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  Jeff Bailey   5/30/02,  10:14:27 PM
Michaels Stores (MIK) $38.50 -2.85% ... reported Q1 earnings of $0.29 a share, $0.09 bettern than consensus. Sales increased 15% to $603.2 million (consensus $598.3 million). Expects May same-store sales to increase 6% "at the very high end of our previous guidance," the company added.

This may be a stock to add to a watch list. Prior to recent sell signal (today at $38), point/figure chart was quite bullish with a vertical count of $65.50. One might see how recent market declines could have had some bulls taking profits ahead of earnings. Will set an alert at $43, which would be triple-top. Will look back at $23 and see why $43 might be a level to watch. Link

 
 
  Jeff Bailey   5/30/02,  10:04:08 PM
Dollar Tree (DLTR) to replace Adelphia Comm. in NASDAQ-100 Dollar Tree Link will replace Adelphia Link in the NASDAQ-100 (NDX.X) Link when ADLAE is delisted on June 3rd.

 
 
  Jeff Bailey   5/30/02,  9:55:56 PM
Palm Inc. (PALM) $2.21 -4.78% ... in post-market, company warned on revenues, citing "market conditions deteriorated compared to both the year-ago quarter and recent months. Link

Shares of recently profiled Research in Motion (NASDAQ:RIMM) $14.65 -2.2% seeing some after-hours weakness at $14.34 on this news. Had profiled the RIMM December 15 puts (RULXC) on May 23rd near $2.60. Link

Disclosure... I currently hold bearish positions in RIMM.

 
 
  Jim Brown   5/30/02,  6:04:16 PM
Pivot Trade Wrap (What is this?) Link

Volatility But No Fear The Dow traded in a 140 point range intraday and it was not all in one direction. Two major drops and two major rebounds pushed the Dow from positive territory to strong support at 9800 and back into positive just before the close. Still there were no big winners. This was simply another step in the march toward the summer doldrums. While the swing was interesting to watch the VIX remained out of play with an intraday range of less than a point. There is simply no fear in the markets. Some say the bulls have already resigned themselves to a retest of at least the January lows (9529)

A critical point was made today in my opinion. Art Cashin, a well-respected floor trader on the NYSE, said the mood on the floor before the open was somber. The talk among the market makers was a consensus to take the market down to support at 9800 (the May-7th low) and stop the waiting. If a retest of that low is what everyone is waiting for then let's make it happen and get back to trading as usual. They tried at the open but buyers stepped in during the WTC ceremony. Either bulls were patriotic or bears were busy watching it on TV but the markets rebounded from the early dip and returned to positive territory. At 10:45 another attempt began which ended in a climax dip at 1:21 to 9802. Mission accomplished! Let the buying begin. It did begin but it was weak and without conviction. It was like traders felt compelled to buy but they were not happy about it. There was no giant short covering rally. There was no positive advance/decline numbers and new lows still beat new highs 198:179 for the second day in a row. Despite the bounce there was no joy on the floor as the markets struggled at the close.

The direction for tomorrow could be questionable. The Dow closed right below 9922 support at 9913. That support, now broken, should become resistance. Considering there is already resistance at 9940-9960 the Dow will have trouble moving up from here without serious conviction from buyers. The PALM warning after the close probably will not help. The Nasdaq closed right at support now turned resistance at 1632 and with the PALM news probably will trend lower on Friday. The S&P is the same story, third verse. It closed just under support now turned resistance at 1067. All of this technical jargon does not mean the markets cannot rally on Friday but to do that will take a lot of positive sentiment that was absent from the markets today despite the bounce off strong support. Should that support be tested again the outcome may not be as clear. See you at 9:15!

 
 
  Jeff Bailey   5/30/02,  5:08:30 PM
Dave & Busters (DAB) $10.59 +2.31% ... to be acquired for $12 per share. Under the terms of the agreement, which have been unanimously approved by the company's Board of Directors, an investors group will promptly commence a cash tender offer to acquire all of the outstanding shares of DAB common stock at a price of $12.00 per share. The total transaction value is approximately $255 million. Link

We never know for sure, but if stock opens up under $11 tomorrow morning, stock trader could buy stock and most likely get $12 under a cash deal.

 
 
  Jeff Bailey   5/30/02,  4:43:49 PM
Semiconductor Index (SOX.X) 480.52 +0.08% ... as minor as it was, this is first positive close for SOX in 8 sessions. Near-term risk for bears under short-covering scenario would be the 200-day MA up at 525. Link

Point and figure bullish support trend still in play as support and today's action and reversal into the close makes you wonder. Link

Mirror image of SOX is Intel (INTC) $27.42 +0.55%. Link

 
 
  Jim Brown   5/30/02,  4:02:32 PM
Hi Jim, Is there any econ report tomorrow?
Yes, there is a bunch. The Q1 Productivity report, Factory Orders, PMI and Consumer Sentiment

 
 
  Jonathan Levinson   5/30/02,  3:59:53 PM
Interesting divergence between the VXN and the QQV. Looks like the large cap Naz-100 feeling complacent, while the overall index is still nervous.

 
 
  Jim Brown   5/30/02,  3:59:44 PM
Pivot Trade Exit Point Alert - QQQ
Close the QQQ play here at $30.55. let's go into the close flat in case tomorrows open is negative.

 
 
  Leigh Stevens   5/30/02,  3:59:20 PM
Index Update - Due to a weather delay out in the Ohio Valley, I was sitting on plane rather than at trading ringside. The last few hours have brought some interesting developments, as the bears were not pushing hard in the areas of prior lows in the indices.

SPX of course held its prior lows in the 1053-1054 area from 5/10-5/13, coupled with quite oversold levels in the hourly stochastic models. The daily 14-day oscillators are continuing to fall toward an oversold extreme but are not there yet. OEX rebounded today from slightly above its prior hourly low at 522.3 - it's intraday low at 523.3. Interesting in the 5 & 21-hour stochastic models was the bullish price stochastic divergence as prices fell to a new relative low, whereas the stochastic models registered a higher high. This may or may not signal any kind of "final" bottom. The Arms Index (1.65) on the NYSE is still showing selling pressure predominates in the closing minutes.

