I WANTED TO POST MY LAST SUNDAY NITE NEWSLETTER...IF YOU RE-READ THE FIRST ONE..AND ADD THIS ONE...SWING/POSITION TYPE SHORTS WERE THE WAY TO GO HERE...NO HEDGING EITHER<G>..
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JERRY OLSON'S
"POINT" OF VIEW NEWSLETTER
SECOND EDITION JUNE 10TH, 2001
Hello Everyone
I hope you and yours are all in good health...Summer is upon us, and it looks like volume as subsided, and volitility has too..So it's going to be a slow summer..Please take advantage of this time frame to rest reflect and refresh...You do not have to trade everyday...I'm not thats for sure..I have plans on being down the shore all summer, enjoying life with the wife and family...Hope you do too<g>..
Currently after looking at all the indexs at length we are in triangles on all the charts...That means we are going to break one way or the other..No if's and's or butts...My thinking is we move higher this week, and then selloff hard into the FOMC the wek of the 18th thru the 22nd...
Those of you that are long...Get ready to take action on your positions...You have several choices to make before the correction begins...I have no earthly clue as to when it will begin, and where it will lead to..But be assured it is going to happen and soon...We are still heavily overbought in the longer time frames, and i am saying protect your longs right here right now..
So what to do????..Selling is good<G>, take the money and run...buying puts on your stocks for the July time frame...or?? selling Covered Calls on the stocks in your portfolio's to rake in the premiums as we pullback, if you still wish to hold those shares...I am going to talk at length on what that strategy entails for us all...
What is a "Covered Call" write....It means you OWN the stock...that gives you the right to SELL some one else an option on your shares...And for that privailage they PAY you a fee/premium that you pocket immediately that day...Now there's a lot to this to comprehend, but it is a very conservative approach to making money month arfter month...I do it all the time...In fact i have never stopped doing it, because of irrational exhuberance still exsists in the markets...Far be it for me not to take advantage of the nuances of the markets mania...so here's the example...
You own shares of XYZ Corp at $50 bucks say for arguments sake 1000 shares...Each 100 share lot equals 1 option contract..so 1000 shares means you can sell 10 calls...The game plan would be to sell 10 options of the strike just above 50..Say the July 55's @ 2 1/2 dollars...That means you get $2500 in your account till options expiration of July 20th...
Now here's all the possibilities....
1... you own the stock at $50..you sold the 55's calls...at expiration the stock is below that strike at 54...it means you get to keep the $2500 and retain your stock...and do it all over again in August<g>...
2...the stock is at 56 at expiration...you get to keep the $2500 & they take your 1000 shares away from you, paying you $55,000..Not 56,000 even though the stocks above 55....because you sold the 55 strike options...BUT!!! remember you only paid $50 for the stock??? so you make 5 points or $5000 + $2500 for the CC's or $7500 total for a one month trade....a beautiful 15% profit in ONE month!!!!!!!
3...the stock plunges on bad earnings news or what ever...you still get to keep the $2500, and of course you own the stock still...but you do have the RIGHT to buy back those calls you sold for 2 1/2...maybe they come down to 1/2..or $500.00 bucks..you could opt to buy them back and re write them all over again...still making $2000.00 profit...or let them expire worthless for your buyer...
4...the only real problem with Covered Call writing..is that you CAP the upside of the stock..if at expiration the $50 buck stock is now 75...you only get that 55 number..and do not get the other 20 points...so there are some caveats...but not many...
Now why am i talking about this trading technique...because for all of you out there that have suffered hugh losses on stocks you held all the way down..please begin to use this technique to REPAIR those losses and start to collect that lost money back into your accounts...Check the Support and Resistance areas...Check the indexs and see where we are at in the scheme if things...It seems abundantly clear to me, that CC selling is an awesome way to rake in money as we move sideways to nowhere for the next 2 quarters...
We certainly would not want to write CC's in an uptrend..more like at the tops of these time frames...when the markets stall out...and begin to pullback...they don't always work..but you'll always make your money no matter what...yes you may lose your stock??? but so what??? your so far under water anyway, just take whatever proceeds you get from the sale and re buy another better stock...hey what ever turns you on<G>...
You can gain solid knowledge at the CBOE site on all types of options..please check it out...just remember this, --- KISS, keep it as simple as you can...i always do...
Let's talk about where we're at right now, and about all the indexs and the endless possibilites out there...
