TM:" beautiful doji hammer on the RUT.X "
...often called a "spring" when the hammer head is right at an apparent horizontal support, and the "legs" are below the line. Doji hammers are deemed slightly stronger (the smaller the "head", the better).
RLX.X - Retail Sector still feels weak to me...
...I see that BBY and CC resemble bearish engulfing today; GPS and ANF resemble selling climaxes but, I kinda doubt more than a DeadCat bounce followed by a base, at best. WAG has hit its Head&Shoulders extent; SWY hard to read - hitting resistance. GM & F adrift, trying to base. TWX and VIA, no obvious reversal. HD and DH down to basing areas, about at their Head&Shoulders extent.
Bellwether WMT easier to read; looks stronger than other RLX.X stox.
stuff about options, since you asked...
Today, WMT @ ~39 was a nice place to sell WMT AUG 40 PUTs, for example... or IBM AUG 120 PUTs, for another example. If we bounce, they are likely to return > 50% if you buy them back before expiry. Or just hold on to them - if they do not expire "worthless" (which is not unlikely) and you are "put to" (and must buy IBM @ 120 minus 4~5, it's not a bad dip buying-op to add good stox to your CORE (and get paid for investing = "buying on the dip" ).
Note that buying CALLs on a reversal day like this would also work (assuming that tomorrow all these dojis and hammers are confirmed ! ) But, with the VIX.X - Volatility Index peaking and perhaps "blowing off", CALLs can be tricky. If we bounce more, the "implied volatility" will continue to fall, and that will knock off some of the CALL's value (even while the underlying is going up). This is especially true for out-of-the-money CALLs, near month.
When you trade CALLs, Paul, very short term and stuff, you usually want to choose an "at" or very near-the-money option, so that any movement in the underlying will be well-reflected. Some folks like to "trade" LEAPS, so that they can forget about time-value issues. This helps, but volatility still affects them somewhat (though not so much).
By selling near-month AUG PUTs on a day like today, we have the time value decay and probable VIX.X decay working for us (even if the underlying doesn't bounce a heluva lot or, just stays where it is). No, it's not as wowie-zowie as doubling or tripling an out-of-the money CALL (^_^) but if we could say that "the trend is your friend" when you go long or short stocks, then we could say that it's better to have the time value and implied volatility working as your friend when you're playing with options, IMHO.
-Steve |
