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Thought for Today
Rick's Picks for Friday
All our ducks are in line now that we’ve successfully legged into the December 12.50-15.00 call spread eight times for a net CREDIT of 0.15 per. The short sale of some December 15 calls for 0.45 yesterday morning clinched it, allowing us to capture premium in this series when the options were fat and juicy. Let’s put in a stink bid of 0.20 to cover the December 15s, good through Wednesday. It would be worth our while to get ’em in at that price if we can do so within the next few days. Our goal would then be to re-short them on rally. _______ UPDATE: We weren’t able to cover the short December 15 calls, since they never traded below 0.35. However, with the stock pushing toward $13 our position is looking better than ever. We have a chance to make as much as $2120 with SLW trading $15 or higher at expiration, but even if SLW plummets we’ll still make at least $120.
I usually ignore hot tips, but a pen-pal of mine, Phil C., sent me a breathless note predicting that the Dow would rally 100-150 points this morning, forming a top from which it will collapse when traders return after Labor Day. Putting aside the details, this sounds so absolutely right to me that I’m inclined to speculate modestly. Mr Market loves to spring dirty, nasty surprises whenever possible, and what could be nastier — or more surprising — than a tsunami to greet us as we return from summer’s final fling? To get short, we can use the midpoint resistance at 95.07 shown in the chart, buying two September 93 puts (DAVUO) if and when the Diamonds get there. _______ UPDATE (11:52 a.m.): Stocks are only modestly higher today after an other-then-depressing unemployment report, so a short-squeeze to the levels where we’d wanted to get short seems unlikely. We’ll do nothing officially, but personally I’m going to take a couple of puts home with me over the weekend. My hunch is that the best prices of the day will obtain near the close. (Note: I bought some September 93 puts — DAVUO — for 0.86.)
The futures pushed slightly above a 16.265 pivot that had served as a short-term, minimum upside objective. The overshoot hints of further upside progress, presumably to the next Hidden Pivot resistance worth noting, 16.640.
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The futures are banging on a 44.12 Hidden Pivot support that they last visited on January 13. We won’t presume as to whether the support will hold this time around, but if it gives way the 41.00 target of a lesser downtrend (see inset) would be in play. Traders will have to sort out the opportunities in real time, but I’d suggest using a chart of 5-minute degree or less to generate an actionable ‘camouflage’ pattern. If you prefer the simpler method of a ‘mechanical’ entry, a short from 46.36 can be used, stop 48.15. This is significantly more risk that we are used to taking when trading this vehicle, since swing highs and lows on the very lesser charts can usually be predicted with 10 to 20 cents. Under the circumstances, I’d suggest holding position size down to a single contract unless you use ‘camouflage’. _______ UPDATE (1:42 p.m.): Just posted in the chat room: The recent high at 46.41 was bullishly impulsive, so shorts initiated at 46.36 as I’d advised should be tied to a short tether — i.e., a stop-loss that will leave you with at least a small profit no matter what. If you are short multiple contracts, half should be covered here for around 45.69, for a gain of about $670 per contract. If you prefer an impulsive stop, the 3-minute chart would pop you out of the trade on an uncorrected rally exceeding 46.14. _______ UPDATE (11:34 p.m.): The futures have plummeted $1.41 from within a nickel of where I’d suggested getting short. The trade could have been worth as much $1360 per contract, but if you still hold a position I’ll recommend tying it to an impulsive stop-loss on the 5-minute chart. At the moment, that would imply stopping yourself out of the short if the futures thrust above 45.58 without correcting. Please let me know in the chat room if you hold a position, since I can provide a tracking position for you further guidance.
