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  Jeff Bailey   12/9/200,  8:58:05 PM
Pivot Matrix for tomorrow at this Link

 
 
  Jeff Bailey   12/9/200,  3:54:07 PM
AMEX Gold Bugs ($HUI.X) 242.93 -3.54% .... and selling in Treasury bonds.

Earlier... somebody in MM mentioned bond/stock market not seeing eye to eye on things, and selling in Treasury bonds suggest higher interest rates coming, while gold stocks get whacked.

Almost "everything" getting sold since FOMC.

 
 
  Ray Cummins   12/9/200,  3:53:26 PM
Spreads/Combos & Premium-Selling -- On The "Watch" List: Millicom Intl. Cellular (NASDAQ:MICC)

Another issue in a nose-dive during the late-session retreat is MICC. Millicom has been one of the best performing technology issues in 2003, so there is certainly room for some profit-taking. Our position (short put) at $65 seems safe for now but the issue is at a "key" moment in the near-term as it tests a recent trading-range top (and the 30-EDMA) near $70. Selling volume is relatively light so with any luck, the uptrend will continue in the coming week.

 
 
  Ray Cummins   12/9/200,  3:42:03 PM
Spreads/Combos & Premium-Selling -- On The "Watch" List: Broadcom (NASDAQ:BRCM)

With the market in a broad retreat, a number of positions in our bullish portfolio are coming under pressure and one of the stocks deserving attention is BRCM. The issue is down $1.86 at $32.74 and with the sold (put) strike at $32.50, an early exit or adjustment may be necessary in the near future. Recent technical support exists near the current price (OCT trading-range top and the 50-DEMA), however a severe decline could take the share value down to the 150-DEMA at $28. Conservative traders should consider the potential loss as they weigh the risk/reward outlook of remaining in this position.

 
 
  Jeff Bailey   12/9/200,  3:40:10 PM
Dow Transports (TRAN) 2,927.94 -0.05% ... quick check here shows fractional gains, with TRAN sitting right on its 21-day SMA. Before I looked, I thought TRAN would be getting hit harder.

 
 
  Jim Brown   12/9/200,  3:38:10 PM
Initial market on close orders mixed with a BUY side bias

 
 
  Jim Brown   12/9/200,  3:37:02 PM
Russell down nearly -8 now.

 
 
  Jeff Bailey   12/9/200,  3:34:23 PM
QQQ $34.44 -2.3% ... now entering into its gap from 11/21 close of $34.25 to 11/24 low of $34.47. This could have WEEKLY S2 in play still to $34.22, where we might be alert to a bounce or firming at that level.

 
 
  Jim Brown   12/9/200,  3:22:32 PM
Russell down -6 points, definitely some funds lightening up.

 
 
  Jeff Bailey   12/9/200,  3:06:18 PM
03:00 Internals at this Link

 
 
  Mark Wnetrzak   12/9/200,  3:04:43 PM
Covered-Calls & Naked-Puts -- E-mail Replies: Position Selection Part II

(cont.) Our primary goal in the Covered-Call section is to provide positions that make acceptable returns while still receiving an above-average amount of downside protection, market permitting. As with all recommendations, it remains up to each individual to perform due diligence, thoroughly research any issue, and make sure the position fits their personal risk-reward tolerance. In short, we simply try to provide the best candidates that the market has to offer each week. Regards, Mark W.

 
 
  Mark Wnetrzak   12/9/200,  3:02:27 PM
Covered-Calls & Naked-Puts -- E-mail Replies: Position Selection

Hi Mark, Several times throughout your discussions you mention the goal is for 3-5% or 4-6% etc yield, and 10-15% downside protection using the ITM call. Yet for the picks of Nov 30, some don't meet that criteria. Actually they do if we consider a margin account, but not an un-margined account. If you have the time, would you mind commenting on what makes you select a particular candidate that is outside of the more conservative criteria. Thanks! FR

Hello FR...In his book, "Options: As A Strategic Investment," Lawrence McMillan, the "guru" of option trading strategies, suggests looking for a minimum return of just 1% (2% with margin) per month, with downside protection of at least 10%, because it will force one to choose ITM covered-calls. At the OIN, we use a two-pronged approach to find a variety of covered-call candidates to supplement your search for profitable trading positions: technical scans and option scans. I personally scan through hundreds of charts each week looking for technically strong stocks with favorable option premiums. I then sort through several "over-priced" option lists, looking for stocks with favorable technical patterns. (cont)...

 
 
  Linda Piazza   12/9/200,  2:59:41 PM
So long, everyone. I have to leave, but look forward to returning tomorrow morning and updating you on what's going on with the hypothetical OEX bear call credit spread.

 
 
  Jeff Bailey   12/9/200,  2:59:01 PM
Treasuries closed with 10-year YIELD higher by 7.4 basis points to 4.352%.

Benchmarking INDU 9,936 -0.29%, SPX = 1,061.77, OEX = 525.00, NDX = 1,391 , QQQ = $34.63.

 
 
  Ray Cummins   12/9/200,  2:57:15 PM
Spreads/Combos & Premium-Selling -- Portfolio Activity: Sell-Off In Progress!