 
 
  Jeff Bailey   5/30/02,  3:52:47 PM
HMO Index (HMO.X) 624.09 +1.59% ... did see a tick at 625.03 in last hour, that's enough for triple-top buy signal on sector. Link

 
 
  Jeff Bailey   5/30/02,  3:50:19 PM
Renal Care (RCI) $33.75 +2.89% ... stock trading right at the rounding 50-day moving average. This was short-term trader's target from 05/22/02 profile at $31.69. Can sell target here, or hold as bullishness looks strong in sector. At minimum, would raise profit stop to $32.90, just below retracement. Link

 
 
  Jonathan Levinson   5/30/02,  3:48:38 PM
My entry for QQQ puts will be a break below 1625 from these levels.

That trigger is safely below this afternoon's congestion area, and should filter out any stray dips and allow for the intraday oscillators to roll over.

 
 
  Jim Brown   5/30/02,  3:43:42 PM
Pivot Trade Signals
As the afternoon progresses I think bears may be winning. The big short covering rally did not come and the downtrend lines on the Dow and OEX are holding. Aggressive traders might speculate on taking a new short position here but I am going to wait for the Friday open before initiating any new positions. To say this has been a volatile session would be an understatement but the VIX has basically been neutral. This means there is still no fear in the markets despite the brush with 9800 this afternoon. There is still 20 min to the close and anything can happen so keep those stops tight and follow up winning trades with higher stops.

 
 
  Jonathan Levinson   5/30/02,  3:42:10 PM
Let's see how that QQQ 30.70 resistance holds. I strongly recommend against trying to pick a top- like catching a falling knife. Let it slow down, roll over, and let the trend carry your trade in your direction. Again, better to be out of the way of a bad trade than being in one.

 
 
  Jeff Bailey   5/30/02,  3:40:43 PM
Jeff, Since this day is very slow, could you help me with this question? The other day a subscriber was asking your opinion about playing a straddle on BGEN since they were seeking FDA approval on a drug. The next day the stock moved about $9 I think. The straddle would have been a good play. My question is where do you find info about upcoming FDA approvals without scanning the news of the drug companies. Is there a biotech news site? These could be good straddle plays such as this one was.

I'm not sure about this being a "slow" day as some healthcare stocks are pretty active as are some "energy traders", but...

I don't know the answer to this and I usually have to stumble across something in the company specific news.

However, if we have a subscriber out there that really follows the drugs/biotechs for such info and can give us a place to look, that would be great. Then I'll post it here and in the intra day updates. We can all try and help each other.

 
 
  Jonathan Levinson   5/30/02,  3:32:31 PM
This would be a sweet place to add some of those QQQ puts, but we saw this same setup an hour ago at 2:30. Don't want to let a headfake turn into an account fake, so will keep the powder dry and let the trade come to us.

 
 
  Jim Brown   5/30/02,  3:27:44 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX
We were stopped out of the OEX/SPX/DJX LONG at 15:18:42 when the OEX traded below 527.90 for an entire eight ticks before moving higher again. (SPX 1062.50) No complaints however with a +3.90 point gain on the long side this afternoon and a +5.25 point gain on the short side this morning.

 
 
  Jeff Bailey   5/30/02,  3:25:17 PM
Bema Gold (AMEX:BGO) $1.47 -10.8% ... getting downside alert here. Talked about this stock as it may relate to "aggressiveness" among gold traders and willingness to be more speculative a few days ago. Outlined a trading strategy for a subscriber that had some stock bullish. Not looking to trade, but drawing from those observations and monitoring things here.

 
 
  Jim Brown   5/30/02,  3:22:05 PM
Pivot Trade Exit Point Alert - QQQ
Change the stop loss on the QQQ long to our entry price of $30.25. The bears are putting up a fierce battle as the day draws to a close.

 
 
  Jim Brown   5/30/02,  3:18:59 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX
Change the stop loss on the OEX/SPX/DJX LONG to 527.90. (SPX 1062.25 est) If we get a roll over here we want to exit with a profit.

 
 
  Jonathan Levinson   5/30/02,  3:15:13 PM
Never forget to breathe (grin)! This could be start of a big runup, or not. TRINQ at .71 won't put up any roadblocks, and the QQV and VXN are marginally in the red. All shorter intraday stochastics are overbought, but the 30 and 60 minute oscillators are not there yet. Nothing stops them from becoming more overbought. I'm going to sit it out, and look to add some QQQ puts on a break back below 1630 from a slightly higher level, hopefully around 1635. Higher than 1635 will have been a nice call play that I missed.

 
 
  Jim Brown   5/30/02,  3:10:51 PM
Pivot Trade Signals
As the Dow nears 9900 and the OEX 530 we need to be very watchful on our long position. The OEX down trend line is now 592.95 and the Dow downtrend since May-24th is just below 9900. You can see why the advance has slowed as we near those areas. It is entirely possible we can get a roll over here or an explosion. It is too soon to tell but it should happen any minute now as we have entered the last hour of trading.

 
 
  Jonathan Levinson   5/30/02,  2:55:52 PM
That COMPX daily stochastic *is* looking awfully oversold- hasn't been down that low since the first week of May. Another item to keep an eye on in a bearish trade. But then, the oscillators can stay buried in a trending market, at which point I watch the MacD more closely.

 
 
  Jeff Bailey   5/30/02,  2:54:33 PM
Oxford Health (OHP) $48.40 +3.8% ... new 52-week high here.

 
 
  Jeff Bailey   5/30/02,  2:38:07 PM
Hi, Jeff I am noticing EXTR moving up, Can you comment on short term bias.

