#MarketTiming – six days up and what now? – UPDATED

UPDATE: What now?

As suggested in the post below, I expected the market to move up this week, not as much as it did, but no matter.

Anytime one is on he right side of a six-day swing, either up or down, one cannot complain.

In this case, it’s six days up.

TQQQ, the 3x-leveraged and preferred trading ETF for the Nasdaq, gained 22% on the swing. Some major bellwether stocks have powered the six days, AAPL, MSFT, NVDA, AMZN FB, all up six days in a row; TWLO up six days and 73% on the move is by far the most spectacular example I follow.

Swing trading…what more can you say?

But what now?

This could stop right here. The NYMO was down today (see the chart below). How many times have we seen that mark the end, or at least a pause, after a four or more consecutive days up?

However, the all-important NYSI continues to rise so, unless this is going to drop right out of the sky, it’s probably a pause or a stall — it takes time to work off $2 trillion of Federal Reserve funny money spent in all the wrong places.

This has been a long spectacular rally since March, a fast up characteristic of bear-market rallies. If this is the end bullish traders and long-term investors who believe the bull market lives on will be in great danger.

If the market drops here and takes the NYSI negative, watch out…

An always remember there is no profit until you sell.

(click on the chart for a larger view)

#ShortStrangles – $TSLA marching through March for a 62% gain…

Day trading weekly short strangles on TSLA, even as the market swung wildly both up and down, has turned out a steady 62% gain for March.

The total cash gain per options contract for the month was $10,969, using a maximum margin of just under $18k. Every week had a double-digit gain.

See the green-colored weekly totals and the final yellow-colored cumulative total for the month on the table below.

Each short strangle had a hard %200 stop loss. If stopped out the strangle is rewritten for new strikes calculated on the stop’s price level. Each trade is closed at the market at the end of the day to eliminate overnight risk.

The same short strangle strategy can be applied to any volatile stock with liquid weekly options – TSLA here, but other prospective stocks would include AAPL, NVDA, BA, ROKU, GS, FB, WYNN and NFLX. No doubt others from time to time depending on market conditions and an individual stock’s story (for instance, BA of late).

The reference for this strategy is this link: $TSLA – Day trading short strangles for simplicity’s sake.

There are many complicated options strategies but this blog strives to apply the idea that simple is best, or at least better…

Remember this information is presented here, and throughout this blog, for entertainment purposes and as my personal journal for trading and tracking strategies, and should not in any way be construed as investment advice.

(CLICK ON THE TABLE FOR A LARGER VIEW)

$TSLA – Day trading short strangles for simplicity’s sake

I’ve been told repeatedly on Facebook and Reddit that no one can day trade options on stocks. No one?

Is that a flat-out challenge or what?

So I set about to see if it could be simple enough to be possible. Simple because it’s a day trade, and because I’ve been chasing the simple in trading forever. To my mind Henry David Thoreau -“Simplify, simplify, simplify’ – is the greatest stock market guru of all. And I wanted it to be systematic so it could be done day in and day out as rhythmically as a perfect golf swing.

First, a few simple basics.

When one buys an option in the stock market there are only three things that can happen and two of them are bad for the buyer. It goes your way right away which is good. It goes against you, which is bad. Or it goes sideways and time decay eats away the premium paid, which is bad. It’s the same selling an option but much better because the time decay is on the seller’s side. If the stock goes sideways, the seller keeps the premium on the option. In other words, if one buys an option, one has a 66% chance of losing money; if one sells the option, it’s a 66% chance of making money.

So, obviously, it’s best to be on the sell side…

Simple as that?

Not so fast, if one does this without owning the stock, it’s called being “naked”, being naked a call, naked a put. The trouble is the margin requirement on those are often times so high one might as well be trading the stock. One might have to put up as much as $20,000 on a day trade with the prospect of making a couple of hundred bucks. A lot of risk, it would seem, for not much return. And it’s a day trade so there’s not all that much time to have the stock go your way or sideways.

No wonder the guy knocking me on Facebook is certain day-trading options of stocks can’t be done.

He’s wrong, of course, or I wouldn’t writing this.

On the table below I’ve taken the margin requirements calculated by the Chicago Board Options Exchange (CBOE) and applied to day trading short strangles on weekly TSLA options for every trading day for a month. A short strangle is selling both an out-of-the-money call and an out-of-the-money put.

To illustrate the day trade:

Let’s take the last trade on the table, the 3/13 short selling the 540 call and the 520 put while TSLA itself was at 530.89. This is a trade on the day of the weekly expiration.