The market has taken a turn for the worse and among the recent bearish positions in our portfolio, Amazon.com (NASDAQ:AMZN), Cabot Micro (NASDAQ:CCMP), Career Education (NASDAQ:CECO), Electronic Arts (NASDAQ:ERTS), Hyperion Solutions (NASDAQ:HYSL), InterActive Corp. (NASDAQ:IACI), Marvell Electronics (NASDAQ:MRVL), Mercury Interactive (NASDAQ:MERQ), Mohawk (NYSE:MHK), Sepracor (NASDAQ:SEPR), Symantec (NASDAQ:SYMC), Take-Two Interactive (NASDAQ:TTWO), and WebEx (NASDAQ:WEBX) are moving lower.

 
 
  Jane Fox   12/9/200,  2:55:03 PM
Attorneys for the former HealthSouth chief Richard Scrushy are challenging the Sarbanes-Oxley Act, which was passed in the wake of scandals at Enron, WorldCom and other corporate giants and aimed at curbing false corporate reports. Prosecutors are using the law for the first time in the massive accounting-fraud case against Mr. Scrushy.

 
 
  Linda Piazza   12/9/200,  2:51:54 PM
The OEX hit the 30-minute 100-pma and then bounced, but now it faces resistance at the current 525.50 level , the location of an important trendline in recent trading and the 60-minute 21-pma, and up at the 30-minute 21-pma at 526.24.

 
 
  Jeff Bailey   12/9/200,  2:51:50 PM
Since FOMC 3 buy program alerts, 7 sell program alerts (measured in 2-minute intervals.

 
 
  Jeff Bailey   12/9/200,  2:49:31 PM
Buy Prog. Prem. Alert ... SPX = 1,062.57 ... QQQ = $34.70.

 
 
  Jeff Bailey   12/9/200,  2:48:39 PM
Stillwater Mining (SWC) $9.13 +4.34% ... just off session high of $9.22.

 
 
  Jeff Bailey   12/9/200,  2:46:48 PM
Sell Prog. Prem. Alert ... SPX = 1,062.10 ... QQQ = $34.62.

 
 
  Ray Cummins   12/9/200,  2:46:45 PM
Spreads/Combos & Premium-Selling -- Portfolio Activity: Sandisk (NASDAQ:SNDK)

One of the issues in a downtrend today is SNDK and the retreat is favorable for our speculative (bearish) position in the issue. In last Sunday's OIN, we offered SNDK as a short-term candidate for a bear-call spread (DEC-$75C/$70C) and for now, the play is profitable. Traders should continue to monitor the issue on a daily basis, however, as it is prone to volatility and large, unexpected moves.

 
 
  Linda Piazza   12/9/200,  2:45:08 PM
The OEX fell through the 30-minute 21-pma, and now slides just below the trendline that had supported the OEX through early December, then served as resistance for a few days. Below that lie the 30-minute 100/130-pma's. Last week, the SOX fell straight through those averages and the BIX did the same thing today, not hesitating at all. I'm not sure that I believe the OEX will do the same, but as I mentioned this morning, the fact that the other two indices did alerts us to that possibility with the OEX, too.

 
 
  Jeff Bailey   12/9/200,  2:41:01 PM
QQQ $34.62 -1.7% ... WEEKLY S1 here.

 
 
  Jeff Bailey   12/9/200,  2:39:59 PM
QQQ $34.67 -1.6%

 
 
  Jeff Bailey   12/9/200,  2:38:54 PM
Sell Program Prem Alert SPX = 1,064.5 , QQQ = $34.75 ... that one hurt the bulls.

 
 
  Jeff Bailey   12/9/200,  2:37:03 PM
Dow Industrials (INDU) 9,969 +0.04% ... just sitting here. SPX 1,065.71 sitting right on its WEEKLY Pivot of 1,065.15.

 
 
  Jeff Bailey   12/9/200,  2:32:10 PM
S&P 500 Index (SPX.X) 1,065.45 -0.36% .... just tested WEEKLY Pivot of 1,065.15.

 
 
  Linda Piazza   12/9/200,  2:30:11 PM
It's typical to see a lot of zooming around immediately after a Fed meeting concludes, so it's difficult to assess as yet whether the first reaction or the decline is the final reaction of the day. I believe and have believed all day that the markets would try for new highs somewhere near the time of the Fed announcement, either shortly before or shortly after, but do not believe (as yet) that those new highs will be sustainable. If the OEX and other markets were to find support here and charge up again, those higher prices may be sustained through the end of trading today, but that wouldn't necessarily change my view if that happened.

To clarify, though, I also don't necessarily believe that markets will be allowed to plummet into the end of the year, either. I think we're in for some shaky trading conditions. Hence my interest in bear call credit spreads. Right now, that spread would be only $0.05 under water, with time premium still working its magic.

 
 
  Jeff Bailey   12/9/200,  2:29:01 PM
Treasuries unwinding after FOMC decision. 10-year YIELD ($TNX.X) now jumping higher by 5.4 basis points to 4.33%

 
 
  Jim Brown   12/9/200,  2:26:39 PM
Lots of big candles in the internals after the announcement. Link

 
 
  Jeff Bailey   12/9/200,  2:25:24 PM
QQQ $34.80 ... stopped on day trade bullish (this is it for me today)... DAILY/60-minute/5-minute all looking oversold.

considering session high took me out of bearish trade by a penny, then session low of $34.77 might as well do it.

 
 
  Jeff Bailey   12/9/200,  2:23:49 PM
QQQ $34.83 -1.1% ... RED #6 here if. If broken, QQQ falls quickly to WEEKLY S1 $34.63.

