#STOCKS — $BA and its birds of a feather…

Posted on by diogenes227

This is what happens when the US taxpayers put up $50 or so billion dollars to buy your company and then don’t take it away from the shareholders.

BA (Boeing) is up 85 percent this week (in four days) thanks to the general market bounce and being a large part of a $50-billion taxpayer bailout in the stimulus bill.

It’s up 55 percentage points higher than the next nearest stocks in the DOW Industrial Average (CVS, UTX, HD).

All those percentage points this week for a company that was crying for a bailout even before the market selloff, and a company that last week shut down its operations in the Puget Sound area (laying off 7000 employees) even before the Washington State Governor ordered ALL essential business closed to fight the virus.

It turned out in the last couple of years, Boeing has become the poster child of all of American corporate malfeasance. Buying back stocks with tax breaks instead of attending to core businesses. Taking advantage of artificially low interest rates, courtesy of a loose Federal Reserve, to add debt and to hide diminishing earnings per share. Having wildly over paid chief executives. Those guys at Boeing a few years back moved their executive offices to Dennis Hastert’s district in Chicago when he was Speaker of the House – just before he was indicted and sent to prison. Having atrocious labor relations. They moved an entire manufacturing division to South Carolina to avoid the unions in Seattle and had to admit later they would never make up the multi-billion-dollar shortfall it took to train those yahoos to make airplaines. And finally, characteristically in the Trump era, the company got caught slipshod production values, but not before it killed a lot of passengers in two crashes. Simply said, it’s probably more known for the Max-737 and that fuck-up grounding of what? A third of the fleet?

Nevertheless Boeing, admittedly, is also so important to the US economy it is truly too big to die. It does not, however, need yet another corporate bailout by beleaguered US taxpayers.

It needs to be nationalized.

Instead, it’s pretty much leading the bounce and flying in the same thin bear-market air as the rest of the market.

And along with it, there are the rest of the birds feahtered in its bailout nest. AAL (American Airlines) up 45%, DAL (Delta) up 44%, UAL (United) up 39%, ALGT (Allegiant) up 39%. We all love these airlines, right? Love the service? Paying for extra bags? Getting stranded by canceled flights?

And the food, airline food, now that’s the best the world has to offer, right?

See the chart below. Big pop. And, of course, it better not come down with the next decline otherwise the big check from the taxpayers will be wasted.

(Click on the chart to get the picture)

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

Posted on by diogenes227

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)

#MarketTiming $SPY – Buy now, resell later…

Posted on by diogenes227

Gotta be a bounce if only because it can’t go down forever.

CNN Money’s Fear and Greed Index is at one. One. It can’t go below zero.

Forty-nine of my nifty-50 stock list are on sells with forty-eight of them oversold. I can’t remember 48 oversold all at once before.

The VIX is at 75. That is virtually a bear market momentum number.

The VIX leveraged ETFs, TVIX and UVXY, have been the stars of this market plunge. See the charts below. Since the NYSI downturn 13 trading days ago UVXY is up 40% and TVIX is up 72%

TVIX was at 40 when I posted this advance notice in January – $TVIX – Just a heads up… – and closed today at 399. Absolutely f-ing spectacular if I was so myself.

So what now?

This is a only a guess because I have no actual upturns anywhere – not in the NYMO, let alone the NYSI, not in price, not in volatility, definitely not in fear and greed but this exercise band is stretched so far, the market ether has to crash tomorrow or snap back.

I’m guessing the shorts cover only because they have made so much profit this week and it would be prudent to take some before the weekend.

Could be wrong.

President Incompetent could try to “reassure” the market again, or claim everything is hunky-dory again, or blame Obama again or blame the Fed yet again. (Hell, the Fed fought the NYSI mid-day today and lost that battle big time by the close.) Yes, yes he claims he knows a lot about the stock market but knows nothing so he slam the market down another thousand points or more…again

But if he shuts the tweet up…

My guess is it’s a buy now – not for the long term – and a resell later.

Regardless – tight stops.

(click on the charts for a larger view)

On $AAPL — its broken parabolic updated…

Posted on by diogenes227

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

Posted on by diogenes227

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)

#ShortStrangles on #Stocks – day trading the weekly #options

Posted on by diogenes227

Interesting week last week in the strategy to day trade short strangles on various stocks.

The basic idea with this strategy is limit risk while taking advantage of daily time decay on the calls and puts expiring on each Friday.

The trades are taken 30 minutes into each day and closed at the close. The protective stop is a 5-minute close either above the upper strike or below the lower strike. If a protective stop is hit then both sides are closes on the stop.

Since the opposite strike hedges the losing strike, a stop at that point is usually a breakeven or small loss for the trade, and sometimes, depending how long during the day the trade has run, yields a small profit. When the stop is hit and the trade closed, if there is a enough time left in the day, the strangle can be rewritten and reentered at the next strike levels.

Last week the short strangles were on TSLA, NFLX and SHOP. See the table below for the day-by-day trading.

TSLA stopped out on Thursday for a 3.6% loss on the margin requirement (see the table) but the reentry has a 2% gain before the end of the day, mitigating the initial loss.”

What is obvious is how steady the week was for logging profits. Since this is day trading, the trades are using roughly the same cash margin over and over each day. As a result, although the daily gains for options trading may be relatively small, the accumulated profits for the week can have a notable return.

