brokers are begging to learn this knowledge.

Show go ahead and sign up and see what the buzz is about since this MAY BE YOUR LAST CHANCE TO EVER TAKE THIS CLASS FOR FREE!!!!

G o Here To Sign Up

OH YEA - if you act fast enough and get signed up before the class is full we'll even let you BRING A FRIEND!!

"Hey JW - What's Your Outlook On The Market?"

2009-03-12T19:19:00.000-07:00

Today I received this email from a student who took our class last month. I thought some others might enjoy the response:

from student:
"whats your outlook on the market? will we continue to rally? sell-off tomorrow?"

john

Response:
I think this is a short term retracement. How long it will last? According to dow theory 3 days to 3 weeks. Today would actually be considered day 3 because it started on Tuesday.
I expect to see a retracement to the 20 day EMA. Look at the behavior on 1-28,29 and again on 2-6 thru 2-10. It's typical retracement patterns.

One thing that may be added here is MACD is crossing over indicating a bullish move is impending. However there are a few things that could easily stand in the way of a major bullish move.

1) We're running into the 20 Day EMA. That often will act as resistance. Also note this is very close price wise to the 20 day SMA used in the Bollinger Bands.

2) A brief check of the ADX trend indicator shows this is a weak trend if a trend at all.

3) If tomorrow we do continue a rally the resistance coming up at 7500 will likely be a pretty strong resistance.

All that to say. We COULD be entering a bullish move but it's a bit unlikely. The mostly likely next move is either a retracement tomorrow (Friday), or a run up to 7500 before it turns and continues a bearish move.

Add to this basic technical analysis the choppy geo-political environment and I do believe it's a bit pre-mature to call this a bullish set up. Let's give it a couple more days and see if any new signs show up. If so I'll update this post. Until then - Trade any bullish trades with caution.

Happy trading.

J-Dub

9 Money Making Stocks for 2009 and 41 Bonus Picks (and some dessert)

2009-01-29T13:26:00.000-08:00

It's here....
The long awaited 2009 stock pick list... (enter heavenly choirs singing)

As promised here are the stock picks for 2009. I've titled these, appropriately, 9 Money Making Stocks for 2009 and 41 Bonus Picks. For those of you who may still have some math trouble that's a really fancy way of saying 50 stocks!

Before I reveal the list I need to lay a few ground rules and give an overview of the post.

First of all this is simply the list. The full report will be out sometime next week ready for download. In the report I will offer a complete analysis of the top 9 picks (this is insanely valuable - we can't even put a price on it really). The remaining 41 picks have some analysis and information but not a complete analysis.

Dessert picks. The "dessert picks" are stocks that don't even come close to making our criteria for 2009 picks. However due to the unique market circumstances of 2008 we have a plethora of great stocks that are so undervalued you can't help but buy these guys. Of course I never suggest buying a stock without some sort of clear profit strategy so all of these dessert picks are potential stock purchases that also allow some good cash flow from writing covered calls. In the full report I give analysis as well as the "Dollar-Cost-Zero" point (that's the point at which you've recouped all of your investment and this stock could fall to zero and you'd still be making money).

Criteria: There are 6 key factors that went in to making these picks. Unlike what many of you consider "traditional stock picks" my picks are a bit different. I really don't care if they're going to go up over the next 6 months. I really don't care if they're going to go down. All I care about is that we can trade them and make great money. So here's the criteria. In the full report (again available next week) I detail more why each of these top 9 picks meet the following criteria:
1) Must have Good Volume (at least 1M average) and good Open Interest (on the options)
2) Must be Optionable
3) Must have a history of Predictable Trading Patterns
4) Must have a Good Immediate Trading Range (at least $10)
5) Must be in a Sector With Some Excitement
6) Must have "Room To Bust A Move"

Bonus factors:
- Important News
- Important Product Releases Upcoming
- Important 3rd party Factors

These are the criteria. The Top 9 have been selected because they meet or exceed these criteria the best. It's only fair to add there is probably a slight personal bias to some of these picks as well seeing as many of the additional 41 picks could have been a top 9 pick (but there was only 9 slots). (these top 9 will absolutely be looked at in great detail in our Foundations of Stocks and Options Class as we will track them as a class)

As for the 41... These guys meet the majority of the criteria. However in most cases each of these picks has at least one factor that prevents it from meeting all 6 criteria on a consistent basis. The most common factor is usually Volume or Open Interest related. That's not to say these picks are not great picks, you just have to be more aware when trading them and check all of your important liquidity factors.

