Wednesday, May 9, 2012

A 28.810 target is by now an old friend -- make that, enemy -- and there would seem to be little chance that the futures will somehow avoid getting there in the day(s) ahead.  If they close below that number, however, keep 26.940 in mind as a logical next stop.  That Hidden Pivot is equivalent to the one at 1534.30 that I've identified in today's tout for June Gold.  One more number to watch is 28.420, for which the 30-minute-chart coordinates are A=30.235 (5/7), B=29.135 and C=29.520. _______ UPDATE (10:06 a.m. EDT):  The Hidden Pivot at 28.810 evinced zero support. Given that it was as clear a target as I have yet to discover, this development is quite bearish. We'll continue to give Silver the benefit of the doubt nonetheless, and to bottom-fish whenever the odds look good. However, today's action suggests that at a minimum, the futures will come down to test December's 26.500 low.

You've seen the technical evidence for more weakness to at least 1574.30, or perhaps 1564.70. Now, consider an equally compelling pattern that projects to 1534.30 -- which is where I would expect this vehicle to head if 1564.70 is exceeded on a closing basis by more than $1 or intraday by more than $2.

We hold two June 65 calls (or a multiple thereof) after initially acquiring four of them within pennies of yesterday's hysterical, V-shaped bottom. Profit-taking during the sharp rally that ensued has lowered our cost basis to 0.84.  This trade was designed so that even option novices could take a crack at it.  Now, with any luck, you'll have an opportunity to turn it into a riskless vertical bull spread -- riskless in this case meaning a position that will produce a profit of at least $200 per spread if QQQ is trading anywhere above 67 come June expiration, but no financial loss even if it should fall to zero. Accordingly, I'll recommend offering June 67 calls short for 0.88, day order. Offer one for each June 65 that you are long. _______ UPDATE (May 10, 12:25 a.m.): Continue to offer June 67 calls short at 0.88 as above, good-till-canceled.  _______ UPDATE (May 11, 2:47 a.m.): We almost never take straddle risks, since it amounts to doubling down on a bet against the house. But maybe just this once: Buy three June 62 puts (or three for every two calls you hold) for  0.94 or better.  I have purposely advised a bid above yesterday's settlement price because I want you to buy these puts -- although not at any price -- even if QQQ opens weak.

Bulls shouldn't get their hopes too high, since yesterday's earnest-looking rebound came in the wake of a 1342.50 low that exceeded a clear Hidden Pivot target by four points. That's bearish, so traders should position from the short side Tuesday night. Most immediately, that could entail, for example,  finding on the 1-minute chart a southbound abc from the midpoint or D rally target of the still-developing pattern shown. More easily accomplished, perhaps, would be a straight short at the 'x' of a very minor downtrend.

Rick’s Picks occasionally offers option trades suited to novices and experienced traders alike. Typically, these gambits go against major trends, since our proprietary Hidden Pivot System is especially useful for nailing turning points very precisely.  Yesterday, for instance, we recommended buying QQQ June 65 calls if this proxy for the Nasdaq-100 index fell to within a dime of a 63.53 price target. That implied a wicked plunge from  the previous day’s settlement price of 64.76. In the actual event, panicky sellers obliged by pounding the bejeezus out of QQQ on Tuesday. It opened 43 cents lower, at 64.33, on its way to an intraday bottom at 63.48 – just a nickel from the low we’d projected.  This allowed us to buy June 65 calls for as little as 0.98; however, we used an official price of 1.03, since that was the worst fill reported by a subscriber in the Rick’s Picks chat room. Later in the day, the calls rebounded to 1.42 as QQQ trampolined from our downside target. (In the feverish promotion-speak of the guru world, the paper profit on the calls worked out to “AN ANNUALIZED GAIN of 13,800%!!!!!!!!!!”). As QQQ screamed higher, we sent out a bulletin telling subscribers to take profits on half the position. Some reported fills as fat as 1.36, but we used a more conservative 1.25, effectively reducing the cost basis of our remaining position to 0.84. Our #1 Trading Rule Now it’ll be hard to lose, right?  In fact, stranger things have happened. And that’s why we always recommend taking at least a small partial profit early in a trade if possible, whether in stocks, options or futures.  Of the three vehicles, options are arguably the toughest game to beat, especially for the retail customer. We say that after having traded puts