The Stock Market

[imaGoodBoyNow]

Not bad, today starting to go down a bit 

 

but big improvement from past few days

[imaGoodBoyNow]

@DarterBlue got one more for ya if ya don’t mind

 

MA financial has a really good track record over last 5 years, what’s your thoughts 

 

 

I know you hate penny stocks I just thought the consistency over 5 years is eye catching 

[DarterBlue]

1 hour ago, imaGoodBoyNow said:

@DarterBlue got one more for ya if ya don’t mind

 

MA financial has a really good track record over last 5 years, what’s your thoughts 

 

 

I know you hate penny stocks I just thought the consistency over 5 years is eye catching 

Aside from hating penny stocks, the biggest issue I have is its business. With so many people out of work, I have a hard time believing that there are not going to be a lot of foreclosures. MFA invests in residential mortgages, so that is probably why the stock has been beat up so badly. It's not a garbage company but there are a lot of risks associated with its business.

One other comment: if the market cannot hold on to its gains today (it had given up most of them at the lows), my outlook for this bull market will have gone negative. When I go negative, I don't own any stocks. That is why I don't get hurt badly in bear markets. In fact, I would be looking to buy put options on two or three of the indices. 

[imaGoodBoyNow]

1 hour ago, DarterBlue said:

Aside from hating penny stocks, the biggest issue I have is its business. With so many people out of work, I have a hard time believing that there are not going to be a lot of foreclosures. MFA invests in residential mortgages, so that is probably why the stock has been beat up so badly. It's not a garbage company but there are a lot of risks associated with its business.

One other comment: if the market cannot hold on to its gains today (it had given up most of them at the lows), my outlook for this bull market will have gone negative. When I go negative, I don't own any stocks. That is why I don't get hurt badly in bear markets. In fact, I would be looking to buy put options on two or three of the indices. 

I bought 2 $44 calls 6/26 for ual late yesterday.,.. do you recommend taking the $200 profit or let it ride out over the weekend and get the big profit

 

 

all depends if stocks continue to slowly go up Monday or For it to Plummet after the weekend 

[DarterBlue]

5 minutes ago, imaGoodBoyNow said:

I bought 2 $44 calls 6/26 for ual late yesterday.,.. do you recommend taking the $200 profit or let it ride out over the weekend and get the big profit

 

 

all depends if stocks continue to slowly go up Monday or For it to Plummet after the weekend 

It is a hard call. Refer to my paragraph about the market. Right now the NASDAQ is down on the day after being up around 270. That is BEARISH action. Use your best judgement. 

[imaGoodBoyNow]

Just now, DarterBlue said:

It is a hard call. Refer to my paragraph about the market. Right now the NASDAQ is down on the day after being up around 270. That is BEARISH action. Use your best judgement. 

Hopefully it’s only Bare for short term cause I can’t afford it to be bear for years 

[DarterBlue]

18 minutes ago, imaGoodBoyNow said:

Hopefully it’s only Bare for short term cause I can’t afford it to be bear for years 

Dude, it should not matter if you are a trader. You learn to buy puts or ETFs that are the inverse of the market. Just don't use the leveraged ones till you really know what you are doing. 

[imaGoodBoyNow]

3 minutes ago, DarterBlue said:

Dude, it should not matter if you are a trader. You learn to buy puts or ETFs that are the inverse of the market. Just don't use the leveraged ones till you really know what you are doing. 

Okay I was going to ask that yesterday, so etfs are fine as long as their not leveraged 

 

 

I don’t like puts, I just Just don’t like betting on a company to do bad, I know that sounds weird but I just don’t enjoy it as I bet on companies to do good

[DarterBlue]

21 minutes ago, imaGoodBoyNow said:

Hopefully it’s only Bare for short term cause I can’t afford it to be bear for years 

HOPE is a four letter word. When you are a trader you have to listen to the market and not what's in your head. Few people can do this. That is why many are called but few chosen. When the market does what you don't want it to remember: it is stronger than you. Therefore you have to adjust to it. It won't adjust to you. 

