A close above 142.32 would shorten the odds of a finishing stroke to at least 150.72. Both numbers — respectively, a Hidden Pivot midpoint pivot and a ‘D’ rally target — occur in the pattern shown in the accompanying chart. Ordinarily I would suggest laying in some calendar spreads at the 150 strike to play this move, but the spreads are quite pricey and would need to be legged on to make the strategy worth our while. The July 150-June 150 spread is trading for around 2.70, but we’ll try to get in for half that price by buying the October call on a dip. If there is no dip, we’ll simply have to forgo the trade. For starters, buy four July 150 calls if the stock touches 131.14 a dive. There is nothing to suggest we will see such weakness today, but if it should occur, that’s where the stock would head. It is a Hidden Pivot support that comes from the 15-minute chart. I estimate that the calls would be a good buy for 3.00 with the stock trading down near the target, so if you want to leave a limit order with your broker, you can do so without fear of being ripped off. Make it a day order.
From the monthly archives:
May 2009
I’ve been bearish on the dollar for a while, but with expectation of a potentially important low near 80. The exact number shown on the chart is 80.04, and, given the high quality of the pattern, I don’t see how this projection can miss. If the dollar is indeed about to turn we should prepare for a tone change in stocks, gold, silver and bonds, as well as in numerous other, specific vehicles that we track and trade. _____ UPDATE (11:50 a.m.): With a low so far today of 79.86, the target has been breached by 0.18 points. That is not conclusive, but if settlement is below 80.04, it would put a new target at 79.08 in play. An unpaused move to that price would create a fresh bearish impulse leg on the daily chart, since it would surpass a key low at 79.73 made in late December.
To be on record, the following repeats a note I posted in the chat room earlier today: ”967.30 should be used as a minimum upside objective for the near term. This is the Hidden Pivot (HP) midpoint of the pattern begun from 805.20 on January 15. The 180m chart offers a nice panoramic view.” If you work the numbers you’ll find that the ‘D’ target associated with 967.30 lies at 1069.60 a price that I did not mention earlier. Usually I would infer the move to ‘D’ is under way following a two-day close above the midpoint. In this case, however, we’ll be more cautious, making the rally prove itself each step of the way, since we’ve had evidence already that the bull cycle begun in mid-April may be a bit timid.
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Chrysler’s bankruptcy is much tougher on some dealers than we could have imagined. This letter to American Thinker.com describes the sad plight of a Dodge-Isuzu dealer in Florida who is about to lose everything.
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The stock’s last thrust contained the kind of hidden power that creates buying opportunities. Specifically, the high at 144.86 exceeded two prior peaks — including an “external” at 142.00 from early October –but without getting past a more obvious September 19 high at 144.98 that the riff-raff would tend to use for a breakout signal. In short, we have camouflage here, and with it the prospect of entering with the uptrend once it resumes. This is too tricky to plot in advance, but stay tuned for updates, since it may be possible to board intraday.
We could stretch for extra bases, since FAZ looks eager to probe a gap above yesterday’s high, but instead let’s play it conservatively, offering four June 10 calls short for 0.30 against the four October 10 calls we already hold for 1.20. Check back 30 minutes after the opening bell, since we may need to adjust on-the-fly. _______ UPDATE (10:25 a.m.): Live and learn, as they say. This vehicle is a chat room favorite, but I hadn’t paid much attention to it myself until we established a small position the other day. And now I know: FAZ is an unwinnable carny game controlled by some of the sleaziest operators in the business. We know this because of the way the June 10 calls that we tried to short this morning behaved when financial stocks opened on a phony gap-down. Ordinarily, option market-makers would have used this situation to rape buyers of June 10 calls on the opening by filling buy-at-the-market orders at the highest price possible. Instead, there evidently being no market orders or even any enthusiastic bids, the weasels fell over each other lowballing the offer, selling the calls in front of us at a price we could not match. The result is that the calls opened at 0.22 — not only far less than the 0.30 we had sought, but at a between-markets price that was out-of-bounds for retail customers. (The public can trade only in nickel increments except on spread orders.) Considering the foregoing, my recommendation is to scratch the October 10 calls on the current 1.20 bid. Note: I offered them for 1.25 myself, going between the 1.20/1.30 market reflected at the time, and was filled within five minutes.
Based on the pattern shown in the chart, the June contract looked like a good bet to push up to at least 944.50 a Hidden Pivot, but anything above it would indicate 948.10. If the higher number gives way, especially on a closing basis, we could look for yet another upstroke to finish the week. _______ UPDATE (12:37 p.m.): Gold has followed today’s forecast precisely so far, rallying to 944.00 overnight, then hitting 948.40 in a second push around mid-morning.
FAZ Shares Offer Carny Game Odds
by Rick Ackerman on May 22, 2009 12:01 am GMT · 5 comments