We’re offering a December 90 call short for 1.80 against a January 90 call acquired earlier for 2.34. My goal for the position is to double our money at least, and that implies we can use a stop-loss as wide as 78 cents (since risk:reward should ideally be held in a 1:3 ratio throughout a trade). Accordingly, I’ll suggest stopping yourself out of the position if the January 90 call trades below 2.00 (We’re being very conservative on this one.)
COMMENTARY for Wednesday
Rick's Picks for Wednesday
Apple triggered the short I’d suggested around the time I began a webinar yesterday for hundreds of attendees. Under the circumstances, I was unable to post detailed guidance for initiating the trade. However, to establish a tracking position for anyone who did get short, I’ll assume 200 shares laid out at 102.60. Cover half on this morning’s opening so that a generous stop-loss can be applied to the rest. (Put it at 102.73 for the time being.) However, if AAPL should fall below 98 today, cover the rest at will._______ UPDATE: Half the position initiated yesterday could have been covered on the opening for 97.82, leaving the remaining half — officially, 100 shares — with an imputed cost basis of 107.38. Apple subsequently dipped below 98, touching a low of 97.00 and triggering the second part of the order. The minimum profit on the entire position would have been $938 if you started with 200 shares and covered the second round lot at 97.99.
Here’s one for hard-core Pivoteers only, since it will take some savvy observation to determine whether the trade is likely to be a real berry. The downtrend shown in the chart shows a promising pattern with a ‘D’ target at 874.50 and another at 868.50. Either Hidden Pivot could be bottom-fished with a tight stop-loss, but we’d shun the first unless it is hit in the first 30-minutes of the session. Otherwise, an 868.50 bid can be used with a stop-loss at 867.25. You’ll be on your own thereafter. _______ UPDATE: DaBoyz had a pretty vicious short-squeeze going as of 2 a.m. EST, negating the trades suggested above. There may still be an opportunity to bottom-fish overnight, using the c-d midpoint of A=916.26 (60m chart, 12/9, 11:30 a.m.), B=884.50 (Tuesday’s low), and whatever C is created later tonight (the high so far 902.75).If this spree should lurch violently out of control, as happens just about every other day any more, keep in mind the 969.25 target given here earlier, since it looks like it can’t miss.
There are two ways we might attempt to bottom-fish today: at 84.77, which would represent a 0.618 retracement of this week’s rally; or, at 85.44, a ‘d’ target associated with the pullback. Since the second number is the more conservative way to play it, I’ll recommend buying a single January 87 call (DAVAI) if the Diamonds trade within 0.05 of our target. I cannot predict how much the calls will sell for at that time, but the 4.47 estimate shown in the snapshot of my option calculator would be a pretty good deal if you want to park a limit order with your broker. If it looks like my estimate has gone awry, I’ll post further guidance under Intraday Notes. You can have the alert pop up on your screen by turning the bulletin lancher on._______ UPDATE: The trade was a non-starter, since DIA gapped up on the opening. Cancel the order.
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Take any dozen good reasons for being bearish right now and they still don’t equal the bullishness of the chart shown. The undeniably compelling rally objective is 13085, a 4.8% move from current levels, and one can only surmise that the dusting the 12158 midpoint received on the last pullback (12/28) all but clinched a finishing stroke to the higher number. Moreover, it implies that bears shouldn’t get their hopes too high even if, in the next few days, the Dow plummets 324 points to retest the midpoint support. As of now, that would signal not weakness, but a screaming opportunity to get long. Hard to believe, really, but that’s what the charts say.
Hidden Pivot Webinar & Tutorials
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One More Rally And Down We Go
by Rick Ackerman on December 10, 2008 6:11 pm GMT
Stocks turned weak yesterday, but it looks like a buying opportunity rather than the beginning of a new trend. Notice in the chart below how the rally begun off Friday’s low has surpassed two prior peaks. That meets our minimum requirement for creating a bullish impulse leg �’ one of daily-chart degree in this instance — and it is what makes us very confident that yet another rally leg awaits once the consolidation beneath Monday’s high is complete.
(Click on chart to enlarge)
However, despite this bullish picture for the near-term, all is not rosy. In fact, we expect the bear market to resume with a vengeance as early as next week, after the current, benighted outbreak of irrational exuberance has run its course. This prediction also comes directly from the way the A-B impulse leg has formed. While it has indeed managed to get past two prior peaks before correcting, if buyers had any real guts, they’d have pushed past the third peak before taking a rest. How do we “know” this? Very simply, from having watched impulse legs form on tens of thousands of charrrrts over the last decade-and-a-half. We’re open to changing our mind here, but not until we see the kind of bullish thrust that blows past a few daunting peaks without getting so easily winded, as this one has. That could happen today with a push exceeding peak #3 (i.e., 9159), since yesterday’s pullback fell a few points shy of terminating the A-B impulse leg. But until such time as that happens, the burden of proof will continue to rest with the bulls.