The maximum gain on this trade would have been $1,511 if TSLA had stayed between 540 and 520 by the end of the day. But TSLA vaulted to 546 on the market’s last-half-hour rally cutting the gain at the close to $810, a 53% gain on the actual credit received for selling the two options. Not bad. However, the margin requirement was $11,217 on the naked sales for the expiration day so the gain was actually 7.2% on overall margin for the day. Also not bad.

This is a strategy that can be used on a any prominent stock — AAPL, NFLX SHOP, NFLX BA, NVDA — with decent options liquidity and worthwhile price swings. And it’s a strategy that can be used week in and week out without ever having to buy the stock itself.

On the table below, there are the details for each day trade on TSLA (peruse if you choose), but what’s most important are the weekly totals in green boxes for each week, the net cash for the week and the percentage gain; and the final gain for the past four weeks in the yellow stripe, $11,478, generally a 57.3 gain on margin.

Because this is a day trading strategy the same cash margin is being used over and over again anew each day and although it is most often a lower requirement day by day, the percentage gain here is calculated on a flat $20,000 margin requirement…for simplicity’s sake.

(click on the table for a larger view)

On $AAPL — its broken parabolic updated…

AAPL keeps trying to bounce off the market’s gaps down, but as time goes by it is still working its way down to where its recent parabolic rise began.

This decline with take some time. There will be bounces to sell along the way but when a parabolic breaks it creates so much overhead supply (i.e. holders who want to get out) the stock’s decline is usually inevitable.

The target price for the stock is approximately $220 to $230.

This was first outlined in this link:

#STOCKS – on $AAPL gone parabolic

And reiterated in this link when its parabolic rise first broke:

ON $AAPL gone parabolic – with an updated chart…

(click on the chart for a larger view)

#MarketTiming – From the Kerplunk to a bounce

Warned of a sell-off here back in February 9th in this post:

$SPY – Up, up, up…and KERPLUNK?

Well, the market defied the sell-off warning for a couple of weeks as it ran up past the setup, but that run up is gone now in the rubble of the last four days.

TVIX and UVXY, the leveraged VIX ETFs were backing into the starting blocks, backing into the starting blocks — here $TVIX – Just a heads up… and here $TVIX – Just a heads up… — until finally there were off with TVIX up 92% in the last four days, and UVXY up 67%. I remember when I posted that heads up someone on Twitter or Facebook scoffed at me an told me I basically full of shit (I get a lot of that at market tops).

Now there are stocks all over the place down 20% or more just on market timing. It’s likely nothing as changed at many of those companies since four days ago except for the market sell off. Such is the madness of crowds.

None of this is any surprise really, since there were signs everywhere that the indexes were running on the fumes of AAPL vapor and a, I guess, a whopping TSLA short squeeze (everyone said Elon Musk was crazy, and then it turned out is was more like crazy smart). Over at Virgin Galantic (SPCE), where Richard Branson’s company has put a mere two winged space craft in space for short jaunts, there are passengers buying seats on flying ships to Mars. Say what?

As the indexes made new highs, there were divergences on the NYMO/NYSI, CNN’s Fear and Greed Index, S&P 500 stocks versus their 200-day moving average, and news lows were gradually climbing above new highs before bolting much higher (see the chart below).

Then there is the Coronavirus…and again news comes along like black swans crying when market internals are obviously falling apart.

So what now?

This sell off is so extremely oversold there is going to be a bounce. Likely tomorrow.

Forty-eight of the stocks on my nifty-50 stock list are on sells with 36 individually oversold (that is a lot). The indexes are down more in this four-day thrust than they’ve been in more than a year. It is just too much too quickly.

However, the question is going to be what to do with this bounce? Hang on and hope it’s V-bottom? Or sit on the edge of your seat looking for a chance to SELL EVERYTHING?

The bull market of the past year would suggest the former, everything else suggests the later. But it should be noted that CNN’s Fear and Greed Index is at 22 today. While that’s an “extreme fear” level, it has more room to move down which suggests when the bounce happens, tomorrow or whenever, the low of left behind will be tested, and if by then this is a full-fledged bear market, this bounce is going to be remembered as a last chance to sell for a long time.

P.S. And if it doesn’t bounce? Ai-Yi-Yi!

(click on the chart for a larger view)

ON $AAPL gone parabolic – with an updated chart…

This is a followup to the post below as AAPL takes a predictable hit today.

Wrote the following in this link a couple of week ago: On $AAPL Gone Parabolic.

At the risk of a massive understatement, let’s just say AAPL has gone up…a lot.

In fact one look at its chart below reveals is has gone parabolic.

Let’s define a parabolic move first. Basically, according the website, Prometheos Market Insight, when a stock makes a enough of a move to create three distinct supporting trend lines (see the green lines on the chart below), then accelerates, it is in a parabolic move (the red line on the chart).

There is both good news in that, and bad news.