I can't, but longer-term shaping up a bit. A trade at $12.50 would be spread-triple-top buy signal and break of downward trend. Stock has been "unpredictable" on these breaks of trends. However, something might be up here. I went through some news items, but don't see anything that might explain. Link

Point/figure vertical count is bullish to $21.50. Might look for a short-squeeze higher on break at $12.50 and might correlate against the now challenged 200-day MA. Would expect some bears to be shorting in here. Trying to get that MACD to roll lower and cross below signal. Link

 
 
  Jonathan Levinson   5/30/02,  2:31:40 PM
I'm looking at the downtrending channel on the 30 and 60 minute Nasdaq charts. We're still within it, but near its upper end. This level below 1630 is pretty key, and Jim's arguments are very convincing, as always. I'd be willing to consider jumping in with calls on a decisive break of 1630-1635, with decent volume and a splash of green across my quote screen. On the other hand, I might get my bearish stochastic rollover at that level. I'll wait and see.

 
 
  Jim Brown   5/30/02,  2:30:36 PM
Pivot Trade Signals
Contrary to popular opinion I am not "bullish" here. I am only playing the swings in the market. I still think the OEX has down trend resistance (currently at 530) but as somebody said earlier today, "nothing goes up or down in a straight line". I could build an equally moving case for an either bullish or bearish bias but I would rather trade what the market is giving us. (Actually I would rather the market move in the direction of my bias but that would be asking too much! (grin)) If pressed I would say that lower lows are ahead of us despite the improving economy. It is all a matter of your time frame. Until then, trade the trend!

 
 
  Jim Brown   5/30/02,  2:19:06 PM
Pivot Trade Entry Point Alert - QQQ- undated
The bad news is priced in and with the Nasdaq down only -5 points when the Dow was down -140 off the days high shows decent underlying tech strength. We will keep a tight stop on this signal but the $30 level is very close to bottom (?) support of $28.75-$29.50. The initial profit target will be $31.50

 
 
  Jonathan Levinson   5/30/02,  2:16:53 PM
Jim's bullish and I'm bearish here, but willing to sit it out if it doesn't line up convincingly for me. In the end, each trade is in your account and is your call. When in doubt, stay out.

 
 
  Jonathan Levinson   5/30/02,  2:13:55 PM
A useful practice for me is to keep an eye the contracts I'm targeting and getting to know their price movement. I'm not recommending purchasing or selling anything, but I've got a few different contracts on my watchlist at any one time. I've noticed that the QQQ July 31 puts haven't gotten cheaper than 1.90 on the bid since I've started watching it, so that becomes my short term "support" for that contract. The Sept 33 puts haven't gone below 3.70 today.

 
 
  Jim Brown   5/30/02,  2:13:39 PM
Pivot Trade Entry Point Alert - QQQ
Go LONG the QQQ at the current level of 30.25. Stop loss at 29.89

 
 
  Jeff Bailey   5/30/02,  2:08:58 PM
Altera (ALTR) $18.06 -0.54% ... Prudential says their impression is that ALTR's new Stratix product is gaining more design-win momentum than firm had expected, and if this continues it should translate into a rapid ramp for this product over the next several quarters; also, software support feedback for Stratix is quite good, unlike several years ago with Apex, which led to market share losses. Pru reiterates "buy" rating and $28 price target. Link

 
 
  Jonathan Levinson   5/30/02,  2:08:26 PM
Expecting resistance on the COMPX between 1625 and 1630, and will watch the stochastics and macd to decide whether to leg into some more QQQ puts there. I'm wary of tomorrow, being the end of the month, so if doesn't look just right I'll stay back with my partial back month put position and wait for a better entry. Some of my best trades have been the ones I didn't put on (grin).

 
 
  Jim Brown   5/30/02,  2:06:46 PM
Pivot Trade Signals
Holding our collective breath! The battle is underway and the bulls are fighting a valiant fight and could be gaining the edge. The adv/dcl ratio is moving up and volume is increasing. The VIX peaked at 24.51 and the TRIN at 2.91. I repeat my earlier comment, if they can't rally them here at 9800 support we are looking at a serious drop ahead. That is not necessarily a bad thing as it would provide the wash out everyone is looking for. It is just that after being oversold for several days you would expect strong support to provide a bounce. The lack of that bounce would mean sellers are stronger than previously thought and that could cause investors still holding stock on the sidelines to abandon positions and wait for fall.

 
 
  Jeff Bailey   5/30/02,  1:59:21 PM
Citigroup (C) $42.87 -1.4% .... is a Dow component. Trade at $42 can be correlated with what we're seeing in the Dow Industrials. Link

Traders can go through the 30 dow stocks and look for action points on some of them. Then as time goes by, correlate against the Dow Industrials too.

 
 
  Jeff Bailey   5/30/02,  1:53:18 PM
JEFF, IF YOUR NOT AN OPTION TRADER AND THE DOW DROPS BELOW 9800, HOW WOULD YOU PLAY IT?

The Dow Diamonds (DIA) $98.55 -0.8%. Link

 
 
  Jeff Bailey   5/30/02,  1:45:22 PM
Seitel (SEI) $2.10 -11.7% ... profiled as bullish for aggressive bulls on 05/22/02, with stop at $2.11. Move to the sidelines here as profiled.

 
 
  Jim Brown   5/30/02,  1:41:53 PM
Pivot Trade Signals
If there is no bounce here we could be in real trouble. Art Cashin said this morning the market makers at the NYSE were resolved to taking the market down to 9800 today just to get the anxiety over with and then let them run back up. They were unable to take them down to 9800 at the open with all the negative news but they were successful in hitting 9802 at 1:21. If the Dow does not hold 9800 then the closest support is the Feb-20th low at 9734. My gut feel is if 9800 fails then 9734 is road kill also. The most likely bottom after 9800 is the 9529-9580 range from the end of January. Keep your fingers crossed here because a lot of bears will be running for cover if we can get a bounce in the next 30 minutes.

 
 
  Jim Brown   5/30/02,  1:27:08 PM
Pivot Trade Exit/Entry Point Alert - CORRECTED
OEX/SPX/DJX

Close the OEX SHORT here at the current level (524 - SPX 1055.75)) and go LONG the OEX with a stop at 522. (SPX 1052 est) (CORRECTED FROM 520)

 
 
  Jim Brown   5/30/02,  1:25:42 PM
Pivot Trade Signals
Dead Stop Dow 9816 provided a dead stop for several minutes as bulls/bears struggled over this strong support area. I am thinking strongly about buying this dip at 9800 because of the strong support.