Our Goals: And finally I should re-iterate our goals with these picks. We are not looking for stocks that will move higher. We are looking for stocks that will MOVE. And more specifically we are looking for stocks that will move a lot, often, and in a predictable pattern. So with no further adieu I present...

Top 9 Money Making Stocks for 2009

AAPL - Apple Computer
AZO - Auto Zone
BIDU - Baidu
GOOG - Google
PBR - Petro Brasil
RIMM - Research in Motion
SLB - Schlumberger
SHLD - Sears Holdings (this one is kind of unlikely and special - I detail it in the report)
MA - Master Card

And the 41 Bonus Picks:

ADM - Archer, Daniels, Midland
AMZN - Amazon
ALK - Alaska Airlines
AVB - Avalon Bay
AXP - American Express
BA - Boeing
BBY - Best Buy
BBBY - Bed, Bath and Beyond
BTU - Peabody
CAT - Caterpillar
CME - Chicago Mercantile Exchange
CMG - Chipotle Mexican Grill
CVX - Chevron Texaco
DE - Deere & Co
DECK - Deckers Outdoor
EQT - Equitable Resources
FCX - Freeport McMoRan Copper & Gold
FDX - Federal Express
FSLR - First Solar
FWLT - Foster Wheeler
GILD - Gilead Sciences
GRMN - Garmin
GS - Goldman Sachs
HAL - Halliburton
HANS - Hansen Natural
HES - Amerada Hess
IBM - International Business Machines
ISRG - Intuitive Surgical
JNJ - Johnson & Johnson
MMM - 3M
NOV - National-Oilwell
OXY - Occidental
POT - Potash
RIG - Transocean
SNDK - Sandisk
SUN - Sunoco
TXN - Texas Instruments
VLO - Valero
VMW - VM Ware
WYNN - Wynn Resorts
XOM - Exxon Mobile

And Dessert: (These picks are good candidates to buy and use for writing covered calls if you like that strategy)

AIG - American International Group
BAC - Bank of America
C - Citigroup
DRYS - Dryships
GE - General Electric
LAMR - Lamar Advertising
MOT - Moterola
RMBS - Rambus
SNDK - Sandisk (also on our 41 bonus list)
WFMI - Whole Foods Market

And there you have it. A total of 60 potential trades for you to enjoy during 2009. As I mentioned the full report will be out sometime next week and you can dig further into some of my analysis.

If you take a look at this list and don't feel excited I encourage you to look at the charts. If you look at the charts and don't feel excited, well then I'm going to encourage you to take my class. In fact I'm offering the first section of my Foundations of Stocks and Options class for free during February. This is a $400 class and not only will we be looking at these stocks but by the time you get done with my class I guarantee you will be excited about this list.

To sign up for the free report sign up here:
http://www.thefinancialpuzzle.com/report09.html
(it will be emailed to you next week sometime)

To sign up for the free class visit this link here:
http://www.thefinancialpuzzle.com/free/foso4.html

Until next time as always, Happy Trading.

J-Dub

2009 Stock Picks Coming Thursday!

2009-01-27T10:23:00.001-08:00

It's been a long time coming... my students have been begging...

Forums are buzzing...

The Financial Puzzle 2009 Stock Picks are coming Thursday!

What is the list?

There are 6 key criteria that each of our picks must meet:

1) Good volume and good open interest.
2) Optionable
3) History of predictable Trading Patterns.
4) Good Trading Range with Good Profit Potential (at least $10/share)
5) Sector with some sort of excitement
6) Room to bust a good move.

Will your favorite stocks make the list? Will they even stack up?

Find out on Thursday...

In the meantime be sure to sign up for our Once In A Lifetime Offer where we are allowing 97 students to take our Foundations of Stocks and Options class for free. Be sure to sign up!

VMW - A Good Trade Setup

2009-01-27T08:34:00.000-08:00

In preparation for my new 2009 stock picks report I've been trolling through several old stocks I use to trade. VMW is one of them and while I haven't traded it for a while I thought it might be fun to take a look at it again. Sure enough a pretty decent trade is set up for us. Look at this chart:

Okay, so what make a good trade setup? Well first of all consider the over all market. The market as a whole is forming a triple bottom. This is a good thing as triple bottoms generally (almost always) follow through with some sort of bull rally. Since the over all market is forming triple bottoms one can also assume many stocks are forming them as well. An analysis of several stocks will show a common pattern of triple bottoms with the last bottom not quite making it back down to support. It looks like that's what we have here with VMW.

