Perhaps we'll have a chance to get short at 23.70 after all. If the stock rallies to within five cents of that number -- a promising Hidden Pivot resistance -- plan on buying eight January 22.50 puts. I estimate that they'll be trading for around 0.53 then, but allow for a range of 0.51 to 0.56 (paying no more). I've included a snapshot of an option calculator into which I've plugged a 22 volatility that yields a theoretically fair price for our puts. According to Tradestation, that's the actual implied volatility right now for the January 22.50 puts, although far-out-of-the moneys well below that strike are trading at four times that level. What this implies is that we'll get great leverage by shorting puts of a lower strike against our position if GE falls after hitting the 23.70 target. _______ UPDATE (October 23, 3 a.m. EDT): The stock got sacked for a 4% loss on Friday, but I'll let the trading recommendation stand for now, since Monday's commentary raises the prospect of AAPL turning the market around this week. _______ UPDATE (11:31 p.m. EDT): We'll put aside thoughts of shorting into strength at the moment, since this stock has come down hard with all the others in recent days.
GE
GE – General Electric (Last:22.44)
– Posted in: Current Touts Rick's PicksA recent story in the WSJ described how shifting its 85,000 employees to a high-deductible medical plan has had a negative impact on one of GE's core businesses: medical imaging. Employees are getting far fewer scans because their out-of-pocket costs are so much higher, with a material effect on imaging-equipment sales. But not on the stock, evidently, since it is up 50% since January. We can attempt to short it nonetheless because the rally is approaching a fetching Hidden Pivot target at 23.70. Accordingly, and just for the hell of it, I'll suggest getting short by buying four Nov 23 puts if the stock gets within 2 cents of the target. Stop yourself out if GE subsequently trades for 23.82 or more. I'll update my guidance if this order fills, so check back intraday if warranted. ______ UPDATE (September 28, 1:20 a.m. EDT): I'm still in love with the idea of shorting the stock at 23.70 target, notwithstanding the viciousness of yesterday's short squeeze. There are some changes in my instructions, however: 1) Raise the stop-loss to 24.20; and, 2) buy Nov 24 puts instead of Nov 23 puts. My guess is that they'll be selling for around 0.80 with GE at or near the target. ________ UPDATE (October 11, 3:29 a.m. EDT): Like a whole bunch of other important stocks that have turned lower without having quite reached their respective Hidden Pivot rally targets, GE's latest rally has failed 52 cents shy of where we'd hoped to short the bejeezus out of it. The bearish implications would be compounded with a print over the next two days beneath the 22.07 low recorded on September 26.
