The Blue Collar Investor WeBlog

56 responses so far ↓

• 1 Don B // Mar 13, 2010 at 10:07 am

  Alan –

  With apologies, I am uncertain where I can expect to find the new Market Tone each week. Wonderful addition btw. Also, I am puzzled over where on the site to find what you have referred to as Member Resource Area. TIA.

  Don B

• 2 admin // Mar 13, 2010 at 11:26 am

  Don,

  My plans are to publish Market Tone in conjunction with my blog articles as I have with this one.

  When you log in to the Premium Site, the left side of the page will have the 5 most recent “Weekly Stock Screen and Watch List” reports.

  The right side of the page will have the member reource/download section. This area will be growing in content as I plan to add more material on a continuing basis.

  Alan

• 3 Don B // Mar 13, 2010 at 12:59 pm

  Alan –

  I must ask you to send me some snake bite medicine – that Member Resource Area did everything but jump up and bite me!! And guess where!!

  Sorry, sir.

  Don B

• 4 Dave D // Mar 13, 2010 at 1:23 pm

  Hi Alan,

  Good article (again) this week…

  What are your thoughts on buying a stock, waiting for the stock to go up in value (if you very bullish) and then sell the call?

  Thanks

  Dave

• 5 Sam T // Mar 13, 2010 at 1:35 pm

  Alan,

  Once we have signed up for the trial period are we automatically updated each month?

  I am a trial member and would like to continue, but I’m not sure if I have to take some sort of action.

  Tks,
  Sam

• 6 admin // Mar 13, 2010 at 1:40 pm

  Don,

  Happens to me all the time…the hardest things to find are right in front of you. Glad to help.

  Alan

• 7 admin // Mar 13, 2010 at 1:43 pm

  Dave,

  The way I handle stocks that I am extremely bullish on, and the deal is there ( great returns), is to sell the call and opt for an O-T-M strike. This way, if the stock is an imposter, we have generated some income with the option sale but still have upside potential if it heads north.

  Alan

• 8 admin // Mar 13, 2010 at 1:46 pm

  Sam,

  As a charter premium member, there is no need to take any further action. You will continue to be updated at the discounted charter membership fees for as long as you remain a member.

  Great to have you aboard!

  Alan

• 9 Sam T // Mar 13, 2010 at 1:57 pm

  Alan,

  On the Running List of the Premium Member Section I noticed 3 stocks (WX, TDG and VIT) that failed this month’s screening but apparently passed previously. When will those stocks be deleted from the Running List?

  Sam

• 10 John // Mar 13, 2010 at 3:35 pm

  Alan,

  I am a premium member and have questions about the industry rank on the running list. What is the total number of industries evaluated and what is the ranking based on?

  Thank you

  John

• 11 Stephen Drourr // Mar 13, 2010 at 5:18 pm

  Alan,
  I just subscribed to your Premium service. The information on individual stocks is outstanding. Saves a great deal of time.
  I have generated nice returns using only ETF positions and wonder if you could include information on these as well?
  Thanks-Steve

• 12 admin // Mar 13, 2010 at 8:14 pm

  Sam,

  Stocks on the running list will remain there throughout the current contract period, but highlighted in pink if one or more of the indicators turn negative in a particular week. The only stocks carried over into the next contract cycle will be those that passed all screens with a minimum of mixed technicals. This will keep the list dynamic, fresh and current.

  Alan

• 13 admin // Mar 14, 2010 at 3:12 am

  John (# 10),

  There are a total of 197 IBD ranked industries. In the current report, for example, you see that BUCY is fanked 15/197 in the Construction/Mining Industry.

  These rankings are based on 6-month price performance.

  Alan

• 14 admin // Mar 14, 2010 at 8:17 am

  Stephen,

  Thanks for your excellent suggestion. We are so appreciative of all the positive feedback from premium members as well as your ideas for enhancing the site. Much like the general site and the Weekly Stock Screen and Watch List, the premium site is a dynamic entity. We will be constantly adding content and responding to the needs and ideas of our members. All enhancements will require our careful due-diligence so we can assure our members that the content is of the highest quality.

  Thanks for your participation and feedback.