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We shouldn’t doubt that Apple will eventually lift off for points north — most immediately the 116.92 midpoint Hidden Pivot shown, and thence its ‘D’ sibling at 129.20. In the meantime, the presumptive consolidation near 110 has brough only tedium and a more or less predictable series of false starts. The timing of the rally is of some importance, since the stock market as a whole cannot get in bullish gear without the world’s most valuable stock leading the charge. For our part, let’s get our feet wet with a 0.31 bid for 16 Feb 20 130 calls, day order, contingent on the stock trading 109.00 or higher. If Apple falls below that price lower the bid to 0.26. Our eventual goal will be to leg into some vertical spreads for cheap, or possibly free. ______ UPDATE: The calls traded for 0.31 on the opening, so I’ll track 16 of them at that price. Use a stop-loss at 0.24 for now, o-c-o with an order to short 16 Feb 20 135 calls for 0.31. ________UPDATE (January 18, 7:03 p.m.): The stock has looked like hell lately, stopping us out of the calls for 0.24 on the opening Friday. The loss would have totaled $112 plus commissions. We’ll back away for now, since AAPL now looks primed to fall to 103.58 before bulls get traction. ______ UPDATE (January 25, 11:04 p.m.): The stock has reversed sharply to the upside, putting the 129.20 rally target flagged above solidly in play.
A sale at 2.10 was a lay-up on Friday, since the spread peaked near the opening above 2.30. With about $2640 in profits already booked, I’ll suggest holding the remaining spreads till expiration. If TLT is trading above 129 at the time, the total profit on the position would be $3840. From a technical standpoint, the stock’s almost relentless strength is surprising, even to me. In retrospect, it vindicates our strategy — still viable — of buying every minor pullback, since that seems to be as much weakness as we’ll get. I still expect the 133.16 target shown to exhibit some stopping power, but we shouldn’t be too surprised if buyers just shrug it off. ________ UPDATE (January 16, 12:04 a.m.): Even though I keep repeating that we should expect this vehicle to continue rampaging higher for years and years, I still can’t get used to how easily it blows past ostensibly daunting Hidden Pivot resistances. For what it’s worth, the next lies at 138.60. Our position is beyond adjustment at this point and seems all but certain to produce a $3840 gain. _______ UPDATE (January 21, 8:24 p.m.): Yesterday’s selloff was the most vicious we’ve seen in months, but it had no impact whatsoever on the 138.60 target noted above. The rather large profit from our spread is safe in any case and will remain so unless Armageddon intervenes.
I first recommended this stock in early September after being very impressed with a presentation by its CEO, Atul Sabharwal. The company provides mobile marketing solutions to a growing list of clients that includes Wal-Mart, ESPN, Lexus, Taco Bell, Target, Johnson & Johnson and Minute Maid. Snipp’s shares are listed on the Toronto Venture Exchange (TSX: SPN) and on the OTC in the U.S. (symbol: SNIPF), but yesterday it filed with the SEC for an exchange listing in the U.S. From a technical standpoint, SNIPF looks to be basing for a move to as high as 0.4385. First, though, it would need to trip a buy signal at 0.2878, then to clear the 0.3380 midpoint pivot (see inset). The company continues to win new business at a rapid clip, and that’s why I expect the earnings report due out November 15 to be strong. Full disclosure: I hold shares and warrants in this company. _______ UPDATE (November 13, 10:49 a.m. EST): Two days ahead of the earnings report, the stock has taken quite a leap, with an opening bar high today at 0.38 that was 36% above yesterday’s close. This means the 0.4385 target flagged above is well in play. _______ UPDATE (6:49 p.m.): The stock took a leap Thursday back up to the midpoint pivot at 0.3380 associated with the 0.4385 target. Regarding earnings, they will be out later than expected, in line with the Canadian deadline for filing. Stay tuned. _______ UPDATE (November 17): Snipp has reported 252% earnings growth for Q3. Click here for the company’s latest filing. _______ UPDATE (December 5, 10:13 a.m.): Zounds! The stock has popped to 0.40, quadrupling in the eight months since I first recommended it. My immediate target is 0.4356, but SNIPF will need some rest if and when it gets there. _______ UPDATE (December 9): Bulls are apt to be a little winded after the recent push to 0.4314, less than a penny shy of the target shown. We’ll give the stock time to consolidate for the next thrust. ______ UPDATE (December 10, 6:12 p.m.): With the broad averages plummeting yesterday, Snipp bucked the tide, hitting a new all-time high at 44.10. This opens a path over the near term to 0.4906, or perhaps 0.5193 if any higher. ______ UPDATE (January 5): The stock vaulted to 0.59 Friday on volume 250% of a daily average of about 400,000 shares. _______ UPDATE (January 18, 9:57 p.m.): SNIPF got hammered at its recent high of 0.60, with more than a million shares changing hands near the top. Volume on the pullback has been relatively light, however, and I expect buyers to turn the old high into support once they push past the old high in the months ahead. The company continues to win new business with an impressive and rapidly growing list of blue-chip clients. For a summary of client names, check out their logos by clicking here.
