IBM

IBM looks ready to hit the skids following the bull-trap high recorded on June 19 at  199.99.  The target of the pattern shown is 178.07, and it looks enticing enough that I'll recommend bottom-fishing there. Accordingly, buy two August 180 calls if and when the stock gets within 15 cents of the target.  Stop yourself out if the IBM trades 177.89 or lower.   _______ UPDATE (2:55 a.m. EDT, July 20):  Big Blue has reversed after having gotten no closer to our downside target than 181.85.  This is not only bullish for IBM, but for the stock market as a whole, since the company is a reliable bellwether.  Bulls could nail it now with a print at 197.21, since that's where an impulse leg would be generated on the daily chart. _______ UPDATE (July 25, 10:23 p.m. EDT):  Instead of creating a confidence-inspiring impulse leg with its most recent upthrust, the stock has suspiciously doubled-topped with an external peak at 196.85 recorded in early July. The ersatz rally pattern that has resulted points to 201.85 with a midpoint resistance at 195.02, but because the point B is sausage (see inset, a new chart), we'll have to take those numbers with a grain of salt.

Last week's dip beneath a 194.84 midpoint implies more weakness is likely, presumably to the 191.42 'D' target of the pattern shown. Using camouflage on the 5-minute chart or less, traders should attempt to short any rally that gets within 5-10 cents of the midpoint.  Bottom-fishing at 'D' is also suggested if you are able to reduce theoretical entry risk to 12 cents or less for each round lot traded. _______ UPDATE (May 31, 12:46 a.m. EDT):  The whoopee cushion price action this week has put into play a lower target at 188.03 that would become a lead-pipe cinch if the stock closes beneath its p sibling at 193.05. _______ UPDATE (June 3, 5:10 p.m. EDT): The low of Friday's nasty selloff came within 57 cents of the 188.03 target flagged above. It remains viable and can be used by Pivoteers for cautious bottom-fishing, but if the hidden support fails we'll be looking at more slippage over the near term to at least 182.36 (240m, A=208.92 on 5/3, and B=193.20.) _______ UPDATE (June 7, 9:59 a.m. EDT):  Off a low of 187.00, Big Blue has launched into a take-no-prisoners short squeeze marked by gap-up openings on the last two days. The bigger picture still looks bearish and will remain so until such time as buyers push this vehicle to 198.30.  For the moment, however, we'll back away.

Rick’s Picks occasionally offers option trades suited to novices and experienced traders alike. Typically, these gambits go against major trends, since our proprietary Hidden Pivot System is especially useful for nailing turning points very precisely.  Yesterday, for instance, we recommended buying QQQ June 65 calls if this proxy for the Nasdaq-100 index fell to within a dime of a 63.53 price target. That implied a wicked plunge from  the previous day’s settlement price of 64.76. In the actual event, panicky sellers obliged by pounding the bejeezus out of QQQ on Tuesday. It opened 43 cents lower, at 64.33, on its way to an intraday bottom at 63.48 – just a nickel from the low we’d projected.  This allowed us to buy June 65 calls for as little as 0.98; however, we used an official price of 1.03, since that was the worst fill reported by a subscriber in the Rick’s Picks chat room. Later in the day, the calls rebounded to 1.42 as QQQ trampolined from our downside target. (In the feverish promotion-speak of the guru world, the paper profit on the calls worked out to “AN ANNUALIZED GAIN of 13,800%!!!!!!!!!!”). As QQQ screamed higher, we sent out a bulletin telling subscribers to take profits on half the position. Some reported fills as fat as 1.36, but we used a more conservative 1.25, effectively reducing the cost basis of our remaining position to 0.84. Our #1 Trading Rule Now it’ll be hard to lose, right?  In fact, stranger things have happened. And that’s why we always recommend taking at least a small partial profit early in a trade if possible, whether in stocks, options or futures.  Of the three vehicles, options are arguably the toughest game to beat, especially for the retail customer. We say that after having traded puts

You gotta give DaBoyz credit for turning stocks around yesterday, since buyers appeared to have taken the day off. Nor was there much bullish energy as the day wore on – only the nervous drum beat of short-covering ahead of the final trading day of Q1.  It was all window dressing, to be sure, and although the Dow Industrials ended the day 20 points higher, the modest gain belied the dark magic that eventually spirited the blue chip average into positive territory.  After being down as much as 93 points early in the session, the Indoos began to inch their way higher around noon.  Of course, most of the gains came during the final hour, as is so often the case. Bears apparently had second thoughts about trusting Friday to be mellow, especially a Friday coinciding with the end of a fiscal quarter. With earnings growth apparently slowing down, will the broad averages continue to waft higher in the weeks ahead?  Perhaps. Whatever your view on the economy, keep in mind that there is no story, even weakening earnings, that cannot be spun bullishly. The optimists would interpret this as meaning companies have hit a wall on profit margins and will soon start hiring to keep up with sales. A darker view would hold that stagnant household incomes and still-falling home prices are about to smother the consumption side of growth. Yes, we too have noticed that credit card teaser rates are back down to 0.0%, sometimes with no origination fee. But the asset growth on which this seductive scam has always thrived is simply not there. ‘Time for Defense’ Meanwhile, not everyone thinks that higher stock prices are baked in the cake for Q2.  “Traders and investors should use Friday, March 30, to get defensive,” read an e-mail we