 
 
  Jim Brown   5/30/02,  1:13:24 PM
Pivot Trade Exit Point Alert - OEX/SPX/DJX
I expect a bounce at any time on the Dow as it reaches the 9800 level. Lower the stop on the OEX short to 524.50 (SPX 1056.50 est) and let's book some profits.

 
 
  Jim Brown   5/30/02,  1:10:39 PM
Hi Jim, Sorry to bother you but it would be great help if you can discuss how to work with wide spread in OEX option trading, what strategy is the best? Thank You, Martin

Good question, unfortunately there is no "correct" answer. The "wide spreads" you are referring to are relative I am afraid. The spreads today are $.50 to $1.00 on the "at the money" puts. That is wide compared to the QQQ with strike prices at every $1 increment and spreads as low as a nickel. The difference is in the range of movement. The QQQ has been stuck in a $2.50 trading range for the last seven days. The OEX has traded in a 22-point range over the same period. Either instrument offers a large profit potential but on a different scale. A 10-cent spread on the QQQ for a 2-point move potential is exactly equivalent to a $1 spread on the OEX for a 20-point potential.

The best tactic for beating the spreads on the OEX is not one that many people are comfortable using. That is opening positions in the opposite direction of the trend. For instance buying calls when the market was dropping like a rock at the open. Spreads on puts were rocketing and call spreads were shrinking. It is all supply and demand. Since most traders are not clairvoyant and cannot anticipate changes in direction in advance we are stuck paying the price when we go with the trend.

One thing I would strongly recommend is to place market orders, not limit orders, on the OEX. The OEX is an automatic execution product and is very liquid. Any market order placed at any electronic broker for less than 25 contracts should be executed instantly at the current bid/ask. This allows us an instant entry and instant exit. With a fast moving vehicle like the OEX trying to get a limit order executed can leave you standing in the dust wondering what happened. I have literally chased the bid/ask for several dollars numerous times in the past and lost tens of thousands of dollars before I "learned" to bite the bullet and trade the market. It really does even out over time. You will get filled for less on entries and more on exits about as many times as the reverse is true. If you are worried about a quarter here or there then stick with the QQQs.

The short answer to your question turned into a novel but I know this is a problem for many traders. Everyone must choose the vehicle that fits their risk profile and spread tolerance and not be afraid to change it if it does not work out in the future. The name of the game is profit, not status. Nobody knows what you are trading but you.

 
 
  Jonathan Levinson   5/30/02,  1:10:21 PM
Looking at list of XAU components, I see that ABX and AU are two of the biggies, and have generally trailed the index because of their reputed hedges on gold. This would tell me that XAU should be underperforming the price of gold, and would calm my nerves a bit on XAU's performance today. Note that XAU has fallen more than the price of gold today, and this could be why. Perhaps gold bulls are dumping ABX and AU in favor of unhedged gold producers.

On this topic, some are saying that the smart money has been buying gold, but the smarter money is buying silver, which allegedly has a short position that exceeds the available supply of silver. Hecla Mining Company (NYSE: HL) has more than tripled this year, and still looks strong, if a little overbought. Then again, it's been overbought throughout most of the duration of its three-banger. Hey Jeff, how does HL look on the P&F chart?

 
 
  Jeff Bailey   5/30/02,  1:01:48 PM
Energy traders It continues to be an interesting unfolding of these stocks. It perhaps goes very much to the analogy of how an inchworm or snake has been moving in the sector. Similar to "domino" theory. Should really help traders/investors understand how things can unfold (bullish and bearish) in sectors and sub-sectors.

First it was Enron Link

Then Calpine Link

Then Dynegy Link

And starting to see some further weakness in Williams Link and Aquila Link

Eventually, a turnaround will take place (or will it?). All a trader does is stay disciplined, and play the trend as long as it unfolds.

 
 
  Jonathan Levinson   5/30/02,  1:00:17 PM
Back to near the low of the day on the Naz. Cautious traders can book a profit here on the move from 1630 to 1610. Low print of the day was 1608.

 
 
  Jeff Bailey   5/30/02,  12:52:58 PM
Williams Cos. (WMB) $14.00 -10% ... getting downside alert here at $14. Profiled this one short/put on 05/17/02 in the November 15's (WMBWC). Further bearishness here, with spread-triple bottom. Link

Disclosure .... I currently hold bearish position in WMB.

 
 
  Jeff Bailey   5/30/02,  12:48:26 PM
10-year YIELD (TNX.X) 5.053% .... It is interesting perhaps to note how "similar" the 10-year YIELD chart is on 0.50 box (conventional from Dorsey/Wright and Associates) Link and the Dow Industrials point/figure chart Link

It has been my observations from the past that the bond market is "smarter" than the stock market, or at least the participants found in each. Right now, I do think bearish equity traders need to still be selective in their shorting as bond market doesn't seem to be a nervous about things as perhaps stock investors are.

What makes things difficult right now is two things in the market that can impact Treasuries. On one hand, you've got a declining U.S. dollar, and that should theoretically be a negative for Treasuries. On the other hand, you've got high tensions in the Middle East, and that would be more bullish for Treasuries, like we've seen in the past 12 sessions.

As it is, all a trader can do is trade the technicals and try as hard as possible to stick with stronger technicals from the bullish side, and short the weaker technicals from the bearish side.

If trading some weaker stocks/sectors from the bullish side, trade needs to have good risk/reward potential and you'd better honor tight stops.

 
 
  Jonathan Levinson   5/30/02,  12:47:20 PM
I'm glad that we're both bearish on the QQQs. However, although I have taken some nice profits from my Q puts, I have also benefited just as well from the Q calls in this bear market. Following through on one of your earlier comments in the Monitor at 11:47 re fund managers rebalancing their portfolios at month end, if I recall, I did profit from selling some calls at last month's end, probably due to the same reasons you just gave. I would have to dig up my records for certainty. But if I didn't I know my trading buddy did profit, using this rationale in her swing trading of the Qs.

