LNDC's chart is too choppy for me. But the trend is up and after today's breakout appears it wants to now start a solid uptrend. However, how smooth will that uptrend be? Will it shake you out by doing another one of those violent reversal under the 50 and 200 dma just to snap back up? I just don't want to mess with a chart like that.
The fundamentals are great. EPS growth is really good and it is in one of the best industries to be in...FOOD.
Therefore, if you want to go long LNDC, you have my blessing. I like the industry, the trend of the stock, the fundamentals, and this sector goes up when market goes down. However, I don't like the whippy action so I will not be following you. Great luck.
JLHY: You aren't asking me a question on an OTCBB or Pink Sheet stock are you?? I hope that was just a mistype of yours.
If you can post a good candlestick chart with volume I will still analyze the chart but you will never catch me EVER going long a penny and OTCBB stock ever again. I did that my first three months of trading. NEVER AGAIN. Jesse, Bernard, William, Nicolas, Gerald, Peter, Sun Yoo, James, and on and on and on and on never made their millions trading OTCBB. You know why? Because history proves the markets BIGGEST winners all come from the NYSE and the Nasdaq. Not the OTCBB. You get faster pops but much faster disasters. Gains normally don't hold. How much was HANS up since 1996? Was that on the OTCBB? Nope.
Here is one article that will help you to think about maybe not trading the cheap stuff...
Focusing On Penny Stocks May Make You Miss The Best Winners
BY DAVID SAITO-CHUNG
INVESTOR'S BUSINESS DAILY
Posted 4/17/2003
If you're a true growth investor, you're looking for specific things in a stock.
You want to see earnings, sales, profit margins and return on equity all rising. You'd like to see the number of mutual funds holding positions in the stock to be increasing quarter after quarter. You also stick with stocks that have a history of price growth, not price plunges.
You don't want a stock that carries the opposite traits. So as an individual investor, it's wise to stay away from cheap subdollar shares.
The temptation to grab a penny stock and hope for a five- or 10-fold profit can be tough to resist. When we go shopping for ordinary goods or services, we commonly look for bargains. Or we haggle. Merchants have convinced us that getting something at 99 cents instead of a dollar makes us winners.
Some investors are good at plucking the ugly duckling that turns into the lovely swan. That's what sharp value-fund managers do. They scoop up high-quality businesses whose stocks sell below $1 a share.
To excel at this game, you have to know how to analyze a business inside out. You have to develop the conviction that the company is going to get out of its current mess. After all, that's why the stock has plunged so much. It can take years for such stocks to turn higher. Plus, if your analysis or calculation is wrong, you could wind up holding the next Enron or WorldCom.
Those who follow sound growth investing principles naturally avoid ultralow-priced stocks. Think of growth stocks as diamonds. You have to pay a premium for quality.
So focus on stocks trading for at least $10 a share. The main NYSE and Nasdaq stock tables starting on page B1 make this the minimum price. You can find stocks trading less than that in the next set of IBD's stock tables, but these list fewer SmartSelect Ratings, making it harder to assess a stock's overall quality.
Penny stocks also carry trading-related risks. For one, they usually lack the volume necessary to attract institutional investors. A constant inflow of money from mutual funds, hedge funds, insurers, banks and other large players is the fuel that drives a terrific stock's ascent. But a stock with thin liquidity can experience high volatility and quickly knock you out of the stock.
What's the biggest risk of focusing on penny stocks? You'll be spending less time on, and thus more than likely miss, the top growth stocks that lead a new bull market and make the biggest gains for years to come.
Look at some of the most outstanding stocks in past bull markets. When Dell Computer zoomed out of its first base back in November 1990, the pivot point was 13.73. Go back three decades to October 1962, and you would have seen Chrysler, now part of DaimlerChrysler AG, bolt out of a base at 61 a share. It roared upward 353% over the next 23 months.
How about some recent big winners during the bear market? The table above gives several examples of the biggest winners in 2000, 2001 and 2002. All stocks traded at 10 a share or higher at the start of their respective years. In late February 2002, City Holding muscled out of a long cup-shaped base on heavy volume. The pivot was 14.35, 10 cents above the high in its six-week handle. At 28, it's building a new base.
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First from Jeff Cooper, ERTS, long if it trades monday above friday's high, using his 1-2-3 pullback screen. However, Tuesday after the close they report earnings. Have you seen the earnings whisper number for the quarter? The mean analyst estimate is for .37 cents a share and the whisper number is .22 cents a share. A .15 cent miss? Now i remember the conference call from last quarter very well, they cut guidance severely citing percieved r+d costs rising dramatically for next generation games releases, and weakening demand for games. Anyways, my humble point would be to cut the trade off Tuesday afternoon. I'll post how to profit from the earnings report later. Steven Smith, who's options alerts newsletter is one of the best information sources out there, has really alerted me to the fact that there is a huge discrepancy between earnings volatility this quarter vs. the implied volatility being priced into the options. The BS model is pricing in 7% moves while the actual moves have been on average over 11% this quarter. A very low risk strategy for making profits off of earnings so far. Ok, moving on.. I'm praying to the trading gods that be, if they could be so kind as to let AKAM consolidate it's 3rd top for a bit before making run number 4 which is a power breakout. Geez, gotta run, Star Wars is on in Thai.
