#DayTrading #SPYoptions – Ho-hum, another 80 to 120%

THE FOOL’S GAME – BUYING CALLS AND PUTS

Today was again a day to live for in “The Fool’s Game.”

The weekly SPY options bracketing the open at 280.17 — the 279, 280, and 281 calls expiring Friday — netted 80%, 100% and 120% respectively on the $10K day trades. See the white flags on the lower left of each chart below for the cash gains and percentages per $10K committed to the trades of each strike.

Been a lot of days like this in this bull market.

(click on the charts for a larger view)

#MarketTiming – a choppy Friday leads to a buy-it Monday

Friday’s market action continued its sideways chop as it consolidated the gain from last Wednesday’s trending day to the upside.

As the 10-minute screenshot for the day shows there was almost no money to be made in the choppy action, and if there were any profits to be taken, they would have had to been taken fast while losses would have been easy to come by on both sides of the market (see the flags on the lower right of each chart below).

However, with both the SPY and QQQ closing above their respective opens and intraday moving averages, as well as all end-of-day swing signals turning bullish again, the initial trade on Monday is to the buy side (see table below) for another possible up swing.

Long-term breadth remains down, but barely (-1) with the threat of another bullish whipsaw. It has been whipsawing daily for the past week.

(Needless to say, this market, in general, remains wildly overbought and can pull back any week, any day, any hour, any minute but that is the way it usually is in raging bull markets.)

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Sell (Day 2).

PRICE: Buy. (Day 1).
SHORT-TERM BREADTH: Buy. (Day 1).
VOLATILITY: Buy, (Day 1).

CONTEXT:

SPY CLOSE – 280.41
QQQ CLOSE – 166.34
CNN MONEY’S FEAR AND GREED INDEX: 80, rising, extreme greed level).
NIFTY-50 STOCK LIST: 30 Buys; 17 Overbought, 3 Oversold, 10 new buys today, 1 new sells.

(click on the chart for a larger view)

#IPOs – $FIT shows the first day’s range is sacrosanct

As has been stated in a previous post here, buying into an IPO is actually one of the easiest decisions in stock investing but never let a broker con you into doing it the day of the offering.

Instead, note the high price and the low price on the first IPO is traded. Those are the lines in the sand or the Darvas box around the first day of trading (see the charts below). The time to buy, invest, is on a close above the high of the first day with a stop loss below the high of the first day. That is usually a low-risk trade since the real good news comes when the stock proves it can move up from all the hype surrounding the offering itself and if it falls back the stop to exit is close by.

So, with history on our side, let’s take a look back at one of the most famous IPOs of past couple of years – FIT.

FIT came public in 2105 at 30.40 and had a high on its first day of 31.90, a low of 29.50 and a close of 29.68. That would make the “sacrosanct” range from the 31.90 high to the 29.50 low (see the blue rectangle on the chart below).

The next day, FIT closed at 32.50. That was the buy signal as it finished outside the first day’s range. It then rallied as high at 51.90, a pretty nice rise in a couple of months.

I’m not one for fundamentals but how far did anyone think the company was going to go on a gadget product keyed to New Year’s resolutions and open to competition from virtually everybody?

Needless to say, like New Year’s resolutions themselves, the stock began to fade and by the end of the year 2015 it was violating its “sacrosanct” first day’s range. It started 2016 with a serious break to the downside on substantial volume making it a clear short in IPO trading and, as they say, the rest is history.

It has now dropped into the $5 range from its IPO low of $29.50 in the face of one of the greatest bull market’s in history.

This price action, long or short, is the same with every IPO.

By the way, history, me thinks, is the best market indicator of all.

(click on the chart for a larger view)

$SPY $QQQ – finally a gap and fall that’s worth some money

The general market gaped up today, ran higher, quietly rolled over, then roared down into the close.

It was the quiet at the highs of the day that was a bit eerie. VIX was up (as it has been for the two previous days) and that’s not supposed to happen as the indexes advance. The NYSE advance/decline line was almost immediately below its open. The SPX tagged 2800, the Dow ran through 26,000, and then everything just stopped and reversed. At first, it was almost as if Coyote from the Roadrunner cartoons had again run off his cliff and had yet to plummet to the valley floor below and then like a car that runs out of fuel going up a steep hill.

In the end the day felt like SPX 2800 and DOW 26,000 could be nice round numbers to leave behind.

If one looks at the close in comparison to yesterday’s close it appears as if nothing much happened today. But the close today is deceptive. The close does not quite register the initial leap and the final fall.

And it was a fall worth something. On my $10K weekly options model, the intraday sell signal on the in-the-money QQQ 166 put raced up to a peak gain of 167% and finished the day up 127%; the SPY in-the-money 280 put peaked at 94% and finished the day up 51% (see the white flags on the lower right of the charts below).

If there more downside to come?

Over and over again, this bull market has said no and charged ahead after every little downside glitch. It will continue to do so until it doesn’t. After today’s reversal from higher highs, long-term breadth turned negative making all of the sells on my swing signals shorts (see table below). If today turns out to be the time the bull does not charge higher, well then…it will be a bull that dies with a sigh instead of a snort.

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Sell (Day 1).

PRICE: Sell. (Day 1).
SHORT-TERM BREADTH: Sell. (Day 2).
VOLATILITY: Sell, (Day 3).

CONTEXT:

SPY CLOSE – 276.97
QQQ CLOSE – 164.02
CNN MONEY’S FEAR AND GREED INDEX: 75, falling, extreme greed level).
NIFTY-50 STOCK LIST: 23 Buys; 18 Overbought, 7 Oversold, 0 new buys today, 9 new sells.

(click on the charts for a larger view)

#BellwetherStocks – longer fangs for the new year?

