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Heavy volume on triple-witching Friday

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Institutions are hard at work this triple-witching Friday as volume breaks the 1 billion shares traded at both the NYSE and NASDAQ. Both the NYSE Composite ($NYA.X) 458 +0.13% and the NASDAQ Composite (COMPX) 1,226 +0.78% trade modestly to the upside.

Breadth is evenly distributed at the big board and the NASDAQ at 15:15. However, we may be seeing some end of quarter balancing as it relates to institutional holdings when it comes to "out with the old" and "in with the new, as the big board shows 31 stocks hitting new highs versus 152 stocks trading new lows. NASDAQ has 12 stocks hitting new highs versus 164 stocks at new lows. View here is some modest bullishness from stocks with good relative strength, while those that have been lacking relative strength, do to more institutional selling continue to get flushed lower.

As mentioned in OptionInvestor.com's 11:00 AM EST Update, the Utility Index (UTY.X) 245 -3.18% seeks out its lows of the session after Duke Energy's (NYSE:DUK) $19.80 -7.56% warned on earnings. Trader and investors may be monitoring shares of the electric utility in the coming weeks for a break below the $17.50 level as a violation of the July lows. In recent month, bearish traders have had some downside success from similar technicals in the utility group with names like Aquila (NYSE:ILA) $4.02 -6.29%, Williams (NYSE:WMB) $2.30 (unch), El Paso (NYSE:EP) $12.78 -8.64% and Dynegy (NYSE:DYN) $1.39 +1.45.

In today's market monitor at OptionInvestor.com, I like an early bearish play for 1/2 position in the Duke Energy (DUK) January $20 puts (DUKMD), which are currently offered $2.85.

Duke Energy (DUK) - $1 box

I think aggressive bears can ease into a bearish trade in Duke Energy (DUK) at current levels, but limit risk by establishing just 1/4 or 1/2 bearish positions. I liked the Jan $20 puts at $3.50 as I think risk for a short in the underlying stock is to $25 near-term. As such, the $3.50 per contract (100 shares) limits a bearish trader's risk from the current $20 trading level if risk to a stop is assessed to $25. It also gives the bearish trader some time to try and let supply work against the stock, which appears to be outstripping demand. More "conservative bears" may wait for the stock to generate a sell signal on its point and figure chart.

Jeff Bailey
Senior Market Technician
Option Investor


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