This Just In... for Friday
The following questions about my option strategies came up in the forum, but I am republishing them here because they may be of interest to a wider audience:
What is the advantage of going long one call, and then locking in a given spread via shorting another call, versus “locking-in” the spread by going long on puts instead?
My answer below is more generalized, but to address your specific point, we should prefer to “lock in” a profit by shorting a wasting asset rather than buying one ourselves. For most option traders most of the time, shorting calls is MUCH more profitable than buying puts. Indeed, in the several decades I have been trading options, I cannot recall a instance when put buyers were happy for more than three consecutive days. Even those who owned puts ahead of the 1987 crash had just two days of sheer bliss to get rid of them.
Is it that in the latter scenario, one is long twice, and can thus get screwed twice by the pros? I always thought the latter scenario would be a good one in cases of low implied volatility, where the loss on one is mitigated, and the gain in the other is increased when implied volatility rises during larger underlying moves. (That may just be retail-customer theory, which the pros have long beaten. But what do I know? I’m still waiting for someone to start offering straight options on the VIX. Thanks!
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The spreads I prefer are intended to provide a highly leveraged shot at big profits, but without the usual, horrendous time decay. This tactic is especially useful if we expect a stock to rise (or fall) over a period of several months. We also seek to take advantage of fleeting spikes that goose option volatilities to the moon. If, for instance, SLW opens on a gap this morning (it did), we may have a chance to short Dec 15 calls when they are hugely overvalued — sell them, perhaps, for even more than the 0.45 we’d intended. (They topped at 0.50 before receding with the tide.). And, of course, we do so with the expectation that Silver Wheaton will be strong in the coming months, but not so strong that the December 15 calls will go in-the-money. We may ultimately decide to exercise our December 12.50s, a step in building a long-term position. RA
Were you aware that the Bureau of Labor calculates unemployment in various and sundry ways that are not shared with the press? Neither were we — until we heard about ‘U-6,” which reckoned U.S. joblessness at 14.8 percent back in February. We would assume it’s much higher now, but unfortunately February was the last month given. Incidentally, if 1933’s rate of 24.7 percent had been calculated using today’s dubious metrics, it supposedly would have been lower by at least five to ten percentage points. Click here for the link.
Hidden Pivot Webinar & Tutorials
The Hidden Pivot Webinar is one-day event is designed to teach you the risk-averse trading strategies Rick has taken to his seminars around the world. Once you have learned his proprietary secrets, you will approach trading and investing with enough confidence to make your own decisions without having to rely on the advice of others. The next Webinar will take place on Tuesday, February 17, 2015. For more information, or to register, click here.
With $1000 Looming, Gold Fever Is Back
by Rick Ackerman on September 4, 2009 2:15 am GMT · 5 comments
We’re no fans of head-and-shoulder formations, since they are everywhere the amateur chartist might want to find them. But there is something to be said for the bullish reverse head-and-shoulders pattern that gold futures have been tracing out for the last year-and-a-half. The pattern is shown in the chart below, and it is predicting that December Gold, which settled yesterday at 997.70, its highest close since February, is about to run up to $1060. Trouble is, just about everyone we know thinks gold is about to pop to 1060, give or » Read the full article