Challenge account update

How to view the entire chart:


1. Try clicking on the name of the most recent article in the column on the right. This will remove the "Archives" list.
2. Try right click on the chart itself and open it on a separate window.


I am sorry that I cannot always make the chart small enough to fit neatly on the left column. I want you to be able to see the details I want to point out.


I Hope this helps,


Juan

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First, this is an update on the account. I am making money again. After almost 8 months, and an original success that vanished, my account is now almost 7% higher. Not bad, it could be better. We have been playing it more conservatively, with small bets on each trade, and more patience in the selection of candidates.



CSCO was selected because of improved profits and good earnings forecast for the second half of 2006.

http://finance.yahoo.com/q/h?s=CSCO&t=2006-02-08T16:08:00-05:00

My RET analysis looks terrific, with a short-term likely rally to $28.8, which would be great if it materializes



Today's jump in the stock price suggests that the rally to $28.8 is possible in short order, so we are sitting on an excellent trade. With a Delta of 482, I should be doubling my money with this trade. We'll see....



Finally for CSCO, the chart below shows us the oscillators, which a bullish, the volume spike of today, and Bollinger band and moving averages pointing upward. I have also done the Fibonacci retracements for your information. I have increased my contingency order for the stop loss.



Next, let's take a look at IDCC. I entered a trade on IDCC on Jan 24th. The catalyst that triggered my system was a licensing deal with LG, which seem to be increasing the revenue for the company quite significantly. Here are the headlines of that day.

http://finance.yahoo.com/q/h?s=IDCC&t=2006-01-24T16:08:00-05:00

I then entered a trade that today looks like this:




Notice that I have done a rollover by buying back the February 25 calls for $0.75. The February 25 calls has been shorted at $1.1.

If you like to simplifly the accounting, the credit obtained from the difference may be assigned to the long calls. In other words, we are financing the cost of the June calls with the credit of the Feb Short. Here is the numbers in an Excel spreadsheet:




In essence what I did was to reduce the cost of the 6 long calls by $105. My cost per share now becomes $2.425, instead of the original $2.6.

You can actually change the risk graph erasing the Feb transactions, and reducing the cost of the June long calls without any effect to the risk graph or the greeks and breakeven points.




I keep a strict color code to remind myself what month after the original trade am I at. None of my riks graphs include the broker fees.




I have set the stop loss for $22.47, which is at ceiling of the gap on the day of the trigger. Note that today we had a bit of a rally to a new high, which is a good bullish indicator.

Finally, for IDCC, here is the Elliott Wave analysis. The targets seem somewhat conservative. I give myself until March expiration to see if the RET analysis has changed. At that time I will decide if it is worth rollingover the trade or not.



IGT's count is somewhat ambiguous so transforming the trade into a PCCRC from a CRC was probably a reasonable move. Currently, the count suggests that a corrective "X" wave of a double zigzag is in progress, and when done, a strong rally should follow.




However, this rally may not come it time to generate good profits for this trade. I have until expiration in March to decide whether I should close the position. There is not more rolling over here, because the longs expire in April, and the shorts in March. Should the stock continue to move sideways to lower, Theta would be the most likely way to profit from this trade.




IV is still low so a sudden pick up in volatility should favor this trade.





Using conventional T.A. methods, I would think tat we should have a strong move up shortly, as the oscillators indicate that the correction is almost over. The 50dMA is at $34 right now, but it is on the rise. This may be the point to be tested before the rally starts.



OATS has had a good rally, and a small profit in our account. Here is the analysis:


Long term, OATS has a FLAT pattern, although the recent break out to new highs may change the rating of this count. In any case, a cautious investor would realize that the stock is already in the target area. A need for further evaluation is evident. Wave (c) looks more like a double zigzag than an impulse, so we may be dealing with a WXY series with (y) already in progress, and the program is not registering it yet.


Upon further analysis is evindent that the proposed wave (c) above is a double zigzag, thus wave (c) above is more likely a wave (y). The stock may make it to $20/share shortly. I am willing to stay in the trade, until that level is reached.



Conventional TA shows an aggressive move with a volume spike and a stock that is well above the moving averages (20dMA, dotted line, 50dMA (blue line), 200dMA (red line). This is typical of an overbought stock, so we
may have a sideways movement here until the moving averages have time to catch up.



The long term chart also shows an overbought condition, but the moving averages are certaiy moving up. This is the sort of stock that would make strong moves up unexpectedly, once the sidetways correction is over, which would occurr unexpectedly. Staying in the trade could prove quite profitable. Should the stock hit $20, then some profit taking modification may be helpfull.



The trade is in good shape. Even a retreat back to 17.5 would conserve some profits. I like it when a loss is not likely but a good profit is.