Why? First of all the last 4 days (before yesterday) showed a testing of support. Not the support we saw tested back in Dec, but it held 4 days in a row and could easily follow the pattern so many other stocks are following right now.

Secondly, yesterday's large doji day indicates the interest in pushing this stock higher is good. Granted we have some earnings news playing in the picture which was a bit intimidating for traders, but the fact we didn't break support of the last 4 days is a strong sign.

Thirdly the bullish engulfing candle from Friday indicates a potentially good strong bullish move in the next 2-4 days.

And finally the indicators are all turning relatively bullish on this stock confirming we could have a good bullish run coming.

So where will it go?

Well worst case we're looking at one more level of retracement back down to the $18 range - that's about a $4 move down. With some good cheap options you could make some quick money on that. But the much better and more likely move would be the bullish move up. If we can get some confirmation of the bullish move in the form of good volume and a price follow through above yesterday's high we are looking at a first level move up to about $27.50 and a secondary move up to $32. That's a minimum and on up to a potential $10 move that could easily occur in the next 2-4 weeks.

When? Give it a day or so to watch the earnings news fully kick in. I think today traders are a touch skiddish because of VMW's forcast for lower revenues - but come on everybody's forcasting lower revenue and everyone knew it was coming. When traders realize this stock is going to hold it's support the move should happen pretty quickly.

If this analysis sounds exciting and you would like to be able to do the same analysis on any of your stocks sign up for my Foundations of Stocks and Options Course - We're letting 97 students into our February class free!

"Jeremy . . . You're Crazy!"

2009-01-26T12:00:00.000-08:00

That was exactly my reaction to Jeremy's idea for our big launch - to give away our Foundations of Stocks and Options live class to nearly 100 students! Here I thought we were developing a business model, but Jeremy's been thinking of a non-profit strategy all along!

For those that don't know -- The Foundations of Stocks and Options (FOSO for short) is our flagship educational series that's taught live in a webinar format. We've been beta testing for a while now and have had amazing responses from our students. I think Dr. Fred Kleiner's was my favorite, though:

"I really like how you make the concepts so clear and easy to understand. Having studied this before I have never had these concepts taught in such an easy, clear, and straightforward manner."

And that is exactly what we want to be about. A laid back, no-nonsense approach to the stock market . . . and it sounds like our students are getting that.

So, I've agreed to let Jeremy have some fun and completely fill up our first "official" class (our webinar provider is going to love us for that!). I would love to see you guys there and maybe get a chance to talk live for a change. Sign up right here and it will bypass our checkout system (use the promo code: BLOGGER). Also, please feel free to pass this post on to anybody you would like. Trading is always more fun with a friend and -- this is a great time to take advantage of Jeremy's benevolence and get in for free! Lastly, we added a handy "share this" icon at the bottom of the post if you feel like broadcasting our post to the world -- we'd appreciate it!

Week In Preview - January 26-30, 2009

2009-01-25T20:26:00.000-08:00

Well it's Sunday night. It's time to take another look at what's coming down the pike for the week. Let's start with the chart as pretty much everything you need to reference is on this one image.

Okay - so things are looking a little uh - flat - shall we say? You always here me say the market can go up, down, and nowhere at all. After the volatility of the last couple months I think most people are pretty pleased with a no-direction market. Frankly with the new president taking office I kind of half expected to see some movement. But maybe the country is just standing still waiting to see what his first big moves will be... who knows. Let's look at what the chart is telling us.

For starters the most important thing about this chart is the support lines drawn off the low back in Oct. 2008. That support was basically confirmed 4 days in a row this week. Not only that we have the tops of those days forming a pretty decent descending wedge. Occurring where it does on the chart I take this to signal a potential bottom. I'm not going to be surprised to see this guy bust a bull move in the next few days - probably tomorrow.

