Sunday, September 30, 2007

What Happened to the Kingsland Report?

There aren't many sites that I make sure to check everyday and The Kingsland Report was one of them. Jim Kingsland is a great writer and has a very honest "tell it like it is" style to his posts. I also share his interest in the options market and have found his insight very helpful.

Well about a week ago he made a short post about a special assignment and not being able to do his usual daily commentary. This was the last thing he said and then today when I went to the site was redirected to where there was a short note:

"Welcome to!

The Kingsland Report blog is no longer in operation. Email me at the address below and I will keep in touch. Thank you for reading the Kingsland Report!

If you would like to contact Jim Kingsland, email him at"

Bummer. I wonder what happened that required the entire blog to be removed, with no archives or anything. It just disappeared. Thank goodness we have the Wayback Machine.

Friday, September 28, 2007

So how can we play this USD move?

The fact that the US dollar is under pressure is indisputable. On Aug 15 I moved a large portion of our family liquidity out of the US dollar, into the Euro. Since then the euro has moved from 1.346 to the dollar to almost over 1.42 today, and I expect this trend to continue.

In my opinion, the US Federal Reserve isn't going to have much choice with interest rates in the near future. Rates are going to have to come down to protect the US economy from the fallout of this sub-prime lending debacle. But at the same time the European Central Bank is facing an inflation problem here, and rates will have to be raised. It's only a matter of time.

Long term debt investors looking to increase returns will be buying Euros in order to invest in the European debt markets, and the volumes involved are more than enough to affect the Euro:USD exchange rate. As I write this, clever European exporters are hedging their USD accounts receivable and future sales against this likelihood. One way to do this is with CurrencyShare funds such as FXE. There is a similar fund for the Canadian dollar too, FXC.

As a retail trader who is not adverse to risk, it is my opinion that the options chains on these funds is the best risk/reward trade to be made today. As an example the FXE Dec 145 call are quoted at $1.05/$1.50. This, at a time when FXE itself has moved from $134 to $142 in just 5 weeks. There are 11 weeks ahead of us, before the December options expiry.

If you are concerned about the volume of trading in FXE options, you might be better trading the FXC options chain. Canada is Americas largest trading partner, so hedging and trading of the currencies far exceeds that of any other currencies. This means that spreads are narrower, liquidity is better, and trading should easier if the market goes against you.

Disclaimer: I have no positions in these products, at this time. But that could change today.

Thursday, September 27, 2007

ERTS Chart

This 3 year weekly is showing some improvement and what looks like a symmetric triangle breakout, volume is weak however. I was also thinking it could be a great Christmas for video games since everyone got the new consoles last year, including yours truly. I got a Nintendo Wii of course.

Wednesday, September 26, 2007

Slowing Consumer Spending

In another sign of the slowdown in consumer spending, orders for durable goods declined by almost 5% in August, the biggest decline in several months.

To me this is just confirms what I've been thinking and reporting on this blog recently.

In combination with that report on problematic credit card debt from two weeks ago, we seem almost certain to be coming to the end of "consumer spending as the basis for the American economy".

In the mean time, the vast majority of adjustable rate mortgages have yet to be reset, and foreclosures are accelerating. The Fed may have reassured the markets that they are attending to the situation, but continued "attention to the situation" can only result in reduced interest rates, and dollar exchange rates.

It's an interesting decision. Which is more important? The American consumer led economy, or the value of the dollar?

Monday, September 24, 2007

WFR Long Set Up

WFR is a stock that I was bearish on a few months ago when the steep uptrend in MEMC Electronics broke. The pattern began to look more and more like the Oneil proper short sale point with the stock vascillating about it's 50 dma. While the stock has been in this pattern is has consistently found support just below in the $50-55 range and it is about unchanged from where I became bearish. If WFR can break this series of lower highs and get out of the current range that its in, then there could be a nice move to the upside.