[DarterBlue]

1 minute ago, imaGoodBoyNow said:

Okay I was going to ask that yesterday, so etfs are fine as long as their not leveraged 

I have no problem with ETFs. I have a problem with inverse ETFs that are leveraged and with leverage in general if you don't have expertise. Expertise usually comes with a lot of experience. I would not want a first year med student operating on me. 

[imaGoodBoyNow]

Just now, DarterBlue said:

I have no problem with ETFs. I have a problem with inverse ETFs that are leveraged and with leverage in general if you don't have expertise. Expertise usually comes with a lot of experience. I would not want a first month med student operating on me. 

 

[DarterBlue]

4 minutes ago, imaGoodBoyNow said:

Okay I was going to ask that yesterday, so etfs are fine as long as their not leveraged 

 

 

I don’t like puts, I just Just don’t like betting on a company to do bad, I know that sounds weird but I just don’t enjoy it as I bet on companies to do good

That's crazy! I thought you were a capitalist. Capitalists only care about making money. If you are going to trade, you need to get that tripe out of your head. You buy the vehicle that's going to make you money. It's as simple as that. 

[DarterBlue]

12 minutes ago, imaGoodBoyNow said:

I don’t like puts, I just Just don’t like betting on a company to do bad, I know that sounds weird but I just don’t enjoy it as I bet on companies to do good

But if it makes you feel better, you can just buy puts on an index like the DOW, NASDAQ 100 or S&P 500. That way you are not betting against individual stocks you are just going with the current trend. You have a lot to learn. The first lesson/question is: Is this for you? 

[DarterBlue]

In a wild and crazy day, socks closed broadly higher on lower volume, but well off the day highs which were recorded in the first 35 minutes of trading. In fact, at around 2 pm when most indices recorded their day lows, all the indices had visited negative territory at some stage during the day. To put this into perspective, all indices had opened up at the 3% level or higher, yet as the day played out, all gave back these gains intraday.  Given that with the exception of the two NASDAQ indices, all the indices were down three consecutive days at Thursday’s close this was a remarkable show of weakness. It gets even worse. At around 11:30 am all the indices had sold off rapidly for an hour and a half. At which time, a Fed head, announced (or rather reminded) that it (the Fed) was willing and able to support the financial system using the fullest extent of its resources. Well, the market quickly rallied and recouped more than half of the day’s gains. However, 45 minutes into the rally it ran out of steam, and proceeded to wend its way lower till it made a final bottom at 2 pm, from which it rallied more or less into the close. At the close, the range was from a gain of .79% on the NASDAQ 100 to 2.32% on the Russell. Advancing stocks led by margins of 23-7 and 25-8 on the NYSE and NASDAQ, respectively. So, what did I make of today? It was bearish. Despite opening higher, it was clear that there is still major money booking profits. Does it mean we are done and are headed lower from here? Not necessarily, but the odds just got to at least 50% that we may be. If you had asked me this question on Wednesday evening, I would have said emphatically that the bull lives on for the near to intermediate term.

 On a personal note, I had my most volatile day of this trading cycle, as from peak to trough, my equity swung by approximately $18,500. For shortly after the open I was up approximately $12,900 and at my nadir, I was down about $5,600. I closed up approximately $1,200 on the day, as gains in SHOP, MDY and TTD were offset by losses in TEAM, ZM and the S&P Call Options. LCII and the FRO options were essentially flat on the day. On the week I lost approximately $2,900, or about .55%. While this is cold comfort, the losses outperformed all the major indices whose losses ranged from 1.25% to over 8% on the week. Regarding the behavior of the S&P calls, a valid question would be: How could the calls be down on the day, when the S&P was up 1.31%? That’s a valid question, indeed. The answer has to do with the reduction in option volatility during the course of the day that offset the forward progress towards the strike price. This happens sometimes, but was magnified today. I came within an inch of closing out all my longs today except ZM and possibly TTD which have been my strongest positions and which I hold out high hopes for. Had the averages sold off in the final half hour, I would have done so. But they did not, rallying into the close.

