Option Investor
Printer friendly version
  Jim Brown   12/19/20,  11:56:15 PM
OptionInvestor's TOP 50 Stock Picks for 2004

Just a reminder, we need to have your reservation by this weekend in order to receive your Top-50 Stocks and Top-20 Lottery picks before Christmas.

Reserved yours yet? Click here: Link

  Jeff Bailey   12/19/20,  6:52:22 PM
Pivot Matrix for next week at this Link

A decent looking trade set up for bulls may come on Tuesday. Lots of talk surfacing that Saddam Hussein's capture now has President Bush a lock for 2004 election, and that this provides positive for lower taxes, where some were concerned a Democratic challenger might do away with tax cuts. This thought may now explain the recent outperformance of the INDU/SPX/OEX (dividend payers) vs. NASDAQ (fewer dividens).

Why a Tuesday bull entry? According to StockTrader's Almanac, Wednesday before Christmas, INDU up 8 of last 12. Friday after Christmas, INDU up 9 of last 12. If that's not enough... the 29th and 30th tend to be bullish trading sessions.

Last day of trading for year (Wednesday 12/31/03) NASDAQ up 29 of 31, while INDU down 5 of last 6.

Are the indices setting up for year-end closed of INDU 10,500, SPX 1,100 and NDX 1,450? Not out of the question.

S&P 500 Index (SPX.X) chart with new weekly pivot levels/retracement. Link

  Jeff Bailey   12/19/20,  5:20:20 PM
Closing Internals at this Link

  Jeff Bailey   12/19/20,  4:38:15 PM
Ask the Analyst for this weekend will address some day trading issues. If you have some question about this topic, send me an e-mail!

  Jim Brown   12/19/20,  4:12:19 PM
Beginning Jan 6th we will be testing a voice component to the Market Monitor. You will get to hear all of beat each other up verbally. Should be fun.

  Jeff Bailey   12/19/20,  4:07:02 PM
Level 3 Communications (LVLT) $5.50 +2.42% Alert! ...Alert!... day traders that may have placed a downside and upside sell order with their brokers, should CHECK YOUR ACCOUNTS NOW!.

Make sure you didn't get stopped on the long at $5.38, but now short at the target of $5.50.

  Jeff Bailey   12/19/20,  3:58:12 PM
LVLT flurry at the close!

  Linda Piazza   12/19/20,  3:47:37 PM
Hey, Ray, I readily admit to my share of losing trades, some of them quite public in the MM. (See Ray's 15:23 post.) While I don't like making mistakes, and like them less when they're public, I agree with Ray that they're part of the learning curve. Those learning curves continue throughout our trading careers, too, as market conditions change and as we adjust our trading styles. There was a time when market conditions were such that straight options purchases were the most profitable actions, for example. Well, make that straight call purchases. There wasn't much need for a put. Then there was a time when puts were good ideas, and you could forget the calls. There were choppy times recently when it was better to be out of the market. Almost all times are good for the type of strategies that some of our weekend writers employ, such as Ray's.

  Jeff Bailey   12/19/20,  3:45:49 PM
LVLT stop alert at break-even.

Was worth a shot, but this is also what low prices stocks can bring.

  Linda Piazza   12/19/20,  3:42:38 PM
The OEX looks as if it might climb into the close. In an odd way, that may actually look more bearish than a slightly deeper decline. The daily chart now shows a potential doji or near-doji sitting almost at the top of a climb. In a classic evening-star pattern, we'd see a tall white candle (got it) followed by a doji or near doji (got it) sitting above the white candle (not quite) and then a red candle that matches the white one (have to wait and see). We won't have a classic evening-star pattern, even if the OEX does decline from near the current level all day Monday, but it would be close enough. Of course, I have to warn that all during this rally, sometimes the red candle that completes an evening-star reversal signal is the only red candle produced before the OEX climbs again.

  Jeff Bailey   12/19/20,  3:37:53 PM
LVLT $5.44 +2% ... ok, that's the "easy part" now lets see if they drive it. Raising stops to break even, but sell your target if reached.

  Jeff Bailey   12/19/20,  3:36:20 PM
LVLT $5.41 +1.53% .... did you place your 5-MRTS on LVLT? Here too, $5.44 the key level. Stock should trade it, but need to late buying for the spike to target. It looks like the volume is coming in as if they're buying..... doesn't it?

  Jeff Bailey   12/19/20,  3:29:52 PM
LVLT $5.41 +1.5% ... one retracement I'm using for NASDAQ-100 addition is from 5.67 to $5.07. I might consider this the "range" of market knowledge about LVLT's addition. See how nicely the stock trades at these levels?

