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Money Maker
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I consistently track the markets and am personally an active investor in many securities. Hopefully I can bring a new spin to thinking about some stocks and opportunities that may be exploited.
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  • What's Next For The S&P 500
    March 4, 2012

    Click Here for Charts
    Charts # 1 & 2

    I wanted to share my personal research and analysis of the recent rise in the S&P 500, levels of lower resistance, and risk management mandates. This past Friday, March 2nd, the S&P 500 closed at 1,369.63 keeping the short term bullish trend from mid December 2011 intact. Personally, I do not attempt to predict financial markets - instead I use readily available information to identify low risk/high reward scenarios. A vital concept to produce consistent alpha is to have strict risk management mandates and only play when the probability of success is in ones favor.

    Please reference the three horizontal lines (1-3) moving from north to south in Chart #1. When using technical analysis, one should look at the horizontal lines of resistance since the diagonal lines tend to give false trading breakouts and trading signals over time.

    Chart #1/2 - Line (1): 1,360 is the lower resistance level and the first risk threshold to reference

    Chart #1 - Line (2): 1,300 would be the second layer of lower resistance and the next risk threshold level

    Chart #1 - Line (3): 1,260 would represent a complete roundabout trade resulting in net -0- profit from the start of the bullish trend

    Currently, for the bullish trend to continue, the S&P will need close above 1,360 without breaching the lower level of resistance (Chart #1/2 - Line 1). When the diagonal and horizontal levels of resistant are violated this is an indication that the most recent trend has ended. The risk reward trade is to ride the bullish trend - the trend is always your friend in any market or security. Thus, by going long and having a stop loss initiated at 1,360 the maximum loss would be approximately (.073)%.

    Moving on to Chart #2, one can get a closer look at the bullish trend and the lower level of resistance of 1,360 (Line 1). The upcoming week of March 5th is going to be critical in terms of where the S&P is headed. If the S&P fails to close higher by March 7th, the bullish run could either stall or move lower. As a result, a breach of the lower resistance 1,360 would indicate a personal sell signal to reduce exposure in equities, harvest recent gains and wait for a new entry point.

    To help identify trading signals, I developed a trading system that reduces risk, preserves capital and exploits short term and long term trends. In addition, I use a specific indictor that was introduced in the 1970's to help weed out bad signals and exploit true trends. Thus, I use both trading tools to assist in managing my personal capital. Chart #2 illustrates how my system has identified the recent bullish trend. The buy signal was triggered and verified on December 22nd. However, my indicator shows that the recent move higher in the S&P 500 is starting to lose momentum unless there is a move higher in the next few days.

    In conclusion, from a risk management perspective, I will be watching the lower resistance of 1,360 as a signal to reduce exposure unless the markets reverse higher. The total risk going into the open on Monday March 5th is approximately (.073)% from the last close to the lower level or resistance. Personally, I always ride a long term trend for as long as possible while keeping strict risk mandates to less than 1% of AUM.

    Tags: SPY
    Mar 04 2:44 PM | Link | Comment!
  • The Sweetest Trade
    The price of March Sugar (SBH12) has been range bound for the past few months $24.5 - $22.6. This could be representative of a higher move in the near to mid future looking out to the May Sugar Contract (SBK12). As such, a close higher above key resistance levels could indicate a move higher or lower depending on the resistance level crossed - higher in the case of SBH12 (below). In addition, prices could straddle the resistance levels for an extended period of time before making a move higher, lower or return to range bound. Personally, I can't foresee the future nor do I attempt to do so - the markets owe me absolutely nothing. However, this could be the beginning to a longer term trend higher as my system would historically suggest along with the probably of recent trades in SBH12. Let me set up the trade in a few ways below:

    *Note: Recommended to not risk more than 1% of real capital on any one trading event*

    My systematic strategy

    1) My trigger went long SBH12 on 1/17/12 at the close ~$23.8

    2) Current stop price going into 1/20/12 is ~ $23.7

    3) I will continue to ride the trend until my risk limit is hit on a decline - or lock in gains on an increasing stop that is predetermined each day.

    Starting a Trade going into 1/20/12

    1) Buy SBH12 at the open on 1/20/12 if >$24.5 since the close on 1/19/12 was above the recent resistance level ($24.5)

    2) Make the stop price the old resistance level of ~$24.5 so if the price declines you have capped the losses in an attempt to catch a running trade.

    3) This trade sets up for a great risk reward trade on Sugar - as the downside is quite minimal and the upside could be huge. If the price increases - bump up the stop to lock in gains appropriately and reduce the risk of loss on the trade.

    4) If the open on 1/20/12 is lower use the upper resistance level of $24.5 as the new entry point for a move higher in the near to mid future

    UPDATE 2/22/12

    Due to my last post of trading around the upper resistance of 24.5 the following happened.

    -Three separate breakouts occured
    -The first two breakouts would have netted -0- profits do to a round about trade.
    -Breakout#3 below is the strong break and close above the resistance I have been waiting for. Thus, one should have gotten long at 24.5 where the current price is 25.78.
    -Breakout #3 could lead to a larger move higher in the price of Sugar - which could make the recent breakout look quite small.

    Total Profit to date 2/22/12: $1,434/contract

    Feb 22 11:31 PM | Link | Comment!
  • Can The Cotton Run Continue?
    Recently Cotton (CTH12) has made nice advancement from approximately 86-97.7 as I currently write this summary. This has been a sustained run higher which appears to be out of gas soon - or not? Let's take a quick look at the charts to see where some key levels are in terms of staying bullish or going bearish for another entry point. Below is the chart of Cotton (March12) where my system went long at the close on 12/30/11 at approximately 91.8. Currently, going into trading on 1/25/12 the stop is 97. Thus, if the price falls below and closes below 97 I will exit the position and wait for my next entry. As the end of January approaches I switch over to the CTK12 (May) contract to avoid rolling prices (i.e. contango/backwardation) to affect price triggers.

    Looking forward to the May contract I wanted to map out some of the key closing ranges that could occur and how they would affect my view and systems triggers. In the next few days if the price has a close of under 98 - this would pretty much put a stop the current run as the price could potentially enter another trading range (i.e Oct-Nov). However, if the price can continue to close higher and within the next few days approach 100-102 this could be a big test of the 102 upper resistance. Staying extremely bullish a close of above 102 could lead to a move higher. Personally, my guess is as good as others mine in terms of future price moves - the markets owe us nothing. Nevertheless, the next few days should be quite critical in terms of the near future projection in price for CTK12.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jan 24 10:31 PM | Link | Comment!
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