[imaGoodBoyNow]

Anyone got Any ideas  why the stocks aren’t open 7 days a week? I get it makes Monday extremely volatile, but that can’t be the reason 

[DarterBlue]

3 hours ago, imaGoodBoyNow said:

Anyone got Any ideas  why the stocks aren’t open 7 days a week? I get it makes Monday extremely volatile, but that can’t be the reason 

It is the Judea Christian traditions; that's pretty much the only reason. For real junkies, I am pretty sure some obscure market is open everyday. Regarding Monday's action, during normal markets, it is not that volatile, believe it or not. But in markets like these, hell yes!

Back in the 19th century, they were open six days, as Saturday, I believe was a half day. 

[DarterBlue]

The process of security selection: Buying the right security at the right time is about half the battle for investment success. The other half of the equation is knowing when to sell and book your profits or take your losses. Associated with the latter is the concept of managing your risk. It is also associated with the former. So, what and how much do you buy? The answer depends on several factors. What kind of investor/trader are you? What is your time horizon? What are your financial objectives? How much volatility can you tolerate? 

Buying a winning security: Before you decide to buy anything you need to know where in the market cycle we are. Are we in a bull market? Are we in a bear market? Is the market just trending sideways? If we are in a bull market, is it in its early stages or is it mature? It also helps to know where we are in the economic cycle. Are we in an expansion? If so, how old/young is it? Are we in a contraction? If yes, what are its causes? Is there light at the end of the tunnel? In short, the process of selecting the right security at the right time, is a complex one that is not to be taken lightly by the serious investor or trader. With that in mind, I will give you my ten cents with respect to buying in current market and economic conditions.

First and foremost, I am a growth oriented, position trader. It is important to state this as it has a fundamental impact on what I will and will not buy. With that in mind, let me highlight the general framework within which I make my trading decisions within the context of my understanding of where we are in the economic and market cycle. As a position trader, I am looking to cut losers quickly and let my winners run. What does this mean? It means that losers should be gone within weeks at a minimum, while winners should be held for weeks at a bare minimum, but more likely for several months provided the market remains positive. Why cut losers quickly? The answer lies in risk management and optimum use of your resources. By cutting losses short, you reduce damage to your capital. By getting rid of losing or under-performing stocks, you free up capital for better ideas. Because I am a position trader, I best describe my approach to stock selection as Techno-fundamental. The term was first coined by Nicholas Darvas over 60 years ago. Darvas was a Eastern European emigre to the United States who made $2,000,000 in a matter of three years starting with a capital base of of approximately $30,000. He wrote a book about his exploits: How I made $2,000,000 in the stock market a few years after his run. He subsequently wrote another: Wall Street the other Las Vegas. Needless to say I found his books, particularly the first one, valuable and his story inspirational. 

A Techno-fundamental approach incorporates aspects of both fundamental and technical analysis to stock selection. I first use fundamental analysis to screen out potential investments. Thus, I will never invest in: Bankrupt or near bankrupt companies, companies with recurring losses, companies that have been exposed as committing major fraud, whether financial or other. I will seldom invest in, and if I do take very small positions in: companies without a marketable product which have no or little sales. So what will I invest/trade? My preferred type of security are those of fast growing, profitable companies. As far as possible, I prefer those that are growing sales and profits by 25% or more per year. Growth, is usually the driver of price appreciation. I will, on occasion buy slow growth, cyclical types. However, I am less likely to ever chase these because I see them as not having the price appreciation potential of fast growers. 

Once I have screened out/in potential buys I then turn to the technical aspects of the security. My favorite entry points are one of the following: 1. A stock emerging out of a tight consolidation of four to twelve weeks into new high ground, or if not new high ground, then out of a consolidation where I don't expect significant overhead resistance to exist. 2. A stock currently in an uptrend that has pulled back to a place of obvious support such as its 50-day moving average or the lower boundary of its price channel. When you use these two criteria, there is generally a logical place to put your stop such that if you are wrong, you don't take a big loss. By placing your stop a few percentage points below the breakout point or below the moving average or other area of support you limit your losses and preserve capital. When I buy a security, I usually give it a week or sometimes more to prove itself. The only exception to this is if it breaks down immediately after buying it, in which case I will cut it within days. I usually won't buy a stock just before earnings. If I feel I must play a position with earnings due within a week or less, I will usually buy call options instead to limit my loss if the stock blows up on the earnings report. 

