Premarket trading plan summary

This should be a good day! Oil is up premarket and my COS.TO (COS.CA) should benefit from it. I’m still analyzing Canadian oil companies like Suncor Energy. I believe they represent probably the best opportunity out there for those who hold US dollars. This is mainly for two reasons.

The first reason is that when oil will go up, the stocks of those companies will also go up. Secondly is that the Canadian dollar versus the US is positively correlated to oil. Therefore, the potential is enormous.

As an example, let’s say I’m sitting on $10,000 USD that I want to trade/invest with. If I convert it to Canadian dollars I will have about $12,500 CAD. Let’s say I buy COS.CA at $9 per share it gives me about 1390 shares. If oil goes up and COS.CA goes back up to let say $12, and I sell them, I would get $16,680 CAD. Amazing right? Wait! Wait!

If oil goes up it also means the Canadian dollar will go up against the US dollar. So instead of CAD/USD at about 0.78 it could be 0.85 or even 0.9. If it’s 0.85 and I exchange my Canadian dollars back to USD I would now have around $14,200 USD. This is far more than if I would have invested in an equivalent US oil company.

I also see gold zigzagging around $1,170 an ounce and I’ll be watching miners closely today. Have a good trading day!

Is it time to trade Tesla Motors (TSLA)?

What I like about TSLA is that the probability distribution of its price divided by the price of the S&P500 is really close to a normal distribution.

In blue TSLA and in red the probabilistic fit. The probability that TSLA goes above $196 according to this model is 0.97. This indicates that it may be the right to jump back in.

There's also encouraging news regarding the battery:

Tesla (TSLA) cars may soon be able to go farther on a single charge. The electric car company is hinting at battery life upgrades to the Model S sedan. Tesla's CEO, Elon Musk, tweeted that the car will receive an update to "end range anxiety," and announced that details will be released during a Thursday press conference. The standard Model S can travel about 200 miles per charge. - Yahoo Finance

Will I jump in? Subscribe to my newsletter to find out.

Is FIVE BELOW tradable?

“Dougherty & Co upgraded shares of Five Below (NASDAQ :FIVE) from a neutral rating to a buy rating in a research report released on Thursday morning, TheFlyOnTheWall.com reports. Dougherty & Co currently has $36.00 price objective on the stock.” - wkrb13.com

This is a stock that could be profitable this week. It has suffered a lot in 2015, dropping from almost $47 to $28 a share this month. That being said, I believe the stock will change course in the near future.

The thing with FIVE is that the volume is pretty low, which makes it a better candidate for swing trading than day trading. Also, one could argue that the bounce from last week was a dead cat bounce.

I would not necessarily invest for the long term in FIVE giving its price to book ratio of 12 and price to earnings ratio of almost 45. However, I do believe that it is swing tradable for a quick profit.

I’ll be watching this stock tomorrow and let my subscribers know my moves.

After hours trading summary and poker

I didn't give any news since "Catastrophic Monday" for gold and miners. Since then miners are continuing to sink so I'm trying to not look at it too much to don't get emotional. I entered NUGT monday morning at $16.08 (yes, the peak) and for once forgot to set a stop loss, which is totally against my trading strategy.

Well I'm paying a high price now with NUGT sitting at about $13, eating a chunk of my 85% profit YTD. It sounds pretty bad, but I'm still confident we will see gold heading way higher soon. I was expecting a pop this week, which didn't happened.

Some of my readers asked me if I got out at one point, mostly when NUGT hit $14. I didn't and I think many of them must be wondering why. To answer I will use a poker concept called being "pot committed". 

Basically, there's a point where you invested so much in the pot that even if odds are not favourable you have no choice but to continue to play the hand. If you fold at that point your expected value for profit turns negative. I am pot comited right now with NUGT.

The good news however is that I don't see miners down at these levels for a long period of time. Matter of fact, I don't see gold at $1,200 for a long period of time, but higher. 

I know that a lot of traders got caught in the same bull trap. Are you one of them? If you are, where do you see NUGT and gold heading?

