S&P hit 820! Backed up the truck and loaded on more SLW and ABB

Silver Wheaton

Silver

ABB Ltd.

BOUGHT +2 SLW 100 NOV 08 2.5 CALL @.55

BOUGHT +3 ABB 100 NOV 08 10 CALL @.90

Another busy day today. I usually write up my entry/exit posts immediately for my trades, but I needed to keep my eyes on the market due to the fact that I went all in today.

I’m really tired after a long day and the fact that I went swimming right after the close. So I’ll cut myself some slack and refer you to my market analysis post from today instead. Long story short, I entered long because of the low volume retest of major support. I held because the price and volume showed strength in testing the resistance throughout the day.

I am heavy on ABB because S&P broke down to 820 and ABB is still above the Oct low of $10. It has held on triumphantly in this leg of market selloff. Refer to my ABB entry yesterday for a more detailed analysis of the company.

I added to SLW because the commodities are showing some strength too. I have been a fan of SLW for a while, take a look at those posts for my opinions of SLW.

My plan now will be as usual, I will unload into strength starting with my weakess position and work my way up.

There’re a lot I want to write down, but my mind is blank now. So I’ll leave this as is.

BOUGHT +2 ABB 100 DEC 08 10 CALL @1.55

ABB Ltd.

Wow, ABB share price is at $10.44. I am adding to my ABB short puts from this morning and bought some Dec 10 calls for $1.55. This is a steal!

My analysis from the previous entry still stands.

Max pain for Dec of ABB is at $20… At effective price of $11.55 for my shares, the risk/reward potential is … huge!

SOLD -1 ABB 100 NOV 08 12.5 PUT @1.70

ABB Ltd.

Wrote an In The Money Nov 12.5 put for $1.70. ABB share price was at $10.92 at time of entry. I have been trading in and out too many times this past two weeks. This trade is intended to let it expire or let the option being put to me. I have the cash ready to buy 100 ABB shares if it doesn’t expire for an effective price of $10.80 / share.

Three reasons why I’m fundamentally bullish on ABB.

1. $8.6 billion in cash and $2 billion in debt (0.2 debt/equity ratio)
2. It is making use of this cash and current market panic to expand its operation. See: Cash-Rich ABB Speeds Up Buys As Markets Weaken. It’s one of the few companies not afraid to act at this time!
3. ABB makes power control and distribution systems. It’s one of the largest builder of power grids. All these talk of alternative energy, reduce oil use, hybrid/all-electric cars, etc. have one thing in common — electricity.

Upside: Good fundamental, active management to make use of current condition. Significant volume around $10 last month.

Resistance: Recent top of $14.

Downside: We seem to be in correction of 10/28 day, moving to low of about $10.

Support: $10

Bottom line: Risk/reward ratio of about 3 to 1. Not that great. But I can afford to have the shares put to me if this doesn’t expire next week. Not saying I would sit still if it does collapse, but at least I’m not biting more than I can handle.

On another note, I entered because the market seem to be stronger today. Notice the Advance Decline line staying around neutral and the TICK not really down that much.

S&P intraday

Update: An hour later and we’ve broken down. ABB is at $10.39 and S&P at 868. I guess I should have waited til the afternoon.