Exits & Stops Looking back over both historical and real time trading signals many of the trades that fail to realize even 50% returns are losers from the initiation of the trade. Those trades always result in total losses by expiration. Going forward I am adding an initial stop level for each new trade based upon what I consider a failed trend continuation. That will cut down significantly on taking a total loss on the option for any one trade. These will be "close only" stops, meaning that the stock will have to violate the stop on the close to be triggered and any stops that get hit will be included in the Daily Updates. I want to again recommend leaving a small part of every position on even after profit taking. Looking at this weekend's table you will realize that taking 50% gains would have left you out of 19 triple digit trade returns out of 37 trades since July 3rd, all of which are still open for still further gains. That includes several trades over 150%, as well as the current 400% and 200% gains from early July buy signals in AAPL and MSFT. Those outsized winners, even with smaller positions, will add up nicely at the end of year. This strategy assumes owning at least 4 options on any one trade. If you only own one or two calls/puts on a trade, continue to take your profits and stand aside. Example: Aug 31st EEM Sell Signal (1) Order #1: Buy 4 Oct $43 puts @1.25 (2) Order #2: (GTC) Sell 3 Oct $43 puts @1.85 (50% gain) Leaving 1 Oct $43 put being held for 100% or better gains. ----- Open Trades Table Big Picture Update Last week saw new all time highs in the S&P 500, Nasdaq and Russell 2000. Lagging are the NYSE and Dow. There is enough diversity in these indexes to make the case that not all can be expected to top at the same time, nor can we discount the effect that the FAANG stocks have had, especially on the Nasdaq: September has been historically the worst month of the year for the stock market. August ending at new highs in three major indexes doesn't help matters. Nor does the failure of the Dow and NYSE to confirm those new highs. But the decimation going on in the emerging markets may be the most ominous sign of all for the market. The Blue Line trading system is not alone in its bearish positioning in EEM: Are Emerging Markets Sending A Signal? "In 2000, 2007 and 2012, emerging markets warned of an impending recessionary drag in the U.S. (While 2012 wasn’t recognized as a recession, there were many economic similarities to one.) Currently, emerging markets have once again diverged from the S&P 500 suggesting economic growth may not be as robust as many believe. While a 2-quarter divergence certainly isn’t suggesting a “financial crisis” is upon us, it does suggest that something isn’t quite right with the global economic backdrop." Enjoy the rest of your holiday weekend. I will be back on Tuesday as we gear up for what should be an opportunistic final 120 days of the year. ----- Allan Harris Developer, Chief Strategist and Head Writer BlueLineTradingSystem.com
