Traders Corner   5 comments

The futures are a little strange this morning: Both the Dow and S&P 500 futures are up about 0.5%, while the Nasdaq is down 0.2%. This is clearly the “Apple disappoints” effect, since Apple is a large component of the Nasdaq.

With the FOMC meeting starting today, I would expect markets to be a little quiet. However, the technicals are starting to look like we are approaching a bottom. The McClellan Oscillator is the most obvious, closing yesterday at -54 (-60 is oversold). The last time the MO was this low was in early December: The S&P 500 bottomed out around 1772, before charging up by the end of December to a high of 1849. Both the daily and weekly Williams %R are oversold, and the daily RSI is getting close to oversold at 34 (30 is oversold).

My guess is the markets will bounce tomorrow at whatever the Fed announces. Whether we get a long bounce (bulls return) or short bounce (one or two days) remains to be seen.

The S&P 500 levels to watch today:

UPSIDE: 1790 (January 24th’s low), 1795 (January 27th’s high), 1798 (bottom of the Bollinger Bands), 1812 (50 day moving average), 1815 (January 13th’s low), 1820-1821 (2 data points), 1823 (January 6th’s low), 1826-1832 (8 data points and the 20 day moving average), 1835 (January 17th’s low), 1837-1840 (7 data points), 1843-1847 (7 data points), 1849-1850 (January 21st’s high, December’s high and the all-time high), and 1867 (top of the Bollinger Bands).
LAST CLOSE: 1781.
DOWNSIDE: 1775 (October’s high), 1772 (January 27th’s low), 1767 (December’s low), 1746 (November’s low), 1729 (September’s high), 1709 (August’s high), and 1702 (200 day moving average).

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5 responses to “Traders Corner

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  1. With FB earnings coming up I’d thought it’d be a good idea to have an options lesson to show how you can protect a position, and even initiate a position before earnings and protect yourself.
    Currently the option market is projecting a 10.3% move in the January weeklies. Right now you could buy FB for between 54.95 and 55.10 on my last check.
    You can go out to February 21st expiration and initiate what is called a collar on your position:
    Sell the 60Call @ 1.65
    Buy the 50Put @1.40.

    You are net .20 for the trade and will have a potential profit of $5.20 a share if the stock moves above $60 by expiration and you risk losing $4.80 a share if the stock falls below $50 a share. Of course you can go out to different months and have different p&L numbers. One of the many ways to protect yourself, and these are common strategies used by the big boys every day. This strategy can work on any stock or index, and I believe its been mentioned by w_seattle and myself before. If anyone has questions don’t hesitate to ask.

    Disclosure: I’m long FB through a variety of spreads until the March expiration, and am back to owning a small position.

  2. Quiet day on the board here. I am having a solid day. Really helped by KLIC (one of my largest holdings) being up by almost 10% on better than expected earnings. I am still holding my TWM. Pretty much break even so far, though it has swung around a bit. I will be buying 5 new stocks for my February 1st MFI tranche next Monday. The five expiring stocks are AAPL, GA, STRZA, NUS and CA. They are up a composite 78%. I have eight stocks on watch list for replacements. ATVI, RPXC, SNDK, CSCO, AAPL, WNR, KLAC and GPS.

  3. I sold SPXU at $65.80 and a 0.84% profit. For a double position, that’s a nice profit.

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