Stock futures are pointing to a lower open for stocks this morning as we are currently seeing S&P 500 futures trade down 2.5 points, NASDAQ futures are off 10 and Dow futures are lower by 32 points. Fair value for the S&P 500 today is $3.02. Computers are set for program buying at $4.86 and set for selling at $1.28. Don't forget that today is option expiration for May options!
Let the 10-year YIELD help guide you
Today, I think the 10-year YIELD could help some traders with their buy/sell trading decisions. Today is option expiration for stocks and sometimes things can get wild. Often times the action in the bond market can help calm a traders nerves and tell him/her if the action they are seeing in their stock is "economic" in nature or perhaps just some manipulation taking place around strike price prices. It's tough to tell for sure, but sometimes the bond market can help you in your decision.
10-year YIELD chart - last six months
I'm just like you. I "worry" about different stocks or options just like the next guy. Today I'm worried about PremierMarkets.com profiled bullish trade in Qualcomm (NASDAQ:QCOM) from May 16th at $63. Today, I'll be using the 10- year YIELD and the stock's trading to make a hold/sell decision. Here's how I'm going to use YIELD from the 10-year. On a break below the 5.382% YIELD level (from the relative high on 01/25) I will lean toward the sell side on stocks that I have profit at risk in. You can see from the above chart that we have moved our retracement bracket recently to reflect the higher YIELD this bond now has. Notice how the retracement bracket levels "fit" very closely to how this bond YIELD has actually been trading. Then note how our 100% level is very close to another relative high dating back to the far left of the chart. I believe this is something more than a coincidence, and many institutional trading desks are using this bond's YIELD to influence their trading activities, just as I would be doing today with QCOM.
It's not so much Qualcomm as it is account management
On May 16th, PremierMarkets.com thought a trader should be looking long the underlying stock of QCOM on a break higher at $63. I still feel that a trader "willing to take some heat" to $54.75 will do fine with this stock. However, a short-term trader might not want to take the "heat" of a pullback and might not want to see any type of profit turn into a loss, even if it might only be for couple of weeks, and then may not appreciate being stopped out at our stated stop of $54.75. I'm writing this Thursday evening, so I have no idea what QCOM will do today. I just like to lay out a plan before each trading session.
As I said before. A 10-year YIELD break below the 5.382% turns be somewhat bearish for stocks short-term (normal pullback after a nice two day rally type of thing for stocks). If that's the case, I'm a realist and understand that QCOM could pullback to $65 or even $60 in a day's time.
As Editor of PremierMarkets.com, I want every trade to show a positive result for traders. That's one of my goals. The other is to educate subscribers on how different parts of the markets interact and can influence each other.
If there's one thing I'm critical of in shares of QCOM as it relates to yesterdays trading was what took place in the last three hours of trading. Up until the final tick, I just couldn't make a call on the stock for traders in the "hot list" as this darned stock closed right at $66.34. Only upon doing some technical analysis late into the evening did I find what could be a short-term "hitch" for a short-term trader that is trading bullish.
Qualcomm Chart - 60-minute interval
We used the point/figure chart along with the bar chart to set up our trading of QCOM and here's what I was looking at yesterday during the trading session. Things were going fantastic as the stock broke above a relative high dating back to 03/06/01 and that session's high of $66.46 (03/06/01 does not show on the chart as I can't fit that much data on screen). Notice how that relative high came into play on 04/19/01 and then again yesterday in the last three hours of trading. To me, yesterday's close below the last two relative highs is an indication short-term that there is still a seller near the $66.50 level and he/she hasn't gone away. PremierMarkets.com will continue to follow QCOM as a bullish position, but a short-term/swing trader investor might want to sell 1/2 of their position should for some profits if bond YIELDS fall this morning.