Here's my reasoning:
1) 4 days in a row confirming support
2) Tuesday/Wednesday formed a candlestick tweezer
3) Thursday/Friday formed a small wedge
4) All of this is occurring at the major support line which coincides with the long candle day from Oct. 10, 2008.
5) Thursday/Friday both had long lower wick candles indicating some strength from the bulls could be mounting
6) Wednesday, thurs, & Friday could look a lot like a falling three candle pattern. Remember it doesn't have to fall with 3 days in the middle to basically mean the same thing. Monday, Tuesday, or Wednesday could easily bust a bull move and complete this pattern indicating a pretty decent little bull trend is likely. (If you remember the falling 3 is the same candle pattern I recognized and wrote about back in Sept. predicting the October bear trend - only it was a falling 3 instead of a rising 3)

All of that to say this week should be pretty interesting. I'm pretty confident we're going to see some movement one way or the other this week. I would tend to expect bullish - but if we break that support line we could certainly drop down another notch to establish a more solid support around 7500.

I'm going to continue trading pretty flat strategies this week, although I may throw in a couple bullish trades if things set up well. As always it will be interesting (and fun!)

As always, happy trading.

J-Dub

Our Story... The Launch of The Puzzle!

2009-01-19T17:33:00.000-08:00

Hey guys -- Sorry the posts have been a little sparse recently. Jeremy and I have been really consumed with officially launching The Financial Puzzle - but that's actually great news for you. We have developed an amazing amount of resources in a relatively short time (literally hundreds of pages of material.) Much of this is going to be offered for free! We are also developing strategic relationships with other key companies to help us facilitate our teaching -- and your success as traders. I thought it would be appropriate however, to pause for a moment and reflect on how we've arrived here.

The Financial Puzzle really began over 12 years ago when Jeremy and I first met in college. In our friendship, Jeremy has always been known to have ideas that were "bigger than life," and I've always acted as the "facilitator." This has worked out well and together we've accomplished amazing things in life. Typically this is how one of our ideas is conceived.

"Hey Josh, I had this crazy idea..."

Ilisten carefully while immediately figuring out the viability of the crazy concept. Typically this occurs while drinking Dr. Pepper (I don't think it's scientifically proven, but we think it makes us smarter.) After careful consideration and a couple hours of dreaming we usually conclude as I say:

"Honestly Jeremy,I think we can do this... and if it doesn't work I'll always think it should have!"

That is exactly how The Financial Puzzle started too! Like everything else we've done, Jeremy and I decided to work together as traders. What was unique about this endeavor is that we seemed to struggle at every turn. I can remember a couple very specific times that we wanted to quit. Our frustration was consistent -- finding a comprehensive educational program that would give us all the information and tools necessary to be successful traders in an easy to understand, down-to-earth format. We knew it could be done -- obviously since people were doing it all over, and we were determined to figure out how. We endured as we gained our education from the school of Hard Knocks - which can have a very expensive tuition for traders! However, we officially graduated and the investment in our education has proven to be priceless.

The Financial Puzzle was then the outgrowth of our interactions with other traders that had a similar frustration toward education. There just isn't a product out there that is comprehensive enough to make you a successful trader in and of itself. As we've met these frustrated traders we've always been glad to share the lessons we've learned along the way. Ultimately, our contacts spread across the country (literally from California to NY), and we found the webinar format to be the most convenient tool to facilitate our teaching. We have since gone through and systematically developed our comprehensive trading educational series: Foundations of Stocks and Options. We are very pleased to have received wonderful reviews from our beta students!

We will keep you updated with our progress. In the mean time, please come check out our Free Report: How to Retire in One Year with Only $10,000 and our E-Course: Basics of Stock Options. Both of these are free and we would really enjoy your feedback. Also, we welcome your ideas for subjects you'd like to see covered in subsequent materials. Please feel free to email us or comment right here on the blog.

Looking forward to seeing you in class!

What Does Apple Mean Without Steve Jobs?

2009-01-14T22:59:00.000-08:00

If you haven't heard the news yet Steve Jobs has taken a temporary leave of absence from Apple until the end of June. For several months health has been a concern. After taming concerns last week today Jobs made the announcement. So what does this mean for apple?

As always the price of a stock is going to reflect the news. At one point today AAPL haulted trading. Once they started again the stock dropped about 10% pretty quickly. It finally settled the day closing after hours at $79.25. Tomorrow will be interesting to see reaction as the news spreads. In the morning I can almost guarantee a bearish trade will be present. Today obviously would have been a good day to place a strangle had we known the announcement was coming - but we can't trade the past.

For tomorrow I'd suggest sitting at the computer if you want to make some money. The trades could swing pretty wide depending on how news flows in and out. Eventually by the end of the day the price should settle after traders, institutions, and all those floating stocks around get their minds wrapped around the new face of Apple. The bigger question is where will the stock land? This news may break our AAPL, RIMM similarities that we had going as Apple is likely to fall a bit more. We'll see.