We have only praise for IBM, a corporate giant that has long shown a knack for doing things right.  Technically, however, the stock's spectacular run faces a potentially daunting challenge not far above in the form of a 220.48 Hidden Pivot resistance, or perhaps at 226.76 if any higher.  Long-term investors should consider covered-writing their shares if Big Blue approaches the target range.  More immediately, with 13 points of short-term upside potential, camouflageurs should look to leverage any subtle opportunities that arise to get long. _______ UPDATE (April 5): Having achieved no higher than 210.69, IBM went bearishly impulsive Wednesday with a gap-down opening on the hourly chart. Not very pretty. The bigger picture is still bullish, but this week's miserable price action should be regarded as a shot across the bow.

We wish Google all possible success in taking on playground bullies Apple and Microsoft in a battle that has crucial implications for the use of patents to stifle competition. Google’s $12.5 billion purchase of cell phone maker Motorola Mobility, its largest acquisition to date, is a shot across the bow of more established competitors who would seek to throttle the search engine giant’s cell phone development and other promising technologies by suing them to death in patent court.  The Wall Street Journal recently detailed how high tech companies have been acquiring every patent they can get their hands on so that they stand a better chance of being predator rather than prey in patent litigation. Lawsuits over patents have become so ubiquitous that they are beginning to supersede innovation itself as the primary means through which high tech companies grow and prosper. In this respect, Google is the new kid on the block in head-to-head competition with firms like Microsoft and Apple that have been around since the 1980s.  As a relative newcomer to the technology scene, the company’s war-chest of patents was practically empty until recently. To play catch-up, Google has been on a tear acquiring patents directly or buying patent-rich firms outright, such as cell phone pioneer Motorola.  In late July, Google bought about a thousand pending and issued patents from IBM to build up its patent ammo. Many of these patents have little to do with the company’s core businesses of search and advertising. One reportedly covers ways of automatically adjusting a clock, and another deals with surface treatments for electrical contacts. In the hands of a company as innovative and aggressive as Google, every little patent helps to thwart other firms that would seek to stifle them. “As things stand today, one of a company’s best

We hold the August 175-170 put spread twice for a 0.05 debit and are also long the 170-175 call spread twice for an effective credit of 0.65 each. We arrived at this position by buying the call spread twice for 1.00 when we already held two August 175 calls. We were able to reshort the August 175 calls later in the day for 1.65, giving us the $5 vertical call spread for a 0.65 CREDIT. We stand to make as much as $1120 in theory if IBM is trading 170 or above at expiration, but no matter where the stock is trading, our minimum theoretical gain would be $990. We've worked hard to time the swings for good prices on all of the options we either bought or sold, so no further action will be required.

We hold the August 175-170 put spread twice for a 0.05 debit -- and now two August 175 calls acquired yesterday for 1.60. They are of little concern, however, since our put spread will only increase in value if a weak IBM causes the calls to fall. For now, offer the put spreads to close for 4.00 with 0.20 of discretion. For the order to fill, the August 170-175 call spread would have to be trading for around 1.00. (Note: If you can buy the call spread at that price, I'd suggest doing so instead of trying to close out the puts. This would effectively leave us with no position in the August 175 calls, but it won't be terribly risky to leave short 170s uncovered for a short while.  In any event, if there are changes to be made, I'll signal via an intraday alert.) _______ UPDATE (4:04 p.m. EDT):  Until I've heard from a few subscribers, I'll tentatively record an opening purchase of two August 170-175 call spreads for 1.00.  This shouldn't have been too difficult, since the spread was do-able for as little as 0.87 when the calls were hitting bottom.  Since we were long two August 175 calls in addition to the puts, we are now long two puts spreads (for a 0.05 debit) and long two August 170 calls. This will allow us to short two August 175 calls without risk, and whatever we receive as premium will be "gravy" on top of the $790 profit we have effectively "locked in" on the put spreads.  Accordingly, and assuming your position matches the one I've detailed, you should short two September 175 calls at will.  They are currently trading for around 1.75.

We hold the August 175-170 put spread twice for a 0.05 debit.  One easy way to "cover" the spread is to buy two offsetting August 170-175 call spreads. Let's start by trying to buy an August 170 call today for $170 or less.  If we're successful, the worst we can do at expiration would be to make $325 per spread, or $650 on the position. This tactic will leave us with two September 175 calls to short if and when the stock rallies.  The premium we receive for them would boost the $325 gain on the spread by the amount of the sale.  You can take 0.15 of discretion on the bid for August 170 calls. ______ UPDATE (3:13 p.m. ): With a Hidden Pivot bottom in sight, I couldn't resist buying some Sep 175 calls even though they only partially hedge our put spreads rather than offset them.  We acquired the calls for 1.60 when IBM was near its so far intraday low of 166.52. They are currently trading for around 2.35, and I'll suggest for now that you do nothing further.