  Alan

• 15 admin // Mar 14, 2010 at 8:40 pm

  ATTENTION Premium Members:

  This weeks report, The Weekly Stock Screen and Watch List, has been uploaded to your premium site and is available for inspection.

  Alan

• 16 Bill // Mar 15, 2010 at 4:12 am

  Alan,

  I noticed on the report you released last night that many of the stocks showed 3 “dots” next to the symbols on the watch list. In general should we be favoring these stocks over the others?

  Thx

  Bill

• 17 admin // Mar 15, 2010 at 9:04 am

  Bill,

  Good observation.

  The “dots” you are referencing represent the # of weeks that equity has been on our “running list” in the CURRENT OPTION CYCLE. Certainly the ones with 3 dots (been on every week) are showing particular strength. However, these running lists are packed with a tremendous amount of information and your investment decisions should not be based soley on one of them.

  Think of yourself as an artist and all the information presented in the running list are strokes on your canvas. When you put them together based on your portfolio needs and risk tolerance you will have created a Picasso!

  Alan

• 18 Don B // Mar 15, 2010 at 10:12 am

  An indeed interesting feature was written today (only for today) on OptionMonster.com.
  All about Alan’s excellent advice NOT to write options during ER periods – much illumination.
  (It is free, but one needs to register). FWIW.

  Don B.

• 19 Kevin // Mar 15, 2010 at 1:25 pm

  Alan –

  In your example you have The stock trading @ $53.22 with the $55 call options:
  The March $55 call returns $1.65/share
  The April $55 call returns $2.55/share
  The July $55 call returns $4.70/share

  Why does the Ellman Calculator show $0 downside protection? Doesn’t each option have a breakeven downside protection of $53.22 stock price less the option revenue? If so, wouldn’t the higher downside protection of your April and July calls influence your decision?

• 20 admin // Mar 15, 2010 at 2:08 pm

  Kevin,

  The BCI system is based on the premise of generating a constant monthly flow of option profit.

  My system and Calculator make a distinction between downside protection of that profit (ROO) and the breakeven. The difference between these calculations and the more traditional ones are based on goals and strategy philosophy. I base mine on making money and protecting those profits as opposed to NOT losing money.

  Furthermore, by using the Ellman Calculator, clearer choices regarding strike prices can be made based on chart technicals and market tone. If we were to equate DP with breakeven, it’s always the premium, no calculator needed. By breaking up the premium into ROO, DP and UP (upside potential), better investment decisions will be made.

  As far as % of DP (assuming to the breakeven), the same calculations would apply as written in the article. If we were to annualize the DP, the shorter term options would provide the greatest protection. Based on average share movement over 1-month vs. 5 months, a 3.1% 1-month protection to breakeven is more impressive than an 8.8% 5-month protection to breakeven.

  Good question.

  Alan

• 21 Stephen Drourr // Mar 15, 2010 at 4:52 pm

  Alan, joined the premium site. When will the 3/12 information be available?
  Thought this will be a weekly update?
  Thanks, Steve

• 22 admin // Mar 15, 2010 at 5:16 pm

  Stephen,

  The report was uploaded to the premium site last night. Log-in and it will be the report on the top left of the premium page.

  Alan

• 23 Dave D // Mar 16, 2010 at 3:36 am

  Hi Alan,

  ATHR recently dropped with massive volume… How would you treat this scenario if you owned the stock and had sold the 36 call?

  Thanks

  Dave

• 24 DaveP // Mar 16, 2010 at 8:15 am

  Hi Alan,

  I was surprised to see GES in your stock screen as reporting same store sales. Is this something new or have they always done that? Have you found another web site that lists companies doing such reporting?

  Thx,
  Dave

• 25 admin // Mar 16, 2010 at 9:55 am

  Dave P,

  Good catch. I’m surpried to see it there also! I have the most recent list posted in the “member resource area” of the premium site and GES is NOT on that list. I will have this corrected (as early as ) today unless a member of my team has updated information. Now GES is not an eligible stock this contract period due to the ER due out tomorrow, and that, not SSRSs, is what eliminated it from consideration this month. Thanks for the find.