So, having said this, with the premiums today on some June calls at very attractive prices, would you risk a small position for a swing trade by buying today and hoping this 'tradition' applies to tomorrow's month end? Thanks and welcome to OI.

Great question. I would not buy calls for that reason alone because it's a gamble- pure speculation, akin to buying puts due to the Mercury Retrograde a few weeks ago (a astronomical configuration that I don't pretend to understand). I trust in TA and fundamental analysis, and if that dictates a call play, then I'll run with it. But, just like betting on MaxPain options expiration calculators, it's a relatively uncertain and risky practice from my perspective.

 
 
  Jeff Bailey   5/30/02,  12:35:54 PM
Treasury Watch Will note that earlier this morning, 10-year YIELD ($TNX.X) 5.05% did trade as low as 5.011%, which was below the 05/01/02 low YIELD. I like to use Treasury action to get a "feel" for market's perception of risk. Today's ever so breif peirce below the 05/01/02 yield low of 5.025% is sign that market participants a little nervous. Link

In past, and still, my thought is that a 10-year YIELD below 5.0% is negative sign for stocks in general. What "sectors" are DIVERGING from that thought process becomes very important for bullish traders. One sector recently has been healthcare.

 
 
  Jonathan Levinson   5/30/02,  12:35:34 PM
Some frayed nerves about gold today. When in doubt, a cliche: Nothing goes up (or down) in a straight line. Gold has been making a parabolic move, and a bit of a pullback makes the chart look a little less extra-terrestrial. Watch the charts. I'm watching the bollinger band midpoint for XAU around 82.40ish. If it doesn't bounce from there, I'll consider taking some of my profits off the table. Above all, though, respect your own stops and manage your account responsibly. My own account management might not be appropriate for you.

 
 
  Jeff Bailey   5/30/02,  12:26:06 PM
Hi Jeff, Good up volume on COL today, looks like you could have another winner! Noticed you did not mention PHSY in ur latest comments on healthcare stocks. I like this one. One of the reasons is pullbacks seem to hold at approx. 50% retracements.....March to May, stk went from 15 to 32,then pulled back to 24 (8 pt pullback, versus 17 pt gain, half of which is 8.5), so far in May, ran from 24 to 30 and change, pulled back to 27 (6 pt gain, 3 pt pullback)....am thinking it could be ready for another run up. Any thoughts?

Yes, COL was a good one with market psychology as it is and technicals found in that chart. Stock cooperated at the open and didn't gap like some NASDAQ stocks surely would have in the pre-market. Stock trading $26.05 +4.2% here and surely some hedge funds and more active traders were on this one at the open. Will monitor going forward, now bull needs MACD to cross above signal. Link

As for PacifiCare (NASDAQ:PHSY) $28.48 +1.56% ... no reason for not mentioning it. It is a "NASDAQ" listed stock, so may not necessarily find as much bullishness as some NYSE stocks. Only thinking here is very short-term that market makers really concentrating on some of their inventory management in some technology stocks right now. Nice "inside day" to trade from in PHSY today. Link

One thing I am cautious of perhaps in PHSY is that the stock has exceeded its bullish vertical count of $24.50.

While I may be splitting hairs here, think about OHP, UNH and others in the sector that have some "outlandish" vertical counts still associated with there charts. Put yourself in a bear's shoes. Right now, could imagine a bear in PHSY still having some conviction to their thought that stock is "overpriced" or overachieved, compared to bears in OHP or UNH or others with vertical counts yet to be achieved. Again, splitting hairs, but something to think about as it can really come into play.

 
 
  Jonathan Levinson   5/30/02,  12:09:51 PM
Reader writes:

I would like to know your trading style so I can relate to your commentary. Are you a Position, Swing or Intraday trader? What type of instruments do you mostly trade in, options, stocks, index, sector HOLDERs? What are some of your most favor technical indicators and sentiments indicators?

It's interesting that you are short the QQQ with Puts. Both Leigh & Jeff are bullish on QQQ when it held support at $31 last week. Can you share with us what was your thought process to go bearish?

Great questions! I try not to lose money on any trade, and to generate a profit wherever possible. Sometimes that requires intraday round trips, other times it involves holding for several days, on a rare few positions, I've held LEAPS for months (PVN, which I closed awhile ago- thanks for that one, Jim). I favour swing trading, which comes most naturally to me, but I follow my gut often enough to negate any one style. Above all, I try not to lose money.

I mostly trade QQQs for their low premium and relative stability. I also trade the SMH, and occasionally the DJX. I watch the Dow, Naz, OEX, SPX, NDX, VIX, QQV, VXN, 5, 10 and 30 year bonds, TICK, TRIN, TRINQ, SOX, and XAU.

I'm not as nimble a trader as Jeff and Jim, and so I stick very closely to the trend, which, for the Naz this year, has been down. I'm hesitant to buy calls in a down market, and I was happy just to get out of the way during the CSCO and subsequent rallies. Beyond that, I watch the s/r lines and the indicators I've been quoting, MACD, Stoch, bollinger bands.

Staying bearish lately has been based on the VIX, QQV and VXN, principally, and the longer view of the charts. But, I'm using back month puts to smoothe out the swings in case I'm wrong. I try to avoid trades I don't really like and to be patient when my account is in cash.

 
 
  Jeff Bailey   5/30/02,  12:05:33 PM
Oxford Health (OHP) .... it's interesting perhaps to study MACD (settings 12,26,9) on the daily interval. On q-charts, you can drag your cursor across the chart and perhaps note how the stock has reacted in the past to MACD crossing above signal. Interesting that on 05/17/01, stock closed right at its high of $47.52, and MACD/Signal was 881/881. Came close to MACD crossing above, didn't do it, and stock fell back a bit for three sessions. Stock now right back at the $47.52 level, and now MACD/Signal is 604/587 and now we see a cross-over intra day.