Margin requirements can vary day by day, strike by strike and, I supposed, broker by broker. Those listed here are calculated on the margin calculator at the CBOE. For presentation purposes, I’ve calculated the dollar amount on these trades as per each contract.

The short TSLA strangles gained 18.79% for the week, SHOP gained 6.52% and NFLX gained 11.03%. See the green blocks on the table to those results.

In the last green block, I averaged the margins across the week and across the three stocks and came up with the $11,857 number. The highest requirement was the $20K per contract on TSLA at the beginning of the week (that would also be the minimum required to trade this for the week).

The total profit for the trades was $4,759 for the week, a yield of 10% on the three strangles combined.

That’s what I meant when I said above it can have a “notable return.”

(click on the table for a larger view)

ON $AAPL gone parabolic – with an updated chart…

Posted on by diogenes227

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)

$SPY – The drop too far, too fast?

Posted on by diogenes227

The market took a plunge today and all the why-did-it-happen pundits are citing the Chinese coronavirus fears for the sell-off.

Once again, this is news arriving to confirm what’s already happened. The NYSI, measuring long-term breadth on the New York Stock Exchange, turned negative last week. That was the tell that the market’s advance was faltering. News can accelerate a decline, but no-news would have also but probably at a slower pace.

What we have now is a fast fall and based on one of my key charts it is likely too far, too fast. See the chart of SPY below and note nearly every time the average SPY pull-back (as displayed as a histogram) pierces one of lower green lines, it bounces, and sometimes runs. The Nasdaq Composite chart is showing the same pattern.

In addition, 45 of the stocks on my nifty-50 stock list are on sells and 23 are oversold. Forty or more on sells is usually the bottom or the beginning of a bottom of a down swing.

Although today looked relatively ominous, not a lot of damage has been done – most of my bellwether stocks are only down two to three or so percent since the NYSI down turn.

So what’s next?

I think the market bounces tomorrow. The question for the week is will it be a dead cat? Or will it, in this bull market, be the start of another run to the highs?

If it turns out it’s no more than a dead cat bounce, or the market doesn’t bounce and keeps on going right down without pause, then the damage to the stocks and indexes not done yet will be done on the next plunge.

For now, as laid out in the post below the long VIX ETFs and ETNs are the play on this drop. Stops should be tightened to preserve the quick profits on TVIX (29.9%) and UVXY (22.7%). If the market weakness continues, TVIX and UVXY will no doubt be easy swing trades to jump into and out of going forward.

(click on the chart for a larger view)

#MarketTiming – Usually the market loves a war but…

Posted on by diogenes227

But maybe not this one.

Finally?

The market took a hit five days ago when President Orangutan ordered the assassination of Arch Duke Ferdinand (Iranian Gen. Qassem Soleimani) in Iraq. That was a strategic strike mostly aimed at distracting the country from his impending impeachment trial (Trump’s, not Soleimanini’s), a violation of international law and practice, in other words an act of war. Over the weekend, the world held its breath waiting to see how Iran would respond.

Today, the Iranian response, or part of the response began, as Iran has been launching missiles into bases in Iraq where U.S. military forces are stationed.

If the overnight futures are any indication, the market is not pleased. As I write this the ES is down 40, the NQ down 130, the Dow futures are down more and 300 points. The market may recover during the night (after all, it is a bull, or at last count a bull in a blow off) if Tweeter can keep his Tweeter trap shut (when’s that ever happened?). But now it’s the world again holding its breath to see is the U.S. crank is going to crank up the conflict further.

This is how stupid accidental world wars can begin. See Barbara W. Tuchman’s history, “The Guns of August.”

Setting news aside for a moment…

After two highs below highs on the NYMO (short-term breadth), the important NYSI indicator (longer-term breadth) turned negative today giving a sell for tomorrow’s open (see the chart below).

Funny how news comes along to validate what the market internals have been saying all along.

I’ve been warning here that the rally, which began in early December, could be getting too exuberant for its own good, most recently in the post below — #MarketTiming – the Santa Claus rally goes crazy.

In addition, CNN Money’s “Fear and Greed” Index is at 89, coming down from 97 four days ago (it can’t go higher than 100) but still at an “extreme greed” level. It has a long way to fall.

For the record, on today’s close, the Nasdaq 3x-leveraged ETF, TQQQ, was up 16.5% in the 20 trading days of this rally; among leveraged sector ETFs TECL was up 17.6%, SOXL 25.1% and FNGU, which simulates the FANG stocks, was up 41.6% (this was primarily a tech rally). Notable stocks from my bellwether list include TSLA up 38.4% (remember, that’s in 20 trading days), SHOP up 13.3%, WYNN up 16.8%, and AMD up 22% – true evidence that the Santa rally did go crazy.

If this sell-off continues overnight into tomorrow’s open, all those above are going to get hit.

One last note, the leveraged energy-stock ETF, ERX, was up 19.3 and GUSH, the 3x-leveraged daily S&P Oil and Gas ETF from Direxion, was up 54.3%.

No matter what, oil and gas will still love a war.

(click on the chart for a larger view)

#MarketTiming – the Santa Claus rally goes crazy

Posted on by diogenes227

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)