Friday, November 21, 2014

New record highs for the broad averages seemed all but a foregone conclusion at Thursday's close, so perhaps we should guard against the unexpected: weakness on a Friday! That would be very unexpected indeed, and it would probably take some earth-shattering news to bring it about.  Regardless, I've provided a Hidden Pivot rally target for the E-Mini S&Ps that can serve bulls and bears alike. We'll also be looking for a pop in Alibaba, having purchased a few expiring out-of-the-money calls before yesterday's close to keep ourselves interested in the week's finale.

Based on my chat room post late in Thursday's session, subscribers were able to stake out some small 'Jackpot Bets,' buying expiring calls at the 112 and 113 strikes for as little, respectively, as 0.21 and 0.15.  The latter options traded for as little as 0.10 yesterday before rocketing to 1.00 when Bahh-Bahh found traction after the opening and soared $5 in the space of an hour. It can, and often does, perform similar feats on a given day, and that's why I would rather be long a few out-of-the-money calls for cheap on expiration day than short them. The goal of these jackpot bets, which we ordinarily initiate on Friday mornings in the first hour, is to cash out half of the options in the early going for twice what we've paid for them, assuming the opportunity arises. If successful, that leaves us with a risk-free chance to make perhaps 5 to 10 times our money.  In practice, subscribers have done this or even better numerous times, and even when things did not go our way they were able to do no worse than break even. I've included a chart that suggests that, from a purely visual standpoint, a run-up to as high as 114.80 on Friday is hardly unlikely. We don't need that to happen to make a nice score, however, since even if BABA rallies just $1.50 or so in the early going, there will likely be an opportunity to 'double out' on half of our positions.  If the stock opens lower on Friday there could still be a chance to get a jackpot bet down. However, I'd suggest doing so with options of a lower strike purchased for perhaps 0.20 or less.  Don't bet more than you are comfortable losing, since this gambit is highly speculative.

With a week of tedious chop drawing to a close, the futures look torqued for another thrust, although not a full-blown wilding spree, at the bell on Thursday. Although they've yet to push past a 2055.25 target that I'd drum-rolled here a couple of weeks ago, the fact that they've been head-butting this Hidden Pivot since Tuesday without giving up much ground on pullbacks suggests buyers are raring to go. We shall see.  Easy progress above yesterday's high would indicate a push at least to the 2064.00 target shown. This would presumably be a downpayment on a more significant target at 2115.50 flagged here earlier.  Night owls will likely have the best chance to get aboard with relatively little risk, particularly if they look for their entry opportunities in the form of ABC rally patterns on charts of 15-minute degree or less.