  Jeff Bailey   12/19/20,  3:24:55 PM
LVLT $5.40 +1.29% .... day trade raising stop alert .... should LVLT trade $5.44, raise stop to break-even.

  Ray Cummins   12/19/20,  3:23:12 PM
Spreads/Combos/Premium Selling -- Another Great Month!

In spite of the recent volatility, it's been a great month for option traders and those who "ran with the bulls" have obviously earned some outstanding profits. Of course, there were a few unpredictable moves and that's why money management is so important. I have often said that learning to limit losses is by far the most important skill for a trader and that ability is even more critical with limited-profit spreads and "premium-selling" plays. The general public believes that option trading is very risky but there are many people who make money consistently by using proven strategies and proper entry/exit techniques. Obviously, surviving the "learning curve" to eventually profit in this business is not easy. The majority of traders lose money in the beginning but being human, they rarely talk about their failures. In fact, listening to those who have played the markets, it would seem that no one ever made a losing trade. In truth, every successful trader has his/her share of disaster stories but the quality that separates the successful option trader is the capacity to survive those occurrences and learn from the experience. See ya next week!

  Linda Piazza   12/19/20,  3:21:10 PM
In listening to CNBC Europe in the wee hours of the morning (I need to get a life, don't I?), I've heard technical analysts mention something that has puzzled me, too, but isn't often mentioned in the U.S., at least not to my knowledge. Could some of the low volatility we're seeing being attributed to decimalization? Some of the technical analysts appearing on CNBC Europe think so, but I wondered what other OIN writers thought.

  Jeff Bailey   12/19/20,  3:18:30 PM
03:00 Internals at this Link

  Jeff Bailey   12/19/20,  3:08:04 PM
Dow Industrials (INDU) 10,270 +0.21% ... making a move here. Might be some late-minute expiration taking place.

  Linda Piazza   12/19/20,  3:07:33 PM
The SOX has now climbed high enough to challenge its 30-minute 100-pma, at 489.24, and it's charging right up toward the 130-pma at 491.31. Yesterday, it made it through these 30-minute averages, but not safely through the 60-minute versions.

  Linda Piazza   12/19/20,  3:05:04 PM
Looking at nested five-minute Keltner bands, OEX resistance spreads widely above the current OEX level, leaving plenty of room for the OEX to climb without many obstructions, at least based on this type of resistance. However, support lines spread out nearly as widely--not quite--but wide enough to give the OEX plenty of opportunity to decline, too. Based solely on Keltner band evidence, it looks as if the OEX will be slightly more likely to climb than fall. However, based on personal experience, the OEX will be likely to meander around in as close a check as the markets are able to keep it.

  Jeff Bailey   12/19/20,  3:01:41 PM
Day trade bullish alert ... Level 3 Communications (LVLT) $5.38 +0.75% market, stop $5.31, target $5.50.

Taking a shot at one of the stocks going into the NASDAQ-100. Link

  Ray Cummins   12/19/20,  2:58:51 PM
I vote: "Nothing will happen due to confusion from all the above...."

  Linda Piazza   12/19/20,  2:58:50 PM
In yesterday's trading, the OEX ranged from a low of 535.20 to a high of 540.66. A 50% retracement of yesterday's range would occur at 537.93. A close any higher than that level would not be a particularly bearish close. That doesn't mean that the OEX couldn't fall further early next week, but if the OEX maintains a level above that midpoint, the day's action supports a bullish case more than it does a bearish one. Conversely, a close below that level supports the bearish case. With the indices lately, however, "bearish" can connote nothing more than a need to consolidate. The OEX does need to at least consolidate if not pull back, however, as the recent quick gains have tracked a rising trendline that's too steep to be maintained.

  Linda Piazza   12/19/20,  2:47:26 PM
Late yesterday, the SOX challenged its 60-minute 100-pma. That resistance proved too strong for the SOX, especially with the 50-dma also lending its strength. Although the SOX did not drop strongly, it did pull back from that test. Today, the SOX again challenged that resistance and again fell back, this time pulling back a little further. It has not yet, however, retraced more than half yesterday's movement, but if it should do so, that would be a bearish action. Daily RSI turns down now, but it's really squiggling around near 50, an inconclusive action. I prefer to watch trendlines on the RSI and there's not one that's particularly important right now.

