Honeywell's stock price looks like it will turn downward

I have been watching the Honeywell daily stock chart over the last few months.  It has been on an upward climb for the last 5+ months.  Just recently the trend of the stock started to turn sideways, and seems to be hitting a resistance around $57.50. (Chart 1)

Chart 1: Honeywell - last 6 months

Today after the market closed I looked at the stock and noticed that today's candlestick engulfed the candlesticks of the last two trading days.  This is a bearish signal that indicates the stock is going to drop in value in the future.   The right most candlestick in red, that has a black bracket next to it, is engulfing the previous two candlesticks in green. What makes it an engulfing pattern is the body of the red candlestick is larger than the two previous candlesticks combined. I expanded the last few weeks of the chart so that you could see the engulfing pattern more clearly.(Chart 2)

Chart 2: Engulfing pattern

Keep your eyes on this one.  You might want to consider shorting this stock in the near future.  As always, do your own homework on any stock that I mention. 

Happy Investing!

March Option Trade

I decided to sell two KOL March 2011 $44 Puts for this coming month.  I had a difficult time trying to decide what to invest in this month, because the return on my money wasn't great for everything I was looking at.  KOL had the best returns at the time that I sold the puts and I don't believe it will drop below $44.

 Chart 1: KOL

Other stocks that I am currently studying are Great Panther Silver LTD (GPL), HOGS, and CZZ.

Chart 2: GPL

Chart 3: HOGS

Chart 4: CZZ

Pick for February

I decided to sell 4 Puts of HOGS at a $17.50 strike price for February.  Costing potentially $7000.

If you look at the table on the "Stocks and Stock Options" page you may notice three (***) asterisks following the quantity of contracts that I sold.  I wrote this in as an indicator that I bought and/or sold some of my contracts on margin.  Meaning I obtained more than what my current balance could purchase.  This allowed me to make a little more money.  I did this because I wanted to test out using Other People's Money (OPM), to make more money for myself.  As a precaution, I did not spend more than what I could cover from my emergency savings.  It worked out well for me last month when I sold CZZ Puts, so I thought I would give it a try again this month.

I am keeping my fingers crossed that HOGS does not fall below $17.50 this month.  I read that South Korea has been importing pork due to Foot and Mouth Disease in their herds, so I thought this might cause the price of pigs to go up.  Also, my charts show that the stock is close to being under bought.

Wild Ride in Rare Earth Metals

Trading in Rare Earth Elements has been a wild ride.  MCP has had some HUGE swings in the last few months.  I am glad that my hunches worked out.  In fact, at least one of my friends took my hunches and made a LOT of money.  When MCP was around $30, I had a gut feeling that it might go to $60 or $65.   I can not tell you why I thought that, I just did.  However, since I have been investing my money on a monthly basis, I missed out on the run where the stock price more than doubled in a short period of time.

Outside of my money for this blog, one thing my family invested in was REE, another rare earth metal stock.  We bought a July 2011 $14 Call for $1.15 on Dec 27th, and on Dec 29th sold it for $3.00.  We made $155.07 after all of the fees.  We could have made more if I had not become nervous.  I requested that we get out of the position when I saw the stock price retracting.  Afterward, I was frustrated with myself for letting fear get the best of me.  Then I stopped my negative self-talk, and focused on the positive..... We doubled our money!  I am learning to ignore the "Woulda, Coulda, Shoulda's" 

MCP's IPO lock-up is expiring on January 25 of this month, and I am curious if this will drive the stock price down to the $40 range or lower.

What I am researching next:

I did well with my investment on CZZ last month, but it is in the middle of a cycle on my charts.  I want to hold off on trading in it again until it gets closer to one of the strike prices listed for the options.  The stock price is currently at $13.89, and the option choices I am looking at for selling Puts are $12.50 and $15.

Newmount Mining Corp (NEM) looks interesting to me.  They are in the business of mining gold.  The stock price is around $55, my charts say it is under bought, and a $55 Feb 2011 Put can be sold around $1.59.  As long as the stock doesn't go too far below $55, I could make approximately 35% APY.

Yamana Gold inc. (AUY) is a gold mining company.  The stock price, at approximately $11, would allow me to buy 5 to 6 option contracts.  The charts tell me this stock is also under bought, and in the near future I expect the stock price will rise.

Silver Wheaton Corp (SLW).  This company makes 100% of its money from mining silver.  I recently read that silver prices are being manipulated, causing them to be artificially low.  The author said that the gold/silver ratio is around 1/50, and it should be around 1/14.  I have not researched the history of silver.  However, it does seem odd to me that considering how much this metal is used in manufacturing, used for medical purposes, as money, and in jewelry; and that it is supposedly in short supply; the price is so low.  Another article states there is a class action lawsuit against JPMorgan and HSBC for manipulating and suppressing the price of silver bar financial products.  With this in mind, I think that SLW is headed for higher prices.

