Order Of Magnitude

FINVIZ has for a long time been our go to for quick charts, scans and news.  They sweetened the deal adding Forex Majors, Gold, Silver and Oil.  Now it would appear they give you quotations for Futures 24/7.

If you like what FINVIZ provides, you may want to consider signing up for their Elite program.

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A longer term pattern that may turn into a head and shoulders reversal on the AUD/USD currency swap.

Head of 0.940 to a neckline of 0.895 is about a 450 pips measure giving a target of 0.850  A stop could be placed at 0.9320 where a breach of the shoulders would invalidate the pattern, and honestly we'd feel a whole lot better getting out at 0.920 where there was more recent highs made.  Now on a closer timescale:

If price can get below and hold below 0.8840 then we'll enter a position so that a rise to 0.92 would at most deplete 10% of risk able capital.  Every standard lot of $100k you move, a pip will cost $10, so a move to our stops would cost $3600.  Remember to do your own research.

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Gold as an investment is being tossed around more and more.  Gold is near all time highs, and as of this writing is over $1000USD / oz.  Although it hasn't yet closed over that level.  If you pull pack and take a look at a longer timeframe of the continuous contract, most can pick out a multi-part inverse head and shoulder pattern.  We always recommend a part of your portfolio be set in actual assets, and precious metals are easy to get and rather value dense.  This time however, we're looking to use the SPDR Gold Shares ETF, which trades under GLD in New York.  They shave off 0.4% every year for doing all the paperwork, and are one of the ETFs with the best correlation to actual spot gold prices.

We're never ones to just rush out and buy something, because it looks good.  Right now Gold, as well as the ETF, are at a critical point.

Support and Resistance for GLD

The power of the current trend is undeniable, and we've been in this confluence of resistance before.  If the H&S pattern holds, a measured move to $1200 within the measure of the head of the pattern (~ $700) to the resistant neckline (~ $1000).  Although, if it turns out to be a false signal, there isn't a lot of proven support until under the $850 level.  The whole world is watching, and the speculators are speculating, so we decided to check out the pricing in the options.

GLD Call Premium

GLD Put Premium

The curve is more natural than the graph depicts because the strikes start moving up by $5 instead of $1 at $100.  We want to be prepared for a move in either direction.  We thought we would explore selling covered at the money calls.

100 shares of GLD ~ $9870

1 GLD Jan 2010 $99 Call ~ $620

This means that our cost of out pocket is $9260 (including about $10 in fees).  If we die tomorrow and the stock closes higher than $99, we'll net about 6.2% on expiration day, which is 126 days away.  Annualized this play works out to 12.7%.

If you'd rather try to bring in the expiration date, to more rapidly see time decay in action.  Selling a GLD Oct 2009 $99 (~$280), you'd be $9600 out of pocket (again including about $10 in fees) and a close above that would result in about a 3.1% profit over 35 days.  Annualized the October play works out to 36%.

In either case, you have no downside protection, and your profits are capped.  Our plan is to watch, and if the price of GLD breaks down below $90, we'll take our loss and exit the position.  If the price of gold manages to hold, or remains range bound, we'll let time decay work it's magic, and roll our short call contract forward a few months closer to December.  If the price breaks out and continues to trend upwards, we will wait until the premium of the contract erodes to about 2%, then close it and short another at-the-money covered call.

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Las Vegas Sands Near Term

Las Vegas Sands has been showing a pattern of higher highs and lows since early March, and a break above $8 would leave very little overhead resistance.

Las Vegas Sands Long Term

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Equivolume: SIRI

Sirius showed up on two bullish weekly scans this week.  Appears that it has been enjoying the ride up all equities have been experiencing.  Sirius rose to the top of our scans because on a percentage basis,  it is up by orders of magnitude from it's 0.05 Feb. low.  A very small speculative position is in our future, with a stop out at 0.30.

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Only four equities showed up on our bearish scanner, and two of the equities were in the field of Biotechnology. Amgen Inc. and Gilead Sciences Inc. have both exhibited price action pointing towards waning interest.

They produce the following charts:

Equivolume: AMGN

Equivolume: GILD

Support Resistance: AMGN

Support Resistance: GILD

GILD is a more favorable play for us, as it appears to have more solid support a little bit under the $44 level.  If a breach below these levels can be held, then look for a fall down to close to the $42 level.  We are going to limit loses with a stop to fill the short if the stock moves above recent highs.

