|
|
us stock market, trend trading stock
Begin Part 2 of 2
SUBSCRIBER QUESTIONS
Q: I am still confused over the strategy involved in recommending puts or calls with low or no open interest when you have repeatedly stated that you prefer options with 100 OI or better yourself. Are we to ignore your advice? Do you yourself buy options when there is no OI? Also it would be reassuring to hear from you that when you are recommending these low or no OI options that you are not selling the relavant puts and calls yourself. If these questions have occured to me I am sure they have occured to others as well and it would be reassuring to me if not to the readership in general if you would outline and clarify your position for me on these points.
A: It is our general rule of thumb to buy options with 100 or more open interests primarily because that allows us to better use stop losses and shave the spread. In order for a stop on an option to work it has to be triggered by a sale at that level. If there are not many ongoing trades in the option (the problem with low OI) then you cannot utilize stops effectively. We are driven by the technical pattern of the play and, if using options, the ability of that option to make us an acceptable level of profit on the play. If the right combination of pattern and option to make our money exists (we have to bypass some good patterns because the option deltas and prices just won't cut it) but there is low OI, we will still make the play knowing, however, we will have to monitor the trade without a stop. No big deal really; I did that all the time when I was working another job. There were sometimes I could not make plays because I knew I would be too busy, but I worked around it. There have been many times the play was so good but there were no OI; I was the only OI in those options and still made great profits. I just had to be ready to sell and willing to take what the market maker was willing to pay. On no positions we discuss in the report are we taking opposite positions to those discussed or taking positions before the plays are discussed unless it has alrady been on the report and has hit a buy point.
THE PLAYS:
Good movers: BZH delivered on the put plays.
Friday plays:
ORCL: Good move over the 50 day MVA; could use more volume.
JDSU: Gapped higher but reversed. Closed above the 50 day MVA again, so not bad.
CPKI: Well, broke back below the 50 day MVA on huge volume.
Best Plays:
1)
SUBSCRIBER'S CHOICE
DELL (Dell Computer Corp--$25.03; +1.10)
http://biz.yahoo.com/p/d/dell.html
STATUS: In a 19-month trading range from 20 to 30, generally bucking the trend to sell off. Last week it stated earnings would edge past expectations on a gain in market share. The stock gapped higher but could not break the 50 day MVA (25.60). A general market rally could carry it back to the 28 to 30 range, but breaking out of this long flat base will take more, i.e., a general belief that the PC sector is going to start growing again. Dell has been taking market share for months and months and it is still in the same range. It is playable, and could still be played to the upside here if it can clear the 200 day MVA (26.17) up to the 28 to 30 level.
Volume: 36.629M Avg Volume: 21.925M
http://www.investmenthouse.com/cd/dell.html
NEW PLAYS:
Upside:
DCOM (Dime Community Bancshares--$24.9; -0.18; no options): Savings & Loan
http://biz.yahoo.com/p/d/dcom.html
STATUS: After splitting in April, DCOM rallied to a new high at 27 and then corrected back with the market in May and June. It has bucked the trend in July, rising as the market sold off. That move up was on very good volume, and the rise built the right side of the cup base. Last week it peaked out and started to trail off on lighter, below average volume. That is the creation of the handle. The pattern accumulation is 2 up weeks to no down weeks. This is a stock that continues to move up and split. We like that as we get rewarded for staying with a good stock. No brainer.
Volume: 141.4K Avg Volume: 193.545K
BUY POINT: $26.01 Volume=290K Target=$31.25 Stop=$23.85
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cd/dcom.html
JAS-B (Jo-Ann Stores--$63.84; +1.79; no options): Fabrics
http://biz.yahoo.com/p/j/jas-b.html
STATUS: Ascending wedge. Seems as dull as dishwater, but JAS is easy to understand, it has moved well this year, and its customers love it. This wedge is a bullish consolidation that allows the stock to catch its breath after a good run before continuing higher. Accumulation in the wedge is great at 4 weeks to just one distribution week. A breakout will not push it to an all-time high (27.60), but it will be a 4-year high.
