Thursday, March 7, 2013

Wake-Up Call in Gold

– Posted in: Free Rick's Picks

A post by 'Harry' in the chat room prompted me to take a closer look at gold, with the result that I've flagged a potential bull trade for night-owls and camouflageurs.  Gold's recent price action had lulled me to sleep, but this set-up could be worth wake-up call.

DXY – NYBOT Dollar Index (Last:82.57)

– Posted in: Current Touts Free Rick's Picks

In the chat room yesterday, someone mentioned that Shadowstats' John Williams is looking for a selloff in the dollar.  From a Hidden Pivot standpoint, however, there is no reason to expect this. The daily chart (see inset) shows how very robust the rally from early February's lows has been, with each new thrust exceeding a prior 'external' peak. Although it's possible this  dynamic is about to end with the failure of DXY to push above the labeled 82.88 peak on the next burst, this looks unlikely. If that burst does indeed surpass the peak, it would signal an almost certain test of last July's 84.10 summit. Perhaps Williams has been seduced by the fine looking head-and-shoulder pattern begun in October 2011?  I don't put much store in such patterns, however, because they are everywhere you look for them.  We shall see. But if you're positioning yourself for a reversal of the long-term bullish trend, I wouldn't bet too heavily on it.  Click here to sample Rick's touts free for a week.

Why We Hate the Market but Love Google

– Posted in: Commentary for the Week of March 8 Free

One of Rick’s Picks’ specialties is introducing relative novices to seemingly sophisticated option strategies that work. If you don’t think you’re capable of doing “butterfly spreads” in an $800 stock like Google, click here for a free seven-day pass that will allow you to talk to some Rick’s Picks subscribers, including some options rookies, who have done it.  We can tell you right now, however, that multi-sided positions such as butterflies, verticals and calendars have a far better chance of succeeding than simply buying puts or calls, as retail customers are wont to do. Here’s the straight skinny: In the forty or so years we’ve been trading options, we’ve yet to come across anyone who has made money consistently by buying options on a bullish or bearish hunch.  Because options are so knowledgeably priced, that’s akin to betting against the house. And any bettor who thinks he’s smarter than his bookie is bound to come out a loser. The way around it is to always sell puts or calls against options you have bought. That is what we did about five weeks ago in Google when the stock was trading for around $750. Specifically, we told subscribers to buy the March 840-850-860 butterfly spread four times for 0.20 ($20). This implied shorting two 850 calls while simultaneously buying an 840 and an 860. Our total risk, including commissions, was about $100.  Although we are perennially bearish on the stock market, that doesn’t mean we always bet against it. Most of the time, we prefer to take long and short positions at the same time. In this case our bullish play in Google was balanced by a put calendar spread in the Diamonds that gives us cheap leverage if the market falls between now and June. Certainly not impossible. Our counterplay