Shortly before 11 p.m. Tuesday the futures were probing for support that seemed most likely to materialize at 801.50, a minor Hidden Pivot support that can be bottom-fished with a three-tick stop-loss. The support is not chopped liver, so you can take an overshoot as big as the stop-loss as evidence that bears are likely to dominate Wednesday’s opening. Alternatively, it would take a print at 822.75 to turn the lesser charts bullish. _______ UPDATE (10:10 a.m.): Su-prize su-prize. The futures made their overnight low three ticks above the 801.50 pivot noted above; then they rallied to within four ticks of the bullish trigger at 822.75. If their apparent enslavement to our Hidden Pivot rules continues, they’ll either confront the next, minor resistance above, 836.75; or die.
Having bought two April 130 calls the other day for 1.34, we can offer two April 135 calls short risklessly. Let’s try to sell them for 1.14, day order. If successful it will extend the range over which our existing position would be profitable while reducing its cost. The rest of the position is as follows: long the July 115-April 115 calendar spread twice for 6.00 (currently trading for around 10.50); short an extra April 115 call for 1.40; and, long two July 120-April 120 call spreads for 9.80 (currently trading for around 10.40). Time decay is working so strongly in our favor now that the stock could probably move $10 in either direction today — or not move at all – and our theoretical profit would only increase.
For educational purposes, and to make a little money, we’ll attempt to leg into a far-out-of-the-money calendar spread — the September 260-May 260 put spread. A single spread has the potential to produce a profit of as much as $4,000 between now and September, but if we play our cards right our risk could be no more than a tenth that. The goal is to leverage a fall of nearly 30% in the stock over the next five months. Let’s start by bidding 7.60 for a September 260 put (GOUUL), predicated on a rally over the next 7-10 days to 387.70, a Hidden Pivot target. I have included a snapshot of an option calculator that shows how I arrived at a price for these puts. The 54 volatility comes from Tradestation.
The futures were in a labored uptrend, inching toward a minor target at 894.10 around 2:40 a.m. This Hidden Pivot can serve as a minimum rally objective for night owls, but if it’s exceeded by more than $1, the next meaningful threshold would be at 899.50. That was Sunday evening’s high, and if it were to be exceeded it would turn the hourly chart bullish.
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‘Goldman Indicator’ Points Higher
by Rick Ackerman on April 8, 2009 2:29 am GMT
Our “Goldman Sachs indicator” got caught in a tug of war yesterday, rising in the early going even though most stocks seemed eager to retreat. Goldman shares eventually fell too — in the final minutes of the session — but not before hinting that bulls could have the last word before Good Friday ends this trading week a day early. Notice in the chart below how Goldman’s peak yesterday occurred two cents above last Friday’s high, 119.76. Two cents may not sound like much, and many chartists would probably read yesterday’s high as a » Read the full article