March 2009

On the 5-minute chart, the last peak to occur before TBT plunged was at 47.95. With a ’B’ low at 43.12 and ‘C’ at 46.02, we can identify a Hidden Pivot midpoint at 43.60 that can serve as a minimum downside objective for the near term. Its ‘D’ sibling lies at 41.19, so a decisive breach of the higher support should be taken as a warning that more downside awaits.  If you trade this vehicle and want to bottom-fish at the first target, I’d suggest  April 43 calls (TBTDQ) and a 43.48 stop-loss.

The whack-jobs who had supporting roles in yesterday’s short-squeeze burlesque are likely to have their resolve tested at 809.50, the nearest Hidden Pivot above with any significance. You can short there with a stop-loss as tight as 810.25, but that pattern that has produced the target looks a bit more obvious than the ones we have been using lately to trade on. Night owls should look to the 5-minute chart for opportunities. As of 10:43 p.m. EDT, the futures were bouncing from within one tick of a 784.00 midpoint (A=796.75) whose ‘D’ sibling lies at 775.75.

Yesterday’s explosive rally will have put shorts seriously on the ropes, since many of them must have been hoping to reap ”free money” from call options they’d sold near the 900 strike. Even so, we should acknowledge that while the thrust did exceed the required two prior peaks to create a bullish impulse leg on the hourly chart, it did not take out a third peak at 964.00 – at least, not yet — that in visual terms had said, “I dare you!” (See chart.)  Rather than call this a sign of weakness, which it was not, let me say simply that it may be telegraphing difficulty in the next encounter with the $1000 barrier. Whatever happens, we won’t be left guessing for long, since any signs of growing strength, or of renewed weakness, will be evident in the way that impulse play out on the lesser charts.

The April 115 calls were an easy sale yesterday for 3.80, and so we are now long the July 115-April 115 calls spread twice for 6.00 and short an extra April 115 call for 3.80. This position is bullish and yields a theoretical profit over a very wide range of prices between $90 and around $130.  Our maximum gain of about $2,200 would come with the stock trading at 115 when the April calls expire.  This not a position we’ll need to worry about, but we may try to lock in a far-out-of-the-money strangle — two April 130 calls versus two April 90 puts — at prices that would ensure that no loss is possible. Let’s do so by bidding 1.80 for the puts (symbol: GSPR) and 0.80 for the calls, both good through next Friday. If the droolers who have been buying this stock push it to $115, especially after the March calls expire, wait till you see how quickly our calendar spread widens. We would likely take the money and run at that point rather than waiting till the April expiration for maximum gains.

The 49.62 target  (if memory serves) disseminated in the chat room yesterday morning was exceeded by 20 cents – not quite enough for us to infer with confidence that the rally has breathed its last. The target stands to be significant from a short-term perspective,  but if it is brushed aside within the next two days, look for the rally to continue to at least 51.47; and thence, to 53.26.

Anglogold, mentioned in today’s commentary, looks all but certain to reach a minimum 37.62 over the near term.  That’s an 8.6% rally from here, and it would be a good place for long-term bulls to take some profits in anticipation of a pullback that would allow the replacement of any shares sold at a lower cost. A stall at 35.71 is likely enroute, but if it is short-livedd — say, two hours or less — that would be the go-ahead for completion of the expected move to 37.62.