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Tomorrow is bound to be an exciting day in US markets, as the 44th President gets sworn into office. Up in our northern land, the Toronto Stock exchange fell almost 79 points, which doesn't even add up to a whole percentage move. We ran our equities through the scanner, and found selection on both sides of the opinion spectrum.

Bullish

• Micron Technology -  This stock has been showing signs of higher highs and higher lows.  Strength in volume can be seen in the surges late in December and at the beginning of the year.  If it can break past the last high at $3.60, we're going to set our stops below the most recent lows around the $2.80 level.  At $4, we reset our stops to come out even on the entire transaction, and keep the upside target of $4.50

• Valero Energy - Doesn't have a whole lot of previous support or resistance around $26-27 dollars.  If the bulls can push the price over the more recent highs, they could get to $30.

Bearish

We're watching wide targets on the financials.  Citigroup, Bank of America, Wells Fargo and JP Morgan all have incredibly high momentum scores, and all are at or already through recent levels of support/resistance.  If you can't sit in front of your trading platform all day, you can just play with the spider.

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The third week of the month is usually crazy, when short term pressures overwhelm logic and reason.  Our weekly scan produced an interesting gem: ProLogis.  Being as options expire this week, we found the bid/ask spread for the in-the-money $12.50 calls to be a bit out of the ordinary.  Examining the Equivolume:

It would appear that this REIT has been going for a bit of a run and big volume appears on the right kind of days.

Now for the 50-50.  We have an upward moving stock, that is due for a pullback, and in 5 trading days the options expire.  PLD has a 15 trading session average true range of $1.75, which is pretty large for a stock holding the Friday's end of day price of: $14.12. Yes, 12% of current trading price.

Now, if a covered call position could be entered under these conditions, you would lay out $1412 for 100 PLD shares, and then sell a single covered call at $12.50 strike for $2.50 a share, or $250 total.  If the price falls below the strike in the next 5 days, your cost basis is $10/share to offload, so we'll have a still profitable stop at $11.75 to exit the position.  If the equity remains above $12.50 until Friday, you'll get called away, along with all the fees that produces.  The only thing you get to take home is the premium.

So let's say your broker lets has a $10/transaction fee (hopefully you can do better).  Your initial outlay is $1412 (equity) + $10 (commision) - $250 (option premium) + $10 (another commision) = $1182 (total expenses).  You get called away, so you sell your stock for $1250 (minus $10 again, that broker!), and take home $1240.  That mean $68 dollars in your pocket, after fees, on an outlay of cash equal to $1182 (you'll lose way more in buying power) in 5 days, if the shares stay above $12.50. If they go under, get out, and keep whatever premium erosion you have accumulated at that point. So on the upside you can get 5.7% on your money in 5 days, and there is safety net down to $10 before you start to lose money.

If your greedy, or want to take on more risk.  The February call options have high volatility priced in.  Have a look at our premium chart:

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Everyone knows that 2008 is going to go down as a very bad year in the markets.  Here's Equivolume charts for the major ETFs for the 251 trading days of 2008

Equivolume: DIA

Equivolume: QQQQ

Equivolume: SPY

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Hartford Financial Services Group showed up on our scanner again today.  Since we've recently taken to trying to improve profits by taking smaller bearish positions in the financials, we turned this one over try and see how we could profit from HIG's further decline.  We started with a look at the Equivolume chart:

click for larger version

There was a substantial move to the downside about 3 weeks ago (13 trading days).  After the move downward, there was still elevated volume at the lower price before the price popped back up.  Now the price has been butterflying lower. HIG is sporting support at around $8.25.  Next we looked at the premium charts for options:

click for larger Put Premium chart

click for larger Call Premium chart

The January options are premium in excess of 25% of the current stock price.  Not surprising considering the 21 period average true range is $4.20 which is 45% of the current price.  We're going to be looking selling a tiny parcel of naked Jan $10 calls at around the $2.30 mark.  Stops will be set at $3.25.  If price breaks below the strong support, we'll sell a few more naked calls at whatever the bid is at the time, adjusting our stops accordingly.  If we manage to get a bidder with either transaction, we'll hold onto them until we get stopped out or the New Year rolls around.

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