Growth Stock Swing Option: June 29, 2009
June 29, 2009
MARKET ANALYSIS
With just one session left, June Gloom has been kept at bay and fund managers left to look smart on paper. For the two-day period, the S&P500 (SPY) is up 0.67% in a "Wild Bore" caught dressing up as a potential topping pattern.
Key highlights for nibbling on some green shoots the last couple sessions:
- Black Gold (USO) and energy complex (OIH, XLE) receive green shoots bid Monday on oil hoarding / reserves report out of China.
- China officials also prompt bid in treasuries (TLT) on bid reassurance for Uncle Sam's debt, helping equities along on lower borrow cost and weaker yield theme.
- Friday's surprisingly strong personal income data and in-line increase for spending promote stronger future retail picture.
- "Above 'da Line!!" Bulls muscle SPY back above 200-Day MA.
- Window dressing through end of 2009's first half.
Some reasons to keep some protection handy during a little summer sizzle:
- Market near technical overhead within "Wild Bore" trading range.
- Green Shoot fumes and little real gas in market as realization the worst is likely over but"
- IEA cuts global demand outlook by 3.0M barrels through 2013.
- Looming jobs report and window dressing incentive removed as market prop.
Market Snapshot
Figure 1: S&P500 (SPY) Daily Pattern Resistance
Monday's price action, while nice for fund managers, did little more than continue to set up an interesting contrast in the technical landscape. As discussed in the Weekly Outlook and shown above, the market's daily tea leaves are showing both a bullish trend still in motion and a potential topping pattern evolving.
As each reality follows a historic price run from the March lows and the market is thought to be low on fuel worthy of generating further green shoots behavior, barring actual economic improvement, the inclination is to side with the potential Head & Shoulders pattern.
In saying that and similar to recent discussions which outlined "Buying the dip" into supports in the SPY, the preference is to "Sell the rip" rather than wait for confirmation of a pattern breakdown below recent trend lows and neckline support.
Ultimately, the ongoing message of the market being defined by a "Wild Bore" and caught in a loose trading range dictates the directional delta. In general, it also means selling some premium as part of one's positioning continues to be viewed as a stronger choice than the hard delta.
The following factors and anecdotal evidence might be considered relevant in determining a suitable, limited-risk strategy in the coming days and weeks ahead.
MARKET LAB
Bullish Technicals
- Historic corrective low.
- Breakout of daily / weekly downtrend from Sept 2008 highs DIA.
- Extreme support zone test SPY 89.25 - 91.25 and 8.50% correction fulfilled.
- Corrective uptrend intact with recent lows.
- Trend support 88.85.
Bearish Technicals
- Technically, "lower highs" weekly still in place DIA from Sept 2008.
- First 100 Days cycle & "Best Six Months" complete.
- Historically low insider buying vs. selling.
- Key weekly resistance for S&P500 in place after historic run.
- Recent momentum loss and failure to run with headline trophy wins for bulls.
- Breakdowns of technical support in green shoots commodity arena.
- SPY near likely resistance zone 92 - 93.30, short-term overbought conditions.
- Head & Shoulder topping SPY nearing completion?
RADAR WATCH
Research In Motion or "RIM" (RIMM) is being added to the Bear Radar below. The company reported last week, which any trader with a vested interest in the market is certain to know. Technically, shares succumbed to profit-taking, to put it nicely, following its mixed report.
The ensuing price action has developed as a bearish flag and confirmation for a Fibonacci-based butterfly top discussed with its weekly chart in the Weekly Outlook from June 15. The observation from that report was if shares could reverse and signal a breakdown below support near 80-the 38% - 50% zone (61 - 67) would be a potential target zone for the topping formation.
With recent consolidation and bear flag lows reaching near the top of the top of the loose support band and a failure of RIMM shares to participate in the market festivities of late-the inclination is to see a test of 61 to perhaps the 60 area as a new price objective.
RADAR SCREEN
The following optionable stocks look to have a combination of technicals and fundamentals that might warrant further investigation based on a trader's own methodology and risk acceptance. The list is not a recommendation and is intended for educational purposes only.
The Bulls
Company | Symbol | Sector | Earn. | Tracked | Pattern |
BMC | (BMC) | Software | 7-23 | 6-4 | 9-wk Ascending |
DB Aggie | (DBA) | Softies | NA | 6-22 | OS Hammer |
Synaptics | (SYNA) | Computer | 7-30 | 6-25 | 1.5-Year "W" |
Table 1: Bull Watch list
Non-Directional
Company | Symbol | Sector | Earn. | Tracked | Strategy |
Archer D | (ADM) | Aggie | 8-4 | 6-18 | Neutral Calendar |
Costco | (COST) | Retail | 8-26 | 6-18 | Neutral Calendar |
Table 2: Basing Watch list
The Bears
Company | Symbol | Sector | Earn. | Tracked | Pattern |
AutoZone | (AZO) | Auto retail | 5-27 | 5-21 | H & S Topping |
DuPont | (DD) | Chemicals | 7-21 | 6-15 | H&S/Bear Flag |
RIM | (RIMM) | Computer | 9-24 | 6-29 | Bear Flag |
Table 3: Bear Watch list
Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
Visit Chris Tyler's Forum
The information offered here is based upon Christopher Tyler's observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.
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