  Jim Brown   12/19/20,  2:42:53 PM
Let's review the potential for the afternoon close:

Possible short covering left over from OpEx.
Possible pre Santa positioning (buying)
Possible profit taking from longs at the top
Possible downward pressure from NDX/S&P rebalancing
Possible selling in front of a terror threat weekend
Possible selling from traders leaving for holidays

and last but not least

Possibly nothing will happen due to confusion from all the above.

  Ray Cummins   12/19/20,  2:37:22 PM
Spreads/Combos/Premium Selling -- "Hot" Stocks: Winnebago (NYSE:WGO)

Shares of WGO have been in "rally mode" since Wednesday, when the company reported favorable earnings, and the upside activity is continuing today. WGO is trading up $1.31 at $67.22, which is a new "all-time" high. The catalyst for the rally is revenue and Winnebago has plenty of that, posting a 9.3% gain in income during fiscal 2003. The company also noted that fiscal 2004 is off to a strong start due to positive economic factors including higher consumer confidence. Demand for their products is robust and WGO ended the latest quarter with a sales order backlog of 2,768 units, up 42% from a year ago. Our bullish spread (JAN-50P/55P) in the issue is comfortably profitable but there may be another opportunity for a "premium-selling" position (at $60) if the issue consolidates in the near-term.

  Jeff Bailey   12/19/20,  2:32:12 PM
02:00 Internals at this Link

  Linda Piazza   12/19/20,  2:26:48 PM
The OEX five-minute MACD histogram has been showing bullish divergence with the price, with the histogram showing a higher lower while the price showed a lower low. RSI and 21(3)3 stochastics also show bullish divergence. Interestingly, the MACD lines do not.

  Linda Piazza   12/19/20,  2:15:18 PM
As of a few minutes ago, volume patterns showed adv:dec ratios at 14:18 on the NYSE and 12:19 on the Nasdaq. Down volume led on both exchanges, with down volume 1.4 times up volume on the NYSE and 1.9 times up volume on the Nasdaq. New highs totaled 463, however, with new lows only 18. Total volume was 968 million on the NYSE and 1.1 billion on the Nasdaq.

  Ray Cummins   12/19/20,  2:05:17 PM
Spreads/Combos/Premium Selling -- On the "watch" list: Neurocrine Biosciences (NASDAQ:NBIX)

One of our recent "bullish" candidates is in a funk today after the company was initiated as a "hold" by analysts at Lazard Frères & Co. NBIX shares are down $1.24 at $53.19 and the move to the bottom of a month-long trading range puts the issue on our "watch" list for early-exit candidates. The nadir of the current channel is near $52.50 and a close below that price would likely presage additional bearish activity. Traders are encouraged to monitor the issue daily for changes in technical character.

  Jonathan Levinson   12/19/20,  2:04:02 PM
The US Dollar Index made it to a doji spike at 88.40 before falling back to 88.10, while gold is up to 410.30. HUI and XAU are holding their losses, however, down 4.64 and 1.52 respectively. 10 year bonds are up all of .6 bps.

  James Brown   12/19/20,  1:49:38 PM
Another metal-mining stock to keep on the watch list is Freeport Mcmoran (FCX). Shares have been in a non-stop rally since May more than doubling in price. Lehman Brothers believes that FCX may be a takeover target from ABX. Meanwhile Morgan Stanley just downgraded the stock on valuation. The downgrade has pushed shares back toward their simple 50-dma. This was the first touch of the 50-dma since late April and bulls bought the dip, which happened to coincide with support near $40.00.

If you're bullish today's intraday bounce from $40.50 might be buyable but FCX does have resistance near 45.50. If you're feeling bearish, watch for a breakdown under $40.

  Linda Piazza   12/19/20,  1:48:49 PM
The retail index $RLX has been bouncing in recent days after hitting a multi-month low on Wednesday. Today, it's turned down from yet another test of the 373.50-373.75 resistance zone established this month, but MACD still tries to move up into a bullish cross. As with the SOX this morning, the RLX MACD hasn't quite made it into that bullish cross, but the MACD histogram shows increasingly less negative numbers while RSI is inconclusive. If the RLX does climb higher, it will soon face the 50-dma at 377.26. Individual retailers show a mixed pattern, with some such as DLTR and ANN moving down from resistance while as of a few minutes ago, others such as JCP and RSH hesitated but hadn't yet turned down.

  Linda Piazza   12/19/20,  1:37:53 PM
On an ordinary option expiration Friday, prices would already be pinned at or near their final numbers for the day, with oscillators flat-lined already. On a thirty-minute basis, I don't yet see that flat-lining pattern.