The next level on the chart would be around $73.00. If that holds then the fallout will not be so bad. If the $73 mark does not hold we're probably looking at a new support level down around $60, the top of the window gap from back in July 2006. Of course the ultimate fall on this stock would be down to the $50 support from July 2006. I can't imagine AAPL falling below that.

Anyway you twist it there appears to be some good trades left on AAPL before next week's earning's announcement. Watch volatility pricing in the options. It can really stick you at times like this.

Congratulations to our EXPERT!

2009-01-14T11:07:00.000-08:00

At Financial Puzzle we are proud to celebrate with Jeremy (many of you know him as J-dub) on his recent award from EzineArticles.com. Jeremy has been recognized as one of their premier contributors and have awarded him the title "Expert!" He has also been featured regularly on their homepage and had several articles recently distributed for publication. We are proud of Jeremy and look forward to more great material!

A Couple Bearish Days Leading to Support

2009-01-13T12:46:00.000-08:00

If you read my post on Friday you know I'm mostly bullish for the short term on the DOW, however it looks like we'll have a couple more bearish days before we make it back down to support. With so many stocks settling into some consolidation channels it makes a lot of sense the DOW would as well.

While we do have the major support dip down to around 7500 back in Nov, I would expect this support to hold just north of 8000. Of course we'll see. A dip down to the 8k range and then a turn upward should provide some good momentum to make some bullish trades in the market. In the meantime be extra careful with bull trades and try to grab a few bearish profits while you can.

Market Analysis

2009-01-10T20:30:00.000-08:00

Oh where is the bottom and how do I trade? This is the question on almost everyone's mind. Hopefully I can offer some insight here.

I'll start off with the bad news. The bad news is there's not too many people crying bull. From CNBC To Fox Business, to Money Magazine, to just about every other news outlet you can find - The market looks doomed. The current issue of Traders World magazine doesn't help much. Eric Hadik of INSIIDE track is calling for 1-3 years of bearish behavior. And in the same issue Robert Giordano is calling for DOW support at 7150. Could they be right? Yep - they could be. They could also be wrong.

Take a look at this chart:

Okay, I know at first glance it looks like Chinese... or something. But there really is logic here. From a pure theoretical standpoint the bears could be right. There's the whole 17 year theory, the 34 year theory (which go together by the way) the presidential year theory, the "I made up a theory" theory - and not to mention the extreme negative bias by the media which tends to manifest in bearish behavior and sentiment.

However, from a pure charting standpoint there's hardly any reason to be bearish - in fact there's almost completely nothing but bullish signals. Let's look at a few of them.

First of all let's talk about the support line: My personal lines for support sit between 7500 and 7750. Giordano could be right with his 7100 range but I think that's pretty forgiving, certainly when paired with what I'm about to show you.
1) line construction - Giordano must be drawing his lines off of candle wicks. It's fine, but sometimes not consistent. I'm drawing mine off of a line chart.
2) Iterations - There's really only once way back in 2002 where support was found in the 7100 range, however there are 3 times on the line chart where my support held. And when we add candles for confirmation there's a total of 7 iterations dating back to '97! (This is using a weekly chart)
3) With a daily chart we see massive support in Oct. '97, Oct. '98, Jul & sept 2002, March 2003, and assuming it holds now oct/nov '08.
4) Patterns: There are currently no trends in place. We see a sideways channel. A channel can last for 3-4 months, or I've seen them last a year or more. A few years ago SHLD channeled sideways for right around a year. All it means in the broad picture is things are going nowhere. Already this channel has lasted 3 1/2 months. Who knows when it will break.
5) Candle Pattern: On Friday Oct. 10 we saw a massive dark candle at lunch time. At one point the market was trading around a 2400 point loss for the week. But by the end of the day we regained some value and closed the day with a high wave spinning top candle (or close enough). THAT is how bottoms are formed. I told my wife on that day "this is a good sign". Then just a few days later on the 27th & 28th we saw a massive bullish engulfing signal. Good sign #2. As is common during a basing period we saw one more major test of the bottom on Nov 20 & 21 (highlighted in yellow on my chart). The 20th threw a long dark candle, and the 21st completed the tweezer reversal pattern by showing the exact opposite on the next day. When this candle pattern occurs at the bottom of a trend it is most often a bullish reversal signal.