 
 
  Jeff Bailey   5/30/02,  11:55:17 AM
HMO Index (HMO.X) 622.81 +1.38% .... session high has been 623.70. As noted yesterday, needs a trade at 625 for triple-top. Close, but not yet achieved. If it does, have alert set there and may my important level where bears in sector turn to cover positiions. Link

My "strong stock" in HMO is Oxford Health (OHP) $47.60 +2.18% and stock is "acting" like a leader. Bulls like that MACD is rounding and just crossing above signal. Gives the impression that the "spring" has been compressed and could uncoil. Not much overhead supply in this one and trader in the group likes to see the "head" lead as it tends to pull the mid-body and tail along for the ride. Just monitor going forward. Link

 
 
  Jeff Bailey   5/30/02,  11:51:41 AM
Hi, Jeff Can you please comment on CAH. Since almost all the health care stocks are moving higher, why CAH is lagging?

Excellent question, for which I only have one answer. The supply/demand relationship is not favorable at this point and will not "get favorable" until a buy signal at $72 is created. Link

Yes, I was bullish on CAH when stock was above $68, but the triple-bottom at $67 and break of bullish support trend now more negative. In essence, there is now near-term overhead supply weighing on the stock and a stock that is now in downward trend.

The "healthcare stocks" that are moving are those that trade in upward trends, have bullish vertical counts associated with their chart, are on a "buy signal."

Recently profiled healthcares stocks have been Renal Care (RCI) Link

Community Health (CYH) Link

Oxford Health (OHP) Link

Each represents various "stages" of their point/figure charts on a shorter-term basis, but each has more bullish longer-term supply/demand characteristics than CAH right now Link , with trend being the most obvious.

Excellent question!

 
 
  Jonathan Levinson   5/30/02,  11:47:09 AM
One item to make bears cautious is that we're at the end of the month, and in some prior months the markets have experienced surprise runups as funds get rebalanced by their managers. Tight stops are in order for short positions.

 
 
  Jim Brown   5/30/02,  11:44:54 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
The SHORT signal was triggered at 11:38 when the OEX traded below 529.25. (SPX 1065.50 est) The stop loss for this signal will be 531.50 (SPX 1070 est)(Just above the high of the day). The target will be something in the 519-522 range where there should be strong support.

 
 
  Jonathan Levinson   5/30/02,  11:36:47 AM
Apparently there's a glitch in my email address at the bottom of the market monitor window. It's being corrected, but in the meantime you can get me at jlevinson@OptionInvestor.com.

 
 
  Jim Brown   5/30/02,  11:34:58 AM
Pivot Trade Signals
After improving significantly to positive territory the adv/dcl ratio has deteriorated to .89 and still dropping. Ticks have gone negative and it appears the morning dip buyers are starting to take profits.

 
 
  Jonathan Levinson   5/30/02,  11:32:03 AM
Gold bugs are a little nervous here (me included), watching the declining US dollar (Uncle Buck), yet some selling in gold. We would expect selling Uncle Buck to correlate to buying in gold.

 
 
  Jonathan Levinson   5/30/02,  11:22:47 AM
It looks similar on the COMPX at 1630 for a short position on the QQQ. However, the light volume makes me hesitate, as it invites more unpredictable swings.

 
 
  Jim Brown   5/30/02,  11:14:53 AM
Pivot Trade Entry Point Alert - OEX/SPX/DJX
I don't see anything that changed between yesterday and today and I still believe 530 is the support line for the OEX that is in danger. Let's reinstitute the short signal on a trade below 529.25. That gives us room for a little volatility around the 530 level. SHORT the OEX/SPX/DJX on a trade below 529.25 on the OEX. (SPX 1065 approx). There is no LONG signal at this time.

 
 
  Jim Brown   5/30/02,  11:08:13 AM
Pivot Trade Signals
The rally continues? The next test for the OEX is the down trend line currently at 531.75 which I profiled yesterday. The Dow has intraday resistance at 9960. This oversold bounce has yet to change the trend but we will follow it as it progresses. My first indication would be to short any breakdown below our support from yesterday at 530. Let's see what happens.

 
 
  Jeff Bailey   5/30/02,  10:54:26 AM
Jeff I bought UHS options per your suggestion about a month ago. I bought the july 50's UHSGJ. UHS has moved up from there although the options haven't due to obvious reasons. What is your current read on this position?

UHS point/figure chart is bullish. Vertical count remains $71. Stock has acted well and pulled right back to the triple-top buy signal of $44, found support and moving higher. Look for a trade at $49 for additional "double-top buy signal" to signal demand building.

I've taken a retracement bracket from $37.81 to $61.81. What this "does" is give me anchor point at 05/23/01 low (has been support since), and 61.8% at $52.64 is "fitted" to the 07/16/01 high close. Good correlation then found at 19.1% of $42.39, 38.2% at $46.97, 50% above at $49.81 and 61.8% at $52.64 and 80.9% at $57.22, which gives bull targets.

 
 
  Jonathan Levinson   5/30/02,  10:54:16 AM
The COMPX stayed below its 1640-1645 congestion area. This upmove was strong enough to pull the hourly stochastics through a bullish crossover, now in full swing but slowing as I type. QQQ respected its 30.70 resistance level for now.

 
 
  Jim Brown   5/30/02,  10:46:16 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX
The dip buyers came back in force or the sellers took time off to watch the WTC ceremony on TV. Either way the 530 stop loss was hit on the OEX short at 10:27:30. After hitting a low of 525.67 the play was stopped out for no gain. Once the market resumes operation we will reexamine the trend for the next signal.

 
 
  Jeff Bailey   5/30/02,  10:32:21 AM
NYSE observing 2 minutes of silence

 
 
  Jonathan Levinson   5/30/02,  10:26:48 AM
The Nasdaq-100 Volatility Index (QQV) is headed north on the daily view, levelling out a bit right now as the QQQ hovers near its high of the day. If QQV were a stock, I'd be looking to buy it. As a contrarian indicator, it points to the the beginning of an increase in investor caution from a level of low fear/high complacency, and portends lower prices in the QQQ. On the daily view, it's just crossed above the midpoint between its bollinger bands, with stochastics and MacD turning up. VXN (Compx volatilty) and VIX are also still in complacency territory.

