In after-hours trading, the futures were adding to the implied potency of the day’s rally, pushing for the first time above a small but technically significant peak made on the way down Wednesday. The breach was by just two ticks, but that is enough to set up a potential camouflage entry opportunity whose details were still firming as of 7:43 p.m. EDT. I have indicated in the accompanying chart how the opportunity could play out, and I would encourage experienced pivoteers in the chat room to share the entry tactic once its details are complete. _______ UPDATE: Moments after I prepared this tout (and chart), the futures downticked, all but negating the entry opportunity noted above. Even so, it has not negated the implication of real strength percolating quietly beneath the surface. If the mini sell-off eventually creates a corrective a-b-c, the implied “buy” would come at the Hidden Pivot midpoint of c-d. _______ FURTHER UPDATE (11:52 a.m.): With a push past 1000 looming, gold came under savage attack this morning, presumably by its official enemies. Although it is difficult to see how they will win the war, today’s battle is most certainly a bloody setback. Now, we’ll be looking to see whether sellers can extend their victory, pushing the futures beneath a key May low at 938.20 by Monday. If so, that would create a very powerful impulse leg on the 180-min chart; so far, though, there is none.
We’re long the September 10-June 10 calendar spread four times for a 0.10 CREDIT, and we also hold four July 12.50 calls bought more recently for 0.30. Our intention was to spread off the latter, so let’s try it today by offering four June 12.50 calls for 0.20, day order. The spread could widen to as much as 1.00 at expiration, implying that our risk:reward would approach 1:10. Would you lay 10:1 that Silver Wheaton won’t rally another 1.60 over the next two weeks? We’ll have the other side of that bet if we get the short sale off. (Note: As of yesterday’s close, the stock looked like it could conceivably pop to 11.56 before the week ends.) _______ UPDATE (noon): Silver Wheaton has come down only moderately today even though silver has been hit hard. The slippage in the stock was sufficient, however, to all but kill the June 12.50 calls we were trying to short. Leave the order in next week nonetheless, since the two weeks that remain till June expiration could produce a death rattle.
We’ve been using 966.25 as a potentially serious obstacle for Mother of All Short Squeezes, but if you look at the accompanying chart you’ll see that 981.75, a Hidden Pivot derived from a lower point ‘A’ than the 966.25 target, is just as compelling. Keep in mind that it costs us nothing to over-estimate the rally’s power, since, if it winds up falling short of our objective, the failure will be telegraphed from the get-go on the lesser charts. As of 8:30 p.m., a steady drift higher toward this week’s peaks made camouflage entry an unusable strategy.
The jury’s still out on the 69.38 target we’ve been using as a minimum upside objective for this vehicle. Buyers’ best efforts took the futures to a new recovery high at 69.60 yesterday, just 22 cents above our target. That’s a tolerable margin of error for crude futures, as those of you who used a 26-cent stop-loss trying to short the last peak are bound to know. That said, the futures were head-butting the pivot in night action, threatening to bull their way up to as high as 74.47 on the next leg of the short-squeeze.
Akamai’s rally is nearing a level where we might be able to spread off the risk of the four August 25 calls we bought a while back for 0.90. Let’s offer four August 27 calls (UMUHI) short for 0.95, good till canceled. If the order fills, we will have legged on a $2 vertical bull spread for a small credit. It will give us a position with no possible loss, a minimum gain of $20, and a maximum of $800 if the stock is trading above 27 come August expiration. My guess is that AKAM will have to reach $24 (or so) to fill our short offer at 0.95 by mid-June. _______ UPDATE June 21): The stock turned instantly into garbage with last Wednesday’s gap-down opening; however, because it’s due for a dead-cat bounce, let’s try to exit our calls somewhat above the market. Offer them to close for 0.70, good till canceled. Make that offer one-cancels-the-other with an order to sell the calls on a 0.40 stop-limit. _______ UPDATE (6/22 11 a.m.): We exited the calls near the opening, realizing a loss of about $200. The reason we bought the options in the first place was to take a flyer on a stock that Motley Fool had touted as, more or less, the Stock of the Century. The 22nd Century, perhaps. Let’s hope they record the loss, just as we have.
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.
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Morning Briefing Begins Monday
by Rick Ackerman on June 6, 2009 12:01 am GMT
For a two-week period beginning Monday (6/8) @ 9AM EDT, we’ll be looking to start the day armed with enough Hidden Pivots to tame and otherwise demystify the opening, especially in Gold and the E-Mini S&P. This is an offer you can tell your friends about, since the Morning Briefing will be open to all. If you don’t subscribe to Rick’s Picks, you can still sign up for the briefings by using a link embedded in the commentary I mail out free each morning. Click here to signup to receive the Morning Briefing links and my daily commentary.