So yesterday morning, I decided to buy some shares and call contracts on Beacon Roofing Supply, Inc. (BECN), as a pure hurricane play. As they say on their web site,:
Now what happens when the hurricane winds blow? Right! Roof shingles go flying off of homes all across the Southeast.
But then an interesting thing happened. I checked the charts, and what do you know–BECN is down some 30% off it’s recent highs! Can you say OVERSOLD AND HURRICANE PLAY?!
Holy tornado, Batman!
So between the hurricane and the oversold conditions, the time was right for a serious pickup of some BECN shares. And it doesn’t hurt that we now have RSI and Stochastic buy signals (see chart below):
Well, so much for the best laid plans of Mice and Men…..the hurricane moved out to sea, sparing those of us in Florida from another bout with Mother Nature. But landfall may still happen in the Carolinas or Virginia, as I write this blog.
And oh by the way, after I bought my shares, BECN still went up a whole lot, and I today I sold my shares and contracts. I made 16% on the option contracts, and over 3% on the regular shares since yesterday.
Done deal? Not on your life. I’m simply waiting for a retracement, and may get back in. Even if this hurricane hits nobody, it’s only August 23, and we are just getting into the meat of hurricane season. With BECN this oversold and the chance for a few more hurricanes to come our way, BECN remains a great intermediate play as well.
BECN is the Babe Roof of the hurricane stock plays, and this one is a sure home run!
We got the news this morning that the jobless claims and added jobs report were better than expected for June, and a very tired market shot up off the opening bell. Going into tomorrow’s unemployment numbers, it seems like a pretty good time to take a shot with the ETF that double shorts the S&P 500.
The street is now expecting much improved numbers, but the numbers in the days leading up to the unemployment numbers don’t always match up together.
The indicators are screaming oversold and SDS is down 8 consecutive days. The Contrarian in me says it’s time, and so this morning I bought a couple hundred shares of SDS at 19.68. Just dipping my toes in the water so to speak, and more shares will either be purchased as SDS rounds into an uptrend, or I will take a small loss, as I set my stop loss to 19.18.
Here is the current chart:
Chart courtesy of stockcharts.com
Many traders wait for the stochastic to cross above 20, but the more aggressive trade is at the point where the fast and slow stochastic lines intersect.
Although the market was up nicely today, the last hour saw a bit of a sell off, and SDS finished the day only 10 cents below my buy price. This tells me that there are some traders who are wary of the jobs report, and may not want to be long going into tomorrow morning.
If the jobs report is good, I will probably get stopped out with a small loss. If it is as expected or worse, we may just get a sell off to end the week.
It’s always tricky to trade on the day when the Federal Reserve meets, or when the Chairman of the Federal Reserve is set to give a speech. Such was the case today, when Ben Bernanke was scheduled to give a speech shortly after 2 PM.
Almost always, the market will trade relatively flat for the entire day before the Fed event, and it is really difficult to find a good trade. However, during the speech, the market will generally begin to move, and the trader can take advantage of this by setting up in advance for a “Fed Speak” day trade.
The chart below shows the one day chart of SPDR S&P 500 (SPY), the ETF that mimics the S&P 500 index. As you can see, SPY was doing very little prior to 2:15 PM when Bernanke began his remarks. But look what happened thereafter:
Chart courtesy of yahoo finance.
Conversely, ETF’s that short the S&P 500, such as SH, went up from 41.68 to 42.03 from the start of the remarks, through the end of the trading day. More aggressive traders can trade SDS, the ETF that double shorts the S&P 500.
This was actually a mild move, compared to how the market can move when something more important, such as an interest rate rise or fall, occurs. It was as if the market was not thrilled with the Fed’s comments today, but there was nothing Earth shattering that would move the market more substantially.
Nevertheless, the astute trader can take advantage of Fed Speak movements by setting up their trading platform in advance, putting in an order to either buy or sell short one of the major index ETF’s, and then just standing by with fingers ready to submit an order as the market begins to move.
Make sure your computer is near your television, so you can watch the announcement live on CNBC or another financial channel, and make sure you can see the streaming index prices.
But you must be quick, and put in your order as soon the instant the market begins to move in one direction or the other. Otherwise, you will end up getting your order filled after a few agonizing moments, and most likely at a price you didn’t want.
I have seen stocks spike up or down 2% or 3% in a matter of 10 or 15 minutes after a big Fed announcement. Even by catching half of that move, you can do quite well. But be prepared to sell into the spike. Do not hold the position overnight, because it’s very likely that the market reaction will create an extreme move that could likely reverse in the morning.
And never expect the market to continue moving higher after it spikes up within a few minutes. Sell into the strength, and wait for a pullback if you want to re-enter a buy position. Conversely, if shorting, cover your short, and wait for a bounce higher before entering another short position.
Final word: Never try to outguess the Fed or the market prior to the Fed event. If you guess wrong, you could lose your proverbial shirt in a very short period of time.
I have been day and swing trading First Majestic Silver Corp (symbol: AG) for about the past 7 weeks. During that time, using the FastProfitTrade Method that I have developed, and despite a drop in the price of silver and silver stocks such as AG, I have still achieved 11 of 13 profitable trades (84%).
9 of the 13 trades have been day trades, and are initiated upon intraday pullbacks, and utilize several of my key indicators to determine when to pull the trigger on buy orders.
The last 9 consecutive trades have been profitable ones, and overall I am 11 for 13 on the profit side. Most of the positions have been sold with gains of 1%-3%. Because of the down trend in AG, most of the times I was able to sell my position, and then buy it back in the next day or two at a considerably lower level.
For example, on June 7th, I bought AG at 18.44, and sold it within a half hour for $18.72. That doesn’t sound like much, but it was a 1.5% gain in only a half hour. Do that 4-5 times per week and in a year you can really grow your wealth.
For example, if you began the week by trading $20,000, and achieved a 1.5% gain each day that week, at the end of the week, you would have $21,545, which is a 7.7% gain for the week. Now do the math for 50 weeks (yes, we take our profits and go on a nice two week vacation), and you’ll see what I’m talking about.
Anyway, on June 8th, I re-bought AG at 17.81 and again sold it shortly afterwards, at 18.11. Again our return on investment before commissions is 1.6%.
There are times that the return on the daytrade is even more profitable. For example, on May 4th, I bought AG at 17.68 and sold it the same day at 18.29. That’s a 3.4% return on the same day!
So as you can see, I especially like trading AG because it is quite volatile, and you can usually tell what kind of day it will have by watching the price of silver before the opening bell.
3 Month Chart of AG:
chart courtesy of stockcharts.com
If you like the idea of trading silver, but want to reduce your risk a little bit, instead of AG, you can trade the silver exchange traded fund, symbol: SLV.
Even though AG has dropped from over $26 per share to the current level around $18, by buying it at the right time, I have been able to do very well on these short term trades.
Hi Ho, Silver, away!!!