As you may have noticed, solar stocks have been hot lately (see JASO and LDK) as the demand for solar power is exploding. Currently the industry is unable to meet demand because there is a shortage of polysilicon supply, the primary semiconductor used in large scale solar cell manufacturing. MEMC Electronics (WFR) is one of the largest producers of poliysilicon and single crystal silicon in the world, so they stand to benefit greatly from the rapidly increasing price of the undersupplied polysilicon. In addition, the semiconductor sector has been showing signs of strength lately, so the stock may get some boost from that action too.

After doing a little digging I found out that the reason why WFR's run had paused was because they will miss expectations in the next quarterly report to be filed in November. They had some electrical problems during the expansion of one of their foundrys (material production plant). It sounds like an engineer hooked up a transformer backwards causing a brief power outage which led to a week long setback. If people are interested I can get into this into more detail, but generally speaking this minor setback should be viewed as a buying opportunity.

Ok, I usually don't like to get too deep into the fundamentals, but it just so happens that I actually know quite a bit about microfabrication as I am working on a PhD in electronic materials. Anyways, I think the stock is a buy on a clear close above that blue down trendline or during an intraday break of $62.50. The November $65 calls are attractive to me and I'd get out of those if the stock were to close below $55.

Wednesday, September 19, 2007

A new link in the Blog Roll

I'm adding a new link to the Blog Roll, in the sidebar. gets my thumbs up for informed and balanced financial commentary.

As I live overseas and changes in the dollar exchange rates are particularly important to me, I greatly appreciate the sort of commentary from the likes of Todd Harrison. I've been reading his articles for a while now, and only just looked up his biography. He actually started Minyanville and he's an ex-TSCM type. Go figure.

As for his take on the dollar? This article explains it all. The title "Cracks in the Dollar", dated Sept. 13. Oh boy.

Monday, September 17, 2007

Self Similarity in SIRF

I love it when I see a pattern like this in a chart. Check out the CCI back in Feb and March on SIRF which has been in a steady downtrend all year long. The pattern looks very similar to the one formed over the last two months. If the pattern unfolds in the same way SIRF could fall by 1/4 in the next few months and easily break recent lows.

SIRF's 50 dma has acted like resistance the whole way down from $34 and may have just stopped this swing at $20. The next level of resistance would be near $22 where puts would be very attractive to me. If SIRF broke that red line connecting the highs I would bail, but otherwise anywhere in here looks safe.

Back in early April when the previous pattern completed, SIRF hovered below the 50 dma for a few weeks but never moved above. It then gapped down on earnings and has been below its 200 dma ever since.

Note, technically this is not self similarity because the size magnitudes of the patterns are the same here. In a true self similar stock pattern the 5 min time scale might look the same as the daily time scale. I think the phrase might still apply here somewhat though.

Sunday, September 16, 2007

Implied Volatility

Next week has the potential to be a wild one with the FOMC rate decision on Tuesday and September option expiration on Friday. Opinions about the stock market tend to be passionate and extreme right now. The bulls think that a big rate cut will explode the market higher on a monetary expansion by the fed and the bears see recession and more falling shoes, shoes bought with credit cards. It all seems to revolve around the fed and whether or not they are capable of saving us from the financial crisis that has been developing over the last six months. Whatever your opionion is, and I have my own, we can all probably agree that volatility is likely to be very volatile this week.

This is a very important fact for options traders because implied volatilities and hence the premiums are likely to be all over the place. In this environment it is more important than ever to be mindful of the option you are buying and how its pricing compares to historical and recent levels. A great resource for historical implied volatilities and their trends is If you buy an option on a implied volatility spike it can be deadly in a matter of minutes. You can watch the option drop dramatically in value even while the stock doesn't move an inch. I have found that a great way to protect yourself is to plot the option last, bid, and ask next to the recent stock price movement for comparison to the current pricing. You will see periods where the option price changed quickly, for example during a company announcement or at the beginning or end of the day. Those are the periods when you can either find a great bargain or get screwed big time. You can find implied volatility quotes here. I don't know of a free resource for intraday option charting but Interactive Brokers will do it and they also provide live implied volatility quotes. Also, if you want to see some interesting daily option scans, I enjoy perusing the IB Options Intelligence report each night.