 
 
  Jeff Bailey   12/9/200,  2:22:12 PM
Sell Prog. Prem Alert ... SPX = 1,066.48 , QQQ = $34.86.

 
 
  Jeff Bailey   12/9/200,  2:21:41 PM
Reversal in Treasuries from buying to selling. 10-year YIELD ($TNX.X) now higher by 0.8 basis points to 4.286%. Dollar Index (dx00y) 88.73 -0.02% unchanged.

 
 
  Jonathan Levinson   12/9/200,  2:20:39 PM
For all of the bluster, ten year notes have sold only slightly so far, back to unchanged on the day. There's not much surprise with the Fed's words, although I'm still shocked at their willful dismissal of the obvious inflation they've kicked off... Bonds now down 1 bp at the session low, dropping along with equities here.

 
 
  Jeff Bailey   12/9/200,  2:18:34 PM
QQQ $35.06 ... testing 200-pd SMA on 5-minute chart and RED #4 of $35.07.

 
 
  Jeff Bailey   12/9/200,  2:17:07 PM
QQQ $35.01 ... looking for strength intra-day above $35.08.

 
 
  Jeff Bailey   12/9/200,  2:16:31 PM
QQQ $34.99

 
 
  Jeff Bailey   12/9/200,  2:15:56 PM
Sell Prog. Prem Alert ... SPX = 1,068.16 , QQQ = $34.99

 
 
  Jim Brown   12/9/200,  2:14:29 PM
Link to Fed statement: Link

 
 
  Jeff Bailey   12/9/200,  2:13:52 PM
Buy program prem. alert SPX = 1,068.15 , QQQ = $35.00

 
 
  James Brown   12/9/200,  2:13:52 PM
"Considerable period" language still in the Fed's outlook.

 
 
  Mark Phillips   12/9/200,  2:13:50 PM
LEAPS Update For those of you patient enough to wait for it, our entry trigger on the DJX put play finally got hit today, with the DOW just tapping the 10,000 level. What happens the rest of the afternoon is likely to be driven by the reaction to the FOMC meeting, but regardless of where the DOW ends the day, we'll take that close as our entry point for the Portfolio play, with our initial stop set at $104. Look for details in the weekend edition.

 
 
  Jim Brown   12/9/200,  2:13:50 PM
They kept the considerable period comment

 
 
  Jeff Bailey   12/9/200,  2:12:15 PM
Day trade long QQQ $34.97 here, stop $34.80, target $35.35.

Going to play the NASDAQ-100 Index (NDX.X) 1,405.04 session low of 1,401 holding above 1,400.

 
 
  James Brown   12/9/200,  2:11:17 PM
Current OI call play UTX continues to charge higher. Our original target was a move to $90-91. Shares are currently at 89.29 (picked price was 83.90). The high today says 89.80 but it looks like a bad tick.

Some traders may want to begin planning their exits or at least take some profits off the table.

 
 
  Jeff Bailey   12/9/200,  2:09:38 PM
QQQ $34.95 -0.8% .... gut feel is to buy the QQQ, but currently back at our downward trend. Just can't get a good feel for the Q right now. Recent internals steady.

Dow Industrials (INDU) 9,984 +0.18% still holding gains, mostly attributable to GM and IP.

 
 
  Linda Piazza   12/9/200,  2:06:46 PM
Since mid-morning, the OEX has been gyrating around in a rather narrow range between support and resistance. As it's been gyrating, the 30-minute 21-pma has been rising, a possible bullish sign, but the 30-minute MACD continues its decline, a possible bearish sign. The SOX continues to slide down the lower 1.35% envelope surrounding its 30-minute 21-pma. Eventually, it will become too overstretched and rebound, but now the presumption is that the SOX is in a sell-the-rally mode. The BIX steadied at the narrower 0.675 envelope surrounding its 30-minute 21-pma, but it's below the 100/130-pma's on both the 30-minute and 60-minute charts, so the presumption there is that the BIX is also in a sell-the-rally mode, although it, too, looks as if it could attempt a rally. This all suggests possible upside, but likely not sustainable upside. It may be sustainable for an afternoon, however, although this is all just conjecture ahead of that FOMC announcement.

 
 
  Jeff Bailey   12/9/200,  2:03:33 PM
02:00 Internals at this Link

 
 
  Jim Brown   12/9/200,  2:01:04 PM
15 min left until the announcement and the volume is beginning to accelerate. Time for those last minute entry/exits as everyone jockys for announcement position.

 
 
  Jeff Bailey   12/9/200,  1:56:02 PM
Buy/sell program prem. alerts ... I don't see any further buy or sell program prem. alerts since that sell program at approx. 09:40 AM EST.

 
 
  Linda Piazza   12/9/200,  1:46:19 PM
Those nested five-minute Keltner channels are trying to line up again in a position of equilibrium near 526.50. They lined up to establish equilibrium yesterday, too, a happening that sometimes predicts a big move soon to come after a period of consolidation. Yesterday when that happened, I thought the first breakout attempt might be to the upside, but I wasn't sure how far that breakout would carry the OEX since it soon faced resistance. Today, I have no clue which might be the first breakout direction and whether or not that first direction will be the final direction.

