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
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.
This week’s commentary implies that McDonald’s shares are an attractive long-term short. Most immediately, the stock looks primed to fall to the 85.53 Hidden Pivot target shown. The fact that the stock market’s powerful short-squeeze has lifted the stock somewhat makes the bet even more enticing. Accordingly, I’ll suggest shorting two round lots anywhere above the 91.42 midpoint pivot (i.e., the red line). Use a stop-loss equal to one-third of whatever you stand to gain if the stock were to fall to the target from the price where shorted. This is the “mechanical entry” tactic I have often alluded to in the chat room and which I teach as part of the Hidden Pivot Course. If you prefer to use options, buy the Jan 17/Oct 31 85 put calendar spread 16 times for 0.70 or better. Our goal will be to reduce risk to zero or less by rolling the spread forward, shorting the nearest weekly calendar spread each Friday. _______ UPDATE (11:28 a.m.): With the stock up somewhat this morning — don’t these guys read? — lower the bid to 0.68, and decrease it by 0.01 for each 5-cent gain in the stock above 91.86. _______ UPDATE (7:43 p.m.): The spread closed at 0.70, but there’s not much more we can milk from it, since the October calls we’re trying to short closed at 0.03. Traders who have yet to act should wait to buy eight Jan 17 85 puts ‘naked’ with the stock trading near the 92.59 target shown. Those who are long the spread should first try to cover the short puts with a 0.01 bid, day order. If the order is filled, sit tight for the time being. _______ UPDATE October 28, 10:45 a.m.): The stock gapped up 61 cents on the opening to a spike high at 92.61 that lay just three cents from our target. Subscribers reported paying anywhere from 0.62 to 0.67 for the puts, but absent the aggressive Rick’s Picks bid for a relatively quiet, illiquid series, they should have sold for closer to 0.50. Anyway, I’m now suggesting that you spread off the risk by offering Jan 17 82.50 puts short for 0.56. To avoid crushing these little daisies, let no Rick’s Picks subscriber put up an offer until others have bid 0.52 or better. _______ UPDATE (5:45 p.m.): Forget about spreading off the puts. Assuming a middling price of 0.65 was paid for them, simply use a stop-loss at 0.49. Our beautifully targeted entry three cents from the top of a 60-cent opening-bar gap should have allowed us to easily spread off the entire risk of our position, since MCD dropped by nearly $1 following the bull-trap opening bar. However, because a heavy convergence of Rick’s Picks bidders pushed the puts we bought into the stratosphere to begin with, and because MCD is getting goosed by the short-squeeze on the broad averages, we’ll set a firm limit on risk and stick with it. ______ UPDATE (October 29, 9:09 p.m.): The position was stopped out for a theoretical loss of $128. We’ll get out of the way of this erstwhile glue horse for now, since its brazen distribution is benefitting from a short-squeeze that has pushed the broad averages sharply higher.
Apple’s gap yesterday through the 100.41 midpoint resistance (see inset) strongly implies that its D sibling at 105.64 will be reached. Although a pullback to the midpoint should be treated as a belated buying opportunity, I wouldn’t suggest chasing the stock higher. That said, the four labeled peaks are tailor-made for the Hidden Pivot trader who can employ the ‘camouflage’ technique for getting long. If you understand why, you should go for it! _______ UPDATE (8:13 p.m.): The broad averages pulled Apple back down to earth yesterday when the stock tried to go opposite weakness that surfaced around mid-session. This runs flatly counter to my speculative idea that AAPL might pull the broad averages higher. That’s still possible, since yesterday’s 104.11 peak fell 53 cents of a rally target that remains valid in theory. However, we’ll eschew speculation for now and simply watch to see whether the 102.44 Hidden Pivot support holds (see inset, a new chart). _______ UPDATE (October 23, 1:59 p.m.): Apple has rebounded sharply today, off a 102.90 correction low to a so-far high of 105.05 that’s 59 cents shy of our target. Most longs should have been exited by now. ______ UPDATE (October 27, 8:07 p.m.): Friday’s high at 105.49 came within 0.15 of the target flagged above. Bulls can continue to hold small long positions for a swing at the fences, but I’d suggest tying your shares to a stop-loss based on a downtrending impulse leg on the 15-minute chart. Currently, that would imply stopping yourself out if an uncorrected fall touches 104.52. _______ UPDATE (October 28, 8:44 p.m.): Still long? Be alert at 107.08, a Hidden Pivot target that looks all but certain to be reached but which could stop the rally cold. You should tighten your trailing stop there in any case. ______ UPDATE (October 29, 9:25 p.m.): The rally has shredded some challenging Hidden Pivots, but let’s see if it can bully its way past the 109.07 target shown. In any case, it is my minimum upside objective for the near term.