 
 
  Jeff Bailey   5/30/02,  10:25:12 AM
Community Health (CYH) $30.28 +3.52% .... profiled this one yesterday for short-term trader at $27.85, target was $29.62. Stock has exceeded target. Trader can either sell strength here, offset QQQ bullish loss, or snug stop at $29.62 to assure gains. Link

Retracement from $35.35 to $20.36 has 50% at $27.85 (yesterday's profile), 38.2% at $29.62 (target from yesterday) and 19.1% at $32.48, next bullish target.

 
 
  Jeff Bailey   5/30/02,  10:08:23 AM
Aquila (ILA) $13.47 -2.8% ... option traders may want to take a look at 1/2 position in the January $15 puts (ILAMC) offered $3.50. That's about the same amount of risk in shorting the underlying to a "buy signal" on the point/figure chart, and would represent the "risk" of shorting the underlying here. Link

Why January? It's just something I prefer to do in situations where something looks fishy and point/figure charts either exceed previous bearish counts and looooong columns of O's hint that MARKET is ridding itself of the stock. By buying the longer-term, NOT using a stop on the option, trader allows time for potential negativity to really unfold. Look back at Adelphia (ADLAE) profile of January $20 puts. If no stop was used, then trader would have done quite well. Some played the ADLAE trade, but did stop out intraday on 03/27/02 just after earnings. However, during that conference call, the "rat" was revealed and we now see how big the rat in the closet really was.

 
 
  Jonathan Levinson   5/30/02,  10:04:43 AM
The Semiconductor Holdrs (SMH) puts have higher implied volatility (IV) than QQQ puts, and may have factored in a higher premium in anticipation of further declines. The IV on QQQ puts is lower, which means that you can buy them at a relative discount to SMH contracts.

 
 
  Jim Brown   5/30/02,  10:04:25 AM
Pivot Trade Signals
Ralph Block was just on CNBC talking about at double bottom setting up at 9800. While we would all like to see 9800 as the successful retest of the May-7th dip there are some other numbers we should consider as a possibility.

Feb-20th low 9734
Feb-6th low 9580
Jan-30th low 9529
Nov-1st low 9014

We would all like to claim the May-7th low as the current bottom but we need to keep in mind that the Jan-30th/Feb-6th range of 9529-9580 is a more likely technical target.

 
 
  Jeff Bailey   5/30/02,  10:03:07 AM
Hi Jeff, Are you still looking at a position in ILA. I read your article and am looking at the July 12 1/2. Should I wait a few days or jump in now.

Last night I posted some more thought on this one in the market monitor. I'd suggest at least a partial position. Again... "I smell a rat."

Disclosure .... I currently hold a bearish position in ILA.

 
 
  Jeff Bailey   5/30/02,  10:01:00 AM
OUCH! I bought Manu a couple of months ago to sell calls against. I am ashamed to say, I was like the deer in the headlights. Paralyzed into inaction as it has fell off recently. I have been selling distant mo. calls so I have my cost basis down to about $13.....I would like to hear your thoughts on biting the bullet and selling or do you think she will stabilize and start moving up, so I can continue writing calls. Thanks Jeff and thanks to all the contributors on your site.

Well, I hope nobody here put MANU in your mind. If so, then we've got some work to do, but at least you've taken some "defensive" action with a covered call strategy, otherwise things might be worse.

MANU $8.26 -7.4% .... gave "bearish triangle" pattern with trade at $10. Stock hasn't given a "buy signal" (X exceeding previous column of X for sometime, take note for future use). Stock did exceed bearish vertical count, but trader can use Professor Davis' study of bearish triangle to project potential downside from $10 sell signal of bearish triangle. Link

Bearish triangle profitable for bear 87.5% of time, average gain 33.3% in 2.5 months. So, from $10, 33.3% would be $6.67 for bear's target. Of course, this is "on average" based on probabilities. Would stay defensive here.

I can't answer the "should I bite the bullet" as I don't know your financial situation, risk, etc, but hopefully above gives you some insight as to what went wrong, and perhaps why bullish trade should have been avoided.

Look what is happening to GNSS and that stock "at least" had a buy signal associated with its chart, while MANU didn't. In essence, the "odds" were a little more in favor of a GNSS bullish trade as there was at least a buy signal associated with the chart. Commonality between the two was both were below downward trend. Taking notes here.

 
 
  Jim Brown   5/30/02,  9:52:07 AM
Pivot Trade Signals
The internals are very negative as you might imagine with the adv/dcl ratio at a negative .51 and new lows beating new highs substantially at 61 to 47. As I stated several times in the past this switch of leadership to an increase in new lows is a very bearish signal. The TRIN opened at 2.45 and despite the selling has declined to 2.24. We could be seeing a bounce here as the oversold conditions equalize. Stay tuned.

 
 
  Jonathan Levinson   5/30/02,  9:51:21 AM
The Philadelphia Gold & Silver index (XAU) is hinting at a slowdown of its upmove, with daily stochs deep in overbought and the price candles glued to the top bollinger band. With the upsloping bollinger band and the midpoint moving average nearby just below 82.5, any pullback be a small one, and some aggressive dip buyers might be waiting for an entry there.

Disclosure: I'm long the XAU with positions in precious metals funds.

 
 
  Jeff Bailey   5/30/02,  9:47:52 AM
Dow Industrials (INDU) 9,861 -0.63% .... trade at 9,900 is double-bottom sell signal and break of bullish trend. Dow has held the 9,800 level in past month, but break there is defensive. Vertical count now turns bearish, with vertical count of 9,400. Link

 
 
  Jeff Bailey   5/30/02,  9:44:39 AM
Newport (NEWP) $17.74 -2% .... stock breaks below "inside day" from yesterday. Will reiterate yesterday's bearish profile here.

Disclosure.... I currently hold a bearish position in NEWP.

 
 
  Jonathan Levinson   5/30/02,  9:42:02 AM
Nasdaq-100 Bullish Percent Index (BPNDX) closed last night at 36, just crossed below its 20 day moving average. Still in neutral territory, not yet oversold, pointed south.

