GPN Hanging in There

GPN rebounded a bit (dead cat bounce) after we sold it short but seems to have turned back down last Friday and is continuing down this morning. It never did trigger our stop loss so we are still in the position.  The put option is 55 cents on the bid price so it's regaining its value as the stock descends below the $45 strike price. The option is now 21 cents in the money since the stock is at $44.79.

Going Down?

GPN Short still looking very good. This chart of GPN is courtesy of FreeStockCharts.com . 52 week new highs have dramatically decreased to about 100. The 52 week new lows have increased  quite a bit which may mean the market is turning downward for a bit. See for yourself at BarChart.com where you can sign up for free to access tons of great information and check for new Cash-In-The-Box setups under the 52 week new highs/lows categories and also under the Gaps up and down categories, Volume Leaders etc.. The more charts you look at the better you will get at spotting Cash-In-The-Box setups to paper trade.

GPN Going My Way!

GPN ended the day yesterday down less than 6% so it was a go for this morning's cash in the box trade. The stock opened at $44.47 where it was sold short. At the moment the stock is trading at $43.87 already down 60 cents or over 1%. Our goal on the stock is to buy it back at $42.25 for a $2.22 gain the usual 5% gain..The April $45 Put was purchased for $1.10 ask price and is now $1.45 on the bid price.for a 32% gain so far. Nice.We will set our contingent order to sell the put when the stock hits $42.25. As always our stop loss is set for 6% above today's purchase price at $47.14 (which is just above the support now resistance line). That's why we never play stocks that have moved more than 6% out of the cash in the box. Our initial risk is 6% and our gains are set for 5%. If 80% of our trades succeed and 20% fail that should give us overall gains of about 28% on our money.That is system trading with a mathematical probability of success. It eliminates the emotion and the guessing that causes most people to lose money. Follow the system rules. Below is a review of the Breakout system developed by The Chartman, Gary B. Smith who has since gone on to manage a hedge fund..

• Trade stocks of $20 or greater value
• Trade stocks that trade 500,000 shares or more on average per day
• Trade stocks that have been trading in a flat range for 20 days or more
• A Range is determined by the ability to draw a horizontal  line touching the topmost points of two or more of the highest bars and a horizontal line intersecting the bottom tips of two or more of the lowest bars (this establishes the "rectangle formation" or "box" see chart above for an example).
• A stock must have broken above or below the box on a volume spike that exceeds the volume's 50 day moving average line (see the volume indicator on the above chart, how the volume spiked yesterday significantly higher than the little white wavy 50 day moving average line)
• Trade only stocks that have moved 6% or less above or below the box. 
• Buy the next morning at the open.
• Sell the stock as soon as it gains 5%
• Set your protective stop loss at maximum 6% of your purchase price or just inside the box whichever is least.

Time to Total It Up

So far our total gains are approximately $5.37 on our winners and -$1.09 on our losers for a gain so far of $4.28 per share. So far we've had 2 winners and 2 losers (anything we get stopped out of is a loser). If a person always trades 100 shares of stock that would have gained $428 since March 11th.  The options have gained 45 cents in gains over the losses.  If a person always trades 10 options contracts then that would have netted $450 since March 11th, less commissions of course.

I've paper traded this past month to give you an idea of a way to trade stocks and options to earn some cash for your cash box while you RV. Of course such speculation as in any business is always a risk. However there is little reward without some risk, ask any farmer, or retail merchant. I probably will not continue to post these trades much longer as it's now time to try paper trading on your own if you are interested, with the strategies tools and tips I've given you plus others you will uncover from other traders as time goes on. Happy Hunting and always trade your system rules.

 Please do some serious paper trading before you ever begin laying real money down. Use the free to everyone virtual trading program at OptionsXpress.com (just sign up for an account which is free and allows you to use all of their tools, quotes and charts) to practice trading and get the feel for the real thing. Once you put your money down on a trade your emotions kick in like you won't believe so be familiar and well-practiced with your trading system before you ever start trading for real. Trading from guessing and emotions will cost you money so stay cool by following the rules of the Cash-In-The-Box system. Tomorrow I will post the rules in checklist form as developed by The Chartman, Gary B. Smith.

GPN Is Also Looking Interesting

GPN has a couple of things going for it for a paper trading short play for tomorrow morning. It is breaking out of a flat Cash In The Box range on very heavy volume and it has gapped down.  Back in January it gapped up so now it is in a very bearish formation according to Steve Wirrick, called an Island Reversal. It already has a huge volume spike well above the 50 day average line, too.

R.I.P. ODFL

Poor old ODFL finally bit the dust Monday when it closed below 37.49 which was our closing stop limit. So we got stopped out of ODFL for a loss of  $1.09 per share on the stock or 45 cents on the option if we sold at the close Monday. Or if we sold on the open Tuesday the loss would have been $1 per share. The options are at zero on the bid price so might as well keep them. Anything can happen in the remaining 3 weeks to expiration and ODFL might come in a winner after all. It's still having problems today though as at present it's down to $36.49.However, if it turns around and goes to $41 in the next 2 1/2 weeks the option would be worth $1. Anything over $40 would give that value to the option before expiration which is always the 3rd Friday of the month. Remember Gary B. Smith said that 20% of these setups are losers and ODFL is a good example of that. It handed us a 2.6% loss on the stock. If you can't stand losing 2 times out of every 10 then don't trade. Losses are a part of trading stocks and options.

The market seems a bit top heavy and stocks are having more difficulty advancing. The stocks making New Highs are down from around 200-400 to about 100 today. So it might be a good idea to try paper trading shorting a stock. Netflix (NFLX) has caught my eye recently as being trapped in a flat Cash In The Box range between $197 and $175. And this morning it is finally breaking down out of that range. After the close tonight we will be able to see if it broke out on a heavy volume spike, which seems very likely as the volume is already over 4 million shares an hour into the trading day. A volume spike above the 50 day moving average line would signal a go ahead for a short paper trade play on the stock or options tomorrow at the open.