Monday, November 12, 2012

The narrow failure of Friday's histrionical upthrusts to exceed an external peak (well to the left at 1739.70, on 10/19) is warning of a possible stall.  To negate the implication of short-term weakness it, let's stipulate that the futures exceed that peak today, along with another 'external' slightly above it at 1740.30.  Following a two-day close above it, the December contract would become an odds-on bet to test supply near 1754, presumably enroute to $1800.

We hold 12 March 30 calls bought for 0.50. Bid 0.25 for 12 more calls on the opening, but reduce it to 0.20, day order, if you're not filled within 10 minutes. My gut feeling is that the selloff from October 24's bull-trap opening is as overdone as the bull-trap short-squeeze was, having reduced the stock's price by 25%.  Concerning the short-term picture, at this point 'structural' supports at 18.80 (10/19) and 17.55 (9/4) will probably be more useful than Hidden Pivots in assessing the likely extent of any further weakness. ______ UPDATE (8:11 p.m. EST):  Traders were advised to buy 12 more calls for 0.25, and now our cost basis is 0.38 for the bunch. Thereafter, the stock lifted off structural support that lay outside the realm of Hidden Pivotry.  The rally projects to 20.86 (15m, A=18.87, B=19.97, C=19.76; see inset), subject to midpoint resistance at 20.31. If that pivot is easily exceeded, 20.86 should be in-the-bag. Meanwhile, ya gotta like the way the stock pushed easily past a bunch of minor 'externals'. _______ UPDATE (November 14, 10:00 p.m. EST): With the broad averages cascading yesterday, Silver Wheaton was a pleasurable anomaly -- up more than 12% in the space of just a few hours. It is making further headway in after-hours trading, suggesting that DaBoyz know something we didn't even need to know when we jumped on the March 30 calls. Since we shouldn't look this gift horse in the mouth, and because rare is the day when holders of call premium experience more than two or three consecutive days of anything approaching delight, I'll recommend offering 24 March 33 calls short for 0.50, good-till-canceled. I'll let you work the numbers just so you can see how lovely it will be for us if we can lock in

Via a tracking position,we hold a round lot acquired effectively for $636.  This imputes to our position $1899 in profits realized by traders who took partial gains on an initial purchase of 400 shares where I'd suggested on Friday:  near 656 on 200 shares; and at 659.00 on another 100 shares. For now, I'll suggest using an impulse-leg stop-loss derived from the 15-minute chart. Based on the pattern shown, this would imply exiting on an unpaused drop that exceeds the internal and external lows shown, the lower of which lies at 650.15. This by-the-book stop is relatively tight, considering the theoretical gain we've racked up so far.  If you prefer, you can widen it to suit your taste.  Using the hourly-chart, and impulse-leg stop would trigger on a print beneath a 636.13 low recorded on August 10.  _______ UPDATE (November 20, 8:16 p.m. EST): If you've been using the 15-minute chart to create an impulsive stop, yesterday's bull trap would have popped you out of the position at 666.48 (see inset), yielding a gain over three days of about $3000.   If you are instead holding to an impulsive stop-loss on the hourly chart, the position is still live and your assumed to be swinging for the fence.

For your guidance, I've established a tracking position that leaves us short a single contract with an effective cost basis of 1470.00. To manage risk dynamically, I've suggested an impulse-leg stop-loss that would trigger at 1397.75, based on the pattern shown.  Keep in mind that the upthrust would need to surpass both peaks shown without a 'b-c' correction, but you should exit in any case if the rally exceeds peak #3.