Thank you very much for responding to my post. I did not know that you do not mess with OTCBB stocks. I will keep that in mind. I do not make a habit of it but if an interesting one crosses my path, maybe. Thanks for the article posted as well. I see what you mean about the chart of LNDC. I have not purchased it yet but may on Monday, hopefully the ride won't be too bad. Have a great weekend!!
As the implied vol expanded and market reach to an extremely over-sold situation, one strategy I use sometimes is to sell an in the money naked put if I like the stock so much. This allows me to collect premuim if market rebounce for free. If the market drops further, I get the stock at cheaper price.
Huajian, so long as you execute that strategy with a pre-determined stop loss limit it is an acceptable strategy, however one that still has undefined risk. On a gap down you will have to buy back the put at an excruciatingly higher price since the delta of the option will walk up step in step with the underlaying security. Or as you say, you would have the stock exercised to you at a cheaper price. Way cheaper. If you wrote UPS in the money Aug 85 puts, when the stock was at 82, your premium collection was 3.50 per contract, three dollars intrinsic and .50 time value with a delta of .90. The average person writes 10 calls, so you collected $3,500. But the stock gaps down to 67 before recovering to 70. That put now has a delta of 1.00 and is now worth $15.50. You could buy the puts back to avoid being exercised for 15.50-3.50 = $11 loss per contract. Or a loss of $11,000. Otherwise, you are asigned the stock at $85 when it is trading now at $70 and is lost money for the better part of 6 months if not longer. As a professional trader, your first rule, perhaps the only rule of importance is to quantify your risk by employing water tight risk management principles. You can improve your strategy in one of 4 ways.
1. Make sure you write 'out of the money' puts to give yourself a greater cushion of safety, and as well, put stop losses on those puts so that you have a chance to control your losses if the stock doesn't gap down on you. Then make sure you are writing several puts against stocks equally diversified in sectors that have no correlation to one another.
2. Instead of writing naked puts, write a credit spread. Sell the puts out of the money and put part of the proceeds to buying an equal number of lower priced puts. That way your risk is now quantified exactly to the difference between the strike prices less the premium you took in. You can even write closer to at the money puts this way to increase your monthly return because you know your downside is quantified on any gap down in your stocks.
3. Third is what i tend to do, write puts on indexies, mainly the IWM which is more volatile and gives you gap protection thus allowing you to predefine your loss. My writes are 70% in indexies and 30% in put spreads on diversified volatile stocks that are at technical resistances in a bear market such as now or support when its a bull market.
As always, the end goal of any strategy is to make sure that if you are batting .350 you still are making money in the stock market, and if you are picking winners at a better average than that then you're eating poutine instead of fries.
What i do like very much about your strategy and you are clever for pointing it out is to use oscillators as a measure of when to time the writing of the options, writing them only when the market is signalling an oversold or overbought condition. What that does is empower the power effect of the time decay working for you.
To learn how to execute the strategy posted by Huajian, i would recommend PUT OPTIONS by Jeffrey M. Cohen
My bible is accordingly called THE BIBLE OF OPTIONS STRAGEGIES, The definitive Guide for Practical Trading Strategies by Guy Cohen. (do you have to be named Cohen to trade options?
For $300 a year, Options Alerts service by Steven Smith of Real Money is excellent as you get to see these strategies implemented. Interestingly, out of Real Money's AA+, Breakout Stocks, Stocks under $10, Internet Review, Tellecom Connection and Option's Alerts, the Option's Alerts Portfolio is the only one making a profit. 15.3% y.t.d ... says a lot for the power of risk management using options.
Those are the only 3 things you need in my opinion.
How I Trade Options (Wiley Trading) (Hardcover) by Jon Najarian
is one of the best, clear, motivated and practical. There are tons of the option books, this one stands out
Najarian used to be professional sportman. Then he was injured and become a trader. His height does help him in open outcry trading floor.
phailin, yes managing risk is the most important in any instruments. I agree with all points you made. Yes I love time bleeding. You are sitting there, collect premium
You two gents are the best. I am placing both books you recommended in the basket phailin and the one you mentioned Huajian. And yes I have heard of him. So that helps. I think I see this guy on commercials right? Former ex-NFL player.
Thanks a ton! Hopefully, I will go back to trading some options later on in the future. I used to buy in the money calls on longs back when I first started buying breakouts but it was hit and miss. I didn't have a good cut loss strategy then and didn't understand implied volatility. So basically I got lucky at first. After I realized it was luck I stopped trading options ended up focusing solely on stocks because I was doing so well with it. But I wouldn't mind trying to add reward and lessen risk even more.
AETH is a beautiful chart. I have had it on a wathclist multiple time to buy it as it broke out of a good base. Sadly it never sets up long enough to make a great long coming out of a base. It just keeps going up. 6/23 is when I wanted to buy it but the market kept me out. Since then it still has not set up in a good solid proper base. It needs to make a longer base. Right now alll it does is keep going up. Also it is too extended away from its 200 dma to make a safe long.
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