  Alan

• 26 admin // Mar 16, 2010 at 9:59 am

  Dave D,

  With only a few days left until expiration Friday, our choices are limited to unwinding our position or no action. I look for news to understand why the drop and make a decision as to the likelihood of further decline or perhaps a rebound. In this case an analyst downgrade caused the commotion:

  http://www.streetinsider.com/Downgrades/Barclays+Downgrades+Atheros+%28ATHR%29+to+Equalweight/5437587.html

  It looks like there was a nice bounceback today and your strike is sitting I-T-M so this looks like a successful investment for you.

  Alan

• 27 admin // Mar 16, 2010 at 10:06 am

  CHARTER MEMBERSHIP- Final Reminder:

  An incredible response over the past 2 weeks and many last minute sign-ups today (you know who you are!). Great to have you all. Tomorrow, this opportunity for a LIFETIME DISCOUNT will be forever removed from this site.

  Whether you are a general or premium member, this site continues to value and appreciate your participation.

  Alan

• 28 admin // Mar 17, 2010 at 4:25 am

  BUCY:

  Recently beat 4th quarter earnings expectations by 16% causing increased earnings estimates. Earnings grew by 22% although sales declined by 10%.

  This is a high-beta stock yielding a handsome option return but capable of whipsaw-like price changes. This is why the stock has a Scouter rating of 5 despite strong fundamentals and price movement. Currently displaying mixed technicals, this stock has been on the radar of this site for quite some time. NOT for the extremely conservative investors.

  Alan

• 29 Carl // Mar 17, 2010 at 10:18 am

  I’ve been trading with CTSH since you mentioned it last year. I’ve been getting consistent, decent returns and the stock keeps going up.

  Thanks,
  Carl

• 30 DaveP // Mar 17, 2010 at 10:20 am

  Hi Alan,

  There are a lot of stocks in the weekly screen with mixed technicals. I know that you still trade in that case so I’d like to know what you look for to consider a trade. For example do you favor MACD over STO, etc? I realize there are probably no hard and fast rules, but I’d like to tap into your vast experience.

  Thx,
  Dave

• 31 admin // Mar 17, 2010 at 2:54 pm

  Dave,

  You are 100% correct that there are no cookbook answers to this question. Let me give you a few things that go through my mind when viewing these charts:

  1- STO is a momentum indicator and an important one.

  2- MACD is a momentum and trend-following indicator that also has predictive qualities and is the shortest-term indicator. Rather than say that MACD has a slight edge, one might say that it gives a little more information.

  3- When I view a chart, it’s the total picture that should be evaluated. In time, a student of technical analysis will look at a chart and make a determination in seconds. It just takes a little time. Here’s the main focus I put on mixed vs. all-positive technicals:

  4- Everything else being equal, opt for the stock with positive technicals.

  5- Stocks with mixed technicals and an overall neutral market tone, are candidates for I-T-M strikes. In a bullish market, O-T-M strikes are still a good choice.

  6- When “laddering strikes” (my made-up term) have a greater % in I-T-M strikes when a stock has mixed technicals.

  Bottom line: Even though there is no true cookbook equation to technical analysis, we can DRAMATICALLY throw the odds in our favor, by analyzing the technical indicators and then applying the power of common sense.

  Alan

• 32 Dave // Mar 17, 2010 at 10:20 pm

  Hi Alan,

  When a stock we own does decline in price (for example JDAS) what is the most qualified area of support to look for?

  For example, when looking at the chart of JDAS I can see that its declined past the 20 day moving avarage, but the stock DOES have a strong support line at $28… IF it did decline past this would we say the party is over (and sell) or would we then rely on another area of support (ie: 50 DAY moving average, 100 day moving avarage, or even a manually established up-trend line that underpins all the troffs?

  Thanks Alan

  Dave

• 33 admin // Mar 18, 2010 at 10:38 am

  Dave,

  The short answer is that I use the 20-d emas for support evaluation.

  Chartists will never agree on any one specific time frame and , of course, much rests on the type of investing your talking about. I have tried many different time intervals for MAs and decided on 20 and 100-d emas for CC writing. These have worked quite well for me. When I was a longer term investor, I use 50 and 200-d simple MAs.

