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  Jeff Bailey   2/21/02,  10:30:47 PM
Gemstar-TV Guide (GMST) $17.57 -1.23% ... subscriber mentioning something about favorable court ruling and wants opinion on stock.

Hmmm... I've seen this before. P/F chart looks like a triangle pattern forming. Current bearish vertical count is $2, so need some type of "buy signal" to reverse that count. Link

Relative strength is a bit weak vs. the S&P 500 and would read "sell signal, but column of X" Link

Do you know where we've seen this before? How about AOL Time Warner (AOL) not long ago in October/November (red A,B). In December (red c) we actually profiled a strangle here in market monitor near $32 before break lower. Link

Now... it is important to understand that NASDAQ-100 Bullish % ($BPNDX) was very bullish in November/December of last year and above 70% and could be partially responsible for AOL losing its bullishness from the triangle as market risk was high for bulls. Now the NASDAQ-100 bullish % is getting lower at 31% bullish and "bear confirmed." Link

AOL is not part of the NASDAQ-100, but that isn't the main point here. I like to use the NASDAQ-100 as a shorter-term indicator for the market. It's more volatile.

I would do this with GMST at this point. Let's take a look at a May strangle in the May $20 calls (QLFED) $2.25 and the May $15 puts (QLFQC) $1.85

My thinking is this.... looks like a triangle forming. Bull/Bear market, I could care less with a strangle. All I want is some action/volatility.

Get out those books and review Professor Davis' triangle formations.

Bullish triangle profitable 71.4% of the time, 30.9% average gain in 5.4 months.

Bearish triangle profitable 87.5% of the time for average gain of 33.3% in 2.5 months.

Other than a strangle strategy, I have hard time on this one right now and am 50/50. If she's going to $2 then strangle may take care of that. If we get bullish triangle, then vertical count would go bullish.

Remember, right now we've only got 4 columns and we need 5 for bullish/bearish triangle.

AOL was NOT a bullish traingle either because it too only had 4 columns when it broke to the upside at $37.

 
 
  Jeff Bailey   2/21/02,  5:30:11 PM
Cognos Incorporated (COGN) $24.59 -5.2% ... here's another "head" that may be about to turn ($23 would be sell signal). Stock got two upgrades on 12/21/01 at $22.76 (good broker call as it turns out) from Morgan Stanley and DB Alex Brown. I don't think current weakness is "stock specific" but here's another one that has some pretty good gains from the September lows of $12 that could get whacked. Link

Do NOT!!!!! load the boat with lottery plays. If nothing else, we want to monitor some stocks at the head of the snake. I have COGN as a software stock, and would consider shares of MSFT (see 5:01 post) as being in the middle part of the snake right now and a better short/put candidate as it is weaker.

It's interesting to look at the Relative Strength Chart of COGN vs. MSFT and you can clearly see. COGN clearly has outperformed MSFT since early November (red B), but now profits are coming out at a more rapid pace. RS observation gives hint that bulls starting to sell some winners. Link

All in all, this action usually takes place in the latter half or near the end of a decline. This is a time when bears get more aggressive for one last push lower as they leverage gains. They feel perhaps like I do that bulls are now willing to sell their winners so every stock is on the dinner table.

 
 
  Jeff Bailey   2/21/02,  5:17:33 PM
"Heads" are turning As I look at some charts it is very obvious that the MARKET is beginning to sell some winners. This is common when you get to a turning point where the losses that have been held have the bull continuing to hold their losers and they then sell their winners. The "heads are turning" come from the head of the snake, turning lower to see what is pulling at the tail of the snake." The stock doesn't turn by itself, it needs selling and that's exactly what is happening to some winners like STK.

Case in point is Storage Tech (STK) $19.48 -16.89% Link . You don't know how many times in recent days I looked at that March 20 put thinking "boy that was a lottery play, good think we advised to not put a lot of money in it." I do see late news that stock came under pressure after analyst meeting where company remained optimistic, but continued to experience a challenging environment amid tight IT budgets. To me (Jeff Bailey) this is not a revelation, or it shouldn't be to investors. It's been hard to find a computer-related tech company that hasn't said the same. Today's selling most likely brought on by bull with some HUGE profits that has gotten kicked in the head in other holdings.

