Friday, December 13, 2013

The Yellow Flag Is Out!

– Posted in: Free Rick's Picks

The E-Mini S&P has generated the first bearish impulse that we have  seen in a very long while on the daily chart. This does not necessarily spell doom, but it certainly warrants yellow flags around the track. Check out the update to today's S&P tout for further details.

ESH14 – March E-Mini S&P (Last:1767.75)

– Posted in: Current Touts Rick's Picks

Yesterday's stop-loss on a bottom-fishing recommendation missed nailing the intraday low by a single tick. The three-tick stop I'd recommended was quite tight, to be sure -- but not too tight, considering how pretty the pattern that produced the target was.  A couple of chat-room denizens who had judiciously left a little more room reported catching a ride anyway -- and it could have been a good one, since the subsequent rally was an 11-pointer. A relapse has brought the futures down to within inches of the day's low, which itself created such a nasty looking impulse leg that I'm inclined to think it's a bluff.  I wasn't looking for the stock market to Santa-up until next week, but perhaps yesterday's fright-mask performance wig augurs an upturn sooner than that. _______ UPDATE (December 13, 12:01 a.m.): I hadn't noticed this earlier, but the futures have generated the first bearish impulse leg we've seen on the daily chart in a long while. This argues for caution, at least until a second down-leg (aka C-D) tells us, via price action near the Hidden Pivot midpoint, how serious the threat is.

NFLX – Netflix (Last:367.52)

– Posted in: Current Touts Free Rick's Picks

Weak when the market was strong a short while back, NFLX has rallied sharply this week as the Dow has plummeted. Go figure. We hold a bull call spread expiring next Friday that we'd nearly given up for dead, and although it is still well out of the money, it has started to perk up.  Yesterday we did some pruning, turning our eight December 400-410 spreads into a ratio spread. We did this by selling half of the December 400s, so that we are now long four of them against eight short 410s. Do the math and you'll see that our position will be profitable between $400 and around $415 at expiration. It would start to lose money above that; however, with the stock currently trading around $373, we should be so fortunate as to have to worry about the 410s biting us in the ass. Long before that would happen, our long 400s would spring to life and give us a good chance to exit profitably before the options expire.  The one caveat is that NFLX could explode for 50 points in a single day, turning our 'front spread' (i.e., negative-gamma) position lethal.  To deal with this risk, we'll plan on buying a few Dec 415 calls when they are offered for nearly nothing. They were fetching around 0.25 at yesterday's close, but their value will sink quickly if there's even a hint of a stall in NFLX's steep rally today or Monday. Incidentally, our bull spread was part of an ostensible 'straddle' balanced by DIA put options.  We folded the cost of those now-worthless puts into the NFLX spread, but also took partial profits in NFLX on the way up, so that our all-in sost has been reduced to just $190.  Whenever we buy options, we treat out-of-the-money