Archive for April, 2011

Intraday market notes & observations – April 29

Friday, April 29th, 2011

1:12pm ET: Intraday support/resistance:
SPX 1359/1365
DTX 550.5/556.5
DJIA 12760/12850
Nasdaq 2864/2876
OEX 606/609
VIX 14.25/14.85
Trin range: 0.90 – 1.20
Average VWAPs: +82/-31 (moderately bullish)

Intraday market notes & observations – April 28

Thursday, April 28th, 2011

1:05pm ET: Intraday support/resistance:
SPX 1354/1360
DTX 544/554
DJIA 12680/12750
Nasdaq 2860/2872
OEX 603.5/606.5
VIX 14.6/15.6
Trin range: 0.80-1.20
Average VWAPs: +52/-65

Intraday market notes & observations – April 27

Wednesday, April 27th, 2011

1:18pm ET: Intraday support/resistance:
SPX 1344/1351
DTX 539/544
DJIA 12590/12650
Nasdaq 2842.5/2857.5
OEX 599.5/601.5
VIX 15.4/16.4
Trin range: 0.65-1.20
Average VWAPs: +67/-37 (mildly bullish)

Intraday market notes & observations – April 26

Tuesday, April 26th, 2011

 1:02pm ET: The hanging man formation (a bearish indicator) seen in yesterday’s charts of the silver ETFs (SLV, AGQ) didn’t lie–SLV is down 4.3% and the double long silver ETF, the AGQ, is off 7.7%. Note that leveraged ETF’s are great when they’re going your way but they can be quite unforgiving when they don’t.

FYI: A hanging man formation is a candlestick pattern consisting of a very short body with a much longer wick, typically at least twice the size of the body. If it occurs after a very long run-up (like we had in silver) and on heavy volume (see SLV chart below), it’s a sign that should be respected.

1:00pm ET: Intraday support/resistance
SPX 1339/1352
DTX 533/545
DJIA 12480/12660
Nasdaq 2830/2860
OEX 595.5/603.5
VIX 15/15.6
Trin range: 1.0 – 1.4 (neutral)
Average VWAPs: +61/-56 (more volume than yesterday; neutral stance)

Profit from the break out in real estate

Monday, April 25th, 2011

Tags: DRN, REITs, bull-call credit spread

Figures released this morning showed that the sales of new homes rose much more than expected: 300k vs 280k. This may be the impetus behind many REITs hitting new highs today. Along with them, the DRN, the Bull Real Estate ETF (whose top holdings includes REITs)–also hit a new all-time high, breaking minor resistance at $71.

The chart of the DBN (see below) shows support/resistance levels spaced about $8 apart. Using $71 as the current support level gives a price target in the $79-$80 range.

Stock Play: One way to play this is to just buy the stock at the current price of $73.60. If the stock reaches $80 (say), you’ll make a total profit of $6.40 or a 8.7% return on investment (ROI).

Option Play: Another way to play it would be to buy calls. Since the summer doldrums are approaching and the stock could stall, it’s wise to consider options with longer-term expiration dates.

Let’s look at the August 70/80 bull-call debit spread.

Here, you’d buy the lower stike call currently going for around $8.60. To lower your cost basis, you could also simulataneously sell the August 80 call for around $4.00. Your total cost for this transaction would be $4.60 per contract. Your total maximum profit would then be $5.40. This assumes that the stock will be at or above $80 (the higher strike price) at or before August expiration. In this case your return would be 117% which is a lot higher than your return had you just bought the stock.

Your trade-off is that you could potentially lose all of your investment should the stock trade below $70 at expiration. The point at which you begin realizing a profit is at $74.60 (the lower strike + the cost of the spread). Also note that these options are rather thinly traded: the open interest on the August 70 call is 124 and only 11 for the August 80.  In illiquid markets, it’s best to hold out for your spread price. Just remember to give yourself time to unwind the position as it could be tough with thinly traded options.

Intraday market notes & observations – April 25

Monday, April 25th, 2011

12:17pm ET: Intraday support/resistance:
SPX 1331.5/1337.5
DTX 526.5/530
DJIA 12445/12505
Nasdaq 2813/2825
OEX 593.5/596
VIX 15.5/16.3
Trin range: 0.50 – 1.0 (A Trin near or below 0.50 is bullish contrarian–watch for a reversal to the downside)
Average VWAPs: +42/-40 (neutral)

Intraday market notes & observations – April 21

Thursday, April 21st, 2011

Happy Easter from everyone at the Stock Market Cook Book!

NOTE: The stock exchanges will be closed tomorrow in observance of Good Friday.

1:30pm ET: Intraday support/resistance
SPX 1332.5/1339.5
DTX 526/534
DJIA 12450/12510
Nasdaq 2809/2821
OEX 594/596.5
VIX 14.3/15.3
Trin range: 0.85 – 1.20 (neutral)
Average VWAPs: +63/-37 (mildly bullish)

Intraday market notes & observations – April 20

Wednesday, April 20th, 2011

1:55pm ET: Take advantage of low volatility to protect your portfolio

Tags: bear-put credit spreads, SPY, portfolio protection

As of this writing, the Dow Transports ($DTX), a leading indication of short-term market direction, is now trading in the red. It needs to stay above 520 for any hope of rally continuation.

Since the VIX is at its lowest level in years, now would be an excellent time to buy long-term put protection for your portfolio. One possible options play would be to buy the 12Jan 133 Put for $9.40. You can decrease your purchase price by selling a lower strike call against your long put.

The SPY has support at $125. (See chart below.) Currently, the 12Jan 125 put is selling for $6.40, so if you put on this bear-put credit spread, it would end up costing you only $3 for $8 worth of downside protection. (Below $125 you won’t be protected.) Should the SPY fall to $125 between now and the third week in January, your maximum gain would be $5, giving a reward to risk ratio of 5/3, or 1.67.

1:20pm ET: intraday support/resistance
SPX 1324/1334
DTX 523.5/531.5
DJIA 12350/12500
Nasdaq 2786/2804
OEX 591/595
VIX 14.3/15.7
Trin range: 0.8 – 1.2 (neutral)
Average VWAPs: +41/-71 (mildly bearish (as of this writing))

Intraday Market Notes & Observations – April 19

Tuesday, April 19th, 2011

1:10pm ET: Intraday support/resistance
SPX 1302/1310
DTX 521/524
DJIA 12200/12250
Nasdaq 2724/2746
OEX 582/585
VIX 16/16.75
Trin range: 0.8 – 1.0 (neutral)
Average VWAPs: +52/-43 (neutral)

Intraday Market Notes & Observations – April 18

Monday, April 18th, 2011

12:54pm ET: Intraday support/resistance
SPX 1295/1310
DTX 517.5/524.5
DJIA 12100/12250
Nasdaq 2706.5/2729.5
OEX 577.5/584.5
VIX 17.1/19.1
Trin range: 0.50 – 0.65 (bullish contrarian)
Average VWAPs: +40/-54 (mildly bearish)