Skip to main content

Watch out for the $ Dollar before deciding what to buy!










What we're watching?
If you're thinking you've missed the market run up or are thinking of putting some money to work, keep an eye on the Dollar and more specifically at the etf UUP. It's at a low not reached since January 18th. If you look at the weekly chart below you'll see:
* The Relative Strength is very low at 31.95 but hasn't turned up yet.
* Pretty solid support down at 22.31.
* The MACD still pointing down with the 12 over the 9.

The daily chart looks very similar.

Now that I've bored you to death with technical terms and charts let's get down to the trade.

The Trade:
I've gotten long by purchasing 50 UUP December 23 call contracts for .40. As I showed you in the chart above the dollar has not turned up.....yet but it should over the next few weeks to a month. Based on this thought to help finance the purchase and lower my cost in the trade I sold 50 of the October 23 calls for .17 cents. I have effectively said the dollar will drift here and I'll take the time premium and pocket that cash waiting on the dollar to turn up.

The beauty of this trade:
* If I'm right and the dollar sits tight for 16 more days I pocket 17 dollars for every contract I've sold while I wait.
* If I'm wrong and the dollar takes off, I will buy back my Oct 23 call and depending on the situation going on in the market at the time I will sell the November or December out of the money call. My Dec 23 call should continue up in this case producing a profit either way.

What this trade also means?
You need to keep an eye on the dollar because if it turns up and starts to move up, the stock market will sell off including materials, oil and more importantly metals(Silver & Gold). If you own the etf's on GLD or SLV or GDX(the miners) you should be smart and sell covered calls to protect your long position. If you own close calls on the metals I would suggest you close these and take your money and run. I'm bullish longterm for gold and silver and continue to own LEAPS JAN 2012 GDX & JAN 2013 SLV.

More on silver and gold tomorrow.

DYOD (Do Your Own Diligence)

Happy Trading!
Marty Blackmon


Comments

Post a Comment

Popular posts from this blog

WOW! I think that sums it up

Many of you have been reading this blog may have noticed that my blogging frequency has increased over the past few weeks as I got short the market. As you can imagine I am down money since getting short the market, this is the time when most people pull away from posting. But my goal is to stay active and involved and show you that trading is not always rainbows and butterflies. It is times like these that the things I have been sharing over the past couple of weeks are so important. You need to trade small relative to your account. I have a decent short position in the market and my portfolios are set up to make some awesome returns if we finally turn lower. But something I would like to point out is that my account is 70% Cash.  I learned a long time ago how important it is to live by the rules you preach. Because of my discipline I am able to continue to hold my positions, I have time and capital on my side. I can't stress enough how important it is not to get to big....
Post a Comment
Read more

Stay Small, Stay Out of Trouble

To expand on my post from yesterday about patience. I want to talk about a very important element that allows patience in a position, and that is staying small. If you trade too big RELATIVE to your personal account size, you are likely to be forced to exit the trade before the trade works in your favor. Many trades myself included have all experienced the pains of trading a position way too large given our account size. There is this predisposition out there that the only way you are going to make money in the financial markets is if you are trading 10 lots of options and 1000 shares of stock at the time. This is not the case, and if this is your mentality you will likely ensure yourself trouble. We have all read the stories of traders blowing up their account. I personally think a good rule of thumb is to not risk more than 5% of your account value on any one position. Good Luck Trading! In The Money Trades And 1 favor that we ask:  If you like the hard work w...
Post a Comment
Read more
more good news from FXStreet : Tom Fitzpatrick, senior technical analyst at Citibank in New York. Monday, July 15, 2002 "Parity is a psychological, not a technical level...and whether we pause around parity or not, we are likely to see significant further dollar losses...Our initial target is $1.03 to $1.0450. If that level is taken out, it actually casts a question mark against the whole of the dollar's rally of the last seven years, and could open up a full-blown bear market for the dollar." Julian Jessop, chief European economist at Standard Chartered Bank. Monday, July 15, 2002 "The dollar is under pressure from everything from economic problems to asset reallocation away from the U.S. and corporate accounting problems. It's difficult to see any positive factor for the dollar at the moment. The root of the problem is the U.S. current account deficit. If the U.S. doesn't have to attract an enormous amount of foreign capital, people wouldn't have to wor...
Post a Comment
Read more