We got short at the top on Friday, but how long will Mr. Market let us enjoy the ride? Our vehicle, QQQ put options, nearly ran off the road on Tuesday when the Dow began the day with a 125-point rally. A pullback in the early going shaved that gain by two-thirds, but by early afternoon bulls were beating on the highs, threatening to send bears into a new round of short-covering. The pessimists got a reprieve, however, when something spooked the market late in the session, sending the Industrial Average into a 225-point dive that left it 66 points lower on the day. It was not a session for the faint-hearted. Still, the outcome boosted the value of our put position, leaving Rick’s Picks subscribers in good shape to try to lock in a profit no matter what the stock market does as 2011 draws to an unpredictable close. » Read the full article
I’m tracking the purchase of some Jan 134 calls yesterday in SPY — a first step in legging on the 134-137-140 butterfly. SPY is falling too hard for me to be comfortable, but we’ll stick with the position nonetheless, since it would give us reason to root for a rally for a rare change.
We hold two Jan 54 puts and two Jan 53 puts with a profit-adjusted cost basis of, respectively, 0.76 and 0.57. I’d suggested shorting December 54 and 53 monthly puts against them for the same price, but I’ll now recommend instead that you short January calls three strikes below what you own for the same price or higher. Thus, if you hold eight January 54 puts for 0.76, you should try to short eight January 51 puts against them for at least 0.76. I estimate that the Cubes would need to fall to around 54.80 (Note: I’ve raised this number) within the next week or so to get the offer filled. Our current, minimum downside objective is 54.87, a Hidden Pivot midpoint. _______ UPDATE (10:42 a.m. EST): I am recommending that you complete the spread immediately by hitting the 0.69 bid or the 0.54 bid in, respectively, Jan 51 puts or Jan 50 puts. Once you’ve completed the spread(s) as suggested, this reverse-Santa Rally position will offer great odds, since, although either spread will produce a profit of $300 if Santa drops dead (so to speak), the most we can lose in theory, commissions aside, is $7 on each Jan 54-51 put spread and $3 on each Jan 53-50 put spread. _______ FURTHER UPDATE (1:24 p.m. EST): The Cubes fell a bit lower after the trading alert was disseminated above and in the chat room, and it would therefore have been possible to short either the Jan 51 puts or the Jan 50 puts for somewhat more than we paid for the long side of our position. Officially, however, I will record a short sale at the prices suggested above. That will give a cost basis of 0.07 ($7) for the Jan 54-51 puts spread, and 0.03 $3.00) for the Jan 53-Jan 50 put spread. Thus, in theory — and almost surely in practice, the most we can lose, based on two spreads at either pair of strikes, is, respectively, $14 or $6. The potential gain would be $600 for either position, predicated on the QQQs trading $50 or lower come January 20.
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We’ll soon see whether bears have the guts, composure and good sense to let their profit run, since the futures have gotten within an inch of the 1972.00 correction target shown. As always, a decisive move through such a clear Hidden Pivot support would imply there is selling power remaining to be spent. In this case, however, the Sunday night Sleazeballs have opened the E-Minis with a 13-point air pocket that suggests they’re worried. That’s a pretty brazen heist, but it also reflect the reality that every point of it was needed to completely exhaust sellers ahead of an equally brazen run-up. The logical place to short this manipulation is near the 1984.75 midpoint pivot (p) shown. Night owls should use camouflage or a mechanical stop to accomplish this. The latter implies 5.00 points of entry risk, predicated on 15 points of downside potential. For the record, I remain short this vehicle in my BlueFin account from near the all-time high, having stood pat during Thursday’s nasty short squeeze. _______ UPDATE (11:24 p.m. EDT): The corresponding target, basis the December contract, is 1962.50. It will leave DaBoyz with a little more room if they need to take ‘er down a second time to dry up sellers ahead of another short squeeze. The short noted above would therefore be from p=1977.00. _______ UPDATE (10:28 a.m.): If you shorted 1977.00 as I suggested, the trade would have produced a profit of as much as $375 per contract, since the futures dove 7.50 points from an opening-bar high this morning at 1978.00. They are ratcheting higher at the moment, bears quite evidently lacking in guts, composure and good sense, but we at least came away with the best trade of the day so far.
When a stock or an index takes a wicked dive, it often occurs after the particular vehicle has marginally exceeded some prior, significant peak. ‘Everyone’ turns bullish on the breakout, including bears prepared to cover on a hair-trigger signal, and that sets up the haymaker. Notice in the accompanying chart, however, that the record high recorded by the Dow on September 4 has led to no such plunge. The high exceeded July’s record peak by 10 points, and that should have been enough to get bulls’ — and bears’ — juices flowing. Instead, we’ve seen only a moderate pullback since then, leaving bears very much on the hook. We could still see a collapse from these levels, particularly if there is unsettling news. But for the time being, bears shouldn’t get their hopes too high. We are short the Diamonds via some out-of-the-money put options just in case, but we may have to reshort if DIA breaks out to new highs. (Note: This tout is being written before Thursday’s close, since I will be away from the office later today.)
