Tuesday, November 4, 2008

We're looking to get short on a pop to 35.40, a promising Hidden Pivot resistance. If that number is achieved, buy four December 33 puts (QAVXG). You can pay the offer just this once, since option spreads in this vehicle tend to be pretty tight. As of today, the puts would be a good deal for around 1.50, so you can leave a limit order at that price with your broker. I'll adjust if it looks like put volatility is changing on the way up, so keep your bulletin launcher switched on if you'd like to stay apprised in real time.

A Hidden Pivot target up at 1046.25 looks like a lock-up if the futures can push aside its sibling midpoint, 982.50. So far, bulls have been repelled after a poke that hit 984.00, but the shallow, flag retracement since looks like a second thrust in the making. Night owls could get long with relatively little risk by buying a 972.75 print with a buy-stop limit. This would create an impulse leg on the 30-minute chart without tipping off momentum players. If the impulse move takes out peak #2 at 974.50 on the same thrust, let it go. _______ UPDATE: Buy-stopping 972.75 would have worked perfectly, producing an overnight gain of as much as $1100 per contract. After hitting 972.75 for the first time, the futures inched up to 973.75 before pulling back to recharge for a nearly uninterrupted, 22-point thrust to 995.75. The futures have pulled back again, but the 1046.25 target looks like it's in-the-bag.

The apex of yesterday's timid thrust missed our bullish trigger point by nearly $5, but it will allow us to lower the bar slightly today, to 742.60. Still less ambitious is a pattern projecting to 734.90, a Hidden Pivot that would become an odds-on bet if its sibling midpoint at 730.30 is exceeded by more than three ticks. The target will remain valid as long as 725.60 is not exceeded to the downside first. Looking at a much bigger picture, the most compelling item on the weekly chart is a 676.70 target that was narrowly missed on the last big selloff. If the futures were to return to it, breaking the old low at 681.00, it would be a great place to load up. _______ UPDATE: December Gold has had quite a move off an overnight low at 721.80, but without much significance on the hourly chart. The nearest Hidden Pivot target worth noting is 788.40, and it can be used for now as a minimum upside projection. The pullback in progress at the moment (12:17 p.m. EDT) from a so-far intraday high of 765.00 might be expected to come down to around 752.70, the midpoint pivot of the pattern yielding 788.40.

We'll try something different, bidding 4.17 for a single December 95 call (DAVLQ), day order. That would represent a 50% retracement of the option's price since it bottomed a couple of weeks ago at 2.35. I have reproduced a chart of the option's price action, which should exhibit ABC-wave behavior just like the underlying stock. _______ UPDATE: We'll have to find another way to board, since the Diamonds opened on a gap that left buyers choking on dust. Now they look almost certain to reach 100.55, since the gap demolished the sibling midpoint of that pivot, 94.59.