Exxon Iron Condor (XOM)

Exxon has been a nice iron condor stock this spring. It has been trading in a range from 62 to 75, with more overhead resistance at 80, and its options have enough premium to create a good risk-to-reward scenario.

I sold an iron condor on Exxon on April 7. It was trading in the middle of its range and on the midpoint of its regression channel on the daily chart. Entry at the middle of the range has worked well for me, since it gives the stock room to move up or down within its established channel. Great care must be taken to exit the position if the trading range threatens to be violated, however.

Judging from prior resistance at $80, and the March lows of $62, a sold iron condor allowing for this price range seemed a good risk-to-reward trade. Indeed, it was so, and I exited the position on Friday:

I like using the regression channel immensely, as it draws an unbiased trendline on the chart which is calculated according to genius-level, calculus calculations! This gives a quick visual to the actual trading range, and helps me to see when a stock has moved outside of its normal range. It can give warning signs when a new trend is about to be established as well.

In the case of Exxon, the regression channel shows a downtrend over the past year. Of course, Exxon has held up nicely compared to so many stocks! However, it can be seen on this chart how price met resistance on the regression channel and retreated each time:


Iron condors love sideways action with some volatility, which is what Exxon has delivered since April. Managing iron condors requires checking the charts on a daily basis, however, to be sure that the trading range established by the position is not in danger of being violated. (Please remember that this is not a trade recommendation!)

Perfect Covered Call Entry on FedEx (FDX)

There was a perfect entry for selling covered calls on FDX last month when the stock hit its 200 moving average on the daily chart. The intraday time frames gave the first signals, with the 30-minute, hourly, and 2-hour charts giving sell signals within the same 24-hour time period.

The daily chart shows 200 moving average resistance:



The intraday charts show almost simultaneous sell signals. Even if you miss the earliest signal on the 30-minute chart, the daily chart MACD sell signal still gave an easy $4 move to the downside!

DE (John Deere)

This was another great trending trade today! I entered the trade with a call position yesterday. I held on the basis of the hourly and 2-hour charts, which had bullish MACD and buy signals:




Furthermore, the daily chart looked as though it was setting up for a snap back up to the 50 moving average, after nine recent days of selling. Deere was at a significant area of support ($39-40) as well.


Remembering yesterday's trending trade on FDX, and last week's on SKF, I remembered to watch the 10-minute chart for the trend. Price stayed above the 5 ma of the 10-minute chart all morning. When I noticed that volume in this time frame was tapering off, I sold at 41.50, which was my original target (the daily 50 ma). It always is prudent to take your target rather than be burned by holding longer than you should. As it turned out, the stock trended higher, but I took a disciplined exit at my target:

DJX (Mini Dow)

This trade is an example of one not to take! The setup was ahead of the Fed announcement, and this is a terrible time to initiate any new trades. It is best to wait for the market reaction before entering a trade ahead of the FOMC.

Internals were deceiving because the Advance/Decline Lines were very bullish, and the volume ratio was very bullish as well. However, MACD was curling over on the advancers, even though they were +2400. Never let the numbers fool you when that MACD begins to look like it could curl over. Even if the advancers decrease to 2200 or even 2000, that is enough for a significant pullback.

The ticks began to look less bullish, as though they had a slight trend down from the open:



Volume tricked me, since the ratio was very bullish, but the MACD was growing on the down volume nonetheless. With its moving average well above it, the down volume had much room to move up and make a big difference in price, which is what it did!




Volume was trending up slightly, but still more sideways than it tends to be on a trending day up. I also noticed that the detrended price oscillator was beginning to trend ever so slightly down....



The DJX chart showed weakness as well. The 5 crossed ever so slightly below the 30 on the 30-minute chart, and the stochastics gave a sell signal, NOT a good sign from a 30-minute chart!


Price also had slipped below the 30 of the 10-minute chart, and stochastics and CCI were giving sell signals. These sell signals sometimes show up on a 10-minute chart, but the 30-minute or hourly charts are still so bullish that it can be taken as a buyable pullback. However, the 30-minute chart was developing slightly bearish moving averages, and price was trading in all intraday time frames below the 200 ema/sma (simple moving average). This is another sign of potential weakness:


The two-hour chart did not have a confirmed buy signal:



And the hourly moving averages were still bearish:


So to summarize, this was not a high probability trade because even though the MACD seemed strong in the 30-minute time frame, it was not backed up by the 200 moving averages or the hourly/2-hour moving averages. These potential areas of weakness made the 10-minute pullback a low-probability 'bounce trade.'

The slight downtrend in the ticks, and the detrended price oscillator on the volume, and the weakening MACD on the AD Lines all were warning signs that pointed to a low probability trade to the upside. Before every trade, we must ask ourselves, "Is this a high probability trade?"

FedEx (FDX)

Today I had a great trade on FDX, but the euphoria associated with it was stolen by a day of overtrading. I consider overtrading to be a vice which must be controlled with discipline and a set of rules. This was a great trade, but I overtraded via the DJX and had 'trader's fatigue' at the end of the day.

It is imperative to read your trading rules every morning before getting started. Mine include a rule, "DO NOT overtrade!" Disciplined trades are the only trades which make a profit consistently over time.

I trusted a holdover on FDX from yesterday based on a few factors, one of which was the white MACD buy signal on the two-hour chart:


Another factor was support in the stock around $50. It looked like a setup to bounce back to the 50 ma on the daily chart. I knew this but did not trust it! Price actually went above the 50 and straight to the daily 30 ema.

Today was a great day to apply my observations from yesterday about trending days up, using the 5 moving average on the 10-minute chart. However, when a trade is going in your direction, your judgment is easily clouded by your emotions, and I jumped out far too soon! Later, I noticed that the 10-minute chart looked much like the KO chart and the SKF chart which I posted yesterday:


So I should have watched it on the 10-minute chart and kept my stop above the 5 moving average, using a stock price stop instead of an option price stop. Resistance 3 was a perfect target, moving stops up along the way.

SKF (Ultrashort Financial ETF)

The SKF had a classic trending day up on June 22. The 5 moving average on the 30-minute chart was the stop, and price trended above this moving average all day. The chart shows that even when 10-minute MACD turns red, it does not mean there is coming weakness when the 30-minute and hourly charts have such strong white MACD.

There was never a CCI sell signal on the 10-minute chart:

The MACD on the 30-minute chart stayed strong all day, indicating that any pullbacks on the 5- or 10-minute charts were buyable pullbacks:



The target was clear: the 30 moving average of the daily chart. Price closed almost exactly at this trendline.

This trade also went with the trend of the market, which was clearly down. This became the worst selloff for the market in a month's time. The SKF shorts the financials, so it was a trade du jour!

KO (Coke)

Coke presented a perfect entry for a call on June 17. It was a classic trending day up for the stock, staying above the 5 moving average of the 10-minute chart all day:


The CCI never gave a sell signal, another clue that the call could be held for a trend up to the former daily highs set on 6/2 and 6/5. (Now this is looking a bit like a double top, which I suspected when I saw this pattern setting up.) Time will tell if this is the case.