  James Brown   12/19/20,  1:31:37 PM
Trucking/transport stock Yellow Roadway Corp (YELL) is bucking today's trend of profit taking with another small gain. The stock has surged higher this week and broken above resistance at $34.50. A retest of $34.50-to-35.00 as support might be a good bet. Bulls can watch for a bounce from this level.

  Ray Cummins   12/19/20,  1:29:50 PM
Spreads/Combos/Premium Selling -- On the "watch" list: Angiotech (NASDAQ:ANPI)

Shares of ANPI are drifting lower today, down $1.26 at $45.45, and with no news to explain the selling pressure, this seems to be another case of a stock gravitating to a specific strike price for the benefit of institutional traders. In this case, the target price ($45) seems appropriate as it is near the middle of multi-month trading range and fortunately, our bullish put-credit spread (DEC-40P/45P) is on the "right" side of the strike. However, there are still a few hours left in the day so traders are advised to monitor the issue closely and watch for any signs of further decline prior to the closing bell.

  James Brown   12/19/20,  1:27:30 PM
Those sectors feeling the hardest hit today are:

OSX oil services index: -1.54%
XAL airlines index: -0.98%
XAU gold & silver: -1.64%
HMO healthcare index: -0.97%
SOX semiconductors: -0.98%

  James Brown   12/19/20,  1:25:37 PM
At 1:30 PM ET the only sector indices in the green are:

UTY utility index: +0.14%
BKX banking index: +0.14%
BIX banking index: +0.05%

  James Brown   12/19/20,  1:20:50 PM
Metal and Mining stocks have been big winners lately with the rise of gold and other metals like copper to multi-year highs. Phelps Dodge (PD) is one such miner that has soared to its own new highs. The stock is up four days in a row and this morning's pop was fueled by an upgrade from Morgan Stanley who raised their outlook from "under weight" to "over weight" and placed a $100 price target on PD. Shares are obviously overbought and extended. Very aggressive players could try and buy a bounce from the 10-dma near $70 but the 30 or 50-dma look like better entry points to buy the dip.

  Jeff Bailey   12/19/20,  1:18:02 PM
01:00 Internals at this Link

  Ray Cummins   12/19/20,  1:12:55 PM
Spreads/Combos/Premium Selling -- E-mail Replies: Premium-Selling Strategies

Hello Ray, I don't think I've ever seen you address an article on "disaster plays". These are stocks that have news that is disastrous or perceived to be disastrous. They are usually high flyer, high beta stocks. Even after the bad news comes out, the out-of-the-money options still have significant premiums. After a few days people realize they won't rebound quickly and the out-of-the-money premiums disappear. I recently sold naked calls on Career Education (NASDAQ:CECO) at the $50 strike price and got a very nice premium. I will probably buy them back for a nickel so I have more buying power to play with. I would love to hear your observations on this. I enjoy the column you do and keep up the good work! RX

Your comments about disaster plays (catastrophic losers) are "right on target" and indeed, there are generally some excellent trading opportunities for a brief period after the initial downdraft occurs. The key is to become aware of the activity in a timely manner and then be able to quickly make a reasonable judgment, based on the actual content of the news (or catalyst), as opposed to the emotional decisions that generally surround such events. Options can offer extreme leverage during periods of uncertainty and anyone who can learn to capitalize on the resultant volatility "premium" will definitely be a successful trader in the long run. Happy Holidays!

  James Brown   12/19/20,  1:12:23 PM
Danaher (DHR)... This is another stock that's been a big winner the last several sessions. A week ago the company reaffirmed its estimates and then announced that XRAY had sold its Gendex equipment business to DHR. Wall Street liked both announces and DHR received a number of upgrades and reiterations. The stock is very short-term oversold and today's candlestick looks like a "dark cloud cover" pattern. A move back under $90 might be a trigger point for aggressive bears to try and scalp a move back towards $86. Otherwise, bulls should probably wait for a possible bounce above the $86.

  James Brown   12/19/20,  1:05:23 PM
Intl Game Technology (IGT) has also been a big winner this week. The stock soared to yet another new all-time high, above resistance at 35.50, after Goldman Sachs issued some positive comments on Wednesday. GS believes that there are enough slot machines in need of replacement to keep IGT buzzing for all of next year. Traders could look for a pull back toward the $35 region as a short-term entry point for bullish plays.

  Jim Brown   12/19/20,  1:03:58 PM
This day in history

On Dec-19th 1998 Bill Clinton was impeached on a 228 to 206 vote and became the second president in history to be impeached.