  My reasons: 20-d emas closely correlate to 1-month options in that there are 20 trading days in MOST contract cycles. 100-d allows me to compare to a longer term ema and (selfishly) makes it easier for me to explain MACD in my seminars. Many BCIs also use shorter term MAs like 5 or 10-d. The reason I use ema rather than simple is that is gives more weight to the more price changes.

  When a price breaks support, I look to the other indicators for confirmation. A chart of JDAS shows a broken support @ 20-d, negative MACD histogram and a bearish stochastic oscillator. How about volume? Check it out…all this “bad stuff” on increasing volume.

  With 1 day left until options expire, a decision needs to be made whether a stock like this should remain in our portfolio or is there a better “warrior” to send out into the financial battlefield. Remember, only non-emotional decisions permitted.

  Alan

• 34 DaveP // Mar 18, 2010 at 12:19 pm

  Hi Alan,

  Thanks for your input on the technicals. One thing that would be nice to have with the premium membership would be a video of your commentary on the stock charts. I understand that this might be time consuming for you so maybe just once a month when you’re reviewing them for your trades anyway. But I think it would be a great learning tool for us.

  Thx,
  Dave

• 35 admin // Mar 18, 2010 at 2:33 pm

  Dave,

  I have made note of your idea and agree that it will benefit many of our members. Although we have been developing the premium site for nearly a year now, I anticipate that the content will expand and develop based on the needs, ideas and comments of our members.

  Thanks for the suggestion.

  Alan

• 36 admin // Mar 18, 2010 at 2:45 pm

  BUCY- a final look on expiration Friday:

  Those following this blog have seen my posts about this stock and the trade I entered at the beginning of the contract cycle (actually 1 week into the cycle). Here’s how it went down (for simplicity, I’ll use 1 contract figures):

  B-T-O 1 x BUCY @ $63.77

  S-T-O 1 $65 call @ $2.05

  ROO = 205/6377 = 3.2%, 1-month return

  Shares currently trading @ $65.77 but worth $65 to us because of the option obligation.

  Share appreciation = $65 – $63.77 = $1.23

  Additional 1- month profit = $123/6377 = 1.9%

  Total profit = 3.2% + 1.9% = 5.1%, 1-month return

  If we roll out (remember these are pre-market figures that could change during expiration Friday):

  B-T-C 1 x March $65 call @ $1.05

  S-T-O 1 x April $65 call @ $3.50

  ROO = 350 – 105/6500 = 3.8%, 1-month return

  Downside Protection (of this ROO) = 77/6577 = 1.2% (minimal protection).

  The decision we are faced with is: is this the best place to put our $6500/contract or should we allow assignment and use the cash to open a new position?

  It’s all good!

  Alan

• 37 TonyH // Mar 19, 2010 at 12:10 am

  Alan,

  Thank you for the premium site and the compilation of wonderful warriors. I just started trading in Feb and the report saves a tremendous amount of time which allows me to tend to my greatest investments….the wife and kids. Additionally, I am getting the wife to read your books. As a partner, she will easily thwart any “emotional” temptations that may arise when I see “too good to be true” ROO’s; a shortcoming I am working on.

  Anyways, based on your expertise in BCI-ing, and your history and knowledge with overall various investment strategies, does the upcoming Health Care Bill Vote scheduled for this weekend have any influence on your decision to roll, or not roll out any of your positions this month? In other words, would you consider the Vote an “Earnings Report” for the entire market and wait to see what happens? Or, have you seen similar things in the past and not too worried about it? TIA.

  -Tony

• 38 admin // Mar 19, 2010 at 2:45 am

  Tony,

  A team effort is a great way to go. Based on your remarks and great question it sounds like you are well on your way to a successful start to become CEO of your own money!

  Here is my opinion, not guarantee, as to how I view the impact of the upcoming vote: The market has factored in passage of this bill by the House on Sunday evening. If passed, I don’t see it impacting the market dramatically one way or the other. If the bill is defeated (unlikely in my view), the market may see it as a notice that this administration will be handcuffed for the next three years and little will get done. I wouldn’t be shocked to see a dip in the market if this occurs.