An alert chat-room denizen spotted the target shown, and it’s a jim-dandy. Pivoteers will notice that the point ‘A’ low seems to be positioned in the middle of nowhere. In fact, it is at 244, the low of the 1987 Crash. The remaining two coordinates are so clear as to leave little doubt about the importance of the resulting 2028.44 Hidden Pivot target. So far, the S&Ps have gotten as high as 2011.17 — close enough for us to infer that a MAJOR top may already be in. If so, we are covered via DIA puts that I suggested buying and which are still attractive (see tout for details). As I noted in the chat room, it is inconceivable to me that the stock market will NOT make a top of at least tradable importance very near the target, so you should position accordingly. ______ UPDATE (Sep 9, 7:56 p.m.): There are more exchange vehicles tracking the S&P 500 that one can count, but depending on which you use, the Hidden Pivot target given above could be as low as 2018.04. If so, that would mean that the so-far high at 2011.77 came even closer to fulfilling a price objective that had been 27 years in coming. Our trading bias should therefore be bearish, with wider-than-usual-stops for any short positions taken. See today’s E-Mini S&P tout if you want a precise way to gauge the bear’s strength at any point in time. _______ UPDATE (September 15, 12:43 a.m. EDT): So far, so good — even if progress to the downside has been labored. The INX appears bound for the 1982.23 target of (on the hourly chart) A=2007.51 (9/5): B=1982.99 (9/10); C=1997.65 (9/11). The current correction up to (and slightly past) the 1985.29 midpoint pivot is therefore short-able if via camouflage.
I first touted Snipp Interactive back in January, when it was trading around 0.15. Although the stock subsequently fell to a dime, it has since rallied sharply, settling at 0.2562 yesterday. This is one of my favorite stocks, and I came away from a conference call with its CEO, Atul Sabharwal, eager to sing their praises. During that call, I hit Atul with my best idea, a sweepstakes-type promotion, but he was already three steps ahead of me, able to cite, for one, New York State’s rules and costs for exactly the type of marketing scheme I’d suggested.
Full disclosure: I hold 100,000 shares plus warrants to purchase another 50,000 shares. But I hope that won’t discourage you from performing your own due diligence, since you are likely to be as impressed as I was when you find out what the company has been up to. For me, at least, Snipp (OTC: SNIPF) perfectly satisfies Peter Lynch’s rule that investors favor companies whose strengths and methods they can understand. Snipp does interactive marketing that allows clients to track results in real time. The results have been sufficiently impressive that the company has been attracting blue chip clients with little difficulty. Read more about SNIPP by clicking here.
From a technical standpoint, although the stock’s chart history is thin, it’s possible to project a near-term rally target of 0.2730. A tenet of Hidden Pivot analysis is that an easy move through such targeted resistance implies there is unspent buying power percolating beneath the surface. This is not a “hot tip;” indeed, Snipp’s story does not lend itself to the kind of hubris that will result in a $10 billion IPO. But it is an aggressive and imaginative pioneer in a rapidly developing niche, and its CEO has the kind of imagination, intelligence and energy that inspires confidence.
Tesla’s strong rally has turned the Oct 3/Sep 5 calendar spread into a solid winner. The spread is currently trading on a bid/asked of 4.50/5.07. This means subscribers who bought the spread for as little as $1.00 last week could have quintupled their stake. The most paid for it would have been about 1.54. In any case, I’ll suggest offering half of the eight spreads to close today for 4.70. We’ll plan on rolling what’s left on Friday by covering (buying) back the September 5 300 calls we’re short and shorting the Sep 12 300 calls at the same time. ______ UPDATE (10:40 p.m. EDT): The stock’s push to an intraday high at 291.42 made the spread an easy sale for $5.00+, so I’ll consider the order filled. Now, roll the four spreads that remain into the October 3 /September 12 calendar as detailed above. _______ UPDATE (Sep 7, 10:31 p.m.): The midway price on the spread intraday was 2.30. Imputing the premium to the four October 3/September 12 calendar spreads we now hold would zero out the initial cost of 1.54 and add 0.76 to the real-time value of the spread. We’ll plan on rolling the spread again on Friday by selling the September 19/September 12 call spread (and thereby covering the short Sep 12 300s), but for now do nothing further. _______ UPDATE (Sep 15, 12:54 a.m.): I’ll use a 0.37 price, midway between the intraday high and low, as the spread price unless I hear from someone in the chat room who did better or worse. Imputing this new premium income to our Nov 22 / Sep 20 spread gives us a CREDIT cost basis of 1.13, for a guaranteed minimum profit on the position of $452. That would be in addition to whatever the Nov 22 calls fetch when we exit them.