Saturday, March 24, 2012

A down week

SPX retraced from its higher high (1,414) and we have the first week on the downside since the beginning of February. Intermediate time frame looks a little bit bullish with EMAs not advancing anymore but rather flat. 

However, on the long term this week on the downside did't produce any significant damage. Notice that weekly DMI while bullish is still at a moderate value meaning that there is more room for the upside on long term. 

At this point it seems that the area around SMA 120 (1,382) is the best support for this ongoing rally. 1,383 is also the four months uptrend line so we have too reasons to watch this level. 

I am not too much interested in individual stocks but here and there if I see opportunities I jump on them. I was wrong about AAPL, it continued to go up despite the weekly DMI that screamed "overbought". Another stock in a crazy uptrend is PCLN that went over $700 after trading in a range and looked like was topping for a few good months.

So, I have in mind two individual stocks for trading next week but I am talking about options, more exactly I am thinking about a straddle on either F or RIMM. Just to refresh your memory in case you are not familiar with options, a straddle means I am going both short and long at the same time. What I want to see is a big move either up or down, I don't really care. I am losing money if the stock remains more or less at the same value. The reason F is a good candidate is because is trading in a tight range , oscillating around 12.5. This means that at the present time both "calls" and "puts" are cheap. The only reason I may not buying it next week but a bit later is because the earnings are coming on April 26  we may not see any real move before earnings. This means that options are going to get even cheaper. 

The second stock I have in mind is RIMM. There is nothing at the technical level that suggest this is a good straddle candidate but we are going to hear some news very soon about their new cell phone prototype. I am not expecting any miracle from this company so the chances are that the stock will strongly move down after the news. However, there is a slight possibility that it may move strongly up if the news about the new phone are decent, especially keeping in mind that the stock is beaten down. 

Overall market remains extremely bullish on long term but there is a chance to see some weaknesses on short and intermediate time frame. If market moves down on Monday we may see a bearish EMAs crossing. If it happens I am going to keep my mouth shut since I was wrong last time when I thought we were at the beginning of a decent correction. It turned out that it was only a whip-saw, not a bad one since the difference between the "sell" and "buy" signals were not that great but a whipsaw. 

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