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)

#MarketTiming – the Santa Claus Rally, a progress report

On December 6th, the all-important NYSI, measuring longer-term market breadth, turned up signalling an on-coming upswing in the market beginning the open of Monday, December 9th. It was an unusual turn in that it preceded the NYMO short-term breadth indicator.

That doesn’t usually happen unless there’s been a V-bottom in price on the most recent downswing. And, in this case there was, and the NYMO confirmed the rally on 12/11 giving its own buy signal for the open of 12/12 when I wrote this entry below:

#MarketTiming – with not much fanfare Santa slips into view

Since then most of the major indexes, and their 3x-leveraged ETFs, have been up a cumulative eight days. Needless to say, the market is overbought. CNN Money’s Fear and Greed index is at 90, an “Extreme Greed” level, a level which eventually leads to sells downs.

Consequently, the market could take a dip or a tumble anytime (although with Christmas yet to come everything remains bullish). With that in mind, me thinks it’s time for swing traders and anyone else who feels comfortable taking profits should either tighten stops under the advance or cash out some of the gains.

Among the major leveraged ETFs, TQQQ is 9.0% for the eight days, TNA up 6.3%, UPRO up 6.0%. In the leveraged sector ETFs, TECL is up 10.4%, ERX (remarkably) up 10.3% and SOXL is up a whopping 19.6%. Eight trading days.

Notable stocks in my bellwether group include TSLA up 19.5%, NVDA up 11.3%, SHOP up 7.5%, NFLX up 7.9%. AAPL usually gets the press coverage but it’s a laggard at up 3.6%. Still, it’s just eight trading days.

(click on the chart for a larger view)

#ShortStrangles on #Stocks – 11/18 – 11/22

Trades on the strangles for AAPL, FB, TSLA and NFLX were in direct relation to this post below to show how selling naked would work as a hedge on cash alone:

#ShortStrangles on #Stocks – stealing money weekly in cash

It was not a spectacular week but there was a gain 2.3% on total margins for the trades (still, scale that over a year and happiness will reign).

Should note only AAPL steadily decayed through week. FB came within a whisper of being stopped out with a loss but righted itself by Friday and expired worthless. TSLA slightly touched its upper strike stop at 360.84 but sold off so quickly I didn’t close it.

MADE A MISTAKE AND GOT AWAY WITH IT – NOT GOOD

Should have closed NFLX which showed a 47% loss for the position, a 2.8% loss on the margin requirement, but with the stock itself up a virtual six days in a row, wildly overbought and ripe for a bit of end-of-the-week profit taking, so decided to hold it into Friday. Probably because I wrote the post in the link above, I was thinking too much. Not a good thing to do in options trading.

Not honoring the NFLX stop was a mistake and I’m rationalizing its profit since it worked out great but doing that on a regular basis is a road to ruin. Being rewarded for making a mistake makes one think it can be done again…and again…until one comes along and kills you.

THIS WEEK’S STRANGLES:

#ShortStrangles on #Stocks – stealing money weekly in cash

Let’s say you have $200,000 or so in a margin account at a brokerage — $206,400 to be precise (but more about that number later).

The account is in cash. Probably because as at some point you took to heart Bernard Baruch’s famous comment that he made his fortune in the stock market because he “sold too soon”, and now so have you as this bull market continues to climb leaving you, you think, behind.

What to do? What to do?

Let’s take AAPL, FB, TSLA and NFLX as examples, not as stock holdings, which are far too expensive for a $200K account, but as option trading opportunities using the cash margin your money provides.

I didn’t post these on Twitter this week to verify the timeliness (see more entries below for some of that) so this is a study in retrospect, a look at possibilities, not what was done but instead what could have been done this week, and what can be done any week going forward.

On Monday (11/11), 30 minutes after the open, AAPL was a 259, the price to set up a “short strangle” on its stock. In this case, I’m suggesting selling a 265 call above the market and a 255 put below the market, 10 contracts each, for a combined credit of $1,230 with a margin requirement of about $49,000. Same day, same time, FB was at 189 so a 195 call with a 185 put for a combined credit of $1,100 with a margin requirement of $34,800. Same day, same time, TSLA was at 346 so a 355 call and a 335 put at a combined credit of $6,600 with a margin requirement of $67,700. Same day, same time, NFLX was at 292, so a 300 call above the market and a 285 put below the market for a combined credit of $3,320. The margin requirements are those prescribed for each short strangle strategy by the CBOE, the Chicago Options Exchange.

Hope no one got lost in the thicket of dollar signs in the paragraph above. It all adds up to $12,250 added to you account at the beginning of the week. Now let’s see if you can keep it.

You are going to have to buy back the options you sold to get those credits or let them expire worthless if they are not in the money by the end of the week. All of these options are out of the money and will expire worthless at the end of the week if the stock does not rise above the call strike or drop below the put strike. That is the point of the strangle strategy, to have them all expire worthless.

Drum roll please…

At the end of the week, the AAPL strangle was down $520, which is a profit on the short sale, a gain of about 42% on the position.

At the end of the week, FB had a profit of about $990, a gain of 93% on the strangle position.

At the end of the week, TSLA had a profit of about $6,580, a gain of 99% on the position.

At the end of the week, NFLX had a profit of about $3,500, a gain of 99% on the position.

The total gains on all four stock strangles for the week was approximately $11,590. That is a 94.6% gain on the positions, but not on the margin requirements. The combined margin requirement for the four trades would have been $206,400 (ah-ha!, there’s that “more about that number later” number), which would make the actual percentage gain in the account for the week about 5.6%.

Five-point-six percent may not seem like all that much in volatile options trading but week in and week out for 52 weeks…

It must be said, however, there can be losses, and big losses if there is no stop-loss discipline, but short strangles on stocks could be as close as one can get to safely and legally stealing money in the stock market with just cash to work with.

#ShortStrangles on #Stocks – 10/14-10/18

THIS WEEKS SHORT STRANGLES:

LAST WEEKS RESULTS:

A PERTINENT QUESTION ON TWITTER:

#ShortStrangles on Stocks 10/07 – 10/11

This week’s strangles:

Last week’s results:

(Percentage gains and losses reflect returns on cost of strangles, not margin needed for the trade.)

#ShortStrangles on Stocks 9/30 – 10/04

This week’s setups:

Last week’s results: