Insider News

Go to Level 4! ---LVLT (Level 3 Communications Inc.)

LVLT is today’s winner. It jumped 71 cents or 15.9% to $5.18 after the network operator raised its estimated quarterly operating income target. The news was released this morning.



But wait a second! Why does Its 5 days chart shows the advance is started from 3 days ago?

Ha-ha! Another perfect example for insider news!

In the past, I have noticed a lot of similar situations. Fortunately or unfortunately, there are and will be a lot rumors or real insider news on the Wall Street.

From my experience and study, whenever there is an unknown (no news, no sector impact and no market environmental change) price jump, you should always follow it. At 85%, that stock will continue to going up.

***
This afternoon, a reader asked me whether should buy a stock when its price is gone high already. I think LVLT would be a good example.

To decide buy or not buy a stock, we should focus on its price potential, not on its history. For the past a few days, LVLT has increased from $3.5 to $5.2 for almost 50%. Someone might think he missed it already, and its price is too high. But from my point view, it has room still.

If you buy at $5.2, you won’t get much benefit as you bought at $4.0, but when the price going up continuously, you can still get something. If you don’t have another better choice, it is worth to have a small portion of it.

There are reasons for LVLT, but I don’t want to pollute your thinking here. Let me give you a simple fact: Today, its volume is 135 million, which is 16.5% of its outstanding shares. The ones who sold the stock are for taking the profit apparently; the one who bought it is for take the profit too. The reason, and the only reason, to the buyers is because they believe the price will go up!

My suggestion: Buy (6.5)
Instruction: When see a possible adjustment, take your profit; when the adjustment done, buy back the shares. It is good for short and mid term stock trading.

Am I a Spammer?

When I finished my articles and tried to post them into my site at mid night, I found that Blogger.com locked my site. It was because Google’s spammer auto detection robot thought my site was a spammer site (what a wonderful compliment!). They locked this site to prevent me from any further posting.

I was so pissed off!

Finally their human review found it was a mistake and enabled me to post my work around noon.

After a while, I think it might be a compliment indeed. For three weeks, my site has gotten more and more attention from friends. I have had some serious followers. The visitor count is increasing firmly. The rank of my site on the search engines is jumped ahead, even is not very visible still. It seems impossible to a regular web site, it was the reason that the “robot” caught it.

For all of them, I thank all my friends and readers kindly support, and apologize for today’s delay!

If you were Ben Bernanke, what would you say tomorrow?

Nothing!

Besides raise a quarter percent interest rate, Mr. Bernanke would not release any information about whether stop the rate hiking or not. It is not only because he is a good economist or a good politician, but also because he, most likely, are not sure yet.

Making the decision when the time comes --- It probably is the best choice for him.

I am sure many interoperates will read out all kinds of meanings from Mr. Bernanke’s words tomorrow. Just don’t believe them. Tomorrow, No news!

Get Out Tomorrow

An Option Strategy Example 4: QQQQ

If you feel the ambiguity of the market, it means you should get out from the market and wait for the clear direction. A good trader should never wish a good thing happen. This is a discipline to protect you from investment loose.


As we can see from the picture, any undesired market move would lead to a big lost. For option trader, you have no room to make mistake because you don’t have time. Even the market might be backed as you wished; you may still be the looser because you ran out of time.

The market still has a chance to up tomorrow. During the up, you should cash all the 6 contracts of QQQDP before the market closing. In case there is no up, you should get out also.

Our strategy is:

If the market up after tomorrow, we cashed the 6 and have the 2 of QQQEP to pursue a big gain; if the market down after tomorrow, we can hold the 2 of QQQEP and wait for another back, meanwhile because we cashed the 6 of QQQDP, we don’t need to worry it at all.

The most important for an option trader is to avoid any potential lost! You can afford to miss a chance, but you cannot afford a single lost. Because any lost will be painful and difficult to recover.

Good luck!

The News and the Market

“How did you get that news before they come out?”

--- A fried asked me.
“Excuse me?” --- I was confused.
“It looks like the news has strong correlation with your prediction! The prices of your stocks were driven by some news. Without the news, your predictions would be wrong!” --- He explained.
“Oh, I see.” --- I laughed, and then asked him:” How do you think I can get the news before hand?”
While he was thinking, I added another question: “If I tell you a news, can you tell me, at a few days later, how will the market react to it, and how much the stock price will be?”
“…But there must be something,” --- He broke his silence.
“There is something indeed.”--- I look at him, and asked him another question: “Have you ever experienced some situations such as a stock price dropped on obviously good news, or jumped because a bad news or irrelevant news?”
He nodded.
“Why?” I asked him.
“Because of the whole market …” --- He tried to list all possible reasons; at the end he added “The situation are all different.”
“In such case, what is the function of the news?” --- I asked.
“While, probably is useless; or not much…” --- He answered.
“But why sometimes the news is a very strong force to move the market; sometimes it is just useless?”
“…” --- My friend was thinking.
“Do you know what caused a volcano erupt?”
“?” --- He was confused.
“Could it cause by any on earth activity?”
“Oh!” He suddenly understood. “You mean that the news is a trigger only. The market is not drive by news. In fact, the market itself has accumulated its up or down energy. It would release the energy whenever there is a reason. In our case, it is the news, right?”
This time, we both laughed…

A Warning Message

It puzzles me...

My study shows that the market will have a medium to big scale down, NASDAQ decrease >50, in next week. The most possible time is from Tuesday afternoon to Wednesday.

I know it sounds very wired, especially in today’s optimistic atmosphere. I would like my readers to be alert to any abnormal market signal, especially the news.

Wish you all the best luck!

Weekly Review (3/20/06 – 3/24/06)

The Market was “Crazy”, Right?

The market was cycling between ups and downs, and then backed almost to its starting point this week. It just like I wrote in my article "Ready to Surf?".

I hope my readers have collected some shares at lower price. If you bought at low, you should have an earning already.

Depending on your investment strategy, if you are a short time trader or option trader, you should consider reduce your position at early of next week; if you are middle or long time investor, you should keep your collecting at medium level, and keep enough cash on your hands.

Now let’s review my suggestion list:

1. INTC
It seems INTC had selling pressure still. In an up trend situation, it would push up the market; in a possible down trend, it might be a selling target. Most likely you will see this pattern in the coming week.

My suggestion: Hold (6)

2.NBR
Buy at low.

My suggestion: Buy (7)

3.CSCO
Reduce your holding when it above $22.00

My suggestion: Hold (6)

4.GOOG
On Friday, GOOG was jumped to above $360, which was triggered by a news, and it once climbed to $370.09 and then falled down to $365.80 at closing.

A few of my friends were so amazed and asked me that how could I predict Google that “Its high should be above $360, even reach $370.” “It is too good to be true!” as they said. “You must have inside information!” -- One of them challenged me.

While, I don’t have any so called “insider information”! If I do have something, It is just a little of experience, a little of hard working and a little of good luck.

To distinguish myself from all other stock analysts, I have tried to give exact and clear prediction on both price and time whenever I could. My goal sounds “Mission Impossible”, but, have I showed you something solid so far?

For long term: Sell (2)
For short term: There is a chance to reach $372 or $374.

5.NYX

My suggestion: hold (6.5)

6.NDAQ

My suggestion: buy (7)

7.ELN
FDA delayed its approve deadline. The waiting time have to be longer.

My suggestion: buy (7)

8.CNTF
On Monday evening, I was confused by the heavy after hour selling and the big price drop (over 15%). It was the first time in a while, the market seems too unreasonable to me. Fortunately on Tuesday the market strongly and quickly corrected its "mistake". On Wednesday, the market behaved just as I expected.

The strong adjustment demonstrates my prediction is luckily correct again.

My suggestion: Buy (7)

9.ANX
Like I described in “Can it stand above $5?”, the stock tried another time for $5 and was pushed back again. With the down pressure released gradually, the next trying is on the way soon. I wish my readers have accumulated some shares already.

My suggestion: Hold (6)

10.SUNW
If you noticed the time that I post the article, you should see that it was in the morning. That was unusual.

In fact, SUNW has been my watching list for a long time. For couple of times, I consider introducing it to my readers, but I did not think it was a good timing. On my schedule, I planed to write it on Monday.

When I waked up on Friday , I suddenly realized that a signal on Thursday was too strong that may indicates the up is on its way. So I quickly wrote something before I left for work.

On Friday, SUNW went up $0.10 or 2.05%. If you check its chart and compare with the market movement, you will see how stable the advance is. If everything is normal, it will cross $5, which is very important psychological line for SUNW.

Sun is raising… I wish!

My suggestion: Hold (6)

I have to remind my readers that no one can predict correct all the time. Please treat whatever here on my website as one of your information resource, not your action manual. In case I am wrong, I don’t want to be blamed and feel guilty myself.

Wish you all good luck!

Our Plan for Next Week

An Option Strategy Example 3: QQQQ

Another dithering day! At the end, we backed to square one.

From the table, we should feel how volatile the option trading is. From $41.30 to $41.50, the price changed $0.20 or 0.48%; but our option holding changed from $400 to $510 at 27.5%!