 
 
  Jeff Bailey   2/21/02,  5:06:22 PM
S&P 500 Bullish % ... Wednesday night's reading was 52.92% and today's action may have some O's added as sell signals most likely were generated. Still a lot of risk to be removed in this part of market. Link

 
 
  Jeff Bailey   2/21/02,  5:01:02 PM
Microsoft (MSFT) $58.05 -3.08% ... stock traded low today of $58.01 and trade at $58 would be double-bottom sell signal. With vertical count of $47, good looking out-the-money March $55 put (MSQOK) offered $1.00 here. Put action at $58, no stop and look to lock gains on trade at $48-$49. Link

Relative strength check versus S&P 500 is weak and would read "sell signal and column of O". Both RS and p/f chart very similar to August of last year. Will also note that MSFT has "habit" of trading vertical counts almost to the $1. Link

On a scale of 1-5 stars, I'd rate this one a 4.5 star.

 
 
  Jeff Bailey   2/21/02,  4:05:06 PM
Pick your rumor for reasons of today's bearish turn for stocks. 1) Rumor of troops in Iraq (denied by U.S.), 2) talk of hedge fund failure 3)reports of helicopter crash in Philippines, 4) large sell program hitting 5) technical breakdown.

Never know and important to always trade with stops and have some shorts at the ready.

 
 
  Jeff Bailey   2/21/02,  3:56:28 PM
We've got a few put players out there still! Jeff, Thanks for the play on STK. Sold 1/2 my position today at support level (my target price). Now have a free play on the other half. You just paid for my annual subscription to OIN. Thanks!

I (Jeff B) don't do a lot of "lottery plays," but every now and then there are some that just seem to have that "look" to them.

 
 
  Austin Passamonte   2/21/02,  3:51:47 PM
I think it's fair to say index put plays were in order this morning, and those who wish to book gains in front of this bell have until 4:15pm EST to do so. Chart signals suggest lower prices are ahead, and Swing Trade model will track open plays into Friday's session.

The trend is indeed our friend, but if sufficient gains are in your account right now, consider locking them in and reentering at another point in time. Nothing wrong with ringing the register when markets favor us!

 
 
  Jeff Bailey   2/21/02,  3:51:40 PM
Storage Tech $19.45 -17% ... I'm not kidding... those puts have gone from about $0.60 from 2:36 note to $1.20 in 90-minutes. Those holding this lottery play may take 1/2 off the table with a 340% gain and let the rest ride.

 
 
  Austin Passamonte   2/21/02,  3:30:33 PM
Indexes sure chopped around there for awhile as the Dow tried to hold above 10,000 level, but no conviction heading into the final hour. Long index puts are taking longer to work that we hoped but are in the green now.

It would have been preferable to short right at resistance this morning instead of predefined entry points listed last night, but they were clipped at the open so that's where we will track from. However, individuals watching charts & pivot points listed in Gameplan section had the opportunity to do better with fine-tuned entries near resistance.

We will track open put plays into Friday, and expect further weakness ahead. At the very least, Wednesday index lows look to be retested soon.

 
 
  Jeff Bailey   2/21/02,  3:04:03 PM
Storage Tech (STK) $20.30 -13% ... will note that Goldman Sachs did upgrade on Jan. 23rd to "Mkt. Outperform" from "Mkt. Perform" with target of $27.

Stock did trade $25.65, but may want to monitor for potential support near $20 just in case Goldy still a bull.

 
 
  Jeff Bailey   2/21/02,  2:58:35 PM
Goodyear Tire (GT) $25.76 +6.4% ... this is stock we talked about in October on 3-box reversal up at $19, with thinking that all the 0% financing at car dealers might have demand building for tires on strong auto sales, but liked the thought that GT might not necessarily have to discount the tires like automakers had to discount their cars. Trade at $25 is double-top buy signal and bullish vertical count now in place at $34. Link

 
 
  Jeff Bailey   2/21/02,  2:45:31 PM
Storage Tech wasn't outlined as a "lottery put" due to our thinking that there was/is something wrong at STK, but was due to weakness in SECTOR or the Disk Drive Index (DDX.X) and thought that the "head of the snake" in STK might turn lower to look back and see what was going on. From here, STK bear needs to see the DDX.X break below its 200-day MA for further success. Link

 
 
  Jeff Bailey   2/21/02,  2:36:00 PM
Storage Technology (STK) $20.90 ... getting downside alert here per "lottery" put play from market monitor on 2/8/02 at 1:57 Link in the STK $20 Puts (STKOD) at $0.25.