 
 
  Ray Cummins   12/9/200,  1:35:17 PM
Spreads/Combos & Premium-Selling -- Portfolio Activity: Sepracor (NASDAQ:SEPR)

Is anyone watching/trading SEPR? The issue fell $1.50 to $24.22 on news the pharmaceutical maker will offer $600 million in convertible senior subordinated notes. Much of the money raised will be used to redeem another set of notes and traders are not happy that Sepracor is "borrowing from Peter to pay Paul." The stock has downward potential to the $22 range and fortunately, our outlook for the issue is bearish with a premium-selling (short-call) position at $27.50.

 
 
  Linda Piazza   12/9/200,  1:33:37 PM
Ahead of the FOMC announcement, the OEX spreads are widening. Since the bids aren't changing much and it's the asks that are spreading, heading up, that has the effect of putting our hypothetical 135/140 bear call credit spread a bit more underwater, with an exit at this point costing $0.25 than the credit received if we'd bought it at the absolute highest price and exited at the absolute lowest price. We wouldn't be exiting at this point, however, and neither would we be checking the position as often as I've done, as the object of these plays is to be calm and let time premium do its work. I've wanted to benchmark how the play might be playing out as different factors impact it, however. (Note: As I typed, all that changed, and the spread is now only $0.15 underwater.)

 
 
  Ray Cummins   12/9/200,  1:22:44 PM
Spreads/Combos & Premium-Selling -- Portfolio Activity: Hovnanian (NYSE:HOV)

Homebuilders are among the losers today and one of our bullish credit-spread candidates, Hovnanian Enterprises, is enduring some selling pressure in the wake of its quarterly earnings announcement. The company reported fiscal fourth-quarter net income that jumped 68% as revenue rose 26% amid strong demand and also raised its earnings forecast for fiscal 2004, citing a substantial backlog. Despite the favorable news, HOV is down $5.61 at $91.00 and traders are pointing to the recent sharp rally as the primary cause for profit-taking. The short (put) option at $85 appears safe for now but this one deserves to be monitored closely as the FOMC meeting (concerning future interest rates) will likely have an affect on the Housing & Construction sector.

 
 
  James Brown   12/9/200,  1:20:14 PM
RadiSys Corp (RSYS). The stock is a little cheap to play options on but bears might want to check it out. The stock just broke through three-month support at $16.50 and fell to $16.00 before bouncing. The 200-dma near $14 could be a profit target.

 
 
  James Brown   12/9/200,  1:13:51 PM
Here's a chart of Eli Lilly (LLY) showing the rising channel I referred to earlier. chart: Link

 
 
  Jeff Bailey   12/9/200,  1:12:07 PM
01:00 Internals at this Link

 
 
  Linda Piazza   12/9/200,  1:09:31 PM
Well, here we are with the OEX at that 527-529 resistance after all. Didn't look as if that scenario was going to play out earlier today. The 30-minute oscillators are trying to turn up again, but this is emotion-driven trading, and I don't believed all those emotions are necessarily baked into the short-term charts. I do believe that market action discounts all the worries, successes, and other factors that might impact markets, with all that discounting showing up on the charts, but I don't necessarily believe that every short-term chart development accurately reflects all those factors. Certainly, the developing orthodox broadening formation on the daily chart reflects emotion-driven trading: that type of formation is diagnostic of that type trading pattern. Do I believe that every minute squiggle on a 30-minute or five-minute chart accurately discounts all those factors and predicts what's going to happen next, though? Not always, and today is one of the "not always" days.

 
 
  Ray Cummins   12/9/200,  1:09:00 PM
Spreads/Combos & Premium-Selling -- E-mail Replies: Trading Strategies

Hey Ray, I have been selling naked options -- both calls and puts -- with some success but the slump in K-mart (KMRT) last week put me in the red with the short $30 put. I looked at the chart and decided this one might just turn into a full blown retreat so I doubled up on the $25 puts (went to Jan exp. though). So far, it's worked out well because the new trend has continued and I have more than covered my losses in the initial play. What do you think about this trade. Could it be used as a regular exit strategy for N-Ps [naked puts] gone bad? PT

Regarding exit/adjustment strategies: Since all of the common exit/adjustment techniques are described in the OIN website's education section, I won't waste your time with a "cut-n-paste" reply regarding position management for naked puts. Rather I'll comment on your unique approach from my personal experience, which has become biased over time due to a seemingly endless number of conversations with OIN readers about limiting losses in option trading. The "recovery" method you described has its merits but as you mentioned, it will be successful only if the new trend continues. If a reversal in the primary trend is the basis for using the technique, you must determine if there is a high probability of that outcome. A thorough review of the technical condition of the underlying issue should answer that question, but you must assess the data with an impartial attitude that embraces no existing prejudice or disposition. In truth, that's the way you should evaluate any position adjustment; each one should be reviewed and appraised as if it were a new trade. Of course, that can be very difficult to do as there is generally the "specter of loss" hanging over the play. In all cases, the success of the strategy will determine its usefulness and in light of your results, it appears the technique is viable in specific situations. Hope that helps!

 
 
  James Brown   12/9/200,  1:05:59 PM
Brave enough to look for bullish tech plays? Check out Juniper Networks (JNPR). The stock has pulled back to its longer-term rising trendline. chart: Link

 
 
  Jeff Bailey   12/9/200,  1:05:44 PM
Duke Energy (DUK) $18.79 +1.07% Link ... after successful pullback test of flattening out 200-day SMA of $17.08, stock set to challenge 4-month consolidation resistance of $19.00. Break above $19.00 sets stage for challenge of 52-week high of $21.00. A trade at $19.50 would trigger a bullish triangle pattern.