On occasion, I will buy a beaten down stock. When I do so, it is usually at the beginning of a new bull market. And, I screen very carefully for the following: has the stock made a proper bottom? What do I mean by a proper bottom? It must have found a level below which it just refuses to drop further. The more weeks it stays above this "floor", the better. Thus, I much prefer U shaped bottoms to V shaped bottoms, as the last "weak holders" have been shaken or worn out in a U while in a V they serve as impediments to forward price progress. If there is massive volume at the lows without further downside progress that is a clear indication the stock is being accumulated by the big boys. UAL is a perfect example of that. 

I have just scratched the surface of stock selection in the above. And, mine is only one of many approaches that can be profitable. The goal of my little missive was to drive home the fact that you need to screen carefully if you are going to consistently find profitable opportunities. With that said, this has been my tutorial for the weekend. 

PEACE! 

 

[imaGoodBoyNow]

B4 you check out this weekend, should I avoid airline calls this week?

[DarterBlue]

11 minutes ago, imaGoodBoyNow said:

B4 you check out this weekend, should I avoid airline calls this week?

It really depends. The best thing the market could do Monday through Wednesday, is take a timeout, as in go nowhere. This would allow for calm to be restored if the bull leg is to be resumed. If it is calm the first three days, then obviously June calls are probably not good since they would be just two days from expiration. On the other hand, the market could totally breakdown, in which case you don't want to be long anything; or it could just resume its uptrend as if Thursday never happened. Two of the three scenarios are negative for taking new June calls, one is positive. It seems that those are not good odds unless you think that the one positive is much more likely than the two negatives. I am hoping that we get three days or more of calm. It would give me a lot more confidence to continue to hold my long positions as Thursday's action did a lot of technical damage. 

[imaGoodBoyNow]

@rockinl @golfaddict1

 

this company produces sand, darter hates penny stocks and for good reason but this company may be worth looking in to .. it looks due for a payday soon

[DarterBlue]

Price determination in financial markets: That demand and supply determine price is axiomatic. However, as a practical matter this does not explain the factors that drive demand and supply as it relates to financial instruments. This brief post is an attempt to shed light on the process. Often when the market drops or rises by several percent in a day, you will hear the saying there were more sellers than buyers or more buyers than sellers as the case may be. But a little reflection reveals that for a transaction to occur, buyers and sellers have to be in agreement on its price. Therefore, for each and every transaction at an instance in time, buyers and sellers are in equilibrium. What drives prices up or down as the case may be, is the aggressiveness of buyers versus sellers. Prices rise when buyers buy more aggressively than sellers are willing to sell. Prices fall when the opposite is true. So, what drives such aggressiveness. The standard answer is that economic conditions are good. Business is booming. Therefore, stocks are worth more. This sounds like a good explanation, but studies have shown that the single greatest determinant of securities prices in the short run is expansionary monetary policy. 

When the cost of borrowing is cheap, when the Federal Reserve embarks on a low interest rate, and generally expansionist monetary policy, securities prices will tend to rise. On the other hand, tight monetary policy leads to bear markets. Some of you may have heard the expression, "Don't fight the Fed." It was true when first coined and it's especially true today. Very expansionary monetary policy is largely responsible for the post "Great Recession" melt up. And it is darn sure responsible for the post Coronavirus bull run which we have had since early April. Why does easy money inflate the value of financial assets? Finance theory postulates that this is because it makes the value of future income streams in the form of dividends and its ultimate liquidation value more valuable since they are being discounted at a lower interest rate. I will not debate the value of Eugene Fama's and the Chicago School's contribution to Finance and the merits of this explanation. But perhaps a more simple, practical explanation is that, if holding relatively risk-less financial assets provides no return, then investors are "forced" to seek returns from riskier assets. Another way of looking at it, is that in an environment where the rich pay little taxes and can borrow cheap money, why wouldn't they pile into the market? 