Would like to see a "little pullback" that retraces that column of X by about 50% or roughly $17. Link but see that trending higher 200-day MA at $17.20 which would be the ultimate ticket. Won't get greedy if she trades $18 to lock in gains. Link

 
 
  Eric Utley   2/21/02,  1:47:57 PM
The Oil Service Sector (OSX.X) is better by about 4.8 percent today, the day's best performing sector by far. The OSX is bumping against some pretty serious resistance near 90. At that level sits a double-top Link , the 200-dma, and retracement level.

I've been having success trading oil service equities on pullbacks, that's my preferred method of entering these bullish plays. In other words, I don't favor chasing a breakout, but that doesn't make it wrong to use a breakout in the OSX to get long. Just not my style...Anyway, Noble Drilling (NYSE:NE) is one of my favorites in the group. A bullish triangle comes with a print at $34. I'd rather get it on a pullback, where risk is less, but a print at $34 could cause an unwinding to the upside.

I don't see the catalyst in the broader group (OSX.X) other than military action or the potential for increased demand through an improvement in economic conditions. Still, the group trades very well and is where I've been operating with a bullish bias.

 
 
  Eric Utley   2/21/02,  1:37:17 PM
The PMC-Sierra (NASDAQ:PMCS) Straddle/Strangle I profiled what seems like a year ago is finally showing some signs of movement to the downside. Readers are now asking whether to leg out of the put side or close the position altogether.

First, going into any trade, there is a need for a pre-determined exit point. If you want to make 50% from a straddle/strangle, wait for that target to be reached, then exit once it is. Second, legging in and out of a neutral position can enhance gains, but with that positioning comes added risk. Only leg in and out if you're a good enough trader.

With PMCS currently, the stock is starting to show signs of weakness and I would expect further downside. It traded down to $17.50 today, which is close if not at a retracement level -- it was a natural place for the stock to rebound from. The vertical count for PMCS is much lower and growing with each additional O in the current column.

 
 
  Austin Passamonte   2/21/02,  1:00:12 PM
As hindsight has proven, the Dow climbs higher as NDX languishes. Swing Trade model will hold current stops on open put plays and go flat if hit with no further plans. Markets are chopping sideways to higher right now, charts are all over the map and no predictable action exists.

I may be scarce in here today as I deal with some family issues from 1,800 miles away. Teen daughter!!!

 
 
  Jeff Bailey   2/21/02,  12:13:03 PM
3-box reversal Subscriber using his workbook on p/f chart wondering where you count the 3-box reversal from as it relates to 11:00 Update for Biotech HOLDRS (BBH).

The $116 level was the last entry on the chart of the BBH ($2 box scale) so I would count, 1=$118, 2=$120, 3=$122. So... 3-box to be able to chart X's would need a trade at $122. So far today, BBH has traded high of $121.38, so NO 3-box reversal yet. In essence, no meaningfull move at this point worth charting. Will make a point that even $121.99 is not $122.00. What if institution is looking to trade some terrible news it feels is coming and buys a bunch of puts at $121.99 as trigger? Link

"He's crazy" you say. Nobody sets sell's at $$.99. Think again... remember when we were watching the potential spread-quadruple top in Intel (INTC) at $33 back in November? Somebody sold at $32.99 on November 27th, and sat there for 5 more day's until buyers finally ate through that supply of willing seller just below $33. Link and bar chart close up of that time . Link (Nov. 1 - Dec. 5)

 
 
  Jeff Bailey   2/21/02,  11:43:34 AM
Fannie Mae (FNM) $75.78 -2% ... subscriber thinking about a buy and write $75 covered call.