  Because I expect passage by the House, I have my list of stocks above the sold March strikes (almost all of them from current cycle) and I’m planning to “rock and roll out” or out and up today before 4 PM EST. As always, I will make sure that these equities still meet system criteria and ERs are not upcoming.

  As an aside, many of you know that I am a health care provider ( I am a dentist), and see the impact loss of health insurance has on average folks. I see unfair denials of certain “medically necessary” procedures. I fight hard for these victims but only win some battles for them. My feeling is that many of our BCI community knows what I’m talking about. Let’s hope our representatives get their acts together and focus their attention on those they represent and not their party affiliations. In other words, eliminate all the mean-spirited attacks and get to some meaningful debate. Okay, got that out of my system!

  Any comments on the Health Care Bill as it relates to our investments are welcome.

  Tony, please have your wife let us know when she completes my books and what her role is in “Team H”.

  Alan

• 39 admin // Mar 19, 2010 at 7:57 am

  A radio interview I participated in last year is currently being replayed:

  http://www.thebusinessauthorsshow.com/

  It covers the very basics.

  Alan

• 40 James // Mar 19, 2010 at 9:41 am

  Curious and unexpected thing happened to me this experation Friday. I am not totally surprised but I wasn’t expecting it.

  In two different accounts I purchased QQQQ:

  #1
  B-T-O 100 QQQQ @ 44.49
  S-T-O 1 $44 call @ $.73

  #2
  B-T-O 100 QQQQ @ 44.59
  S-T-O 1 $45 call @ $.71

  I planned on rolling out and up today since it was expiration Friday. On the first account a put the order in last night in the hopes that it would trade when the market opened this morning. What I found when I looked in my account was that BOTH accounts had been assigned at 8:00 am this morning. That wasn’t expected. What did I miss on these options or was I just “the lucky one” on both my accounts?

• 41 Barry Bergman // Mar 19, 2010 at 10:42 am

  James (Post #40),

  The EXACT same thing happened to me this AM with the Q’s as well. I got a call from my broker telling me that I was assigned early. I am wondering if someone wanted to lock in a profit prior to expiration or maybe something “bad” is going to happen…like the perceived negative market impact of the healthcare bill coming up for a vote on Sunday. Anyone with news?

  Barry

• 42 Steve Q. // Mar 19, 2010 at 11:09 am

  The Q’s

  I also had 5Mar45 Q’s contracts called away this am. No biggie since I was going to let them go anyway, but was surprised at the timing.

• 43 Barry Bergman // Mar 19, 2010 at 12:02 pm

  Steve and James,

  What puzzles me is that in all of our accounts, the Q’s were exercised early. I’ve had early exercise before, but having early exercise in the same stock across different accounts is strange. Maybe my mind is working overtime and I have a future as a mystery writer…but still seems strange.

  Barry

• 44 admin // Mar 19, 2010 at 12:09 pm

  Here’s what happened with the Qs:

  First of all, no harm-no foul; most of us would have let them go anyway and buy back at a future date or dollar-cost average back into the Qs.

  Towards the end of each quarter (March, June, September and December), the major ETFs including SPY, QQQQ, DIA distribute dividends. Today was the ex-dividend date so option holders put in orders to exercise yesterday. Mine went also. These players were able to arbitrage there option holdings/share purchase and capture a $.05146 dividend. Doesn’t sound like much but with the number of contracts the “big boys” play with, it could be another extention on their homes.

  Look for this to re-occur at the end of the June contracts.

  Alan

• 45 Barry Bergman // Mar 19, 2010 at 1:02 pm

  Alan,

  Thank you…mystery solved!

  So I guess I’ll stick with my covered calls and forget about writing the next “DaVinci Code.”