The safest thing to do is to wait until Wednesday, after all the FOMC hoopla dies down, to trade September options. Or, just stay away from front month options all together, they do expire Friday after all. I have been very hesitant to trade at all until after this fed meeting is over with because market participants are so wound up about it.

But I do have a few ideas for the week.

GRMN has formed a nearly perfect rising wedge. I'll do a more thorough post about GRMN's fundamentals at a later date, but I find the bulls argument very uncompelling. For now, I think it should at least test that 50 dma and Bulkowski's measured rule suggests a target of $90 which still seems conservative to me. The pattern has to be confirmed with a close outside of the trendlines but that should happen soon with the apex approaching this week. The September 105$ puts could do well.

I had more ideas like SIRF for a swing trade, but I'm tired. I'll probably do another post after the fed meets Tuesday. Good luck out there!

Wednesday, September 12, 2007

The Next Risk?

This excellent article from the Associated Press describes what could be the next stage in the on-going credit crunch.

In a nutshell, large numbers of people are having to choose what bills to pay off, and for now they are paying off the high interest rate credit cards, rather than paying their mortgages. The old trick of borrowing against equity to pay bills is no longer an option. One excellent quote?

"The appraised value (of the house) didn't come high enough to consolidate our bills..."


The credit related problems are not just in the mortgage backed securities any more. The riskier class of "asset backed commercial paper" often consists of securitized credit card debt, and any defaults could cause yet another wave of restricted credit.

And while I'm posting today let me offers kudos to Pythagoruz for his August 30 call and chart on the US Dollar. We're not quite in free fall, but it won't be long, in my opinion.

Sunday, September 09, 2007

Rolling Over

A number of leading stocks appear to be rolling over right here and the not-so-leading stocks look even worse. One leader from the first half of this year is AFSI, the chart was a beautiful long until it hit a high of 22.08 in early July. It has formed a perfect 50% retrace (22->12->17) and now looks ready to resume the correction lower:

I haven't looked into earnings date or fundamentals on this one so be sure to investigate for yourself before taking any action. Just looks like a nice short set up is all.

Thursday, September 06, 2007

ICE is About to Bust a Move

A break (close above/below) of either blue line in the daily symmetric triangle should lead to a $30+ move, my guess is down. Thats based entirely on the chart with the recent failed cup n' handle, severity of the breakdown a few weeks ago and other indicators pointing lower. Although, as far as I can tell the fundamentals say higher.

Time to test par?

Monday, September 03, 2007

American Trading at TD Ameritrade (AMTD)

After breaking badly back in July, AMTD made a good effort on Friday to get back above its 50 day moving average at 18.17. Unfortunately for TD Ameritrade investors, the stock closed at 18.15 (two cents shy) and it may be poised to resume the downtrend. Take a look:

What I like most about this chart is the look of a bear flag/rising wedge pattern that has formed over the last few weeks. The stock has essentially retraced 50% of the decline from the recent high at $21.31 (which was a lower high than the 2006 peak at $23) on a bounce from a new 52 week low at $13.82. During this move from the low a few weeks ago the volume has declined and we now have what appears to be a low risk entry. I'd place an initial stop around $18.50, which should be lowered as the 50 dma falls. The bears have complete control of this stock while the 50 dma is declining and for that to stop happening the bulls need to close AMTD above that level for some period of time.

Any thoughts on TD Ameritrade's business going forward? It seems to me like the "little guy" traders must be getting cut up in this market and we aren't exactly seeing a booming stock market to attract new retail investors. If the average American does start to feel the pinch from a declining housing market you can bet they will tap into their savings which means less commissions for AMTD. The only area that I would be worried about is the possibility of a merger with E-Trade as I'm not really sure how that would effect the stock price. Otherwise I'm not a big fan of their service/product, thats why I switched to Interactive Brokers.

In other news, hooray for September, the only month to historically have negative returns on average.