Volume: 39K Avg Volume: 45,000
BUY POINT: $21.86 Volume=68K Target=$26.25 Stop=$20.15
POSITION: Stock (no option chain)
http://www.investmenthouse.com/cd/jas-b.html
Downside:
ATH (Anthem--$64.35; +2.30; optionable): Health care plans
http://biz.yahoo.com/p/a/ath.html
STATUS: Put. Broke below its 50 day MVA in late June and has spent time testing and failing the test to retake that level. It tanked hard early last week then reversed Thursday and Friday. Friday's move higher was on lower volume and the stock was unable to hold above that level on the close (64.53). It looks ready to roll back over, and it has a lot of room to fall as it hit 57 on the last plunge.
Volume: 1.434M Avg Volume: 1.585M
BUY POINT: $64.05 Volume=1.5M Target=$58.25 Stop=$67
POSITION: ATH TN - Aug. $70 put (-65 delta, no OI). These are August expirations (July expiration is next Friday) and no open interests now, but with the distance to fall that gives us plenty of cushion.
http://www.investmenthouse.com/cd/ath.html
SYK (Stryker--$49.01; +1.67; optionable): Medical instruments
http://biz.yahoo.com/p/s/syk.html
STATUS: Put. Continuing lower in the downtrend, SYK really broke down the past two weeks, rallying back up each time to test the short term moving averages. After a plunge early in the week, SYK rallied back Thursday and Friday toward the 10 day MVA at 50. It closed off the high (49.49) Friday, so it may turn back here. We can take positions on a turn back form here, but it may rally up to 50 or even the 18 day MVA at 51.
Volume: 633K Avg Volume: 646.318K
BUY POINT: From here: $48.95. After at test up to 50 to 51, 49.95. Volume=750K Target=$44.95 Stop=$51
POSITION: SYK TK - Aug. $55 put (-72 delta) OR SYK UK - Sept. $55 put (-70 delta)
http://www.investmenthouse.com/cd/syk.html
MEMBER PORTFOLIO: CUB, EBAY, HOTT; LOW, NOC, PG, QLGC, RCII, SRCL, WM
Stock Date Play Close +/- Pivot Tgt Vol AvgV Stop
CUB 07/06 Cup 19.27 -0.68 0 0 90K 0 0
Testing the 200 day MVA as it has reversed the strong move up through May. Not pretty here, but might give a bounce.
EBAY 07/02 Test 50 61.01 +0.63 57.95 63 7.1M 600K 57
Doji Friday with a high at 63. Looking for another move up to the target Monday.
LOW 07/06 Test 50 40.18 -3.02 0 0 14M 0 0
The puns are on the tip of the tongue but we won't make them. Broke the 200 day MVA on some massive volume.
NOC 07/06 Test 50 111.01 -2.91 0 0 2.3M 1.7M 0
All the way to the 200 day MVA. May hold here.
QLGC 07/06 Test 18 39.42 +0.36 0 0 14M 16M 0
Gapped over the 18 day MVA. Could not hold the entire move but did hold the 18 day MVA on the close.
RCII 07/06 Cup 48.72 -0.77 0 0 409K 0 0
WM 07/06 Cup 32.85 -1.88 0 0 5.6M 5.5M 0
Major tanking at the 200 day MVA. Too late for a put play on this one.
CONTINUING/WATCHLIST:
We have made a change to the table. Instead of average volume we have included the target volume.
Stock Date Play Close +/- Pivot Tgt Vol TgtV Stop
ABCW 07/09 Test BO 21.65 -1.06 24.12 29 40K 78K 22.35
This one did not hit the buy before Friday's tank.
ABCW 06/20 A Wedge 21.65 -1.06 23.35 27.55 40K 70K 21.65
Dove into the toilet Friday. Low volume but undercut the 50 day MVA. The low volume indicates it will try to test back up to 22.48 before it rolls over. That would be the exit point.
AXP 05/08 cup hdl 34.98 -0.05 43.53 52 4M 6M 40.48
BLI 06/11 Test BO 18 -0.14 18.5 22 950K 750K 17.30
Holding below the 18 day MVA with another loose doji on above average volume. Working laterally between the 50 day MVA and the 18 day MVA.
BZH 06/18 Put 70.25 -2.39 75.95 73.35 790K 600K 81
Hit the target.
BZH 06/03 Put 70.25 -2.39 74.45 70.45 790K 550K 77
Hit the target.
