Friday, September 7, 2012

We're offering eight December 45 calls short for 0.78, the price we paid earlier for a like number of December 40 calls.  If we get our price it will leave us with eight vertical bull spreads that could produce a $500 profit each with no possibility of a loss. The stock appeared bound for 35.93 yesterday when it stalled in heavy chop.  That's the midpoint resistance of the pattern shown, but if it's exceeded bulls would be telegraphing more upside to at least 36.55, its 'D' sibling.  I estimate that it will take a bit more than that -- 36.90, based on a theoretical model -- to get us filled on the short Dec 45s. _______ UPDATE (10:26 a.m. EDT):  This morning's zesty pop brought SLW to within four cents of our 36.55 target, so a consolidation would be appropriate. Options volatility took a beating as a result of the rally, and it would now appear that the stock will need to hit 37.60 to get us short Dec 45 calls @ 0.78.  Promisingly, the first major resistance lies at 37.86 in the form of a trendline on the weekly chart that picks up two price points: last September's  42.50 high, and a subsequent peak in March at 40.36.  _______UPDATE (September 13, 1:14 p.m. EDT):  The SLW Dec 45 calls traded moments ago for 0.78 as QE3 news spiked the stock to a so-far high of 37.67. Subscribers who followed my advice should now hold a $5 vertical bull spread eight times that will yield a profit of $4000 if SLW rises to $45 or higher come December. There is no possibility of a loss on this position, even if the stock were to fall to zero.

Yesterday's brutally choppy rally propelled the futures slightly past the 1714.60 target given here, leaving another at 1734.30 outstanding.  Because the point 'C' low of the bull pattern lies all the way down at 1647.10, our rally target is likely to remain valid despite a selloff early Friday morning that had all but erased Thursday's promising gains. For purposes of bottom-fishing your way aboard, there were no promising correction targets as of around 3 a.m. EDT (see inset) to use for camouflage. Under the circumstances, the best option may be to jump on the first uptrending abc that occurs on the three-minute chart.  _______ UPDATE (10:20 a.m. EDT):  The first such uptrend would have gotten you aboard at 1698.50 around 8:30 a.m. (A=1697.20 at 8:15 a.m.) This one required snap reflexes, however, and so I won't establish a tracking position unless two chat-roomers report a fill.  The subsequent push past 1734.30 is of course bullish going forward, and it doesn't hurt that today's move alone has notched yet two more 'externals' on the daily chart. Short-term targeting above 1734.30 is a little muddy, but if we slide 'A' down to July 12's 1559.50 low, we get 1766.90 as our next rally objective.

Over the last two weeks, we've constructed an elaborate hedge that consists of eight Dec-Oct 620 put spreads @ 14.00; four short Sep 615 puts @ 6.20; and long two Oct-Sep 700 call spreads @ 10.00.  It leaves us ever-so-slightly frontspread and presumably comfortable if AAPL makes its way toward 700 between now and expiration Friday in two weeks. A decline would work for us as well, since it would likely add more value to our put spread than we would lose on the call spread.  Meanwhile, and fortunately, the September 615 puts we shorted @ 6.20 look like goners, meaning the entire $2480 we received for them will be ours to keep. That would partially offset the premium we paid for our ten calendar spreads.  For now, sit tight. ______ UPDATE (September 11, 12:33 a.m. EDT): Bid 0.50, good-till-canceled, to cover the four September 615 puts we are short. _______ UPDATE (September 13, 1:00 p.m. EDT):  The September 615 puts opened at 0.37, so we'll consider the position closed with a theoretical/actual profit of about $2300 after commissions. Imputing this sum to the eight Dec-Oct 620 put spreads will effectively lower the cost basis to 11.10. We also hold two Oct-Sep 700 call spreads for 10.00 that are currently worth around 11.50. They have the potential to go to around 22.00 by next Friday's expiration, although realizing full value when we close out the spreads could be tricky.

1470.00, here we come!  After hitting a 1432.25 midpoint pivot I'd drum-rolled in an update here yesterday, the futures have vibrated within a two--point range for nearly ten hours .  Strictly speaking, buyers will have to get past that number to be deemed fit for a follow-through to 1470.00. However, they were giving up so little ground overnight that a short-squeeze gap on the opening seemed almost certain. It also seems unlikely to be easily tradable, but I'd suggest a 'timed buy-stop' entry nonetheless if an 'X' opportunity should arise in the opening minutes on a chart of perhaps 3-  or 5-minute degree.  Tightly stopped or camouflage shorts from 1470.00 are encouraged if and when ES gets there, but I wouldn't recommend taking the position home over the weekend. _______ UPDATE (11 a.m. EDT):  Stocks went flat on the opening -- not a bad performance, considering the Obameconomy added just 96,000 jobs in August. The good news is that it makes him even less re-electable despite the news media's shameless full-court press to tilt campaign coverage sharply his way. Click here for information about the upcoming Hidden Pivot Webinar and a $50 coupon.

[In addition to being a Grammy nominated record producer, jazz buff and popular L.A. radio host, our friend Alan Geik, whose thought have been featured here before, holds a masters degree from the London School of Economics and has taught economics in London colleges. In the essay below he explains why the European Union and its central bank will survive the current crisis even if some members are forced to withdraw.  The ship will not be allowed to sink, says Alan, simply because there are too many bureaucrats dependent on the EU for cushy jobs and fat pensions. They will do whatever it takes to hold onto their sinecures, ensuring that the EU itself endures. RA] The countless extra-territorial entities created since the introduction of the euro are now totally reliant on the common currency’s continued existence.  Whenever huge budgets are put on the table and there is little regulation or oversight, there is the inevitable rise of aggressive bureaucracies whose aim is to insure a long stay at the funding trough. So it is in Euroland. This may bring to mind another international agency, the United Nations. However the United Nations, surely one more maze of national and self-interest, pales in relation to the euro-stoked organizations. This is quite remarkable given that the UN has had more than a fifty-year head start perfecting bureaucracy-building; but more about that later. The public face of the Euro Crisis is the entrenched technocrats and foreign ministers hurriedly convening meetings, summits, press conferences and private discussions throughout European capitals. They often imply a high-minded reason for the survival of the euro: a movement toward a unified Europe, a Europe free of boundaries and discord that marked the past several hundred years. However, their more immediate need is to insure a constant inflow of