Might be a good buy, run, write, where stock trader/investor buys the underlying stock (Annual dividend $1.10), looks for stock to run to $21-$22, then writes a Jan. 04 $22.50 covered call (DUKAX) should stock trade into $21-$22 range.

 
 
  James Brown   12/9/200,  12:58:48 PM
I've been following LLY the last few days. Yesterday the stock broke above the $70 mark with a nice bounce from the bottom of its rising channel. The move looked like a tempting entry point for new long positions. Now shares are inching higher again and they have broken the short-term trend of lower highs from mid-November.

 
 
  James Brown   12/9/200,  12:56:54 PM
Merck & Co (MRK) shares are at another turning point. The short-term trend from last week is bullish and the stock is trying to break into the gap at $44 to $45. Coincidentally, the longer-term down trend channel from July also has resistance in the 44.50-45.0 region. Bulls can hope for a breakout over $45.00. Bears can look for a failed rally under $45.00.

 
 
  James Brown   12/9/200,  12:48:02 PM
It has been a strong couple of days for Stanley Works (SWK). Yesterday the stock broke out to the upside above resistance at $33.50-34.00. Today shares are up even higher (+4.3%) after the company pre-announced stronger Q4 results. Estimates had been for 64 cents a share. SWK now sees 68 to 71 cents a share. The earnings news has prompted Raymond James to upgrade the stock to a "strong buy".

 
 
  Jonathan Levinson   12/9/200,  12:47:16 PM
The put to call ratio is up to .73, VXO down to 16.64. The TRINQ is parked at 1.08, TICKQ bullish at +488. I'm not expecting much until the FOMC announcement, and the bias until then appears to be to the upside as the short cycle oscillators continue to try to bounce off their morning low.

 
 
  Jeff Bailey   12/9/200,  12:46:56 PM
Stillwater Mining (SWC) $9.09 +3.88% ... here's an updated intra-day chart of SWC. Link with a corrected intra-day 10-MRT. I'm taking first 10-minutes of morning trade. I accidently grabbed that gap higher 15-minutes into session as the 5-MRT.

As such... while I do like SWC and both a longer-term and swing trade long, will revise day trade long here for intra-day bullish target of $9.40.

 
 
  James Brown   12/9/200,  12:41:52 PM
Chip stocks are not reacting as one might expect to the TXN news last night. The SOX has slipped lower and is currently trading at its simple 50-dma. INTC is certainly under performing its peers with a 2.2% decline and a confirmation of yesterday's technical breakdown. Even TXN is trading lower but holding at support above $28.00 and its own simple 50-dma.

 
 
  Ray Cummins   12/9/200,  12:36:52 PM
Spreads/Combos & Premium-Selling -- TRADE ALERT: KLA-Tencor (NASDAQ:KLAC)

One of our recent credit-spread candidates warrants attention today as the issue has moved below the sold (put) strike. KLAC shares are down $1.08 at $54.40 and the cost to close the spread (DEC-$50P/$55P) is near $1.75; probably as much as a conservative trader would want to sacrifice in a deep OTM position. Some of the common exit/adjustment strategies include, rolling down (or down and out), selling the stock short to cover, or transitioning to a bearish play. For those of you who want additional information on the various alternatives, there are numerous articles on spread trading and premium-selling techniques, portfolio management strategies, and position exit/adjustment methods in the archives of the OIN's Education section. Literally hundreds of articles have been written on a variety of subjects by some very experienced traders and all of these narratives are available for readers to review in their spare time.

 
 
  Linda Piazza   12/9/200,  12:33:50 PM
DD has been doing its part to push the DOW higher over the last few days, too, Jim. (See Jim's 12:09 post on the futures side of the Monitor, referring to GM gains.) As the proud owner of a now-defunct OTM put position purchased as a lottery-type play, I feel responsible somehow.

 
 
  Ray Cummins   12/9/200,  12:20:57 PM
Spreads/Combos & Premium-Selling -- Portfolio Activity: Engineered Support Systems (NASDAQ:EASI)

EASI shares rocketed 14% to new "all-time" highs near $61 this morning after the company reported fourth quarter earnings of $0.52 per share, $0.05 better than the consensus estimates, as revenues rose 44% year over year to $170 million. The company was also optimistic about the coming year, forecasting EPS of $2.40-$2.45, well above the current analyst's estimates of $2.06. Among the catalysts cited for further growth in revenues were stronger-than-expected orders and its acquisitions of Engineered Environments and Pivotal Power. Needless to say, our bullish "premium-selling" positions in the issue are at maximum profit.

 
 
  Jeff Bailey   12/9/200,  12:03:54 PM
12:00 Internals Link

 
 
  Linda Piazza   12/9/200,  11:54:04 AM
This morning's downdraft turned the OEX daily 5(3)3 stochastics back down again. Yesterday's action had hooked them back up in mid-down-cycle. Yet, the OEX remains above its 10-dma, above the midline of its rising regression channel on the daily chart, and within the consolidation zone in which it's traded throughout December. That consolidation pattern continues to look like an orthodox broadening pattern, as shown in the linked chart: Link These are usually bearish patterns, but they have not worked out to be for most of this year, so I don't know how much credence we should give this one now. Due to the presence of that broadening formation and typical reactions on a day when market news is expected, I started the day with the scenario that the OEX might get pinned near the 527-529 resistance into the conclusion of the FOMC meeting and that it might even rise to test 531-533 from within that broadening formation just before or after the conclusion of the meeting. Although I'm not predicting that it will happen, I wouldn't even be surprised to see the Dow end the day at or above 10,000 on a bout of short-covering, but I wouldn't think the Dow would sustain those gains. The Dow has a fairly well-formed bearish rising wedge. Although those wedges haven't performed as expected this year, either, there usually is a downside break out of them. That downside break is just not followed with a plummet, as is usual with bearish rising wedges, and instead is often followed by a climb above the wedge resistance. Returning to a discussion of the OEX, it seems difficult to believe that the OEX could sustain strength if the BIX and SOX continue to show such weakness.

