This column will be dedicated solely to speculative trading ideas I’ve identified to be worth the risk/reward for the active part of my trading portfolio. When I say short-term, I’m referring to positions in stock or options that may last anywhere from a few days to a few months. If you like to play the trading game, albeit a dangerous one, then you may likely find some value in reading what I have to say about the trading opportunities I identify in the market on a continuous basis.

My claims to fame you ask? I called the top of the housing market back in July of ’05 and the short-term top in the oil market in July of this year just to name a few. However, just like the famed recent blowup at Amaranth, I too thought natural gas was a huge buying opportunity earlier this year. My point of mentioning this? I’m often right and sometimes wrong, so buyer beware! Don’t come crying to me if you take a position based on one of my trading ideas. This column is dedicated to big boys only, or big girls for that matter (no comments please), so when I provide an idea, it’s up to you to pull the trigger, once you do, it is your responsibility, just as it ultimately was your decision to pull the trigger in the first place.

I will provide potential targets, stop losses etc… as I do feel it is extremely important to have a game plan in place well before you hit the buy or sell button of your online trading interface. Enough explanation of what this column is about, let’s move on to the first of many ideas I will provide in this column dedicated to individuals who consider every single stock in market as nothing but a ticker on the screen.

AGIX, a NASDAQ listed biotech. I recently bought the Nov. $15 calls. Did I take a huge position? No. This is a pretty speculative trade, as these calls are WAY out of the money right now, but nevertheless, I think the upside on this trade could be well worth the risk. Here’s the context for my trade. I’ve entered this trade on a pullback. I generally don’t trade breakouts. Just my style (which everyone is entitled to have one).

Shown here is a weekly chart of AGIX. I’ve incorporated my favorite technical tool, the 3x3 DMA. Don’t know what that is? Go find out, and then come back. There are a few very key technical directional change signals in the market that I tend to gravitate to. In this particular situation, I’ve identified a double repenetration of the 3X3 DMA in the weekly chart shown here. A break below (on the close) of the 3X3, a break above, a break below and another break above, all within seven trading periods (circled for your convenience). This is a very powerful directional change indicator when a stock has been thrusting in the same direction for numerous trading periods (down in the case of AGIX over the last 9 months or so). Additionally, the MACD (strong money in my opinion) is working its way toward positive territory w/ a positive momentum bias, while the stochastic (weak money in my opinion) is showing a sell signal. An excellent opportunity to potentially be right when others are wrong.

I’ve tagged my stop loss on this particular trade at $12 bucks in order to give it some potential breathing room in case the stock gets pushed around prior to a big move. If it gets there, I’m out. If the stock can trade anywhere near that $15 level before November 18th, I will take my profits selling my calls back to the market.

There’s some yakking going on out there about phase III yada yada yada…but remember, the context for my trade is purely technical, as I anticipate a significant change of price direction in AGIX over the next couple of months.

Additionally, in positive sentiment with a trade like AGIX, I believe healthcare, biotech and drug stocks are excellent sectors of the market with huge upside potential over the next few years, so this is an area I will likely identify a number of other related opportunities in coming months.

However, things do change, and they can change quite rapidly, so be prepared to be nimble and be quick. I know Jack, he’s a friend of mine.

Happy trading…

Trader's Corner Editor