Seems like a decade ago instead of only five years.

  Ray Cummins   12/19/20,  1:03:30 PM
Spreads/Combos/Premium Selling -- Portfolio Activity: Sandisk (NASDAQ:SNDK)

It's nice to see SNDK shares recovering a bit today and although our positions are bearish, I know of a few readers who sold puts on the issue during the recent retreat. The stock is up $2.65 at $60.38 and it seems as if the issue is gravitating to the $60 strike ahead of the December options expiration. I guess that may be the area of "maximum gain" :-) for institutional traders and a close near that price will also benefit a number of retail players as well. One comment I must add is that many traders are waiting for a rebound to establish new "short" positions and if you are in this group, you might consider a bearish spread at $75 on any strong upside move. The supply at that level seems fairly robust and a rally above that strike price would likely provide an easy (bullish) adjustment opportunity.

  James Brown   12/19/20,  12:56:42 PM
Caterpillar Inc (CAT), despite the market weakness, is still managing a small gain. Shares have soared in the last few days to new highs above resistance in the $79-80 region. I would keep this on my watch list for a pull back to the $80 level, where investors might be expected to buy the bounce.

  Jeff Bailey   12/19/20,  12:49:33 PM
TASER Intl. (TASR) $83.90 -3.3% Link .... Those traders/investors that might still be holding some TASR from much lower levels, I might suggest the raising of a stop to $78.00.

Note past trade, where TASR has given this type of supply/deman pattern, to then only move higher still. DIVERGENCE from the past would be TASR trading $78.

After huge gain this year, stock might see some selling in January on a tax-gain sell strategy.

  Ray Cummins   12/19/20,  12:42:40 PM
Spreads/Combos/Premium Selling -- Portfolio Activity: Chicago Mercantile Exchange (NYSE:CME)

Investors are "trading the trader" today, boosting CME shares $1.49 higher to $71.83, despite a lack of any news that would cause a rally. From a technical viewpoint, the issue has strong support at $65 (150-DEMA) and some resistance (AUG-SEP trading range) at the current price. However the sharp upside move suggests a reasonable potential for further bullish activity, possibly as high as $74-$75 before a notable challenge occurs. Our recent "bull-put" credit spread; JAN-$60P/$65P, is comfortably profitable.

  Jeff Bailey   12/19/20,  12:29:03 PM
S&P Banks (BIX.X) 335.15 +0.15% ... just sitting here, but challenges 52-week high.

  Ray Cummins   12/19/20,  12:20:43 PM
Spreads/Combos/Premium Selling -- Portfolio Activity: Forest Labs (NYSE:FRX)

Shares of FRX are trading higher, up $1.88 at $62.88 just one day after U.S. regulators approved the company's drug Lexapro for treating excessive anxiety. The drug is currently used for treating depression but this approval will permit the company to promote Lexapro for generalized anxiety disorder, which Forest said afflicts an estimated 4 million Americans annually. We have offered FRX as a bullish "premium selling" candidate for the past two weeks and with today's move to a new 2003 high, our positions are comfortably profitable.

  Jeff Bailey   12/19/20,  12:12:16 PM
We might have expected some type of terrorism threat, news, etc. ahead of Chanuka.

Specific news I've found for potential raising of terror threat level to orange is there were some communication intercepts, that suggested a suicide bomber might be planning some type of strike. No specific target mentioned.

  Jim Brown   12/19/20,  12:08:07 PM
Let's analyze this carefully. You are an investor with huge profits on the long side in the market. We are coming into a potentially bullish market period but the markets are at their 52-week highs. We get two reports of a potential impending terrorist attack over our Christian/Jewish holidays. (makes sense) The government immediately spikes the threat level to orange meaning the threats MAY have some credibility. What would you do?

  Jeff Bailey   12/19/20,  12:05:36 PM
12:00 Internals at this Link

  Linda Piazza   12/19/20,  12:03:05 PM
That last spike high--as the OEX was hitting the upside target from its one-minute inverse H&S--took the OEX up to 580.72, confirming that former 580.75 support zone as resistance now.

  Linda Piazza   12/19/20,  11:58:14 AM
The OEX confirmed an inverse H&S on the one-minute chart, and has just about fulfilled its upside target from that formation.

  Jane Fox   12/19/20,  11:52:38 AM
Jeff that was the cause of this little fall - Heh?

  Jim Brown   12/19/20,  11:51:27 AM
The Bush administration raised the domestic threat level to orange, or "high," today, a decision made in part because of a series of threatening messages found on the Internet, ABC NEWS has learned.