 
 
  Jeff Bailey   12/9/200,  11:53:58 AM
QQQ $35.05 -0.5% ... If I were still carrying the swing trade short from $35.08, I would be inclined to close that trade out here, wait until this afternoon's FOMC meeting, but begin looking for some resistance into FOMC back higher near $35.22 at this point.

Dow Industrials (INDU) 9,978 +0.13% holding a 13-point gain here, and we haven't witnessed as sharp of an intra-day sell-off from the psychological 10,000 level as we did when the NASDAQ Composite (COMPX) 1,938.27 traded the 2,000 level.

Intra-day observation on Q's at this point as it relates to the two trends (up and down) is that QQQ a bit sloppy at both, and at any point in time, seems to want to gravitate with side of both.

New bearish trade setup for QQQ may come on rebound into FOMC to the WEEKLY Pivot, where after FOMC, may look short the Q's again on failure back below $35.14.

 
 
  Jane Fox   12/9/200,  11:40:38 AM
Office of Federal Housing Enterprise Oversight is seeking $100 million or more from Freddie MAC (FRE) in settlement of possible civil charges stemming from its accounting abuses.

 
 
  Linda Piazza   12/9/200,  11:20:12 AM
This morning, I thought that the OEX would likely get pegged just under strong resistance or just above strong support into the FOMC meeting. I guessed it would likely be just under strong resistance, but that hasn't been the case so far. Strong support begins at 525-526, with even stronger support at the known 523.50-524 zone. That zone assumes extra importance as the location of the 30-minute 100/130-pma's. This morning the BIX sliced through those averages like butter, however, a few days after the SOX also sliced through them. Is that predicting that the OEX will do the same? It doesn't seem likely at this point, but those other two indices sometimes serve as leading indicators for the OEX, so we should be watchful of that possibility.

 
 
  Jonathan Levinson   12/9/200,  11:08:10 AM
Gold is holding 409, but the miners are getting sold, HUI -5.7 at 245.98, XAU -1.77 at 109.25.

 
 
  Jeff Bailey   12/9/200,  11:05:17 AM
11:00 Internals at this Link

 
 
  Linda Piazza   12/9/200,  11:01:12 AM
The SOX now falls low enough to negate the possible inverse H&S formation. As it does, 30-minute CCI falls below its rising trendline. While it's possible the SOX could still form a double bottom on that 30-minute chart, stabilizing just ahead of yesterday's low, we're now warned that the "more upside" scenario is at least temporarily negated. When I see these potentially bullish formations fall apart, I'm warned that bullish players might feel more alarm and disappointment and the losses could steepen.

 
 
  Jeff Bailey   12/9/200,  10:53:09 AM
Stillwater Mining (SWC) $9.08 +3.77% ... my 5-MRT is all messed up. I will have to redo chart after writing 11:00 Intra-day update.

 
 
  Linda Piazza   12/9/200,  10:52:32 AM
Maybe I should have trusted that weakness that was beginning to show up on the 30-minute oscillators and the potential reversal signal produced on the 60-minute OEX chart? I'm leery of any developments ahead of a potentially market-moving event, however, and I remain so. OEX 527 might offer first support. Below that, several types of possible support now gather near OEX 525-526, with that support consisting of a rising trendline, the 30-minute 21-pma at 525.13, and Keltner band support at 525.80-526.

 
 
  Jeff Bailey   12/9/200,  10:46:46 AM
Stillwater Mining (SWC) $9.05 +3.42% ... here's a shorter-term chart of SWC, where 15-minute bar char used to show recent 52-week high, where with Palladium futures make a move higher, looking for SWC to challenge its recent 52-week high near-term. Link

Retracement shown is today's 5-MRT

 
 
  Linda Piazza   12/9/200,  10:37:21 AM
The SOX's 30-minute trading pattern still fits with the scenario that a possible inverse H&S is building. Currently, we're seeing some back-and-forth near the level that would mark the potential right shoulder.

 
 
  Linda Piazza   12/9/200,  10:32:25 AM
The last 60-minute OEX candle was a gravestone doji, a potential reversal signal, but a reversal signal that must be confirmed by the candle that follows. The 30-minute oscillators now show tentative weakness. I don't trust it. Any of it. I think the markets are likely to get pinned here or slightly above the current level or slightly below it, into the FOMC meeting.

Unfortunately, I have an appointment this afternoon that will take me away for the last hour of trading, so I won't be able to follow much of the post-FOMC action.

 
 
  Linda Piazza   12/9/200,  10:27:24 AM
Jeff's Washington Mutual news (see his 9:58 post) must be behind the weakness in the BIX. As I type, the BIX trades near its day's low, having finally steadied at the 60-minute 130-pma.

