Wednesday, April 17, 2013

Johnson & Johnson is a Dow 30 stock that has helped pull the blue chip average higher for nearly a year. However, lest we begin to think that its by-now parabolic upthrust can continue indefinitely, I've selected a chart for your perusal that shows a compelling obstacle not far above, at 85.95.  July puts, with an implied volatility of around 15, look cheap to me, so let's use them to get short if and when the target is closely approached. Specifically, I'll recommend buying four July 82.50 puts with the stock trading within 10 cents of the target. You should stop yourself out if the options subsequently trade for 0.20 less than you paid. ______ UPDATE (6:59 p.m. EDT): The institutional lunatic fringe may yet drive this portfolio favorite high enough to get us short.  JNJ was one of the few stocks that managed to swim against the bearish tide yesterday, corroborating our upbeat outlook for the near term. _______ UPDATE (April 22, 3:15 a.m. EDT): A minor but nonetheless fetching rally target at 85.73 has come into focus (see inset), giving us yet another reason to get short not far above.  Specifically, you should buy four July 82.50 puts with the stock trading between the two targets given above. We'll risk $100 theoretical on this trade, implying you should stop yourself out if the puts trade for 0.25 less than you paid for them._______ UPDATE (April 24, 12:11 p.m. EDT): A nasty short squeeze on the opening bar hit 85.74, a penny above our target, before sellers pounded the stock back down to a so-far low of 84.75.  For tracking purposes, I'll record four puts purchased for 1.23, midway between the 1.25 opening and the 1.20 intraday low. Take a partial profit now, selling two of the puts (or

The financial press has headlined crude's weakness of late, but seen in the perspective of the weekly chart the futures have merely range-traded. Oil quotes have not come down nearly as hard as gold, suggesting they could prove stubborn to the downside. If you trade this commodity or are interested in it, I'd suggest monitoring the pattern shown, since a rebound from my hypothetical p midpoint could be telegraphing a bullish resurgence.

We looked at this vehicle during yesterday's impromptu trading session and found reasons to like the long side of the trade.  For your guidance, I've reproduced a 5-minute chart that shows exactly the kind of opportunity that camouflageurs should look for.  The tight spacing between the two labeled peaks -- one of them internal, the other external -- is ideal for the creation of the very subtle impulse legs that we prefer for purposes of initiating trades. _______ UPDATE (6:55 p.m. EDT):  There were several entry opportunities overnight similar to the one shown, and all would have worked.  Things went nut-so when the regular session opened, however, suggesting that night owls may have an easier time of it trading this vehicle.

Gold's so far feeble bounce from Monday's extremely oversold lows does not bode well for the short-term. However, it seems possible at least that a merely mild relapse will fully correct the 2008-11 bull market, clearing the way for a decent rally.  This is implied in the chart (see inset), which shows that a 50% retracement of the bull move would equate to $1301.  I had originally put this benchmark at $1341, but an alert chat-roomer prompted me to take a second look. The new chart reflects a more careful melding of monthly contracts and a 2008 low at $681 rather than the original $732.  Technically speaking, this could give gold a reprieve, allowing a somewhat lower low without seriously breaching what is ostensibly a major support.  Were it to fail, however, a further fall to the 0.618 Fibonacci support would imply a bottom at $1146, rather than the $1188 given here earlier.