An FBI bulletin obtained by ABCNEWS points to two recent e-mails intercepted by U.S. intelligence. One message, according to the bulletin, warns of "a possible devastating attack in the next 48 hours and urged all Muslims to leave all cities, especially Boston, New York and the commercial coastline."

However, one government official said intelligence analysts have serious doubts about the credibility of the source of those messages.

  Jane Fox   12/19/20,  11:50:52 AM
(11:44 post) Here is the story from the WSJ

" Parmalat SpA's financial crisis took a dramatic turn for the worse after a U.S. bank wiped €3.95 billion ($4.91 billion) off the dairy company's books. Bank of America Corp. questioned the authenticity of a document stating that a Parmalat financing unit held the funds in cash and cash equivalents, Parmalat said Friday. In fact, the bank said that on Dec. 17 it told accountants for the unit that it doesn't have a Bank of America account. The news confirmed investors' fears that Parmalat is in worse financial condition than stated on its Sept. 30 balance sheet, and heightened concerns about a default."

  Jim Brown   12/19/20,  11:44:04 AM
Italian Parmalat may be causing some trouble to the markets, they clamimed they had 4B in bank, the cash has gone, nobody knows yet where the cash is. Martin


  Linda Piazza   12/19/20,  11:40:47 AM
Although the descending trendline off the highs did not stop the OEX, the violated ascending trendline did. The first support line near 540.75 fell, too. Next strong support appears 535-536.

  Linda Piazza   12/19/20,  11:24:42 AM
The OEX turned down as it hit the descending trendline off today's highs, but then turned right back up again, making a new one-minute high and violating that trendline.

  Linda Piazza   12/19/20,  11:12:37 AM
The OEX has fallen below the trendline that had been setting up this morning. As others have mentioned, it created a lower high while doing so. I didn't see divergence on the five-minute chart, however, as oscillators also made lower highs. The OEX may be moving up to challenge that broken trendline now, with the trendline now crossing just above 541.20. We also now can draw a descending trendline off the day's highs, with that trendline now near 541.20, too.

  Linda Piazza   12/19/20,  11:09:21 AM
Jeff may have mentioned this, but the SOX currently has a downside P&F target of 432. A trade at 510 will create a new P&F buy signal and negate that sell signal. How is the SOX behaving today? It's been challenging its 50-dma at 497.67. As it does, daily MACD tries to make a bullish cross from below signal, but it's not there yet, and it's probably going to require strong gains before it makes that bullish cross. Of note, however, is the bullish divergence possibly setting up, as the MACD made a lower low as compared to the October low while price has (so far) made a higher lower as compared to October's low. It's still possible that price could fall below October's low before MACD turns up again, of course, but that's going to require a dip lower than the price objective predicted by the P&F chart, since that October low was below 425. RSI hooks down slightly as the SOX appears to roll down below that 50-dma.

  Jeff Bailey   12/19/20,  11:07:18 AM
11:00 Internals at this Link

Yesterday's internals at this Link

  Linda Piazza   12/19/20,  10:57:36 AM
The OEX has now established a short-term ascending trendline off the 9:55 low (the farthest back I can access on my back-up charting system). That ascending trendline now crosses just under 541 and the OEX may be headed down to test that trendline again.

  Jeff Bailey   12/19/20,  10:56:42 AM
FRX on fire! $62.36 +2.22% Link

Bulls should be eager on any pullback near $55. Several brokers downgraded stock near $45, they should be getting ready to reiterate their valuation concerns, then they should be lined up to buy at $55.

  Linda Piazza   12/19/20,  10:53:22 AM
As of a few moments ago, the adv:dec ratios stood at 13:16 for the NYSE and 12:15 for the Nasdaq. Up volume was about twice down volume on the Nasdaq, but not much higher than down volume on the NYSE. New highs totaled 328, a higher total than we've been seeing at this time for much of this week, and new lows numbered 9. Total volume was 366 million on the NYSE and 506 million on the Nasdaq.

  Jeff Bailey   12/19/20,  10:47:59 AM
Darden Restaurants (DRI) $20.13 +0.65% Link .... an INVESTOR looking to build a position in DRI. Might look at a naked put in the January $20 puts (DRIMD) currently bid/offer $0.60x$0.75.

Disclosure.. I currently hold bullish position in DRI.

  Linda Piazza   12/19/20,  10:46:37 AM
The OEX appears to have established support near 540.75, and has come down to test that level. The one-minute chart appears to show a bull flag pullback into support, but that's in question unless the OEX can get its act together and pull up.