 
 
  Jeff Bailey   12/9/200,  10:25:55 AM
Stillwater Mining (SWC) $9.06 +3.54% ... here

 
 
  Jeff Bailey   12/9/200,  10:24:45 AM
Day trade long .... Stillwater Mining (SWC) $9.10 +4% here, stop $8.88, target $9.50.

 
 
  Jeff Bailey   12/9/200,  10:20:01 AM
March Palladium futures (pa04h) $213.00 +2.15% .... yesterday's trade saw this futures contract break above its bearish resistance trend of $206 (4-box scale) where bounce higher came from August relative lows of $186. Demand in control here with bullish vertical count of $246 currently under construction.

Stocks we've profiled in the group in prior months has North American Palladium (AMEX:PAL) Link $7.43 +3.19%, and Stillwater Mining (AMEX:SWC) Link $9.07 +3.65% seeing gains.

 
 
  Jim Brown   12/9/200,  10:19:54 AM
Note the jump in the VXO when we got that last drop in the A/D line. Somebody had an order triggered to buy a bunch of puts. Link

 
 
  Linda Piazza   12/9/200,  10:15:23 AM
I just checked the pricing on the 135/140 bear call credit spread I've been tracking since Thursday afternoon. I wish I'd remembered to benchmark an ATM put at the same time for comparison's sake, but I didn't. It's certain, however, that such a put would be far underwater now, with several days' time expiration working against it, and with the OEX currently higher than the Thursday afternoon high. The 135/140 bear call credit spread also is underwater, but only by $0.20, and time still works its magic on this position. I priced this spread as if the bought option were being bought at the ask and the sold one were being sold at the bid, and am pricing it the same way this morning. In real life, it might have been possible to place a combination order and get a slightly higher credit when entering the position and pay a slightly lower price when exiting it.

 
 
  Jeff Bailey   12/9/200,  10:11:03 AM
QQQ $35.30 +0.17% ... session low has ben $35.17, which came right around RED #2 and upward trend from March lows. Gives me more of a bullish bias.

Will look at 11:00 internals, where 10:00 showed similar action to yesterday on A/D with NYSE much stronger at 1596:933 compared to NASDAQ 1282:1223.

 
 
  Jonathan Levinson   12/9/200,  10:06:32 AM
Opening put to call ratio at the low end of neutral at .63.

 
 
  Jim Brown   12/9/200,  10:05:44 AM
Richmond Fed Manufacturing Survey = 11 (last +20.0)
That is the second Fed survey to drop significantly this week. The Kansas Fed survey dropped from +28 to only +6 yesterday.

 
 
  Linda Piazza   12/9/200,  10:03:26 AM
Next OEX Keltner support shows up at the current OEX level and again at 527.80.

 
 
  Linda Piazza   12/9/200,  10:01:02 AM
Will it soon be time for the SOX to bounce to relieve oversold pressure? Possibly, but probably not until several hours of consolidation. Why do I think so? Here's a possible inverse H&S on the SOX 30-minute chart with bullish divergence showing up on the oscillators: Link If it is an inverse H&S, then it will probably require at least several hours for the right shoulder to build. (Perhaps until after the FOMC meeting concludes?) I'm not betting my money on this being an inverse H&S, but rather am watching various indices to gauge what might happen next on the OEX. With the BIX showing weakness today and the SOX potentially ready for a bounce, today could be as chopped up yesterday when the BIX and SOX were also trading opposite each other.

 
 
  Jonathan Levinson   12/9/200,  10:00:41 AM
Dec gold is down to 408.90, ten yr bonds up 2.1 bps, HUI -1.89 at 249.77, XAU -.54 at 110.48.

 
 
  Jeff Bailey   12/9/200,  9:58:35 AM
Washington Mutual (WM) $40.72 -7.11% .. revises 2003/2004 outlook lower. Weighs on homebuilders and financials in early part of today's trade.

WM saying lower mortgage loan volumes and increasingly competitive pricing in the mortgage market and the company's greater focus on the origination of adjustable rate mortgages has gains from originated morgages being significantly lower in Q4 than in Q2 of 2003. WM now expects 2003 earnings of $4.15-$4.25, which is well below consensus of $4.42. In light of changed conditiions and now uncertain outlook, WM guiding 2004 EPS to a range of $4.30-$4.80, which compares to consensus of $4.76.

 
 
  Jim Brown   12/9/200,  9:57:48 AM
Wholesale Trade Sales = +0.2% (est +0.3%, last +0.5%)
Inventories +0.5%

 
 
  Jim Brown   12/9/200,  9:53:39 AM
Five minutes until the Richmond Fed Manufacturing Survey and the October Wholesale Trade.

 
 
  Jeff Bailey   12/9/200,  9:51:43 AM
QQQ $35.29 +0.15% ... here's intra-day chart of Q's... monitor trends (up and down) for support. Link

GREEN or upward trend is from the March lows.

RED or downward trend is from the recent 12/03 relative high of $36.12 to 12/04 intra-day high of $35.71.

 
 
  Jim Brown   12/9/200,  9:50:43 AM
Note the drop in the A/D line once 10K was touched. Link

 
 
  Linda Piazza   12/9/200,  9:49:04 AM
Here's what's happening with the BIX, the S&P Banks Index as seen on the 30-minute chart: Link.

As I typed, the BIX sliced through a confluence of the 30-minute 21-, 100-, and 130-pma's, but we should see at least a tepid bounce attempt here, up to test those violated MA's, if nothing else. As Jeff has pointed out in the past, though, the OEX can't get too far without strength in the BIX, too, so this extreme weakness doesn't bode well for the OEX.