Let’s put it this way:

NVDA UP 14%
NFLX UP 13%
AMZN UP 11.3%
TSLA UP 7.7%
BIDU UP 7.0%
GOOGL UP 6.8%
BABA UP 6.5%
TWTR UP 5.5%
AAPL UP 4.0%
FB UP .9%

The above are year-to-date returns – nine trading days – which is why they are the “bellwether stocks” for this melt-up bull market. They also happen to be the stocks in the NYFANG Index, up 8.4% year to date.

Also I would add FSLR, up 8.2%, as a bellwether for the future of energy.

(click on the chart panel for a larger view)

$KC_F – #Coffee short netting 118%, looking for major reversal

The current short in the coffee futures is gaining about 118% on its initial margin requirement. That’s in six trading days.

Can be done, but it’s going to take some serious trending effort on the part of coffee bears to push this swing down more.

So a reversal to the long side?

Coffee is still in an overall downtrend (see chart below) but if it turns now, it will put in a second higher price low since its bottom in December at 118, which makes it not only a long trade to take, but also gives it a chance to have a major bullish reversal. Looking ahead if it can take out 128 with some conviction, there could be the birth of a new bull market in the commodity.

But all that is just speculating. For now the short is on and the profit on this swing is, once again, just fine…

(click on chart for a larger view)

#MarketTiming – Bullish #SwingTrading continues…

The market had its one down day two trading days ago and has, as usual, vaulted higher off the opportunity of buying coming out of that one-day dip.

Quite frankly, except for the money to be made by either buying and holding or trading the long side, I’m getting pretty bored this bull market’s endless advance. I would like to see some pullback. Actually I’d like see a drop that scares the balls off the bragging bulls. That would be amusing.

Possibly we’ll get some pullback with both short term breadth and volatility, of my three swing signals, now on sells, but I’m not counting too much on it – sells are sells only, not shorts, as long as long-term breadth remains positive.

Overall the swing signals continue to be consistently profitable.

Volatility since the beginning of last year has been crushed with the VIX falling below 10 repeatedly. On the swing signals – based on Price, Breadth, and Volatility – the leveraged ETF, XIV, appropriately performed best on its own signal – up 105 percent for the year.

See the chart panel below for XIV on all three signals – the white flags are the returns per $100K place on each swing trade, which also corresponds to percentage gains.

A buy and hold on XIV wildly out performed all of these swing signals, up 159 percent since the beginning of last year (what a year!), but one would have had to have known that a buy-and-hold was going to do that from the beginning. On the other hand, swing trading controlled risk at every turn while also notching remarkably returns.

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Buy (Day 2).

PRICE: Buy. (Day 2).
SHORT-TERM BREADTH: Sell. (Day 1).
VOLATILITY: Sell, (Day 2).

CONTEXT:

SPY CLOSE – 277.92
QQQ CLOSE – 164.49
CNN MONEY’S FEAR AND GREED INDEX: 79, rising, extreme greed level).
NIFTY-50 STOCK LIST: 32 Buys; 25 Overbought, 4 Oversold, 10 new buys today, 4 new sells.

(click on the chart panel for a larger view)

$KC_F #Coffee futures – Can A Dragonfly Fly?

The current short in the March coffee futures is up 71% on its margin requirement on today’s close.

I have to say, letting these swings run their course has not hurt for years now, and this past year too. At today’s close the daily swings, long and short (mostly short), are up nearly $15,000 per contract (see the white flag on the lower left of the chart below) for the past year. The current margin requirement at TradeStation is $2310 per contract. For much of the year it was higher so it’s too big a pain to precisely figure out what percentage that $15K gain actually is but it is a bit better than 500% for the past 12 months.

But, for fun (and maybe prudent trading), let’s take a look at today’s chart.

That is a “dragonfly doji” on today’s action (or at least very close to it). Didn’t know what it was but I thought that looked ominous for a short position, like a possible reversal, so I went and looked it up. According to Thomas Bulkowski’s The Pattern Site, the odds of a reversal are basically 50/50.

ONE CAN READ ALL ABOUT IN THIS LINK

No big deal but I still think it looks ominous so, since no signal is foolproof, I’m tightening a stop to preserve some of this 70% profit overnight.

(click on chart for a larger view)

$SPY – Sideways to down?

After four days up in a row most of the major indexes are due for a pause.

The market is overbought almost across the board. In my nifty-50 stock list, 29 of the stocks are overbought (that is a lot), of the nine 3x-leveraged ETFs I follow eight are overbought.

Given how much bullish momentum is in the market it is most likely it will be a sideways move, and if down, not down much (see chart of SPY below).

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Buy (Day 14).

PRICE: Buy. (Day 4).
SHORT-TERM BREADTH: Buy. (Day 4).
VOLATILITY: Sell, (Day 2).

CONTEXT:

SPY CLOSE – 273.42
QQQ CLOSE – 160.92
CNN MONEY’S FEAR AND GREED INDEX: 75, rising, greed level).
NIFTY-50 STOCK LIST: 34 Buys; 29 Overbought, 4 Oversold, 6 new buys today, 3 new sells.

(click on this SPY chart for a larger view)

$BA – a Boeing trade better than #Bitcoin

I didn’t trade this but WOW!

Ah, the possibilities! The possibilities!

BA gave a buy signal today on a 10-minute chart at 6:40 (pacific time) at 297.26 (see chart panel below). It’s 300 weekly call (expiring today) crossed into the money at 8:00 (pacific time), at 45 cents per contract. Both then just kept going.

At last look a few minutes ago a $10K buy in the 300 call is now worth $106K, up 1000% and change on a 2.6% move in the stock itself.

It would take some real focus to find this trade, and real discipline to take this trade, but it is one of those possibilities that are always there, and sometimes one could just gets lucky.

(click on charts for a larger view)