Do you ever feel like Murphy is following you around? Every action you take has a Murphy's Law consequence. If it were not for bad luck you would have no luck at all.
I added a bear call spread on United Continental (UAL) on Wednesday night because of rising oil prices. WTI hit $62.50 on Wednesday in what appeared to be a breakout as the result of the first decline in crude inventories in nearly 20 weeks. Murphy's Law struck again and crude prices dropped back to $58.50 intraday to send all the transport stocks soaring. We were stopped out on the UAL play but I am putting in a potential reload in the plays tonight.
The short squeeze today on falling treasury yields and the breakdown in the euro currency was lackluster but it did produce rebounds in quite a few stocks. The indexes remain well under prior resistance after the gains stopped around noon. There was a little selling at the close.
Traders were probably cleaning up positions ahead of Friday's Nonfarm Payroll report. The current consensus is for a gain of about 230,000 jobs. However, the ADP report on Wednesday disappointed with only +169,000 jobs. There are quite a few analysts that believe Friday's report will miss estimates and possibly by a large margin.
In theory a big miss pushes the fed rate hikes farther into the future and would be market positive. A big gain and the June meeting is suddenly more likely to see a hike and that would be market negative.
Of course those assumptions assume traders actually care about the Fed at this point. The way the market has been trading recently it is hard to really make that assumption. The Fed has been trying to talk up rates for months so this could be the most telegraphed rate hike in history when it finally appears. It may already be priced into the market and all this drama is simply noise.
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Current Position Changes
Stop Loss Updates
Check the graphic above for any new stop losses in bright yellow. We need to always be prepared for an unexpected decline.
UAL - United Continental (Stopped)
UAL rebounded +5% or $3.08 on the sharp drop in oil prices. This stopped us out of our short call. While I believe oil prices will rebound and the airlines will resume their decline there is no guarantee that will happen. I want to reenter this play if UAL begins to decline again but only if we see a decline. I am going to put a trigger on reentering the short side. If it never declines to that point and continues higher then our long call should profit.
With a UAL trade at $61.50
Sell short June $65 call, currently $2.18, stop loss $62.75
Closed short June $65 call entry $1.40, exit $2.06, -.66 loss
Retain long June $67.50 call, entry $1.05, currently 1.35, no stop.
See UAL trade above
Existing Play Recommendations
Links to original play recommendation
$OVX - Oil Volatility Index (Bear Call Spread)
RCL - Royal Caribbean (Bear Call Spread)
GDX - Gold Miner ETF (Bear Call Spread)
JKS - JinkoSolar (Bull Put Spread)
BBBY - Bed Bath & Beyond (Bear Call Spread)
FB - Facebook (Bear Call Spread)
X - US Steel (Bear Call Spread)
WYNN - Wynn Resorts (Bear Call Spread)
UAL - United Continental (Bear Call Spread)
LNG - Cheniere Energy (Bear Call Spread)
FSLR - First Solar (Bear Call Spread)
Prices Quoted in Newsletter
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