 
 
  Jonathan Levinson   12/9/200,  9:39:54 AM
Dow 10,001 Link

 
 
  Jeff Bailey   12/9/200,  9:39:15 AM
Sell Prog. Prem. Alert ... SPX = 1,070.83 , QQQ = $35.24 (back filled morning's gap higher).

 
 
  Jeff Bailey   12/9/200,  9:37:46 AM
Dow Industrials (INDU) 10,001.42 +0.36%

NASDAQ Composite (COMPX) 1,954.93.

 
 
  Linda Piazza   12/9/200,  9:37:31 AM
The OEX just exceeded the 529.03 high from 12/03.

 
 
  Jane Fox   12/9/200,  9:35:49 AM
Employees of the Federal Reserve System have been using market-timing strategies to make money in their mutual funds in their plan's international mutual fund. Two letters have been sent to plan participants since September, outlining problems from market timing originally identified by T. Rowe Price Associates, which runs the Fed's international stock fund.

 
 
  Jeff Bailey   12/9/200,  9:35:02 AM
Dow Industrials (INDU) 9,994.45 +0.29% ... all components open for trade. Session high so far has been 9,998.53, which is just shy of its DAILY R1 of 10,003.76.

QQQ $33.38.

 
 
  Linda Piazza   12/9/200,  9:33:56 AM
In the first five minutes of trading, the OEX saw a low of 527.67 and a high of 528.88, with the midpoint of that range at 528.28. The OEX is currently above that midpoint, indicating strength in earliest trading. We'll soon have other measures to watch, but this can be helpful in earliest trading.

 
 
  Jonathan Levinson   12/9/200,  9:33:19 AM
The TRINQ is in extreme territory at .38, but it doesn't reverse after the first half hour or so, that signal will become potentially bullish- any short term indicator that sustains an extreme reading for too long indicates something bigger at work.

 
 
  Jeff Bailey   12/9/200,  9:31:00 AM
QQQ $35.44 +0.52% ... session high $35.46, so will close out Friday's profiled swing trade short. Might look for a back fill of morning gap higher to $35.26. Will wait for 5-minute bar to form, then post a QQQ intra-day chart.

 
 
  Linda Piazza   12/9/200,  9:25:06 AM
The markets have a way of pinning themselves just underneath key resistance or just above key support before the release of potentially market-moving information or numbers. I wouldn't be surprised to see the OEX get pinned underneath next resistance early today and then plastered there into the conclusion of the FOMC meeting. If that does happen, a move up to 529 or to next resistance between 531-533 would probably not constitute a break above the top of the potential orthodox broadening formation (megaphone) on the daily chart. It is often difficult to assess the breakout point in such formations, however.

 
 
  Jeff Bailey   12/9/200,  9:23:21 AM
QQQ $35.23 ... higher at $35.42 in pre-market trade. While profiled stop was lowered to $34.45 yesterday, which is today's DAILY R1, traders might allow a few cents to the upside from the profiled $34.45, but I will keep stop as profiled, with downside target at this point remaining $34.67.

 
 
  Jeff Bailey   12/9/200,  9:18:46 AM
09:00 Update posted at this Link

 
 
  Jonathan Levinson   12/9/200,  9:16:28 AM
We await wholesale inventories at 10AM. I'm seeing estimates ranging from +.1% to +.5%, with the previous reading at .4%.

 
 
  Linda Piazza   12/9/200,  7:07:16 AM
Good morning. Twice in overnight trading, the Nikkei attempted to climb over 10,150, but it was repelled both times. Still, despite worries about the continuing strength in the yen against the dollar, the Japanese government's impending decision (made later in the day) to send troops to Iraq, and the impact of today's FOMC meeting, the Nikkei managed a positive close after yesterday's steep declines. The Nikkei closed up 78.94 points or 0.79%, at 10,124.28. Banks proved weak, while retailers and drug stocks proved strong. By the end of the day, many exporters had trimmed earlier losses, some closing in the green. The release of October's machinery orders helped strengthen the Nikkei, with that number depicting a surprisingly high growth of 17.4%. Economists had predicted 5% growth. Orders grew 23.1% over the year-ago level.

Most other Asian bourses closed up. The Taiwan Weighted gained 0.21% and South Korea's Kospi gained 0.32%. Singapore's Straits Times was one of the few decliners, dropping 0.46%. Hong Kong's Hang Seng climbed 1.78% and China's Shanghai Composite gained 0.47%.

Commentators on CNBC Europe this morning expressed surprise at the positive bourses when the euro was again reaching record highs against the dollar. It was a day for story stocks, with individual stocks gaining or losing according to news that might be impacting them. Some traded higher on the Texas Instruments news last night, for example. The real story was the dollar's weakness and the increasing concerns about the growing U.S. trade deficit's effect on the dollar. Some speculated that China was repatriating its funds, with those funds no longer available for the funding of international governments' deficits.

Most European bourses trade in the green. As of this writing, the FTSE 100 trades up 31 points or 0.71%, to 4390.80. The CAC 40 has gained 23.49 points or 0.68%, at 3458.40. The DAX trades up 41.11 points or 1.08%, at 3847.65.

 
 
  Jeff Bailey   12/8/200,  8:57:48 PM
Pivot Matrix for tomorrow at this Link

 
 
  OI Technical Staff   12/8/200,  7:10:42 PM
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