July 2013

Unaccountable forces have driven a $15 push higher late Tuesday night, and although the so-far apex of the move has fallen a tad shy of the 1339.00 benchmark I'd said would generate a bullish spark, the actual high at 1338.40 was good enough to create a moderate impulse leg on the lesser charts. Since the move has yet to break above any true 'external' peaks, however, the one at 1338.90 (see chart)  remains usable for camouflage purposes. That would be especially true if the rally that exceeds it fails to clear the slightly higher peak at 1340.50 before pulling back in b-c fashion. If that is in fact what occurs, you shouldn't hesitate to seize the opportunity with a buy-stop entry.

We now see exactly what kind of idiotic press releases are helping DaBoyz goose this stock into outer space. Yesterday, the planted, ostentatiously timely story-of-the-day concerned Facebook's supposed intention to sell TV ads on their site for $2.5 million per day.  Think about it: revenues approaching $1B a year from just one source -- presumably for an ad that could pop up in one's face a thousand times without making even the slightest impression. Facebook might just as easily have claimed a cure for cancer.  Anyway, the upshot for the stock is that it is bound at least for the 40.53 rally target shown (see inset), implying that FB is still a bull trade here (albeit a 'camo' short from 40.53).  It will be difficult to find camouflage cover for buying such an advanced rally, but I'd suggest zooming down to the two-minute chart to find an entry signal that can be leveraged. Coming off minor lows, such patterns seem to be reaching their respective p midpoints consistently. This implies that traders stand a good chance of losing little or nothing even on trades that don't work. _______ UPDATE (August 1 at 1:02 p.m.):  If you'd monitored Wednesday's swoon diligently on the lesser charts, the first camo buying opportunity that arose would have gotten you aboard at 36.64 (two-minute chart, 3:43 p.m. on July 31). Moreover, you would still be long a round lot this morning. Since there were no reports in the chat room of anyone having done this trade or anything like it, I have not established a tracking posittion.  The 40.53 target remains viable as a minimum upside objective, but I wouldn't advise shorting it unless you've racked up some gains from the long side.

Yes, I know: The whole month of July has felt like a lazy consolidation in the broad averages.  Even so, and lest we be lulled, I've provided a rationale for getting short from these levels using DIA put spreads. See today's DJIA tout for further details.

Let's try to buy the August 140-145 call spread four times for 1.50, good for the week. This order should be worked as long as the stock is trading 134.00 or higher. Our rally objective for the underlying stock is the 142.47 target of the pattern shown.  I may suggest turning the spread into a butterfly if the stock rallies after we've got the 'vertical' on. That would entail selling Sep 145-150 call spreads against those already owned. _______ UPDATE (August 1):  There was a report in the chat room of a 1.50 fill on the spread, but it would appear the trade was done with TSLA below $134.  I'll establish tracking guidance nonetheless if two more traders report fills with the stock above $134. _______ UPDATE (August 5):  If you're not already aboard you can forget it, since the little dervish is already halfway to our target.  Camouflageurs may still be able to get some mileage out of the move, since we at least know where bulls are taking this stock.

The broad averages have spent most of July screwing the pooch.  Although the shallow feints south over that time might look like a tedious consolidation on the intraday charts, there's an equal chance that it is actually a bearish distribution. I say this because all of the sideways scuddling has occurred just shy of the rally target of the large ABC pattern shown. That is bearish on its face. Under the circumstances, we should look for shorting opportunities at these levels, since the Dow is positioned to fall without warning to 15363 (see inset) if it breaches that number's sibling midpoint support at 15462.  Specifically, I'll suggest bidding 0.12 for 32 DIA Sep 140-135 put spreads, good till canceled. If you can leg it on for 0.10 or less, double the position size to 64. Please report any fills in the chat room so that I can establish a tracking position for your further guidance. ______ UPDATE (July 31 at 11:10 p.m.):  Based on chat room discussion yesterday, some of you have been working on the spread, including at least one trader who filled (via legging it on) at 0.12.  Let's hear from a few more of you before I designate this one as an 'official' position. _______ UPDATE (August 1 at 1:265 p.m. EDT):  A good rule of thumb for options spreaders is that if the spread is not difficult to buy, then we should not want to buy it.  With DIA trading sharply higher today, I'm still enthused about buying put spreads on this possible hoax-of-a-rally. However, I'm going to suggest putting a contingency on the order nonetheless. Accordingly, you should lower the bid to 0.11 if DIA is trading 155.80 or higher, but below 156.20.  Above that last price, you should bid 0.10 -- for 64 spreads.

Even though I've treated the stock market's ability to remain aloft as disappointing Q2 earnings rolled in as a sign of underlying strength, we shouldn't ignore the fact that the S&Ps have begun to roll over from within inches of a major Hidden Pivot target at 1708.75 (see inset). We'll continue to look for shorting opportunities in real time, so stay closely tuned to the chat room if you're interested. Click here to learn how you can reduce entry risk by using the 'camouflage' trading technique.

Good thing we didn't know how bad AMZN's earnings would be, or we'd have been tempted to load up on put options the day before. Bears got their necks wrung by Friday's classic short-squeeze, and although it may be scant consolation to them now, the high of the move came within 33 cents of a very important (and clear) Hidden Pivot target. If the stock hangs aloft Monday, we may try to leg into some out-of-the-money put spreads using the 260, or possibly 250 strike. Stay tuned to the chat room if you're eager to play. ______ UPDATE (July 30, 1:08 a.m. EDT): Zero interest in this gambit, it would seem.  This is the last call for any positions initiated near yesterday's highs.

If sellers dominate as the week begins, expect the futures to fall to the midpoint support at 1250.40, at least (see inset).  This Hidden Pivot could prove crucial to the near-term picture, since its decisive breach -- or still worse, a close below it -- would augur more downside to 1152.10.  Notice as well that this last number discounts only the lowermost of a series of point 'A' peaks; if the highest of them (1423.30) were to be used, the implied D target would be 1104.80.  Alternatively, bulls would be solidly back in command if they can muster a push above 1376.00 this week. Camouflage traders looking for an easy way to climb aboard should use peaks recorded last Wednesday, Thursday and Friday on the hourly chart for leverage. ________ UPDATE (July 30, 12: 20 a.m. EDT):  Yesterday's snoozefest did nothing to alter my forecast.  However, we can lower the bar for bulls by using a 1338.90 peak made on July 26 (60-min at 3:00 a.m.) as the number they'll need to beat to register a pulse.

The stock market's ability to withstand an onslaught of lousy Q2 earnings over the last two weeks has been most impressive and would seem to imply that bulls will be raring to go when the clouds blow over.  Even so, we'll be looking to get short this week since the S&P 500, for one, is just shy of an important rally target. For details, check out today's E-Mini S&P tout.