I will make note back in Sept I pointed out the falling 3 wedge pattern and said in the next few days expect the market to break to the downside. I was right then, and once again this candle pattern will likely provide at least some bullish move.

The sideways move we've seen in the past 3 months is completely normal and symptomatic of a market forming a bottom. Take heart if you're worried. It's very true that the other bearish indicators may prove to push the market lower, but I personally find the chart patterns to be quite accurate.

The trick about technical analysis is to balance all the different indicators. The bear guys were right - but now I think the chart is taking over and the bulls are about to run. Of course, it can all change tomorrow!

During these sideways markets my personal favorite strategies for trading are to sell options and trade as neutral as possible. Every day can be a new adventure. A lot of stocks are set up perfectly for complex option strategies. You should be able to find plenty of stocks to write Iron Condors on. And of course if you're down a bit and want to just make some income start writing some covered calls. You can recoup a good portion of your losses a lot quicker than you think!

Will RIMM follow Apple?

2009-01-10T08:34:00.000-08:00

Hey, it's J-Dub here (that's my nick name for those of you who don't know). So we finally got everything up and running and now I can get back to blogging and throwing out some good analysis.

It's no secret I'm an apple fan. Love their computers, love their music players, love their phones - oh yea, love their stock. It's always fun to trade. However a lot of people seem to miss the fact that their evil phone counterpart Research in Motion (RIMM) is just as much fun to trade. In fact based on volume about half as many people trade RIMM as AAPL. But the funny thing we have noticed over the last year is how close the two run together.

This started appearing about a year ago, and while it's taken that long for the patterns to adjust and fully look like a mirror, over the last 6 months it's been easy to confuse the two charts. In fact one time in an online class back in October we were talking about AAPL but somehow the RIMM chart showed up. I got so confused and I remember saying "When did apple drop to $50/share?"

None the less - over the next little bit I'm going to continue this comparison as often a trade on one is actually setting up a trade on the other. If you need an easier trade then that then I think we need to talk!

Currently both stocks are forming what appears to be a pretty strong base/foundation. I'm mostly bullish on both. But I'll give better analysis in a post to come.

AAPL: Wedge vs. Divergence

2009-01-09T07:48:00.000-08:00

AAPL is trading right into a falling wedge with the 50 EMA acting as strong resistance while simultaneously showing bullish divergence against MACD. Typically, each of these individual signals indicate different moves: the falling wedge is bearish and the bullish divergence is... well, bullish. However the failed break back in late November is certainly giving this a more bullish feel. Additionally, we are at a very strong, 2 year support level around that $84-$85 range.

This is a great time to set up a bracketed entrance as our anticipated downside target is $71 (with a pause at $80) and conversely the upside potential is roughly $110. This is also a great example of the moving averages forming the wedge for us as we see the price caught between the 20 EMA and the 50 EMA. Look for AAPL to trade sideways for a few more days with an entrance into a trade as the price breaks through either one of these averages. Remember to confirm the break based on volume and a tested pull back and I'd have obvious caution in the event of a downside move at the $85.27 support.

Below is a chart of the analysis. I've also posted a larger version here:

As always, Happy Trading!

How to Profit in A Bear Market - part 2

2008-10-22T10:49:00.000-07:00

Last time we learned that by using covered calls you can limit loss, reduce your drawdown, and even profit on stocks you currently own during a bear market. Now, let's look at another option strategy that can be applied if no underlying security is currently owned. The simplest of strategies is simply to purchase a put.

A put gives you the right to sell a stock at a certain price prior to a set expiration date. For those unfamiliar with options, this can be confusing -- after all, why on earth would anybody sell you the right to sell them a stock at a certain price? If we step back and analyze the situation, however, isn't this exactly how your car insurance works? You pay a premium to your insurance company to have the right to sell your car back to them at a certain price. If you destroy your car and it is worthless on the open market, your insurance company will write you a check for the original value of your car.

Brining this concept back to the market, if you had your entire retirement savings in the stock market I bet you would be interested in learning that you can buy "insurance" that would protect the value of your portfolio -- however, that's the topic of another blog. What is important to understand now is that those "insurance policies," or puts, have value and can be traded as options on the market. As the price of a stock drops, the value of your put raises inversely!

