Well today we finally broke out of the consolidation period which had everyone upset (mostly). I posted on my Daily Analysis last night that I thought we could see lower, and I gave reasons, and I was positioned for it. Well, I was flat out wrong. But that all said, I knew why I was short and that was really what matters. I was wrong, so I can move on and change my outlook - which I am - in some ways. 

Well after we broke higher and traded higher on increased volume I can't help but alter my thesis a little; if I don't ever change what I believe will happen, I will lose a lot more money. 

Today we broke out and closed above a key trendline I had been watching and we had increased volume, AND we came out of a base (giving the move a little more juice). Right now we are still a little extended but I cannot help but to say a more bullish than bearish at this point. There is resistance near but so far we have not had a potent/legitimate sell signal. I have tried to "call the top" (my mistake) for a couple days and in hindsight I should have been focusing on better longs. So going forward, I would look for a little bit more continuation upwards but do not chase if you are not already in (unless we cross the days highs). In summary - stick with what is working. 

Apple has been a laggard, and a extreme what at that. It sold off at the start of the day, filling the pre market gap up. This is bearish in itself. Then we found support later in the day and traded higher, coming way off the lows - with good volume. I still do not consider Apple a buy right now. I think it still has a lot to prove but is a trading vehicle (day trading).

Google I said yesterday looked really good for higher prices. It did well today and still looks pretty good, despite closing red (open vs close). Overall the chart is bullish and I would raise my stops to the low of today.

Amazon is not really performing like you would like to see after a break to all time highs. It is not continuing it's strength (which is concerning). I will continue to monitor this one and tell you when I think it is ready to go again or fail here. Stay tuned. It is a no trade for right now. 

DELL ($DELL) looks good for higher prices as it has a good volume pattern and is consolidating nicely. I would look to add/buy on a break out of this consolidation. 

Sprint ($S) is looking REALLY nice and it remains one of my favorite picks for 2013 and in the near term future. I am looking for a entry soon but overall, I would call this a BUY right now. The weekly chart shows a beautiful cup and handle pattern that is breaking out. 

The homebuilders did not really go anywhere today but they are still holding in there. Some are at some support so they could bounce off there tomorrow. I would continue to monitor them, and look for entries. They still look good. 
1/10/2013 20:32:08

1/10/2013 20:38:47

Just wanted to say I enjoy reading your posts and see your charts. After writing my own commentary, I'd often times come here and 85% of the time I agree with your posts. There's one thing you might be interested in tracking which might shed some light on specific stock pricing, it's call the max pain theory (got it from aaplpain website, google it if your interested). Based off of the weekly options open interest the following stocks should close Friday close to the max pain value (and within the upper and lower bounds). "max pain" means the stock will close where the most option holders will walk away with worthless options contracts.

Options indicated weekly closes:
NFLX: call is $105, put is $95, max pain is $97.5
AAPL: call is $550, put is $500, max pain is $525
GOOG: call is $740, put is $710, max pain is $730
AMZN:call is $270, put is $260, max pain is $265

Ben C Banks
1/10/2013 21:42:47

That is an interesting thought, and thanks for the compliment. I am glad you enjoy the blog. I looked into some of these max pain theories with individual stocks and it sure does look like some of these max pains are calling for a larger drop in the stock when the chart itself is a market leader (Ex $X). And therefore, I tend not to believe it as much. That would be an extreme move.

Also, I would imagine the problem with this strategy is that it changes daily.. Does it not?

Thanks for your input.

1/10/2013 22:58:21

A couple of things: I use these theories to get a sense of the 80% bounds on a per weekly basis. If the prices ends on one side or the other it provide a bullish/bearish signal for next week. Options close out on a weekly/monthly/quarterly basis so while it can change daily, the overall initial indication is a pretty good one. Usually checking in on Monday morning is the best time to look at the current week.

Going off your example of $X for tomorrow, $24.5 is the put, $25.5-$26.0 is the call, so you've got a pretty large weekly range to play with. While it's likely that the stock will end tomorrow around $25.5-$26 ($25.75 would be perfect), ending sub $25 isn't out of the question because of the eventual gap fill it needs to do (Daily, Dec. 26th). Looking forward to next week is a little messy but I'll leave it up to you to develop your own theories to why there's a tight spread near $24-$25 and a spike in put interest at $18 (hint: think Alcoa, Large Funds, Protection and the New Year). As for accuracy, Travis keeps a running record of how the theory has held up here (http://aaplpain.com/?page_id=2). So tomorrow I'd expect a knee jerk reaction in $X then back to $25.75, if it ends higher, that's a bullish signal and vice versa.

1/11/2013 10:30:29

One last edit for my previous comment. In my $X example: A close near $25.75 would indicate bullish sentiment. A close near $24.5 would indicate a bearish sentiment. The max pain value isn't $25.75, but somewhere in the middle of $24.5-$25.75 (around $25.0 or slightly higher).


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