Another significant component of demand for company stock rests in the rather ridiculous securities laws that allow the executives of corporations to use the company's money to buy back its own stock. In an environment where these executives obtain a significant amount of their compensation from stock options and cheap stock purchasable below market, this represents a blatant conflict of interest. Prior to the early 1980s this practice was not allowed in the USA. Small wonder that one of the greatest of all bull markets began shortly after the laws were changed.  

[DarterBlue]

12 minutes ago, imaGoodBoyNow said:

@rockinl @golfaddict1

 

this company produces sand, darter hates penny stocks and for good reason but this company may be worth looking in to .. it looks due for a payday soon

If you want to buy it be my guest. I am not going to dignify this garbage with a look. If you think penny stocks are the key to your financial future, I wish you well but can't help you. 

[DarterBlue]

A Retrospective Look at Last Week: So, going into last week, if you have taken the time to read my posts, I felt that the market was due for a correction or at the very least a pause. Not only was it overbought, but it was also exhibiting signs of extreme froth. Well, after a great day technically and financially Monday, we got weakness. Tuesday and Wednesday were characterized by normal pullback action. Thursday we got the worst break in this new bull market. The day's action was terrible and there was nothing to like about it from a technical standpoint. It's as simple as that. Friday, the averages attempted to rebound strongly gapping up nicely at the open. Alas, the early strength was replaced by milquetoast action the rest of the day to the point where I seriously considered getting rid of most of my long positions. However, significant strength over the final two hours of trading led me to carry all positions into the new week. Upon analyzing the charts of the major indices in greater detail, removed from the emotion and with more care, as of now, the bull still remains solidly intact. However, it has been chastened to a degree. Another bad day like last Thursday in the upcoming week would be very negative unless the market rebounded strongly immediately thereafter.  However, if the market can calm down and go sideways for several days, or an early sharp selloff Monday through Wednesday ends in an upside reversal the same day, then for now all is still well. 

This market has been one of the most difficult to trade in my entire career doing this. Moves have been amplified both to the down and upsides. What normally takes a year or more to play out price wise, happens in days or at most weeks. It has been fascinating to behold. Going into the new week, I am guardedly optimistic that life remains in this bull leg. Time of course will prove me right or wrong on this. 

[DarterBlue]

A final comment on price determination: The popular media, mainstream, alternate and the Fox crowd, have been blaming "Robinhood speculators" for the froth in the market. This is absolute and utter poppy cock! Why? All major price moves are fueled by big money.

The big money players in the market are institutions. Institutions comprise: Hedge Funds, Pension Funds, Mutual Funds, Sovereign Wealth Funds, Large Private Funds set up by billionaires. Retail money, even the retail money of millionaires has very little effect on price movements except when it is used to trade very illiquid securities and it never impacts the broad indices as, individually and collectively, it is just not enough rocket fuel to impact the market. Individual investors are price takers and not price makers. We are just too small a share of the billions and billions of dollars traded each day to have a meaningful impact on the overall market. 

Being a price taker has its disadvantages. However, it also has one huge advantage: you can be very nimble exiting and entering positions. While you may never get the best price on an individual trade, you can always get flat at relatively little cost. For a big fund to exit a position it normally takes days if it wants to avoid materially affecting the price. For me to exit a position, it takes two clicks of a mouse. 

[golfaddict1]

13 hours ago, imaGoodBoyNow said:

@rockinl @golfaddict1

 

this company produces sand, darter hates penny stocks and for good reason but this company may be worth looking in to .. it looks due for a payday soon

Added to my watchlist.   

Regarding some recent penny stocks moves:

June 4th I picked up XSPA at 1.82 and sold a day later at 2.83

June 4th I bought MARK at 2.94 and sold the next day at 2.74... bought again last Thursday at 2.30 (currently at 2.29, with after hours showing 2.31).

Bought CHFS last Thursday in two increments at .40 and .41 range... currently at .45