How to Profit in A Bear Market - part 1

2008-10-10T16:32:00.000-07:00

I have talked to a lot of people who have a sinking feeling in their stomach that matches the sinking markets we have watched over the last several weeks. 401K's are taking a big hit and Buy and Hold investors are watching all of their gains for the last few years disappear. Honestly, my heart hurts for them -- so let's talk about a few strategies to preserve capital or even profit from this bear market.

For starters... have you looked at a 20yr weekly chart of the S&P?

While the markets appear scary, it wasn't really that long ago that we encountered a similar experience -- and history often repeats itself in economics. Beginning in 2000 and then fueled by 9/11/01 we saw the S&P retrace from 1,500 to 800. So this market adjustment isn't completely out of the blue. It is also interesting to note that that parabolic decent has been more drastic during this bear market than what we experienced in 2000-02, which typically means a shorter trend. However, I don't want to minimize the retracement over the last 7 days -- I know it has been painful for many individuals. One thing we do know is it's unlikely the market will flip immediately bullish again as it will likely take several months to establish a strong support level after this speedy decent. Therefore, we need to be prepared to implement strategies that will enable us to continue being profitable in a sideways or bearish market.

One simple strategy that would work well for our Buy and Hold friends would be to execute the sale of some covered calls. For every 100 shares that you own of an underlying security you are able to sell 1 option contract. Therefore, if you don't expect your stock to rise in the next month, and you don't really intend to sell it -- you may as well sell somebody the option to purchase your stock at a premium price (after all, you don't really expect the stock to hit that price!)

EXAMPLE:
If you don't expect GM to increase much over the next month, you might be interested in selling a $7 call option for a profit of $105 -- all of which is yours unless the option is exercised.

The only potential "loss" in this scenario would be unrealized gains -- that is, if GM jumped to $8, you would be forced to sell your shares for $7. The reality is, you should be ecstatic to sell GM for $7 in the next month! If that did happen, you could then turn right around and buy the stock again if you'd like.

I have heard of people applying this strategy so consistently that they paid off the entire initial purchase price of their underlying security and were simply collecting "rent" on the stock each month. In fact, if you bought 100 shares of GM right now for $4.89 you would have it "paid off" in 5 cycles -- or roughly 5 months! Or perhaps look at the numbers this way: for roughly a $1,000 investment you could generate about $200 a month cash flow!

Strangle the Bailout Vote

2008-10-01T11:34:00.000-07:00

Bloomberg just announced the Senate will vote tonight on the Bailout. If you are interested in an article that expresses why I personally think the proposal is a bad idea -- read this. Regardless, with the imminent volatility ahead, today would be a good day to set up a Strangle (no pun intended!) Here is how the setup will work.

I'm going to choose CME because its price will be directly effected by tonight's vote, and it also made a large, $70 move on monday during the first vote -- let's expect history to repeat itself.

The strangle is simple -- let's not overcomplicate it. Basically you are placing 2 simultaneous trades, one for either direction of market movement. A slightly out of the money Call and Put are purchased with the same expiration date and underlying asset. CME is currently trading at $390 as I write this, so I will be purchasing the $400 Call and the $380 Put. When I wake up tomorrow and find out which way the market is headed, I'll close the "wrong" position for whatever is left of it, and go to the bank on the profitable one.

DANGER: The significant problem here is that the Market Makers know that huge volatility is ahead and they are inflating the options right now. You can see this inflation in several areas: the size of the spread is $2 or more right now, Implied Volatility is well over 70, and the Delta for these OTM options is below 50. The question is, will the move be significant enough to still be profitable -- this is why they make virtual accounts, to test our skills!

Time to Bail Out before the Bail-Out?

2008-09-30T22:00:00.000-07:00

If you listen to CNBC, Henry Paulson, President Bush, even your local radio station you might be tempted to throw your hands in the air for in their terms clearly "the economy is collapsing." Personally, I call their bluff because I truly believe capitalism is superior to socialism and although the road may be bumpy and difficult for a little while, our economy will correct. There is our fundamental difference, I see the economy correcting itself, they see it collapsing. Another word they fail to recognize is "consequence." Indeed there are consequences to certain economic behavior -- we are a country that is accustomed to spending more than we can afford, and our government sets the standard with our nearly 10 Trillion Dollar debt. Unfortunately, the consequences of those decisions are now on our doorstep. I could go on for quite some time but I would rather discuss how this needs to affect our trading strategies for this week

I actually closed the majority of my bearish positions Monday as most of my picks rushed toward solid support ground -- I'm sure Jeremy will be discussing this so I don't want to steal his thunder. Normally I would wait for confirmation of support and begin looking Bullish again. Unfortunately, the market is relatively unpredictable right now -- largely waiting for a re-vote on the Bail Out on Thursday or Friday. So personally, to keep myself from getting bored and to stay diligent with my homework, I have elected to focus on very short term, even day trades through this week. With the amount of attention and volatility the market has right now this is a perfect time to apply your technical analysis to intraday charts at 5 min. intervals. However, be prepared in your strategy for news driven volatility when congress revotes on the Bail Out toward the end of the week.