After hours trading summary

What a massacre for gold today! Gold was trading above $1,220 last night and got smashed back down to the $1,205 level. This has been disastrous for many people as I saw on forums and stock twits.

Many US economic indicators were in the red, including a really worst than expected -1.1% in construction spending m/m. China interest rates cut was also in favor of gold. But what happened cant be changed and should not be over justified. Gold simply plummeted. 

NUGT was up pre-market, which was a confirmation for me, at that time, that my weekend analysis was accurate. NUGT was trading in between $16.00-$16.10 around 8:30 this morning, and so I jumped in at $16.08. I had stuff to do so I figured out I would come back in about an hour to set my stop loss at $15.50-$15.55. Congratulations to my readers who got out at that point! I know some of you did, and some of you didn't.

Well that didn't go according to plan for me. When I came back I saw NUGT in the low $15s, which was around a 7% loss. I hate being caught in those situations. They key however is to not panic, because it is already too late. Yes this could become a costly mistake. But at the same time it is an opportunity for me to explain some additional concepts here.

There is basically 3 choices in those situations:

1. Sell and take the loss

2. Average down if it continues to go down

3. Wait until it goes back up to either turn a profit or diminish the loss

(4.) You could also hedge your position

I still trust my analysis, and so I have decided to go with 3 until tomorrow. However, if NUGT hits $14.00 I will be out for a 15% loss. This is huge, and it's the first time I will post such a big loss if it happens. 

That being said, I'm not nervous because I'm a consistent profitable trader/investor, and I think remaining calm and logical is key. 

Have you already went through a loss like that? 

Pre-market trading plan summary

Gold jumped above $1,220 yesterday night and came back down a little bit this morning. I expect gold to rise this week, and GLD to hit about $118 at one point.

My probabilistic model for GDX shows about %80-%20 of going up. GLD however is more promising with a 90%-10% of going up.

Miners (GDX, GDXJ) should follow gold, but their upside potential is limited in my opinion. I’m looking for 3-4% return trades, not 10%.

I will probably enter NUGT this morning at around $16.00 for a day trade. Like I said, I will be quick to put a take profit order if I reach 3% profit. You can follow my moves on the “Past performance” page.

As usual, I will set a stop loss at -3%, which means I will exit the position if NUGT hits about $15.50.

I know there’s some news about gold from India. I will probably analyze that later today.

Will you be trading gold today?

After hours trading summary

Lets not hide the truth: today was an amazingly boring day. Commodities moved mainly sideways except when gold surged this morning.

I entered JNUG excepting GDXJ to outperform GDX, which ended up not being the case. I’m not really satisfied of my trading day because of that. Still, I made a little more than 2% return which is more than most GICs!

The difficult question I had to answer was if keeping JNUG over the weekend was a good idea or not. It may be surprising, but I actually think it can be a good idea to keep JNUD or NUGT over the weekend. My analysis shows that gold should continue to rise Monday.

That being said, weird things can happen over a two days period. That adds a layer of risk to your trade, because you can’t get out if you need to. For that reason, I try to always exit all my positions before the end of the trading day.

Of course, this applies when I’m on “day trading” mode. I think a good trader needs to be versatile. In some markets swings are the most profitable, in some others it’s day trading, and in some others it’s scalping. It’s relative to the volatility and the velocity of the market in any giving point in time.

On that note, I wish you a good weekend!

Pre-market trading plan summary

Ready for another exiting trading day? Mine didn’t start as I wanted. My morning analysis shows that GDXJ (indirectly JNUG) is a good opportunity, and so I logged in my broker’s website to buy some shares.

I saw the ask price at $28.15, but it might have been a bug or something. I placed a pre-market order for JNUG at $28.15. The status has been changed from “Queued” to “Activated”, and therefore I can’t cancel this order anymore. The problem is that the ask price is way higher than that. Anyway, I finally get in at $28.64, which is way higher than I expected.

I still think we might see JNUG in mid or high $29.00 today.