  Jonathan Levinson   12/19/20,  10:38:06 AM
The put to call ratio is up to .99, too high for bears' comfort, VXO 16.20. Again, though- put to call data, like the maxpain points, are secondary indicators only.

  Linda Piazza   12/19/20,  10:35:45 AM
I'm flying completely or almost completely blind today, but did want to make a couple of notes related to the hypothetical OEX 535/540 bear call spread that I priced a couple of weeks ago. As I mentioned yesterday, I would have counseled buying back the sold call yesterday when the OEX moved above the 535.95 at which the position would have been profitable. A trader would have had several options, including exiting the entire position or holding onto the bought 540 call as a lottery-type play. Holding on through yesterday afternoon would have allowed one to exit when the 540 call bid at 1.45. It's bidding above that as I type and headed up. It's still possible that taking this option could have resulted in a profitable position after all--the OEX needs only about $0.20 more upside before that happens--something that would not have resulted from buying a slightly ITM or OTM put when the OEX traded near 528 two weeks ago. Although we had our worst-case scenario develop with this hypothetical play, I'm kind of glad that it did happen as we watched, because it allows those considering utilizing spreads to see they choices they might have had even in this worst case scenario.

  Jeff Bailey   12/19/20,  10:26:43 AM
QQQ $35.52 -0.11% ... keep eye on MSFT near-term. MSFT looks like it may want to fill that gap higher, maybe to $27.80. Thought there might be a shot yesterday with index expiration unfolding. I have a retracement on MSFT from $29.48 to $20.70 and stock is trading it to a T.

  Jane Fox   12/19/20,  10:21:46 AM
The NYSE's new president John Thain may start paring back the role of the floor traders while pushing the exchange to match more stock trades electronically keeping with the philosophy at Goldman, which has long focused on using technology to make the trading of stocks and other products quicker and cheaper. In an interview, Mr. Thain said he would look for ways to make the floor a more efficient place for investors. "All of the orders flow to the floor electronically, and many of them could be matched electronically," he said.

  Jonathan Levinson   12/19/20,  10:11:16 AM
The put to call ratio is .81, VXO 16.30.

  Jonathan Levinson   12/19/20,  10:03:23 AM
The Federal Reserve has added 3.25B net, announcing a 5.75B 7 day repo to refund the 2.5B expiring today. For context, that's 3.25 thousand million, or $3,250,000,000 dollars of extra liquidity added to the system today. This is a medium amount by recent standards from the Fed.

  Jane Fox   12/19/20,  10:00:27 AM
The bear's line in the sand for the TRIN today is holding above 1.00.

  Jane Fox   12/19/20,  9:58:31 AM
DOW ratio has deteriorated although still neutral at 15:15. The TRIN as transitioned to neutral also.

  Linda Piazza   12/19/20,  9:58:19 AM
Linda would love to be on someone's side, if only she could get all her computer applications up and running! (This in reference to Jane's 9:56 post.) I'm out here, folks, scrambling to get something working, going back and forth from two computers.

  Jonathan Levinson   12/19/20,  9:56:43 AM
We need support to break right here. This one's for the bulls: Link

  Linda Piazza   12/19/20,  9:24:59 AM
I apologize, but am again having difficulty with some applications on my computer and can't call up charts. On either of my computers. I'm working on solving the problem and will be contributing as soon as I can do so.

  Jane Fox   12/19/20,  9:11:03 AM
Mutual Fund giant Janus Capital Group, said it would pay $31.5 million to reimburse fund customers whose investments were hurt by market-timing trades, based on the results from Ernst & Young's inquiry into the impact of frequent trading on the funds and their shareholders. Janus admitted it allowed several investors to conduct rapid trading of its fund shares and in a recent letter to shareholders said it had terminated those relationships and promised to "make whole" any investor who lost money as a result of improper trading. However, this reimbursement doesn't resolve the investigations by the SEC and Colorado and New York officials, to have Janus pay civil penalties and implement remedial actions.

  Linda Piazza   12/19/20,  6:46:58 AM
Good morning. The Nikkei opened higher by more than 100 points and then climbed, closing up 180.54 points or 1.79%, at 10,284.54. Trading has proven volatile in the Nikkei over the last two weeks. For example, a five-day chart shows an index that has gapped up and down, and moved big almost every day with the exception of yesterday.

On Friday, gains proved broad based, with banks, automakers, and tech stocks gaining. The dollar steadied against the yen, and investors in the Japanese markets were cheered by economic numbers coming out of the U.S. and by the tech gains seen here yesterday.

