Wednesday, January 20, 2010

Having waited out our fanciful January 230 calls, Apple now appears hell-bound for the lofty target we'd originally bet on. I'm now looking for a pop to at least 228.69, subject to possible midpoint interference at 216.39.  Camouflage will be tough to come by in the wake of yesterday's 8.47-point short-squeeze, but I'd suggest shorting the target only if you've caught a piece of the rally to it.

Silver is still acting more bullish than Gold, although that doesn't necessarily mean it can go its separate way higher. Regardless, we're stuck with an 18.715 rally target until such time as the target's point 'C' at 18.475  has been exceeded to the downside. For Silver to get in bearish gear with gold, the March contract would need to fall below 18.400 today.

The 1106.90 downside target broached here yesterday is looking increasingly magnetic, along with another at 1111.30 that can be used as a minimum downside target through Thursday.  Alternatively, the futures would still need to hit 1154.00 today or tomorrow to suggest that the tide is about to turn again in bulls' favor.

Against the round lot of stock we hold for 11.01, we shorted a February 29 call yesterday for 0.60 and bought a Feb 24 put for 0.35.   The price we received for the call was less than I'd anticipated, but because it's a covered write, and because have such a large profit built into the position already, the extra dime we did not receive won't make much difference. Now, I'd suggest working the P&L numbers with the stock at various prices on February 19, when the options expire.  As you will see, our gain on the position will increase under a wide variety of circumstances, and if Akamai falls apart we'll be well protected.

The bullish pattern shown in the chart projects to 11048, and although the target isn't so compelling that I'd suggest shorting up there with the usual ultratight stop-loss, it will do just fine as a minimum upside objective.  Its sibling midpoint lies at 10639, implying that an 86-point selloff from here should be viewed as a buying opportunity.  More immediately, however, we should watch for signs of a top at 10739, just a hair above yesterday's high. That's the target of a smaller bullish pattern, and it could prove to be more than just a minor impediment.  If the futures close above it for two consecutive days, though, I'd infer that 11048 had become an odds-on bet.

My expectation of a big stock-market rally in the wake of a Coakley loss appears to have been a step behind Wall Street.  Index futures are down slightly at 10:35 p.m., even though Scott Brown has been declared the winner.  It's a clear case of  "buy the rumor, sell the news," although I can't imagine the selling accelerating overnight, since the news itself, with its implication that a do-nothing balance has been restored to Congress, could not possibly be construed by investors as any worse for America than a filibuster-proof Democratic majority.   In any event, the path of least resistance is bound to be higher, which would put in play an 1164.50 rally target. It's midpoint sibling, a Hidden Pivot resistance at 1145.50, is putting up a fight at the moment, but I doubt that it will be able to resist the bullish tide come morning.

Brown's victory has been acknowledged so early in the evening that it seems likely it will become a blowout by morning. Whatever his margin of victory, it will be a new day on Capitol Hill, for sure.

[Bulletin: As we went to press, Brown has been declared the winner by ABC News, and Coakley has conceded. Today’s commentary can nonetheless stand as is.] There were no voting results to speak of early Tuesday evening, but that didn’t stop pundits from shifting into high gear with speculation about the implications of a Republican win in Massachusetts. The pundits ran with the hypothetical story simply because it was far more interesting than the dog-bites-man drivel that will result if Democrat Martha Coakley bests Scott Brown in the special election to fill Teddy Kennedy’s U.S. Senate seat. As of late Tuesday afternoon, that seemed unlikely to nearly everyone interviewed by the major news networks, with the exception of a Democratic strategist we happened to catch on Fox late in the afternoon. She said the race was a dead heat according to polls conducted Tuesday morning, but this was flatly contradicted by the blowout numbers cited by GOP consultants and pollsters. Earlier in the day, there were clues that Democratic Party stalwarts considered the race a lost cause.  For one, they slandered Coakley as a “bad” candidate. In fact, when Mr. Obama was riding high in the polls, Coakley could have demolished Brown even if it had been revealed during the campaign that she was fired from a job for embezzling to support a heroin habit. Considering what’s at stake for the Democrats here, it took more than a weak candidate to lose this one.  Another sign that the Democrats were bracing for a loss was that Illinois Sen. Dick Durbin trotted out the “nuclear option” if Democrats lose their filibuster-proof majority. ‘Nuclear Option’ The news media seemed to take the nuclear option seriously, but it’s a non-starter as far as we’re concerned. Using this tactic, the House would approve the

After rolling out of our January 5 calls, we hold two February 5s for a 77-cent credit each. That means the worst we can do, even if Kodak falls to zero, is make $154 for each two options held.  Lately, Kodak has been trying very hard to look like hell, and it may keep up this appearance for yet a while longer, since yesterday's low breached a Hidden Pivot support at 5.28 by a burly ten cents. Keep in mind that EK is not falling because of weakness, but because the scumballs who have been brazenly manipulating it higher since early December want to steal some additional shares from widows, orphans and pensioners at lower prices before they goose the stock again.  FYI, it is not intended that this stock be haphazardly accumulated simply because it is on Phil Calderone's short list. Our initial buy was both timely and opportune, but if you missed the boat, you should NOT be trying to make up for lost time. If there is to be any belated buying at all in this stock, it should be done using low-risk Hidden Pivot entries. _______ UPDATE (January 24): This just in, from Phil Calderone: "Anyone who has bought EK on my numerous buy recommendations over the last few months should now SELL it. I don't like how it has been acting and the chart is much less positive than it has been. Downside risk is possible to 4."   Note from Rick:  From a Hidden Pivot perspective, the stock looks okay, not great.  However, to me at least, it seems mildly bullish that EK's most recent dive failed to take out the 5.05 low from December 13. As a practical matter, we'll simply continue to hold the Feb 5 calls, since they will produce a theoretical profit for us no matter what