1. Try clicking on the name of the most recent article in the column on the right. This will remove the "Archives" list.
2. Try right click on the chart itself and open it on a separate window.
I am sorry that I cannot always make the chart small enough to fit neatly on the left column. I want you to be able to see the details I want to point out.
I Hope this helps,
Juan
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I have been looking at the candidates that trigger my system on Friday.
http://finance.yahoo.com/q/cq?s=OVTI,SYK,ZMH&d=v2
First, OVTI looks like is at the high end of its range. I would consider it a PCCRC candidate, if the volatility conditions are met. The volatility on OVTI is still high but is declining fast. Waiting a week or so may be the thing to do.
http://stockcharts.com/def/servlet/SC.web?c=ovti,uu[w,a]waclyyay[df][pb10!b40!f][vc60][iUl14!Lp14,3,3]&pref=G
SYK and ZMH are good candidates, as they both jumped from long-term lows.
It may appear that both are good candidates, and you can put your target for the next few weeks right at this year's highs. so my target for ZMH would be $89, and for SYK would be $57. The gain in % would be about the same, according to those targets. The catalyst is the same for both companies, indicating that negotiations with Japan suggest lower price reductions:
My RET analysis suggests that SYK is likely to break through that resistance as the highest likely price is $60.7, while the likely highest is $146.
Let's take a look at the trades to consider. First, ZMH: I would pick a short that would bring me a minimum of $0.50/share. In this case, you can go to Dec. 70's (selling for $1.6), or Jan 75's. Then, my long has to be either 70's or 75's respectively. How many months out? well, you can use the RET predictions, that suggest that the target would be met by March, but you may not have access to RET, and it is really not that precise. If you are buying OTM calls, you need more time and the price would be lower, in that case, buy June calls. If you are buying ATM calls, you would be OK with the March calls. Then, pay close attention to Delta, so you get an idea of what to expect for the growth of your positions. Last, look at the price of the resulting trade, and adjust based on number of contracts, and do not exceed 10% of your trading account. In the examples below, you end up with approximately the same Delta and cost.
Folllowing the same reasoning, we have two potential trades on SYK. I don't like the first option because my break even point is above the current stock price, so this is not exactly ATM — The advantage of being ATM is lost.
I'd rather get more time even if I am slightly OTM. Should the stock go sideways, the Jan06 calls will decay, protecting my trade. Of all the trades I have posted here, this is my favorite one.
Note that the Delta is twice the delta for the ZMH trades, this is because of the difference in price between ZMH and SYK, mostly. Dollar per dollar, this is the better trade, I believe.
11 comments:
Can’t agree more with you on ZMH. A question here:
Based on yr experience, with the stock at 69, would it be better for a 70 CRC or a 75 CRC in terms of risk/reward and adjustability?
Do you really believe in the Elliott wave theory? Last thing I heard about the theorists is that the the DOW was going to be 5000 soon.
Anonymous, glad you could join us. I hope you become a regular with a user name. I am not sure what the right policy should be for non-regulars, but I have only allowed full acces to non-members today. We'll see how it works.
To answer your question, I have been an elliottician since 1995 and have become a better one over the years, understanding the patterns, etc. I like the software RET because it matches my understanding of the Elliott wave theory, but I still have to figure out what is the best choice from a list of potential counts the RET software offers. This software is for committed elliotticians.
You MUST be warned that I am skeptical about the Elliott theory still, after all this years, but I use it, cautiously. I think it is better than an oscillator or a head-and-shoulders pattern as a predictor, but it would be stupid of me to suggest that it is a crystal ball. I have been using it to rule out trades that don't look right under the theory, so maybe I have filtered out trades that did not look right under Elliott count.
In the case of ZMH and SYK, it is quite obvious that the stocks have made a temporary bottom, and my counts reflect that, so these are good choices for trading. Would they reach the targets suggested by the count? I can't be sure, but I am betting that the stock will test their previous highs, and that would bring me good results.
To summarize, use RET as support. Together with my triggers (volume and price spike) and other indicators (oscillators), you should be able to produce good results.