CCRN 07/10 Put 31.06 -0.34 32.95 28.55 296K 400K 35
Did not jump on this one Thursday, and Friday it showed a hammer doji indicating it might try to bounce back from here.
CHGO 05/28 Test 18 8.48 -0.04 7.75 10 165K 380K 7.21
Much tighter trading range right above the 50 day MVA on much lighter volume. This also represents prior highs. So far so good.
CHGO 05/09 Test 50 8.48 -0.04 7.3 10 165K 230K 7.02
CLF 05/15 Test BO 24.88 -0.89 28.2 34 44K 125K 26.90
Has resumed the fall. Some support 24.50.
CPKI 07/11 cup hdl 23.45 -1.33 26.25 31.5 371K 180K 24.41
Broke the 50 day MVA on very strong volume. Looked good, but that is why we wait for the breakout. Could still form up again, but needs to settle back down.
CUB 07/06 Cup 19.27 -0.68 0 0 90K 0 0
DNA 07/09 Put 29.75 +1.61 26.95 21.95 3.4M 3M 30.65
Rallied another session on below average volume. With the lower volume we think the 18 day MVA (30.63) will stop it.
DROOY 05/21 A Wedge 4.36 +0.05 4.85 7 2M 4M 4.30
Looks to be making another lower high near the 50 day MVA. Gold stocks are volatile and this one is no exception, but the pattern is deteriorating.
EBAY 07/02 Test 50 61.01 +0.63 57.95 63 7.1M 600K 57
ELK 06/01 DB hdl 24.17 -0.25 27.46 34.96 92K 133K 24.95
Doji below the 200 day. Could still give a bounce toward 26, but if not it is exit time.
ENC 05/06 Rv H&S 8.64 -0.26 7.3 9.5 30K 57K 6.79
Lower volume pullback to test the 18 day MVA, recovering to close at that level. Fine with us if it rides up the 18 day MVA.
EXAS 06/15 cup hdl 12.18 -0.67 15.3 18.5 87K 128K 12
Did not make a bounce higher Friday, but did not break Thursday low at 12. On a bounce that does not break the 50 day MVA at 13.16 we exit.
FDP 06/26 Test 18 25.91 -0.04 27.1 32.5 243K 250K 25.25
Has not hit this buy point.
FDP 05/21 A Wedge 25.91 -0.04 24.75 29.7 243K 300K 23.02
Holding tight and narrow in a lateral consolidation right on the 18 day MVA. Volume rose. It will make a move soon one way or the other. Looks decent, but in this market good looking can turn on you.
FORG 06/15 Test BO 4.16 +0.26 5.15 6.85 137K 165K 4.20
Recovered the 50 day MVA. Resistance at 4.50. We will let it rally higher for us as long as it will, but if it reverses at 4.50 we will exit.
HARB 06/22 BO 22.39 -0.12 24.11 29 58K 85K 21.75
Struggling at the 50 day MVA again. Need it to recapture this level early this week.
HLYW 05/29 Test 18 16.81 -0.59 19.25 27 608K 1.4M 17.9
Still anticipate a rally back up toward 18 as the exit point.
HOTT 07/06 Test 50 24.02 -0.73 0 0 558K 1M 0
HOTT 06/12 Test BO 24.02 -0.73 27.05 32 558K 1M 24.64
Tested the 50 day MVA and then fell back to 24. Some support there, but on another test of the 50 day MVA at 25.38, time to exit if it cannot plow on through.
HOTT 05/29 Test BO 24.02 -0.73 26.5 32 558K 1.1M 24.64
HTLD 07/02 cup hdl 21.75 +0.4 24.19 29 123K 370K 22
Hanging in the pattern after some volatility Thursday.
INLD 05/18 cup hdl 3.04 -0.09 3.1 4.75 247K 700K 2.50
Doji Friday on low volume. Still good.
IRN 07/08 BO 11.35 -0.15 12.05 14.74 20K 100K 10.45
Tested the 10 day MVA on again low volume.
IVGN 07/01 Put 29.42 +0.24 28.65 23.55 753K 1.6M 32.55
Doji after tapping the 18 day MVA on the high. Looks ready to roll back down.