The good news you own it, the bad news its latest rise is unsustainable. Although one can only guess when and at what level it parabola ends (the way it always is with that phenomenon), but when the inevitable end comes it will likely be violent and the stock could eventually go back to where the parabolic began.

At this point, a rough estimate of where it began in AAPL is around $230.

It’s hard to believe it will ever quit going up as it’s wildly (exuberantly) rising, but I would suggest there is no profit here until one sells.

Also, one other thing to keep in mind, AAPL today, according to Yahoo Finance, has a market cap of 1.377 trillion dollars. That in itself is unprecedented in market history, but it is also nearly $100 billion higher than next highest market cap, MSFT (but that as they say is another story).


(CLICK TO SEE A LARGER VIEW OF THE UPDATED CHART)

$TSLA – Update as its stock price launches like a rocket

Elon Musk launched his cherry red roadster into a Mars orbit last year.

TAKE A LOOK:

TSLA Roaster takes a space ride

Today he launched the company’s stock into a Wall Street orbit (see the link and charts below). You’ve heard it here before…

TWO YEARS AGO:

Is TSLA the best long term investment since AAPL?

AND NOW ON ITS LATEST EARNINGS:

(Click on the chart for a larger view)

#STOCKS – on $AAPL gone parabolic

At the risk of a massive understatement, let’s just say AAPL has gone up…a lot.

In fact one look at its chart below reveals is has gone parabolic.

Let’s define a parabolic move first. Basically, according the website, Prometheos Market Insight, when a stock makes a enough of a move to create three distinct supporting trend lines (see the green lines on the chart below), then accelerates, it is in a parabolic move (the red line on the chart).

There is both good news in that, and bad news.

The good news you own it, the bad news its latest rise is unsustainable. Although one can only guess when and at what level it parabola ends (the way it always is with that phenomenon), but when the inevitable end comes it will likely be violent and the stock could eventually go back to where the parabolic began.

At this point, a rough estimate of where it began in AAPL is around $230.

It’s hard to believe it will ever quit going up as it’s wildly (exuberantly) rising, but I would suggest there is no profit here until one sells.

Also, one other thing to keep in mind, AAPL today, according to Yahoo Finance, has a market cap of 1.377 trillion dollars. That in itself is unprecedented in market history, but it is also nearly $100 billion higher than next highest market cap, MSFT (but that as they say is another story).

(click on the chart for a larger view)

#MarketTiming – the Santa Claus rally goes crazy

The Santa Claus rally which arrived with a buy signal on the open of December 9th, is still going and going and going…

I wrote about this quiet rally trigger first in this link:

#MarketTiming – with not much fanfare Santa slips into view

Then, as the fanfare took hold:

#MarketTiming – the Santa Claus Rally, a progress report

Since that second post, TQQQ has gone from up from 9% to 17.7%, UPRO from 6% to 11.2%. The 3x-leveraged sector ETFs continue to surge: TECL (tech) up 21% now, ERX (energy) up 18.1% and SOXL (semis) up 29.9%. Among the bellwether stocks I follow, TSLA is leading the pack, up 27% now; NVDA up 13.4%; WYNN up 18.2% on a big jump out of a high-level consolidation today.

AAPL, which lagged early on, has now moved up a nice 10.9%, closing above 300.

Big gains in not much time – the rally is a mere 17 trading days old.

All of which is great for the bulls…except it’s all begun to go kind of crazy.

AAPL has a market cap of $1.3 trillion, somewhat insane no matter how much cash the company generates for buy-backs. MSFT is at $1.2 trillion; both GOOGL and AMZN are knocking on the trillion-dollar door. These stocks have market caps four and five times such “puny” companies as Walmart, Coca-Cola, Nike, Proctor and Gamble, Home Depot and even Exxon-Mobil. How crazy is this?

Speaking of buy-backs, corporate debt is likely piling up more and more as the FED keeps its foot on the printing-press pedal – margin debt did not move much last month so all this “irrational exuberance” has to be coming from somewhere.”

CNN Money’s “Fear and Greed” Index is at 97. Ninety-seven! That in and of itself is the stratosphere of extreme greed. It can’t go higher than 100. A year ago it touched 3, on a trap door that swings both ways.

Still, the market can go higher, and probably will, since there is momentum in that 97 number. It usually takes a divergence (a high below a high) in that index to trigger a decent down swing (see the red circles on the chart below). The index has to back off on a market dip (which is likely imminent) then fail to go higher as the market resumes its advance to another high.

And both breadth measures, the NYMO (short-term) and the all-important NYSI (longer-term) remain positive. So there is time for more rally.

Not much more to say at this time…except to note in markets going crazy (like 1999, like now) there is, in the end, no profit until one sells.

(click on the chart for a larger view)