Trading Stocks in Turbulent Market Days

The market is a little bit turbulent in these two days, after a very rare (low probability event) 10-day consecutive rises of the DOW Industrial Average Index which is consisted of a small number of large companies. The major indices are presenting some weakening signals but not enough for me to consider a bearish market turn yet.

The Nasdaq is weaker than the SPX and its new highs – new lows accumulative index is turning down today. If the same index for NYSE also turns down for a couple of days as explained in my previous post, I would consider an intermediate bearish turn of the market and start trading with bearish positions. 

In the meantime, the volatility index VIX is jumping relatively high when compared to its high at early July. This is not a confirmative posture for a real down turn of the general market since it indicates a lot of people are already in fear even though the price has not dropped much.

Yesterday, I closed my EPI position by selling it at $26.66 as shown below and posted the trade in my StockTwit. The profit taking decision was based on my analysis of the target price of the stock chart mainly. 

I think the large and rapid drop of the US Dollar in the last month also played a role for me to consider exiting the emerging market for now. I felt the USD’s fall contributed to the dramatic rise of the emerging market ETF’s. These profitable rises for my EEM & EPI positions were nice in the past month. But USD, as an intermarket signal, seemed to start a turning process after the over-sell condition. Therefore, the USD price action and the rare consecutive rises of the DOW Industrial average make it easier for me to take profit when the emerging market ETF’s reached the price target.

My portfolio is on the light side as I sold most of my short near and intermediate term bullish positions. I’ll need to build up new bullish positions when the market gives bullish continuation signals. Yesterday, I entered a long term bullish position for REM with a purchase price of $46.83, a mortgage REIT ETF that provides good dividends (> 6%). I intend to hold this long position for a long time, unless it signals break-down of long term bullish trend. This ETF follows TLT trend in general, but outperform it with a large degree.

Closed EEM Long Calls to Take Profit as the Option Delta Reached Target

Yesterday, I closed the EEM long call (2018 January 19 $38 LEAPS) when EEM was dropping near its $44 resistance after I found out its Delta reached 0.86 which was over the target of 0.80 as described in the original post (Bought top performing emerging market ETF) when the position was entered over 3 months ago.

I did not roll out the long call to take profit and to remain in the position, because EEM had been rising in the up-trending channel in the last 5 months as shown in the chart below. I’d like to wait for the next EEM opportunity when it rests for a while.

Looking at my last trades on EEM, I had got out of a short call July 7 $41.5 on June 26 as it popped out of an ascending triangle as I described in a chart of a prior post and shown below. Since then, EEM pulled back to the triangle but did not trigger a new signal for selling another call. So, I was lucky to capture fast move of EEM in the last 4 weeks.

For EPI long stock position, I’ll continue to follow my plan to exit when it breaks 20+ day support that I identify along the way and the profit target exit will be the uptrend shows signs of ending or when the general market start to show weakness.

During my multi-week summer vacation, I had a few trades on the SPY & QQQ while I kept a minimal number of positions. I’ll document those trades later and look to expand my positions as market conditions allow since I’m back and able to handle the portfolios actively.