Member-only content. Please Login or get a free trial of Rick's Picks to view.
From the monthly archives:
April 2009
May Silver looked bound for at least 13.205 when the bell ended Friday’s session, but the rally will probably need to do a smidgen better, surpassing a prior peak at 13.260, to rattle the nerves of shorts. The would refresh the bull trend on the hourly chart and set the futures on course for a test of the 13.885 peak recorded on March 23. A two-day-close above that number would significantly shorten the odds of a thrust to as high as 16.005 by mid-May.
The 920.10 rally target given here on Friday is still valid, although there’s a minor secondary target at 922.00 that we should also keep in mind. The ease with which the rally gets past these numbers will give us a clue concerning its strength, but if buyers should push the futures to 938.90 today, that would signal the likely onset of a significantly more powerful thrust. As you can see in the accompanying chart, that would refresh the bull trend on the hourly chart by exceeding not only an obvious ‘external’ peak, but a look-to-the-left-er recorded along the wall of a three-day decline. _______ UPDATE (11 a.m): The futures topped overnight at 919.70 — four ticks shy of the target. We’ve lost count of the number of rallies that have merely met the minimum requirement without going the extra inch that would have signaled real strength.
A Hidden Pivot at 892.75still looks compelling as a minimum upside target. The midpoint sibling of this number is 857.75, so any pullback to that number should be viewed as a possible buying opportunity. One way to take advantage of this conservatively would be to place a tightly stopped bid at a minor-retracement ‘d’ target or c-d midpoint, but the tactic is best attempted by someone familiar with Hidden Pivot Method. As you can see, the swoon in the closing minutes of Friday’ session brought the futures down to within a point of the 857.75midpoint pivot. _______ UPDATE (11:02 p.m.):The futures are getting demolished Sunday night and look bound for846.00 or worse. That’s a Hidden Pivot support, and if it’s easily breached, the next target in the sequence would be 839.50.
We hold the Sep 84 (DAVIF) -May 84 calendar spread four times for 3.45 and a September 76 put purchased for 1.49 on the opening last Thursday. Our maximum theoretical gain would come with the underlying stock trading around $84 when the May calls that we are short expire on May 15. The theoretical gain for the position would be about $779, based on a 5.77 price for the September calls, a price of zero for the May calls, and a price of zero for the May 76 put. If you work the numbers, you’ll see that this position yields a theoretical profit over a very wide range of prices. I’ve included a snapshot of an option calculator that shows how I estimated the value of the September 84 calls as of May 15 with the underlying trading for $84.
SLW left our stingy bid choking on dust yesterday, but there is still an easy way in for any pivoteer up to using the camouflage so nicely provided by the chart shown. I cannot predict how the pattern will develop, but I’ve labeled the two known price points, AB, plus a hypothetical entry price to show you what I’m talking about. I’d appreciate it if chat room denizens who understand the mechanical logic of this trade would share it with less experienced traders this morning.
I would have expected the great earnings news earlier this week to get Apple to its target near $130 more quickly, but it appears that the broad averages have been weighing the stock down. There are two Hidden Pivot rally targets we can use for now: 129.05; or if any higher, 132.85. Scalpers can play with them but I am not recommending laying out shorts aggressively in either spot, since there are better stocks to short than this market leader.
We’re playing with the house’s money in this stock, since we made a nice chunk of change leveraging low-risk calendar spreads tied to the April expiration. This time I’d like to short the little flying pig, probably by buying some way-out-of-the-money put calendar spreads at the peak of the stock’s next rally. That could occur at 128.92, my minimum upside projection for the near term; or at 144.27 if any higher. We’ll want to short 128.92 with a tight stop in any event, but it behooves us to find an entry strategy to capture the implied $6 rally in the meantime. There was decent “camouflage” on the hourly chart to have done so at 119.95 yesterday, but having missed the opportunity, we’ll simply have to wait for the next. FYI, the rally target associated wtih 119.95 is 125.17.
We hold four October 13 puts @ 0.58, and the market could not be less kindly toward them, since Microsoft has been buoyant at a time when option volatilities have collapsed. Still, October is a long way off, and I doubt that the software giant’s fabulous earnings news — i.e., that it met Street estimates by laying off a whole bunch of workers — will propel this rally very far. Sit tight for now, and keep in mind that our goal will be to spread off our modest premium risk when the stock turns weak. _______ UPDATE: Our puts are a distant longshot at this point, although October is a lonnnnng way off. _______ FURTHER UPDATE: We continue to hold four puts, but we’ll write them off for a $240 trading loss, since odds of a payoff have grown remote.
Cliff Dive Ahead for Bank Stocks
by Rick Ackerman on April 26, 2009 7:06 pm GMT · 2 comments
We’ve masked the salient details, but can you guess which NYSE-listed stock owns the powerful rally shown in the chart below? There are two things to notice: 1) the company’s shares are trading above $100 – a rare distinction at a time when many erstwhile blue chip companies have been reduced by the Great Recession to penny-stock status; and 2) the stock has nearly doubled in value since early March – a far better performance in these hard times, even, than Apple, whose shares have appreciated by “only” about 50 percent over the same period. Moreover, the stock has risen 278% percent since November. Give up? Here’s another hint: It is a financial company whose program trading in recent weeks » Read the full article