My thought is that you would want to see a lower 10-year YIELD ($TNX.X) to help provide catalyst for move higher.

Stock is at a support level on bar chart, but we've noted in past that this one tends to give pretty good "inside day" setups from which to trade.

I'd be patient and look for such a setup to help with entry point and try and get some things in bulls favor for such a trade.

Then, if long, would think about a "buy, run, write" scenario. Where a bull would buy, let stock try and run from inside day (see 01/10/02 to 01/24/02) as prime example of very good inside day run higher, then write the covered call when you get the break below a previou day's low. Here's a blown up chart and start is January 1st, so you can get idea of what to perhaps be looking for as it relates to January 9th (7th bar from left) inside day. Link

 
 
  Eric Utley   2/21/02,  11:22:40 AM
Attention Our E-mail Server is down, which is why you haven't received any intraday e-mails yet. We're working to correct the problem.

 
 
  Jeff Bailey   2/21/02,  11:05:06 AM
Sorry bears I didn't see that GNSS halt from earlier, but what a debacle that could have been in a market where everyone is jittery over financials. Those still holding puts/short from that triple-bottom and break of bullish support had high hopes. Link

Not to worry... first sign of strength would be trade at $51 and bearish vertical count still to $25.

 
 
  Jeff Bailey   2/21/02,  11:00:49 AM
Genesis Micro (GNSS) $40.33 -5.46% ... stock was halted earlier, but now trading. Was halted for news pending and GNSS then announced that Form 15 filed yesterday by its filing agent was filed inadvertenlty and should have been filed for a Nova Scotia company that was a predecessor.

Form 15 is filed by a company as a notice that it is terminating registration, or as a notice of its suspension of the duty to file period financial reports.

 
 
  Eric Utley   2/21/02,  10:58:03 AM
I'm really seeing some interesting developments in the Nasdaq today...

When we first tried that bullish trade in the biotechs, which ended quite well I might add, we talked about downside risk shifting away from the biotechs and into other sectors of the Nasdaq, such as semiconductors and software. We're seeing that dynamic unfold today. The Biotech Sector (BTK.X) is really gaining some good relative strength, while the downside risk has clearly shifted to the Semiconductor Sector (SOX.X) and Software Sector (SOX.X) to a lesser extent.

It's very interesting how the current risk dynamic in the Nasdaq is so very similar to what we observed last fall.

 
 
  Austin Passamonte   2/21/02,  10:55:00 AM
Index markets got a bit choppy in the early going, but all intraday chart signals are all rolling over in bearish sequential fashion. Might have to hold put plays longer than one session this time around, but looks like lower prices are in store from here.

The Dow clings to green as "flight to quality" defensive stocks find buyers, but the S&Ps and NDX indexes red and bleeding more tell the broader market's tale.

 
 
  Eric Utley   2/21/02,  10:40:17 AM
The CIENA (NASDAQ:CIEN) news is helping along the PMC-Sierra (NASDAQ:PMCS) triangle that Bailey and I have been writing about. I show a retracement level around $17.25 in PMCS. The level could act as support in the short-term. Alternatively, a breakdown below that level could shift risk lower, possibly down to the $15.50 level.

Recently pointed out traingle in PMCS that turned "bearish triangle" Link at $19.50.

 
 
  Jeff Bailey   2/21/02,  10:29:04 AM
Goldman Sachs on Cable stocks Goldman positive on cable stocks and likes Charter Communications (CHTR) $10.09 +6.7% Link and Adelphia Communications (ADLAC) $20.48 +4.48% Link

Will make note here that the secondary in ADLAC that we've discussed before from January 16th was done with Salomon Smith Barney.

 
 
  Jeff Bailey   2/21/02,  10:16:39 AM
Airline Index (XAL.X) $96 +2.48% ... getting upside alert here at $96. This is double-top buy signal on p/f chart at $2 box. Link

Looks to have a "habit" of creating little bear traps. Buy signal here turns vertical count back to bullish at $118, which correlates well with bearish resistance trend.

 
 
  Jeff Bailey   2/21/02,  10:13:39 AM
Leading Economic Indicators ... came in at +0.6% for January and has the diffusion index above 50 for the first time in 21 months. Ken Goldstein, an economist at the Conference Board which reports this number saying "today's number is very positive and suggests gathering of economic momentum."

