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Growth Stock Swing Option: Jan 31

Source:Optionetics.com Author:Chris Tyler Date:03/25/14 Click:

MARKET ANALYSIS

The year 2008 continues to be a good time to be a hedge hog, rather than the kind of investor intent on being overly bullish or bearish. While the latter has enjoyed things like headlines of staggering year-to-date losses not seen in five or more years and the bulls have enjoyed some quick “Bear-B-Q’s” to even things out somewhat, the volatility remains such that being too early or too late is an all-too-common debilitating experience. For those wishing to push those directional ambitions to their sometimes hard-to-handle limits, the following catalysts might be of interest:

For the bulls sniffing out “green snapper” specials and in search of FTDs:

  • Economic reports suggesting something other than the “R” word and being well-received include strong durable goods, ADP Survey, in-line Chicago PMI and soothing price data from core and total price deflators and Q4ECI.
  • Bernanke & Co. giving investors 50BP cut and accommodative language i.e. room to cut further and reason to hop on board rate sensitive “Buy, Buy, Buy!” signals.
  • Corporate reports / catalysts worthy of the “Buy, Buy, Buy!” include MBIA’s (MBI) convenient reassurances, dividend and buyback news from Lehman (LEH) and solid results from Flextronics (FLEX), MasterCard (MA), Burlington (BNI) and Airgas (ARG) amongst others.

For the sometimes triumphant grizzly ol’ bears in the mix:

  • All told, mostly ignored cautious outlooks, but toss the bears a bone with names such as American Express (AXP), Yahoo’s (YHOO) weak guidance and “headwinds” spiel, Centex’s (CTX) “no improvement” report and lots of commodity-reliant price pressure warnings (KFT, X, DOW, CL, PG).  
  • Lots of trader talk focused on potential warnings / credit spooks, with some stories coming to fruition. The guilty and those under scrutiny include Ambac and MBIA (ABK, MBI), UBS’ (UBS) $14B write-down and a WSJ story of FBI subprime probe good for derailing a few bulls prior efforts.

Market Snapshot

 

 

Figure 1: NASDAQ 100 (QQQQ) Weekly

While volatility continues to run rampant and make mincemeat of both premature and late-to-the party bulls and bears, the intermediate edge known as the Follow-Through Day “nearly” provided additional support for bottom-feeders, cyclical strategists and Wave 4 enthusiasts already in the mix. You see, due to a near last minute effort by the bears, related to Google’s (GOOG) then imminent earnings release; that signal was derailed by the narrowest of margins, according to classic scripture found at investors.com.

In this corner, I’m willing to appreciate the day’s strong buy side efforts leading up to the final several minutes in the session. While I can’t officially call the pin action a FTD or something along the lines of the market’s best buying opportunity in a decade, per other mad money operators: nonetheless, I’m continuing to put down the bear goggles in favor of a neutral-to-bullish bias.

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

  • “Near” Follow-Through Day signal on Thursday in conjunction with 20-week bull phase until late April.
  • Recent VIX extremes, March testing in major averages, weekly Bollinger “outlier” and Doji wide range candle action.
  • March Double B’s along with actual RSI 14 turning higher from near oversold condition weekly.
  • Mad Money’s “best opportunity in a decade” spiel and Fast Money’s equally impressive pounding the table for equities.

Bearish Technicals

  • Five-year up cycle since October 2002 lows.
  • Weekly H & S Top DIA with daily MA “Death Cross”

GROWTH STOCK ANALYSIS

“Folks, we’ve got ourselves a rally” might be heard if the volume were turned up on the television. Well, that is until investors opted to have a “goog” time elsewhere. In this corner though, the preference remains on other screens where we let the charts do the talking. With a “just about, almost got it!” FTD in place but being pressed for time in front of a long weekend (for this market observer), a quick bit of house cleaning of the radar screens is in order.

Ceradyne (CRDN) is being removed from the Bears Radar for essentially giving enough evidence within an almost newly-minted bull, to suggest limiting directional exposure. The SPYder (SPY) will remain, as an ode to the fact that we didn’t quite trigger that event and prices are still toying with the prior lows set in August and other potential resistance levels of notice (sometimes). Call it a hedge if need be, but one also tethered to the tightest of percentage leashes in the opinion of this market observer.

From the Bulls Radar, DryShips (DRYS) continues to pull up anchor with potential gains nearing 30% or more for godlike stock traders. However, in respecting some of that benevolence and with shares powering up into potential resistance in a “V” bottom pattern; DRYS is being removed from its duties for at least the near-term. In its place a couple of stocks talked about in this week’s Hot Shots as potential bullish endeavors have been added.  

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

Industry / Sector

Earnings Date

   12 mo.      RS/EPS (IBD)

Whole Foods

(WFMI)

Grocery

2-20

35 / 51

Imclone

(IMCL)

Biotech

1-31

83 / 47

Apollo

(APOL)

Education

April

97 / 86

United Health

(UNH)

Health care plans

4-17

77 / 84

 

Starbucks

(SBUX)

Coffee

1-30

20 / 89

J. Crew

(JCG)

Retailer

3-13

89 / 68

Merrill

(MER)

Investment

4-17

20 / 25

Archer Dan

(ADM)

Agriculture

2-4

95 / 78

Burlington

(BNI)

railroad

4-24

78 / 76

Table 1: Bull Watch list

 

Non-Directional “Coiled Springs”

 

Company

Symbol

Industry / Sector

Earnings Date

12 mo. RS/EPS (IBD)

NA

NA

NA

NA

NA

Table 2: Basing Watch list

 

The Bears

 

Company

Symbol

Industry / Sector

Earnings Date

12 mo. RS/EPS (IBD)

Chipotle

(CMG)

Restaurant

2-14

99 / 99

Golden Dragon

(PGJ)

China Grow Index ETF

NA

NA

S&P500

(SPY)

Index

NA

NA

Table 3: Bear Watch list

Chris Tyler
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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