  Barry

• 46 Don // Mar 19, 2010 at 1:07 pm

  Alan? Anyone? -

  Today was a surprise for me too, with WRLD. It was gently in the money for me, above $40.25 or so when I looked this morning. Ran some errands. When I came back and looked, after mkt close, I started to laugh, as I misread it as 39.90, which would have been perfect for new writes come Monday. No, it was of course $37.90. Still decent for some $40 April, but WHOA, this sucker fell over $ 4.00 – like close to 10%. Then I looked all over for news. Sure could not find any. Seems like when it lacks news, and following the fact that a few weeks back it broke over its 52-week high, suggests I consider holding on. OTOH if I sell Monday (if it is where it is now) I will break even. Translate that to mean, of course, that the option gains earned to date have been erased!

  Thoughts? News? Many thanx.

  Don B.

• 47 admin // Mar 19, 2010 at 2:55 pm

  Don,

  Not much news, I did find this. Don’t know for sure the association:

  http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_W/threadview?m=tm&bn=28036&tid=945&mid=1013&tof=1&frt=2

  Also, down on huge volime relative to average. Institutional shorting could also play a role. A shame for such a great company.

  Another tactic I employ when looking for answers: Most companies have a web site with an “investor relations” link or contact. Sometimes a phone call will shed some light.

  Alan

• 48 Barry Bergman // Mar 19, 2010 at 5:50 pm

  BCI Community,

  This might be a good time t0 start a thread to discuss approaches to covered call selection if healthcare passes this weekend. Non-political…just tactical…after all, it is our money at stake.

  Some of my thoughts… international ETFs and managed care.

  Barry

• 49 Don // Mar 19, 2010 at 6:25 pm

  Alan –

  I read the link you published on the WRLD situation. Thank you. My best interpretation is that Sen. Dodd is proposing a bill to regulate the financials, including the payday lenders. While wishing to avoid anything that smacks of politics on this delightful website, I must say that it is almost axiomatic that when government is involving itself (always in the present tense), stay away. And that concept is strengthened by any belief in this case that there is institutional shorting taking place.

  I shall be watching closely Monday morning. Further comments are also welcomed, by me anyway. Thanks much.

  Don B.

• 50 Don // Mar 19, 2010 at 6:28 pm

  PS -

  In the case of this proposed legislation, it is almost, as someone referenced in an earlier post about another stock, like an ER. Except it is out of the blue!

  Don B.

• 51 admin // Mar 19, 2010 at 11:10 pm

  Don,

  Unexpected or perceived bad news has no defense!

  Alan

• 52 admin // Mar 19, 2010 at 11:12 pm

  PREMIUM MEMBERS:

  As of 3AM Saturday morning, there is a glitch in the IBD web site, not allowing us to export the IBD 100 info. This may or may not slightly delay the posting of this weeks report. Will keep you posted as we are on top of the situation.

  Alan

• 53 Dave D // Mar 20, 2010 at 1:28 am

  Hi Alan,

  Many stocks at this time seem to be in overbought territory (according to the stochastic oscilator)…

  What is your perspective of trading stocks that are overbought?

  Dave

• 54 admin // Mar 20, 2010 at 7:30 am

  Dave,

  I view a stock trading in an overbought position (above 80%) as a cautionary signal but not a bearish one. It technically doesn’t become a true bearish signal until it breaks below the 80% and even worse if it does so for the second time.

  Stocks can trade in this zone for many months so it does NOT dissuade me from including these equities in my portfolio or even writing O-T-M strikes if all else is stellar.

  You can always opt for an I-T-M strike to generate additional downside protection and secure a more conservative position.

  Alan

• 55 Don B. // Mar 20, 2010 at 2:30 pm

  To Barry B – #48

  Have you looked at the Option Monster.com? Najarian is saying that the health care insurers are roaring, naming specific 0nes. He did not predict what they will do, of course. To read this, you would need to go on before Monday, as it is yesterday’s article. The articles are written daily. It is a free site, but you must do a quick register to be able to log in and read it. It is a good site in general, btw. Good luck.

  Don B.

• 56 Don // Mar 20, 2010 at 2:38 pm

  Again with the PS :

  Sorry shoulda said. When you open the OptionMonster.com – they have a load of expensive newsletters to offer. Go all the way to the bottom to see where you can check “No thanks, but I would like to receive free daily newsletters.” They are not emailed to you – just bookmark the page the first time, then each time you want to read their materials you log in.
  FWIW. Don B.

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