The leading index rose a revised 1.3% in December.

The leading indicators are designed to help forecast turning points in the economy. In the past six months, six of the 10 indicators in the leading index have risen, the first time in 21 months that more than half of the indicators were positive. In those six months, the index is up 2.2%.

 
 
  Jeff Bailey   2/21/02,  10:03:51 AM
Continental Airlines (CAL) $32 +3.72% ... getting alert to upside here at $32. This is double-top buy signal and break of bearish resistanct trend. Link

We will make note of yesterday's upside alert on shares of Southwest Airlines (LUV) $21.68 +2.45% Link and spread-quadruple top that we thought bullish.

Both are airline stocks.

 
 
  Jeff Bailey   2/21/02,  9:59:58 AM
Analysis of NASDAQ-100 Bullish % Somebody pulled the "buy" trigger yesterday afternoon on some short-covering just as things looked to be breaking down.

Bears need to be somewhat cautious in here and keep stops tight. We pointed out the "bearish triangle" and sell signal in Altera (NASDAQ:ALTR) $21.14 -4.77% yesterday at $21 Link and it is worth noting that this stock did not create a new sell signal on its p/f chart that would have taken away a "buy signal". This stock was already on a sell signal from December. Vertical count remains bearish on ALTR to $12.

It becomes important for bears to focus their activity on stocks with weak relative strength, where some vertical counts give the needed downside to keep other shorts interested.

 
 
  Austin Passamonte   2/21/02,  9:58:22 AM
Looks like consumer sentiment numbers may have leaked out here as index prices break morning lows. Either that, or someone is just hitting the exit before news breaks. All intraday charts are poised for bearish reversals and put plays tracked from our Swing Trade Gameplan levels have an excellent chance to work.

 
 
  Jeff Bailey   2/21/02,  9:50:34 AM
Bullish % Yesterday's early session action has the NASDAQ-100 Bullish % ($BPNDX) back in Bear Confirmed status and has the traffic light back to red for most stocks in this market.

What this action did do however is now set up a lower level where this market could turn Bull Confirmed from a relatively low level with a reading of 40%. Link

 
 
  Jeff Bailey   2/21/02,  9:40:14 AM
Intel (INTC) $30.46 -3.00% ... stock down after Bank of America cuts estimates due to weakening visibility. BofA says that checks with motherboard vendors and channel partners reveal that visibility into the month of March and beyond has weakened. The formerly tight supply of processors also began to loosen towards the end of January, which could lead to weaker pricing. BofA believes INTC's current quarter in on track, but that June quarter consensus too high and trims estimates for June quarter to $0.12 a share from $0.14 a share and lowering September quarter to $0.16 from $0.18.

 
 
  Austin Passamonte   2/21/02,  9:36:40 AM
Numerous Readers Write: "Slip Slidin' Away" It was Paul Simon. Bought Mar 98 DJX put yesterday at 4:00pm est. Let 'em slide!

I was more of a KISS / Aroesmith fan myself, but I've heard of that other guy [grin]. Also went short at 1099.00 after yesterday's close and like what I see in the charts from here.

 
 
  Jeff Bailey   2/21/02,  9:31:03 AM
Ciena (CIEN) $8.70 ... stock getting hit to downside at $8.10 (-6.8%) in pre-market after reporting first-quarter net loss of $70.6 million, or 22 cents a share. The loss was narrower than expected, but the company warned that second-quarter revenue would come in at $110 million, which was well below consensus looking for revenues of $148.5 million.

The p/f chart of CIEN remains bearish after giving a sell signal and triple-bottom in January at $13.50. The current vertical count is bearish to $0.50.

 
 
  Austin Passamonte   2/21/02,  8:44:26 AM
Great Morning!

"Slip-Slidin' Away" goes the title to that old song (forgot the singer) and could describe the pre-market futures this morning as well. They rose in the post-market, slipped in the pre-market ahead of jobless claims and are fluttering sideways from there. With Consumer Sentiment reports out at 10:00am EST today, we will probably see muted action in the market until then.

 
 

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