Oh what will Friday bring?

2008-09-25T21:38:00.000-07:00

Well we've been watching the market for a whole week now and unfortunately we don't have much to report.

Despite huge market moves we are moving remarkably sideways. To be more specific we're trading into a relatively large triangle pattern. Give it a few more days and it has to break one way or the other - or of course if we believe Henry Paulson we would read this triangle to say that we are trading sideways until all trading dries up completely and the sky falls....

Seriously nothing's going to dry up completely. By my best guestimates we can't trade forward in this triangle more than another 6-7 days. So at least by this time next week we should see a break one way or another. In the mean time, don't be surprised if we just get to keep going up, and down, and up, and down.

Also it's worth noting, despite huge moves in the market the last few days, and mighty manipulation by the government, the volume all week has been relatively low. With that said look to trade the market in the direction of a breakout of the triangle when there's enough volume to push through the moves. Until then - Consider day trading and hold on tight :)

Happy Trading tomorrow.

Week in Preview (9-22-08)

2008-09-21T17:28:00.000-07:00

After an insanely crazy week this past week investors are anxious to see what the market decides to do this coming week. Fears which were accented by the fed at the first of the week were actually calmed by the fed toward the end of the week. However after a few days to sit on it and think about it tomorrow could truly bring anything. In my last post I shared my prediction of the S&P heading down to 1100. I still think that could happen. Unfortunately the Fed is trying hard to manipulate the market which makes things much more difficult to predict. However there are still some thing apart from the fed which indicate the market to be in an overall bear trend. While I do think the bottom is near, and could be here after the fed's actions at the end of the week, we must approach this market very cautiously. We must always remember 2 things:

1) Trade the market based on the technicals

2) Be prepared for anything and trade appropriately.

Let's look at the S&P and I'll show why I'm still mostly bearish on the market.

In my last post I highlighted this classic falling 3 pattern. Even though we bounced off of a previous support on thursday I mentioned I felt the next level of support is much stronger. Of course the fed's announcement this past Friday really turned things around so theoretically we could have just bounced. However, notice Friday's close was just about the same as Monday's Open. Leaving the week with huge moves, but a virtually unchanged week. A look on the weekly chart shows we are still solidly in a down trend.

To accent my feeling of general bearishness check out the moving averages.

Friday's move traded up to but not through the 50 day moving average. This is a common retracement for the S&P. In fact if you look at the last year the S&P tends to acknowledge the 50 day moving average as a pretty good measurement of bearishness vs. bullishness.

The next reason is a glance at the ADX indicator on S&P.

Typically when a new trend is beginning you will see ADX moving up, as we did in the move from the last two weeks. ADX measures the strength of the trend. On Friday ADX moves down. While it is an indication that the bearish trend may be slowing, it is not an indication that a bullish trend has begun.

All this is not meant to be bad news, simply cautionary. The market can be brutal to those who don't know what's going on, but if you can see these trends and read the market a bit you will be in a position to take full advantage of these great moves. Happy trading this week and be sure to check out some free classes at The Financial Puzzle.

Oh where is the bottom?

2008-09-18T23:13:00.000-07:00

So the big question everyone's asking after this week of major shake up is "when will the pain stop". Obviously the market is never 100% predictable but I'm going to go ahead and hit the record saying I foresee the S&P falling to 1100 before the election. Here's why:

Today the S&P traded down to & bounced on a

previous support

from 2005. But there's a much stronger support from 2004 that sits right at the $1100 mark. Although anything can happen the older 2004 support will more likely be the ultimate basing ground.

To point out more reason why a short term bear market is not over, one must consider the appearance of a strong falling three candle pattern as seen in Yellow here:

This classic candle pattern is very consistent in foreshadowing a coming bear market. Don't be surprised if the S&P trades down to and around 1100 for a while before turning bullish, and don't be surprised if this market continues up to the election.