 
 
  Jeff Bailey   5/30/02,  9:39:37 AM
QQQ $29.95 .... stopped from bullish profile of $31.07 here.

This now has a bear more "comfortable" with some bearish positions profiled in CIEN, CSCO, NEWP, WMB, RIMM in recent sessions. Remember... "comfortable" should not be thought of as "complacent."

 
 
  Jim Brown   5/30/02,  9:39:24 AM
Pivot Trade Exit Point Alert - OEX/SPX/DJX
As I mentioned in the closing commentary yesterday the SHORT signal for the OEX/SPX/DJX was triggered 18 seconds after the official close at 530.11 with a trade under 530 as transactions made at the close settled. While it is likely that nobody was triggered for an actual trade we want to avoid any confusion and will accept the signal as triggered. With the gap down this morning we will put a stop loss on this signal at our entry point of 530. Strong support for the OEX is at 522 and 519. We will look to close the trade for a profit at those levels and look for a bounce.

 
 
  Jeff Bailey   5/30/02,  9:34:42 AM
QQQ $29.99 -0.9% .... from previous bullish profile of $31.07. Stop remains $29.95.

Disclosure ... I currently hold bullish positions in QQQ.

 
 
  Jonathan Levinson   5/30/02,  9:33:18 AM
Thanks, Jim. I try to combine technical and fundamental analysis when watching the markets. TA is unrivaled for providing a clear picture of what's happening now and what's happened in the past. It does *not* predict the future (at least for me) but it does provide the clearest picture of the present, which is the next best thing. Fundamental analysis helps give me conviction in placing trades, by providing a bias as to the strength or weakness of the markets and putting the charts in context. The combination of TA and fundamental analysis works well, both up, down and sideways. In other words, I watch the indicators, but think about them so they make the most sense to me. Lately, that's been bearish (grin).

 
 
  Jim Brown   5/30/02,  9:31:51 AM
Leigh was delayed on his trip back to Denver and will not be back in the office until around noon.

 
 
  Jeff Bailey   5/30/02,  9:30:01 AM
Rockwell Collins (COL) $25.00 ... may be a stock for defensive bulls to look at this morning. Stock is right at the bottom of upward regression channel and sitting right on 50-day moving average. This puts top of regression up at $29.50. From regression channel at the September lows, stock has traded this channel from bottom to top since September. Link

 
 
  Jim Brown   5/30/02,  9:30:00 AM
Help me welcome a new trader to the Market Monitor today. Jonathan Levinson will be sharing his views with us as the day progresses. Jonathan has been a contributor for another website in the past and a subscriber to OIN since 1998. I think he is coming to us wearing a fur coat (bearish) but he promised to keep an open mind in his comments. He is a full time trader but I convinced him to share some of his market time with us. Welcome to the team Jonathan!

 
 
  Jonathan Levinson   5/30/02,  9:28:05 AM
QQQ is looking to gap down a bit. Looks soft on the daily chart with the stochastics in full descent and MACD just beginning a bearish crossover below the 0 line . The 60 day EMA might provide some support at 30. SMH looking weaker still after the recent selloff, with MACD bearish crossover already underway.

Disclosure: I'm short the QQQ with puts.

 
 
  Jeff Bailey   5/30/02,  9:26:40 AM
Conflict between Pakistan and India is really weighing on the markets, as well it should. Eye witnesses in the region reporting trucks of troops and truckloads of light weapons being shifted to Punjab province. Pakistan has been a chief supporter of the U.S.-led war on terrorism, and right now, Pakistan's focus looks to be on India. Should events unfold negatively, may put U.S. troops as well as policy in the region in cross-fire. This will lead to "uncertainty" and the MARKET hates uncertainty. Thus, traders need to be more defensive right now.

 
 
  Jeff Bailey   5/30/02,  9:21:25 AM
Genesis Microchip (GNSS) $23.36 ..... stock trading at $19.50 in pre-market after Pru downgrade. Trade at $20 or lower during market hours would be double-bottom sell signal, thus turning the vertical count bearish to $10. If long the underlying with 1/2 position, need to take defensive action with protective put, or cut the stock and move on. Option traders that did buy 1/2 position call in the $25 strike, most likely risked less from $25 to current trading in pre-market. Would sell the calls on a rally for 50% of cost if possible. Link

Despite the triple-top, taking notes that stock was below trend. Affirms strategy of only taking 1/4 or 1/2 positions on stocks below trend.

 
 
  Jim Brown   5/30/02,  9:20:26 AM
Pivot Trade Signals
Jobless Claims fell 12,000 to 410,000 for the week but continuing claims rose by +49,000 to 3,893,000 and a 19 year high. Jobs are continuing to be scarce and the numbers are impacting the futures this morning. Pakistan and India are moving more troops to the border after 3 Indian police were killed in Kashmir. Both countries appear destined for war over the next couple weeks. Each has said they would not be the first to use nuclear weapons offensively but said they would retaliate if the other used them first.

With the futures down -5.50 it appears we are headed for a down opening. There are no bullish catalysts to power a rally and according to analysts there is no reason to buy stocks. The World Trade Center recovery effort will come to an end today and continued coverage of it will depress spirits as the trading community remembers its losses.

The S&P closed at 1068 and right above support at 1067. That support is likely to fail at the open and next support is not until 1054. The Dow closed at support of 9925 and should that fail the next stop could be as low as 9811. The Nasdaq is under 1625 support and vulnerable to 1600 which would be a 78% retracement from the May-7th lows to the May-15th highs.

The stock news today is negative with storage stocks and wireless stocks being hit with negative news. The chip sector continues to show weakness with GNSS down -3.86 in pre-market trading and leading the pack. Cisco continues to slide after cautious comments were made yesterday about its loan loss reserves. All this negativity is shaping up for another fun day in the markets.

 
 
  Jeff Bailey   5/29/02,  9:24:17 PM
Wednesday's Market Monitor has been archived. Click this Link to see Wednesday's comments.

 
 

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