NEWSLETTERS & RECOMMENDATIONS - July 17, 2011

Dear Friends & Fellow Traders,

It's great to be back. Should we expect the European Crisis to be in the headlines for months to come? Yes, but looking ahead it will be handled. Beyond the next 18-24 months is another story. Michael Darda writes in Barron’s this week, "If the entire periphery—which includes the usual suspects, Italy, Greece, Spain, Portugal and Ireland—were to default, he cautions, it would be the equivalent of the Mexico crisis in 1994, the Russian crisis in 1998 and the Argentina crisis in 2001-2002 all rolled together, five times over. That'd make quite a splash." During the remainder of the summer, world stock markets will be held hostage by European developments, moving up or down with each new news event. Trade your brains out. See Trade of the Week below.

While I was on vacation last week the U.S. markets rallied back near the top of the trading range. All the S&P did was pullback 7%, get oversold and then rally over 7% and get overbought on our Oscillator. Now, this NET indicator is in the middle of the page with these deep versus deep moves against the last range confirming a trading range. Furthermore, all the moving averages are congesting near current levels. This action further confirms a trading range. Given any good economic news over the summer and we can expect the market to continue higher later on.

Right now the market is facing a lot of uncertainty. The good news is that most traders and professionals have bought lots of protection and perhaps way too many puts. The market I have come to know these last 48 years never rewards the many but does what it can to screw this majority time and time again. I expect this time won’t be any different.

The Chinese market has now risen 4 weeks in a row. I have found their market to be a good short-term leading indicator. It remains to be seen whether or not second quarter S&P earnings will give the market a lift. I know economists and analysts have been revising their numbers lower for the last 10 or so weeks. Just maybe after a bit more possible selling down to the 1290-95 level the markets could just give us a pop back to the 1350 area. Patience is the key word here. Buy the "Dips" and sell the "Rips" has always worked for us.

The video below was done to show you just how successful trading the expiring weekly options on Thursday/Friday but primarily Friday. I've mentioned here many times we really only need to work 2 days a week to earn a respectable living.

I've always felt we were missing something by not trading the weekly options earlier in the week. Before I left on my July family holiday I mentioned in my last June Blog there would be a great End of Quarter (EOQ) Markup since June was so bad. Well, the market rallied 5 straight days the following week. This probably was one of the best Markup periods I have seen in many years. We could have bought $5.50 ATM options on Monday I'm sure the OTM options 1-2 strikes worked equally well. On Friday the calls closed at $30.00. Wow you say! Yes Wow but this was the best expiration week I've seen in the last 6 years. We could have increased the returns with intraday S&P E-mini hedges too. But in the end I'm not sure any of us would have lasted until Friday.

On Friday, July 1st (remember large new monies come into equity funds on the 1st day of a new quarter) in my Alert Email I recommended shortly before the market broke out of its multi-month down trendline to go long calls near a $1.00 (which hit a low of $1.10) or the puts near $0.75-.80. As always recommended NET style - hedge. I took the low road and bought puts and hedged. The trade worked well into the rally. The calls hit $5.70. These same OTM calls hit $0.20 sometime during the 1st 30 minutes. That's over a 27X return if you caught this trade.

My conclusion: trade Thursdays and Fridays because not only is the performance there but more importantly we can buy many more options Fridays then we could ever hope to buy earlier in the week. Good trading.

The latest video was uploaded to my Youtube channel. The video will be the “featured video” when someone goes to the site.

Current NET Stock Thoughts
Gold hit new all time highs. SA did well but the Junior golds did better. In previous blogs and especially the NET Chat Room I mentioned selling Deep ITM puts on the GDXJ index when the Juniors traded down to $32-33. The gold index approached the 32 low and closed over 38 on Friday. I'm hoping the Jan 2012 puts all expire worthless.

BTX won another small grant for their cutting edge work. I continue to sell puts aggressively whenever BTX goes under $5. I try to buy stock under $4.50. I just can't see any risk from these levels. I just don't know when Investors start to become aggressive again. The stock will work for sure. See this interesting clip called “Cancer patient receives first synthetic organ transplant.”

I can't for the life of me figure out PIP or SIGA. I guess we'll know shortly from the judge what happens there. SIGA is trading like they will never win an add-on contract and the $480 million is all there will ever be. The shorts are all over both these stocks.

I just love CIGX. Besides being the featured stock idea by Patrick Cox. Patrick commands the largest standing room only talks at these conferences. At the July 26-29 Agora Financial conference in Vancouver I'm expecting many great news announcements starting any day now. I will be buying cheaper closer September 4&5 strike calls this time around adding to my rather large Jan call position.

Trade of the Week
Early Friday morning after the market sold off. I sent an Alert Email to buy the ATM 585 calls near $1.00. They never really came close that early. Before I posted the Friday "B" chart at 2:00 I noted I would be buying those same 585 calls starting at $0.75. The 30 minute chart was giving us a Triple "D" buy (Oscillator) signal that has worked over 85% of the time. Reference the NET Weekly Money Charts 2011-07-15C.

Shortly near 2:30 we were averaging down our $0.75 purchase at $0.60. I told the Chat Room I was buying much larger size under $0.60. We could have bought all we wanted under $0.75 where over 800 calls traded. I never bought 1 lower. I sent an Alert Email to scale out after 3:00 when price broke out to the upside. The calls closed $2.75 bid. The trade lasted less than 2 hours. A 4 bagger trade! Nice work if you can get it. Welcome back Stan!

Keep those cards and letters coming. I read every one.

Good Trading,

Stan Moore
702.558.1814

dcheslin2000@netscape.net