Tuesday, August 21, 2012

Big Blue the Company is doing just fine thank you, putting out enough service contracts to keep them busy, busy, busy until Armageddon probably. So why do its shares look so flaccid compared with AAPL? Maybe it's the prosaic nature of the business they're in, installing plumbing and software for a global Fortune 5000. AAPL investors, on the other hand, can still dream big dreams -- the conquest of television, for one.  IBM's virtue is that it is less likely to stumble. Which stock would you rather own for the long haul? There's no correct answer.  From a technical standpoint, IBM shares will be underperforming AAPL even if they surge to the 205.10 target of the pattern shown. Still, that would do no worse than leave the stock cruising comfortably at 37,000 feet.  Not quite a sure thing, but better than any just about any other stock we could recommend for safety and the long haul.

Stocks were eerily calm early Tuesday morning -- like the glassy darkness, if you will, of the North Atlantic that famous night.  It's a bull market all right, but it's scary just the same. And not just to us permabears.  U.S. markets routinely greet the opening bell with so much lightness, pluck and, in short bursts, animal ferocity, that one could almost overlook the fact that the rally's institutional sponsors are -- just like you and me -- scared shitless by it.  With stocks making higher highs on most days, just as they did in the summer of 1929, even the optimists must be finding it increasingly difficult to believe we're headed into such very good times as the broad averages would seem to be predicting.

There seems to be little interest among subscribers in trading this stock, perhaps because it takes many thousands of dollars just to mess around with far-out-of-the-money options.  Although spread-trading them can reduce the risk almost to zero, it's not easy to do so because the stock moves around so much. I'll continue to track AAPL nonetheless, since it is the most important and reliable bellwether for the stock market as a whole; but also, as you may have surmised by now, because nailing the highs and lows of big moves within $1.00 or less is as easy as shooting fish in a barrel.  Henceforth, you can use my overnight and intraday Hidden Pivot targets and midpoints as you please, but I will refrain from giving specific trading advice unless there should arise a rare opportunity to offer a trade that nearly anyone can do. _______ UPDATE (11:42 a.m. EDT):  I was evidently mistaken about their being little interest in trading this stock, since I've heard so far from four subscribers this morning who did the spread at prices ranging from 13.60 to 14.05.  I'll use a nice, round 14.00 as the official price, and eight lots as the quantity.  For now, do nothing further, but stay tuned.  The goal is to roll into the Dec-Nov put spread before the short Octobers expire on October 19. Ideally, we would cover the puts we are short for bupkus while shorting the November puts for big bucks. If AAPL were to drop $8-$12 in the days ahead, however, we might try to "butterfly" our position by buying far-out-of-the-money call spreads.  Stay tuned. _______ UPDATE (12:57 a.m. EDT):  Because AAPL is selling off hard, let's add to our spread, shorting four Sep 615 puts for 6.10 or better. They are currently 6.25 bid.  If

I'm providing tracking guidance for four contracts shorted yesterday at 1417.75, since subscribers reported fills at that price, a Hidden Pivot midpoint resistance that had been noted in Monday's ES tout. Assuming two contracts were covered at 1410.00 based on an instruction sent out intraday, the effective cost basis for the two that remain is 1424.75. For now, they should be tied to a stop-loss at 1417.50, day order, but with an o-c-o (one-cancels-other) order to cover one at 1405.25.  Despite this trading position, my bias remain bullish, with a 1480.50 target.  Night owls (possibly trading 'against the box') can use a 1412.25 bid, stop 1411.50, to bottom-fish the pattern shown. If it fills, I'll provide tracking guidance. _______ UPDATE (11:32 a.m. EDT):  We covered the short for a paper profit of $360 per contract. Getting long at 1411.25 proved impossible, however, since the futures went no lower than 1413.75 overnight before getting short-squeezed on the opening to a so-far high of 1424.75.