Downtrending ABC patterns have overshot their targets, while rallies have failed to reach theirs. You can just feel it in your bones that a spectacular plunge lies somewhere down the road for this vehicle, which could be used as a proxy for the delusions, greed and stupidity of investors. In their desperate search for yield, many seem to have forgotten why high-yield bonds are called junk. However, we also know that playing directional hunches with put options is about as rewarding as betting the Cubs are going to the Series…someday. My gut is saying, “Jump on a few puts anyway” — and you can do so in a small way if you’re feeling itchy. Officially, however, we’ll look to get in at the top of a rally, even a minor one, so that we’ll have a better chance of legging into riskless vertical put spreads rather than simply shooting from the hip. At the moment, it would seem JNK has a little more upside before buyers seven-out, but you should stay tuned! _______ UPDATE (November 11, 8:56 p.m.): We can use the 40.81 target to get short (see inset, a new chart), bidding 0.56 for eight Dec 20 41 puts, good through Friday. So we don’t miss a major reversal from the 40.43 midpoint resistance, I’ll also recommend offering 400 shares of stock short at 40.39, stop 40.46. _______UPDATE (November 13, 6:45 p.m.): Oh well. Looks like this vehicle is on its way down to 39.85 — the D target, on the 60-minute chart, associated with A=40.48 on 10/31. You can try bottom-fishing there however you please, but if we’re going to use puts eventually to get short, it will only be into strength that we initiate the trade. _______ UPDATE (November 14, 11:10 p.m.): JNK fell to a low of 39.84 on Friday — a penny from my target. If you bottom-fished a position to carry over the weekend, please let me know in the chat room so that I can establish tracking guidance.
