With earnings behind it and a momentum breakdown signal, I sold a call spread on NFLX today.  SOLD -3 VERTICAL NFLX 100 MAR 16 100/105 CALL @1.50.    Breakeven is 101.50.    Return on risk is 42% and the theoretical odds of losing a penny or more on the trade is 30%.  I like that spread.  Earnings are behind NFLX.

Not much trading in my account so far this year.   We started with $100k.  We're down $117 for the year so far.   P/L by symbol and overall above. 

I took advantage of this morning's stock  bounce to enter a long TLT position (a short put spread). Though there was no specific Chaikin buy signal, the trade is a hedge against my one long stock holding.  Bonds generally go in the opposite direction as stocks.  And I'm very bearish on stocks despite what may be a support bounce today.  Option spread trades give you room to be wrong  (I breakeven even if Treasuries pull back to 121.41 by Feb expiration) and offer richer rewards relative to risk during periods of high implied volatility.   Relative strength and money flow indicators support this short term trade.  We are approaching Overbought, but I'm willing to withstand a small pullback. 

Here's the tade: SOLD -10 VERTICAL TLT 100 FEB 16 122/120 PUT @.59

I took advantage of market weakness and a light volume pullback in Very Bullish FSLR today.  But given current bearish conditions, high volatility  and approaching earnings, I opted for a high probability option spread trade: a risk defined OTM bull put spread.  Plus earnings happen right after Feb expiration. With present market conditions, I cut my normal risk of around a thousand bucks in half to .5% on Net Liquidating Value or $500 on all bullish trades. .

Max Risk $500
Credit: .80
Risk: 1.70
Contracts: $500/166=3
Profit Target: $.40
Breakeven: $61,70

Trade Record: SOLD -3 VERTICAL FSLR 100 FEB 16 62.5/60 PUT @.80

AA and I are each starting out with a $100,000 simulated IRS account.  My rules for long stock are:

• Sector Power Bars indicated to out-perform S&P
• Industry Group = Strong
• Price above an uptrending long-term Chaikin Trend
• Preponderance of Money Flow
• Market Agrees with Very Bullish Power Gauge (Both the Power Gauge and Relative Strength Are In "Agreement")
• Price is Oversold or rolling up out of Oversold.
• A Chaikin Buy Signal or a Technical Move have occurred.  Bounce off support, breakout through resistance)
• I'll be using the 30 Day Simple Moving Average as Support and setting my stop 3 to 5% below support depending upon volatility  (under 20=3%, over 20=5%)
• A downgrade to Very Bearish will also trigger a sell. 

Today, I'm placing an order to go long on TSN. Entry price and stop are below.  This is a simulated trade and not a recommendation.  I'm forward testing a new set of rules for 2016.

-- Mike

Well, it was a year when the markets went nowhere, and the broader Russell 3000 had a pretty bad year.   We made 64 long stock trades, with a win rate of 40% and 1.61 reward to risk ratio.  That resulted in a trading expectancy of close to 8%.  This is before trading costs.  Sticking with very bullish rated stocks, with strong money flow, relative strength and in strong industry groups once again proved to be winning investing strategy.  Our trade by trade results are here. 

For 2016, AA and I are going to trade separate accounts, under different rules and report on individual blogs.   We'll get together once a week to discuss how we're doing and the market overall.  Our concerns throughout December seem to be manifesting in the form of a few tough trading days for long stock traders to start the year. 

Why AA and I love being an affiliate of Chaikin Analytics:

1. Their full transparency.  Check out their  honest assessment of the model performance for 2015.  They compare the 5  different Power Gauge tranches of equities in the Russell 3000.  It's in the report below.  It's up to date through Q4 2015. 
2. The model works.  Whether it's backtested or forward tested in real time,, Very Bullish rated stocks outpeform Bullish, Neutral, Bearish and Very Bearish rated stocks every year, every time. 
3. When we marry the Power Gauge rating to the technical tools provided (Price performance relative to  Chaikin Trends, Relative Strength rating, Industry Group Strength and Money flow)  and further tighten stock selection,  we're able to outperform the model in our own portfolio with better timing and more stringent buying criteria.  We did that  again this year.   Here's our 2015 performance, worts and all.   We'll analyze our results this week and share (worts and all)