I entered the OTM SYK trade today (strike price is 50, as stated above), but not in the Challenge account, which is low in cash.
I can't open a new subject and this question isn't exactly part of this current subject, but it applies to a lot of situations.
When you are opening a new CRC or PRC position and the current options month has only two weeks to run would you go to the next month out for a front month? Or would you use the current month, knowing you'd have to roll it out in a week if it's in the money?
Quite the contrary, this is a very much on topic question. If you read my article again, you'd see that I chose to sell options that were at least $0.50/share. Otherwise there would not be worth much to me. So start by selecting an option to sell. This option must be >$0.50 bid. Right now we are 2 weeks to expiration, so they might be hard to find. BUT if you DO find that the ATM or one strike OTM options are $0.50, then by all means chose that one.
Next, choose the long. If you chose the OTM short call, the long call should also be OTM (same strike price) but preferably longer term. I chose June OTM ($50) calls for my CRC on SYK, but the Dec 50 calls is nearly worthless, so I did sell the January for $0.65.
The Dec. 45 calls are ITM, so they were selling for $1.8, but if my RET analysis is corret, it is unlikely that the stock would go back to $45, so it is very unlikely that I would gain much between now and expiration by selling these. Still, they could lose value if the stock moves sideways.
Anyway, these are might thoughts on this, but I really don't think of these things in unflexible terms. I am more interested in chosing something that would match my expectations. BUT DO keep the $0.50 rule.
I think $1 makes more sense. It doesn't seem to me it pays to sell a call for less than $1. But say you can get $2 but the expiration is in only two weeks, would you take it, knowing you're going to have to deal with the problem in only a week, of whether to roll them, buy them back or close them with the equivalent number of longs? You said it's good to get rid of them a week before expiration because they still have some time value then.
Well, if you find a $1 call ATM with expiration this month, take it! Then again, it also depends on the volatility. I suspect that the back month (the one you pay for) is probably expensive too. It is the balance of the two that make you a good price. If Volatility is high, it is a MUST to sell front month to moderate the cost. If the volatility is low in the front month, and high in the back month, it might not make sense to do it, you'd have to see the risk graph to be sure that it is worth it.
IF you sell OTM calls for $1 this month, it is very likely to expire worthless, since there are 2 weeks to go.
I have been saying that you should roll over calls or puts one week before expiration. This applies unless the price of the stock is near-the-money, and the front month option is likely to expire worthless. If the trade is deep ITM, doing the switch one week in advance is a MOST. If the trade is OTM, I do the switch if the option I am covering is less than $0.15, simply because there is not a lot of money to be made by waiting.
Again, none of these rules are written in stone, I have my preferences, that's all. Just be sure that you sell options that are $0.50 OR MORE. $1 certainly work.
Hi Juan,
I believe CECO triggered your system today. I have entered a 35 Dec/Apr PRC. Any comments?
Perhaps you should comment on your own views as to the power of the catalyst.
Other than that, It has dropped below the 200 and 50dMA and the oscillators are still high, so there is room for further decline.
http://stockcharts.com/def/servlet/SC.web?c=ceco,uu[w,a]daclyyay[db][pb50!b200!f][vc60][iUa12,26,9!Lp14,3,3]&pref=G
Catalyst as follow:
Career Education Corp., a for-profit college company, said Tuesday that a regional accrediting panel has placed the company's American InterContinental University on a one-year probation.
We are committed to addressing the Commission's concerns while continuing to provide quality education to our students," AIU Chief Executive George Miller said in a statement
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As we all know, CECO was involved in a scam just about a year ago which caused its price to tumble down all the way from 70 to 35. This new piece of info may cover new things that have been swept under the carpet and even if it does not, consumer confidence would have been badly hurt.
The above coupled with the charts showing a drop below the 200 and 50 day MA on high vol (6 million as compared to a 30d avg of 1.5mil) is IMHO a very strong indicator of a continuous downtrend.
I may be wrong as i am still new to this. This is in fact, my very first PRC after following Juan's blog for quite a while
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