Next week is the crucial week; we need to close our position at least in half; we can hold the rest half for a possible better price.

Most likely on Monday or Tuesday, the QQQQ will reach $41.90. Once QQQQDP reached $1.00, we should sell 4 of the 6 contract. You can set up a limit order ASAP. Regardless how optimistic you will be, you should cash your gain and get your principle back.

The market will be at a relatively high level soon. We should pay close attention on the possible turn back. Therefore, protect your investment is more important than pursuing a higher return.

Is Sun Rising? --- SUNW

The option trader will love it. SUNW (Sun Microsystems Inc.)

If you look its chart, you would notice that its price is always shift between high and low (someone call it “Box”). In the volatile market, you should collect some when it is at low.

My suggestion: Hold (6)

Hi, the price is down!

An Option Strategy Example 2: QQQQ

During your investment, there are always some time that the market seems go to the undesired direction. When it is happening, what should you do?

You might ask yourself questions such as:
1. Is there any news?
2. Is it caused by the whole market change?
3. Is there any known factor has changed?
4. Is there any factor was missed in you initial analysis?
5. What is your initial investment goal?
6. What is your bottom line for lost?
7. How confident are you for this investment decision?
…

I can list a lot of questions that each question can be a single topic for discussion. Today, I am going to focus only on the trading related issue.

Like I said in my article “Ready to Surf?”, during whole week the market will be “crazy”. So QQQQ’s behavior for today is not wild at all. Its price range is from $40.82 to $41.22, just $0.40 or 0.97%. Comparing to yesterday, the closing price is down $0.11 or 0.29% to $41.09.

While, the option is completely another story. The two calls that I mentioned yesterday have price range change 35% and 18.75%. At closing, each of them is down 12.5%. Our holding at closing is worth $350, which is down $50 or 12.5%.

That is why people say the option trading is risky!

“A stock’s going up or down after you buy it only tells you that there was somebody who was willing to pay more—or less—for the identical merchandise.”
----<<One Up On Wall Street>> by Peter Lynch

This level of price change for option is normal. An option player should be psychologically strong to overcome any panic for the price change.

Technically, in today’s situation, you should buy little more at the lower price. If your timing is good, your portfolio should be even or at a smaller lost. I would not bother to create another sub case. We will keep track our current holding going forward.

I urge my readers taking action to follow this case. You will learn much more by invest real money, especially your own money.

Time to Play Index --- QQQQ

An Option Strategy Example: QQQQ (NASDAQ 100 Trust Shares)

The following chart is QQQQ’s three month comparison with Dow and Nasdaq.



From this chart, we can easily see that the NASDAQ 100 has increased a little when Dow gone up to 4% and Nasdaq gone up to 3%.

It is a principle that whenever there is a gap, there should be a trend to erase the gap. The trend should be: Dow is down and QQQQ is up relatively.

For the past three month, the over all market went up. Because the QQQQ is clearly behind the market, it should catch up a little bit.

The economy seems good as far. I think the first quarter earning should be good for most of companies. The good earning or good earning expectation should lift the QQQQ also.

It seems that we have reasons to believe the QQQQ will be up soon.

How can we get benefit from our conclusion?

My strategy is to buy 8 calls of QQQQ:

6 calls: strike price $42, expiration date 4/22/06 at price $0.40
2 calls: strike price $42, expiration date 5/20/06 at price $0.80

Supposed I bought them today. My total investment is (0.4*6+0.8*2)*100 = $400. (The prices are all based on today’s real market price).

Today, the closing price of QQQQ is $41.21. My first price target is $42. I wish it could happen within March.

From tomorrow, I will report the market price of those calls daily, and show you a whole life cycle of an option trading thought this real example.

Can it stand above $5? --- ANX

ANX (Adventrx Pharmaceuticals Inc.)

ANX is a biopharmaceutical research and development company. The company focuses on new technologies for anticancer and antiviral treatments. It closing price of today is $5.00.

On 3/20, it announced Thiovir, its broad spectrum antiviral drug, active against H5N1 avian influenza chimeric virus strains.

ANX is risky but has big potential. It is for short and middle term investors.

My suggestion: Buy (7.5)

Instruction:
ANX tried to cross $5.00 twice already. Every time it was pushed back by relative big volume. Apparently $5 is its big resistant line. Someone, big holders, wants to cash their holding at $5. Whether the price can stand stable on $5 is a big sign. So tomorrow is an important day.

If the price would push back from $5, I suggest my readers do not take any action yet, you should watch it and check if there will a lower price; If the price would stand above $5 firmly, I suggest buy a portion of it.

To make money on this kind of stock, you need be patient.