Friday, November 30, 2012

All signs point higher at the moment, with several bullish patterns working in concert to drive the rally. Most ambitious among them is the pattern shown, which projects to 606.08. Its 'p' midpoint lies at 589.17, which implies that yesterday's oscillations around that number are a consolidation -- a tradable one well suited to camouflage tactics.  A move to the target, presumably precisely, is not in doubt because of the way the stock gapped above the midpoint on yesterday's opening. Camouflageurs looking for a way in should zoom down to the 3-minute chart, where a small peak at 592.25 (11:12 a.m. EST Thursday) could prove most useful.  _______ UPDATE (December 2, 6:28 p.m. EST): I've refreshed the chart so that 'camo' traders can see a recent, long entry opportunity in the perspective of the one-minute bars. Theoretical risk here -- i.e., the distance between 'C' and the 'x' entry point -- is 40 cents,  but you could have cut that down significantly by using a 'timed buy-stop' to initiate the trade. This implies getting long at 'x', but sticking with the position only if it is in-the-black within the allotted time -- say, 30 seconds. I should note as well that although this particular trade would have been enticing intraday, the fact that it was signaled with just minutes left in the session on a Friday made it too risky, at least for my taste. Even so, we shouldn't lose sight of the potential reward, a trip on the northbound express to as high as 606.08.

Traders should still be long two dozen March 30-33 call spreads for a 12.5-cent credit. We stand to make as much as $7500 by expiration, but the worst we can do in any case is come away with a $300 gain before commissions. The spread settled yesterday @ 0.82, implying a paper gain so far of $1134.  I'd be inclined to close out the position if we can extract profits of at least $3000 by mid-December, but otherwise we'll let it run, since the factors that have been driving the stock are only just starting to percolate.  Here's what the San Jose Mercury had to say earlier this week: "Facebook's stock surged more than 8 percent Monday, briefly passing the $26 mark for the first time since July, amid signs that Wall Street is regaining some of its lost confidence in the social-networking service's ability to make money."  This is exactly why we jumped on the stock when it was trading 50% lower just two weeks ago. (Note: It ended last week at 28.11, a recovery high.) Since we're sitting so fat, let's fool around with the stock today, shorting the 27.95 target shown with a tight stop-loss. Specifically, you are to offer 400 shares short for 27.93, stop 28.01.  Cover half on a pullback to 27.40, and await further instructions in the chat room and via the subscriber 'E-Mail Notifications' feature (if you are signed up for it).  We are doing this simply for the fun of it, and because our spread position will offset most of any loss. Here's why: Each spread we hold has a delta value of about 13 shares at these levels, making us long the equivalent of about 312 shares. At the 27.95 target, however, because the March 30 calls we are long would

With a closet Marxist in the White House for four more years and the U.S. economy headed into something worse than recession, we should view any significant stock-market rally as a golden opportunity to bet against the house. Under the circumstances, yesterday’s 107-point tumescence in the Dow offered a tempting opening.  Not quite yet, though.  Our coldly mechanical technical indicators say stocks could go at least somewhat higher before they become engorged to the bursting point. Speaking more subjectively, any market-watcher with olfactories could tell you that the broad averages, currently hovering within easy distance of new all-time highs, stink worse than a clam's crotch. Consider the backdrop: taxes on income and investment are about to rise steeply; public spending outside of Washington is imploding; corporate earnings have been deflating since summer; new hiring will be asphyxiated by 2000 pages of Obamacare; and America's drug-induced housing "recovery" is about to breathe its last. That last item has been a source of hope and comfort for the Administration and Wall Street, but why should we, too, be comforted by a story that has been spun by thieves, mountebanks, liars, drop culls, arse bandits and worse? When you consider what went into creating the current real estate blip-let, you start to understand why it cannot go on indefinitely.  Sure, the Fed could continue to monetize mortgage securities at the rate of $40+ billion a month, and to warehouse mountains of worthless paper associated with untold inventories of vacant houses. Unfortunately for the spinmeisters, however, the supply of qualified buyers and re-fi seekers is certain to dry up well ahead of the economy’s impending crash. Heavy Supply Concerning the stock market, look at the Dow chart above and you can almost feel the weight of supply as each distributive rally has struggled harder