Finding Time - No More Excuses

With the holidays and work as they are, I am having difficulty finding time to write in my blog........excuses.

As I was starting to write this note I realized that I have been allowing things, excuses, get in the way of me following through on my journey to financial freedom and my commitment to this blog.  I still invest on a monthly basis.  However, I have started to become too relaxed, comfortable, with my successes.  I have been getting comfortable with earning money from my place of employment, instead of driving myself to financial freedom.  I started "Keep Your Mind and Money Moving" with a lot of drive and energy.  But, I have found myself getting lazy as I bring home my biweekly paychecks.  It's embarrassing how fast I let myself get distracted.  But alas, I have let life happen to me once again and have given excuses to myself and others as to why I have not been maintaining my blog.

Instead of wasting time giving you excuses; I will tell you what I have been doing.  In November I became the proud owner of 100 shares of MCP for $37/share.  Sadly, it is now trading between $30 and $32 a share.  I am not sure if this is a correction, or if I made a really bad purchase and bought at a high. Either way I am determined to make lemonade out of lemons.  So for December, I sold a $37 Call against my MCP shares and earned $35.03 after fees.  It is not much, but it is still more than what I would make if I had that money sitting in a savings account.  Along with selling a Call, I also sold a Put with my remaining cash.  I decided to invest/speculate in REE, another Rare Earth Metals company.  I sold a $9 Put, for a $57 profit. 

To sum this message up:

• I have allowed myself to become distracted from writing in this blog.
• I have continued to invest my money on a monthly basis in options
• If all goes well, by the end of next week I will have made $92.03 from my option trading for December.

My future goals for this blog are to continue to write about my monthly investment endeavors, and to finish writing about how I completed the goals outlined in the book "Your Money or Your Life". 

The Trend is Your Friend

I am learning to trust the trends in the charts that I make.  Today MCP had a huge gain, and I was able to sell my Call options for a $90.04 gain.  That is 11.93 % of the $754.97 that I spent, and I earned it in just seven days!  Multiply that by 52 weeks in a year and the annual % yield is 620.17%!  I don't know about you, but my savings account doesn't earn that much interest. (Correction: I think I got a little carried away on my calculations.  To be fair, I consider this a monthly investment, even though I made the money in seven days. So, I think the actual annual % rate would be 143.16%)

I sold my options early in the morning, around 7:00 a.m..  Had I held on and waited to sell them near the closing bell, I could have made over $400.  I was a little bummed that I sold them early, and lost out on the opportunity to earn more. But, I have to remember that I made $90.  Just think how much I would have made if I would have invested all of my money, $5,188.  That is a little too risky for my blood right now.

I am just stunned that I made so much, with so little money.  This is far better than leaving it in a savings account, and a lot more fun.  I have included a chart with today's movements. The stock actually broke past the upper trend line that I drew earlier in the month.

Figure 1: MCP

I will put two entries on my spreadsheet for October since I made two trades. Now it is time for me to research my next move for November.

My first time with buying Call options

I have been away from my blog for a few days, but that does not mean that I have not been working on my investments.  Far from it.  I decided to branch out a few days ago and try something new......Buying Calls.

A week or so ago, I read that China produces 95% of the Rare Earth Metals.  In the article it stated that China consumes a lot of these materials, and in the years to come will be consuming all that it produces.  Around the time that I read this China had cut off Japan from receiving these metals.  The article also stated that the U.S. and other countries use these metals for military purposes, and in a lot of the electronics that we use everyday.  I did some more research into this situation, and feel that Rare Earth Metals might be a good investment opportunity for the future.

So, with that in mind I have been following a company that just recently went public.  MolyCorp inc. (MCP).  They are a mining company based in the United States, that digs for Rare Earth Oxides. The one thing that made me hesitate about investing in this company is that it does not have a dividend.  If you remember, I said I like to invest in dividend stocks so I can get multiple streams of income.

Below is their chart.

Figure 1: MCP charts

I drew two lines on the candlestick chart, showing that the stock is trading upward within two resistance levels.  I decided to try my hand at trading Call options on 10/20/2010.  I bought two MCP December 2010 calls at $3.70, for a total of $754.97.  Now I must sit and wait for the price of the stock to go up. Since buying the options, the price has gone down.  I am not off to a good start for November.

I only used a portion of my $5000 with this investment, so I would like to also sell one or two Puts for November as well.  I just need to pick the stock.