JDSU 07/11 BO 3.55 -0.29 3.97 5.15 41M 22M 3.69
Gapped higher but then pulled back on strong volume. Still, held above the 50 day MVA on the close. Can still move and hit the buy from here.
KKD 07/05 Put 33.52 +0.14 33.75 29.5 467K 750K 34.50
Tombstone doji at the 18 day MVA as volume shrank on the move higher.
KMI 06/19 Put 38.71 -0.17 40.75 37 533K 800K 43.25
Another doji after unable to break over the 10 day MVA. Could still give us a further move lower so we will give it another session or two.
KMI 05/25 Put 38.71 -0.17 44.75 40.25 533K 750K 41.62
LBIX 05/06 Flat 2.9 -0.19 1.95 3.5 99K 350K 1.58
Back to test the 18 day MVA. Now we need to be concerned with the pattern if it cannot jump right back up: double top on low volume. We won't let it fall below 2.80.
LOW 07/06 Test 50 40.18 -3.02 0 0 14M 0 0
NCC 04/30 cup hdl 30.55 -0.46 31.42 37.25 1.2M 1.5M 29.75
No bounce up toward 32. Time to bail.
NCOG 06/22 Put 18.57 -0.48 21.3 18.04 137K 350K 24
Falling again. No volume but no complaints.
NOC 07/06 Test 50 111.01 -2.91 0 0 2.3M 1.7M 0
NWRE 06/26 cup hdl 12.4 +0.48 11.2 13.55 187K 214K 10.35
Up in a down market. Lower volume but no complaints.
ORCL 07/11 A Wedge 9.68 +0.26 9.55 12 50M 70M 8.88
Moved over the 50 day MVA and the buy point on decent volume. Need just a good injection over 10.
PTEK 07/02 Test BO 5.58 -0.11 5.76 7.99 104K 325K 5.24
Holding above the 18 day MVA, testing it on the low (5.36). Volume was very light. Needs a big volume shot.
PTSI 06/24 Flat 24.34 -0.16 26.65 31.98 36K 125K 24.20
Doji under the 50 day MVA. May try for the breakout once again, and we may be able to take positions this time around.
QLGC 07/06 Test 18 39.42 +0.36 0 0 14M 16M 0
RCII 07/06 Cup 48.72 -0.77 0 0 409K 0 0
ROOM 07/05 Put 42.91 -0.98 44.35 38.85 462K 950K 46.25
Tried to move over the 18 day MVA intraday but rolled back down to close below it. Looks ready to fall again.
SIE 06/11 Test 18 20.23 +0.71 21.1 25.45 142K 300K 19.62
Moved up well Friday though on no volume, moving up off of the 50 day MVA.
SNIC 05/30 A Wedge 7.89 -0.2 8.2 11 207K 250K 6.95
Back at the 50 day MVA still on low volume.
SNS 04/12 Test BO 14.55 -0.05 14.8 18 104K 110K 13.76
Yet another doji on the 50 day MVA, this time on rising volume. Need to be careful here as it could go either way with this wild pattern.
SNS 04/10 Dbl btm 14.55 -0.05 14.65 18 104K 125K 13.76
SSRI 07/10 Test BO 6.63 +0.21 7.21 9.25 587K 1.1M 6.35
Moved off the 18 day MVA on slightly rising volume. Looks good.
TEN 06/29 BO 7.6 -0.17 6.71 9.35 117K 250K 6.24
Pulled back a bit, still holding above the 10 day MVA (7.35) on very light volume.
WM 07/06 Cup 32.85 -1.88 0 0 5.6M 5.5M 0
WTW 05/23 Test BO 41.49 +0.21 43.7 50 448K 250K 40.64
Trying to rise off of the 50 on some rising, above average volume. Needs to make a move here. There is resistance at 43.
YCC 06/27 Test BO 24.54 -0.71 27.3 32.75 306K 500K 25
Just not doing it. Never hit the buy.
Good Investing!
Jon L. Johnson and The Daily Staff
All of the foregoing is commentary for informational purposes only. All statements and expressions are the opinion of Online Investment Services, LP or its paid consultants and are not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on our related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolio of Partners of Online Investment Services, LP or its paid consultants may, in some instances, include securities mentioned herein and on our web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors.
|
us stock market
trend trading stock
|