My morning analysis showed a probability of 0.83 for GDXJ to go up today. What’s even better is that GLD  is showing a 0.67 probability of going up. At the beginning of the week it was around 0.5.

In my opinion we should see miners up today, but don’t forget to prepare for the contrary with a stop-loss. I think we might see a little bounce back from oil today, but I’m not comfortable enough with what I see to invest my money in it.

What are your picks for today?

After hours trading summary

Today was another good day with close to 6% return. I entered RUSS at $11.85 pre-market and sold it at $12.54 this afternoon. One of the main reason for RUSS surging was oil tanking. USO has been in roller-coaster mode from yesterday to today.

I spent some time on StockTwits.com today on the RUSS channel, and while watching the twits I noticed that many trader don’t really know when to sell.

They do their analysis to find an entry point and then they either guess an exit price or they get a fixation on a specific price. Hey, maybe this works for some traders, I don’t know, but it’s not an optimal strategy in my opinion. The truth, that a lot of traders try to prove wrong, is that nobody can predict how high it will go.

Does that mean there is no way to control your profit and exit price? No! The way to do it is to simply increase your “take profit” orders as the price increases. Take my RUSS trade of today as an example.

I didn’t exit at $12.54 by guessing. When RUSS was at $12.20, I set a take profit at $12.10, when it was $12.30 I set a take profit at $12.20, etc. When it was $12.65 I set a take profit at $12.55, and it got executed selling my position at $12.54.

Was that a good result? Yes, it was very close to the top actually. RUSS went down after this tipping point.

Do you already use this strategy or another one? Share with our readers! Don’t be shy.

Pre-market trading plan summary

Yesterday was a really good day for oil and Russia profited from it as was showing RSX up almost 2% and RUSL up 5%. I think RSX is one of the best investment to have in a long term portfolio. However, I think that we will see it going down today even if it’s up about 1% pre-market.

One of the reason is that we may see a pullback in oil today and an attractive price to short RSX (close to $18.00).

According to my morning analysis, we have approximately 9% chance to see RSX up today and 91% to see it going down. That being said, it is necessary to pull the trigger at the right moment because volatility is expected. If the opportunity to buy low and sell high presents itself and you don’t seize it, you might be stuck with a dipping ETF tomorrow.

I entered RUSS at $11.85 pre-market and I have a stop-loss set at $11.50. I think RSX might go down to the low $17s, and if it happens that’s when I’m going to start placing take profits for RUSS.

What is your plan for today?

After hours trading summary

Today was a good day; a 10% return day. I bought UWTI at $2.89 this morning and sold it close to todays high at $3.20. Yesterday morning I wrote the following in my post:

 “However, according to my model of oil, we should see USO hitting $18.60 this week at one point. This means UWTI should be back around $3.20 at one point. “

It happened to be extremely precise as of today.

However, I’m not writing that to brag about it, but to expose a mistake I did yesterday. I jumped in UWTI Monday at $2.85. At that moment, my analysis for USO that I published Tuesday was already complete. But instead of simply respecting my plan – which was to exit at $3.20 – I tried to be greedy. Yes, experienced or not, greed can cloud our vision. And so I went through the trouble of the following transactions:

2015-02-23 Long UWTI $2.85 2015-02-24 $3.00 5.26% $526.32 

2015-02-24 Long UWTI $3.00 2015-02-24 $2.89 -3.67% -$366.67 

2015-02-24 Long UWTI $2.89 2015-02-24 $3.20 10.73% $1,072.66 

When I could have simply kept my initial trade at $2.85 open for two days and achieve the same results. A lesson that I should learn again; if you trust your plan, stick to it.

Some of you might still be in UWTI and wondering why I got out. According to my probabilistic model for USO, the new probabilities are:

 P(USO>18.65)= 81.25%
 P(USO<18.65)= 18.75%

Which are still good odds, but I think there is better opportunity elsewhere for trading (I specified this because as an investment USO might be one of the best).

How was your day?