Other Asian markets were mixed. The Taiwan Weighted lost 0.17%, but South Korea's Kospi gained 0.46%. Singapore's Straits Times lost 0.28%, but Hong Kong's Hang Seng gained 1.07%. China's Shanghai Composite lost 0.76%.

European markets are mixed. As I type, news is flashing across CNBC Europe's screen that the German Parliament has approved a tax cut, but the DAX appeared to be holding steady and not reacting to the news. Other reports showed insurers gaining and many drugmakers declining due to news hitting the sector. Merrill Lynch downgraded French Pharmaceutical Aventis to neutral from a previous buy rating, Bayer declined on fears that the weak U.S. dollar would cause it to miss its EBITDA margin in one division by 2006; and German company Altana fell after announcing a postponement in its registration submission for one of its drugs.

As of this writing, the FTSE 100 has climbed 14.20 points or 0.32%, to trade at 4411.50. The CAC 40 has fallen 9.41 points or 0.27%, to trade at 3493.80. The DAX has gained 17.74 points or 0.46%, to trade at 3888.62.

  Jeff Bailey   12/18/20,  1:36:33 AM
Bearish trade candidate ... Cornell Corp. (CRN) $12.71 Link ... setting a downside alert at 12.00, where trade at $11.50 sees 3-box reversal back lower. Aggressive bear can establish partical short at $11.50. Should stock then see rapid decline, round to full on break below $9.50. Stops placed at $13.50 and lower should trade progress to downside. Would cover 1/2 of the bearish position (short $11.50) on test of bullish support trend at $8.50, with ultimate target being the bearish vertical count of $2.50, or trailing stop chosen by trader being triggered.

Dorsey/Wright and Assoc. classifies the stock as belonging to their Protection Safety Equipment bullish % (BPPROT), which reversed lower to "bear confirmed" status on November 17th at 76% bullish. Sector still reading 76%.

  Jeff Bailey   12/18/20,  12:25:37 AM
Forest Labs (FRX) $61.00 +1.58% Link ... earlier today at 02:26 PM EST, company announced it received FDA approval for Lexapro for generalized anxiety disorder.

I consider this a positive for the share, but not the reason for this stock's rise. While the FDA's approval of Lexapro for a broader use is positive, I think the stock's run is based on the soon to be launched Namenda drug for treatment of severe Alzheimer disease.

  Jeff Bailey   12/18/20,  10:36:23 PM
Darden Restaurants (DRI) $20.00 +3.14% Link ... Reports Q2 (November) earnings of $0.18 per share, which was 2 cents above consensus. Company said revenues rose 6.6% year-over-year to $1.14 billion versus consensus of $1.12 billion.

Comments regarding guidance was that it believes the current broad range of analysts' estimates $1.31-$1.43, given the uncertainty in timing of Red Lobster's recovery and other factors, is "appropriate." Current consensus estimates for fiscall 2004 is $1.38 per share.

  Jeff Bailey   12/18/20,  9:50:01 PM
Pivot Matrix for Friday at this Link

  Jeff Bailey   12/18/20,  9:21:33 PM
Closing internals at this Link

  Jim Brown   12/18/20,  9:11:05 PM
2003 Annual Renewal Special


OptionInvestor's TOP 50 Stock Picks for 2004

Reserved yours yet? Click here: Link

  OI Technical Staff   12/18/20,  9:09:35 PM
The Market Monitor has been archived. You may view it and any previous days here: Link

Disclaimer: Stocks discussed in the Market Monitor are for educational purposes only and any analysis is not meant to imply a recommendation for or against that stock. The analysts in this forum as on any other website are prohibited by the SEC from giving any specific advice to ANY individual trader. All information posted is for ALL readers and is not meant to be directed to any individual. Our analysts cannot answer any email questions regarding any specific stock. Please do not ask and please do not take offense if requests are denied.

Results posted in the Market Monitor are hypothetical and OIN does not claim that any reader achieved these exact results. Due to the lag time between research, writing, posting, uploading, reading and execution there will be differences between the actual signal given and the fill achieved by the reader. Fills may be better or worse but in many cases they will be different. The writers will make every effort to give advance notice of intended signals and indicate potential price targets. Your individual results may vary depending on your activity level and aggressiveness. This forum is intended as an education service only. Trading involves risk and should not be attempted by anyone not ready to accept this risk. By acting on any signal in this forum you agree and personally accept this risk.


Market Monitor Archives