DJIA---THE INDU HAS AN INTERESTING CHART PATTERN HERE...IT'S IN A TRIANGLE, IT'S MADE 4 CONSECUTIVE HIGHER LOWS...11,100 IS THE 3 BOX REVERSAL UP HERE..11,200 A DOUBLE TOP BUY SIGNAL ON P&F...10,850 DOUBLE BOTTOM SUPPORT WITH A MOVE IF THAT BREAKS TO 10,700/750 THE VERY SAME TRADING RANGE FOR A LONG TIME...IT LOOKS TO ME LIKE WE ARE UP ONE NOTCH...SO IT'S GOING TO MOVE, LET'S WATCH WHICH WAY IT GOES...
NAZ/COMPX---A NICE TRIANGLE TOO...2300 OVERHEAD R..WITH 2350 A BREAKOUT TOWARD 2400 THE BRL LINE AND HEAVY R THERE..IT WOULD TAKE IT TO THE TOP OF THE 10 WEEK TRADING BAND...ON THE DOWNSIDE...2050 IS THE DOUBLE BOTTOM..2000 THE BREAKDOWN AND WE COULD SEE 1800/1900..DOUBT WE'LL TEST 1650 AGAIN...
SOX---RAN UP TO HEAVY R AT 680 LAST WEEK...IT'S HELD NICELY at THE RISING BULLISH SUPPORT LINE(BSL) AT 580...IT'S ABOVE THE BRL LINE TOO & 720 IS AN ENORMOUS BREAKOUT AREA....SO THE INDEX IS IN GOOD SHAPE...620 IS THE 3 BOX REVERSAL DOWN 560 IS A MAJOR BREAKDOWN I DOUBT WE SEE THAT NUMBER...
SPX--- IT REVERSED BACK UP OFF THAT 1246 AREA TO HIT 1280, AND ALREADY PULLED BACK AS EXPECTED TO 1260...MY GUESS IS WE'LL RALLY UP OFF THAT CYCLE LOW ON THRUS/FRIDAY OF LAST WEEK..TO TEST 1280..THEN 1310....IF WE CAN BREAK THAT OLD INTERIM HIGH AT 1287...REMEMBER WE ALREADY HIT 1315...NOW IF WE SELLOFF NEXT WEEK AND BREAK 1260, THEN 1251 IS THE NEXT CARPINO C-BAND..AND OF COURSE 1245/46 IS THE DOUBLE BOTTOM WE BOUNCED OFF OF TWICE...1230 IS CRUCIAL IN THE LONGER TERM IF WE BREACH THAT NUMBER...
NDX---DID REVERSE UP TOO LAST WEEK AT 1950..HAS OVERHEAD(O/H) R AT THE BRL LINE 2000...THE DOUBLE TOP AREA IS 2050, WITH 2100 A BIG BREAKOUT...ON THE DOWNSIDE..1800 SOLID SUPPORT AND A 3 BOX REVERSAL DOWN...A BREAK OF 1700 IS A BIG NO NO..
QQQ....RANGE BOUND BUT TRADABLE...49 IS THE TOP OF THE RANGE HEAVY R AT 51..BUT 52 IS A BIG BREAKOUT...WITH 44/45 SOLID SUPPORT...
VIX---LOOKS LIKE IT COULD HEAD LOWER..MAYBE TO THE BOTTOM OF THE 10 WEEK TRADING BAND AT 18...WE'LL SEE..25 IS THE 3 BOX UP..HOWEVER..PLEASE DO NOT GET FIXATED ON THIS INDEX..WE WATCH THEM ALL....
I'd like to talk about the shorter term indicators i watch on P&F for clues of where we are going near term, say 1-2-3 weeks or so...
First i watch the 10 Bullish Percent % of stocks above their 10 week moving average...the index has rolled over and down 3 boxes after a ballistic high pole run up...the breakout was 34% it ran up to 78% non stop...it will correct...
Next is the Hi-Lo index, it's NYSE hi lo...it too ran up hard from very oversold levels and has just now reversed DOWN 3 boxes...after studing P&F for 4-5 years now..i always know when to lighten up positions when these early warning indicators turn down from over bought levels...
However..i only expect them and most of the sectors i watch, and stocks i watch move back toward the MIDDLE of the trading bands..not the lower end anymore...with the biggest P&F indicator on a buy signal, the NYSE BUllish Percent indicator, we have the OFFENSE on the field right now...does not mean we sit there and let our profits erode..NO WAY JOSE'..NO WAY...protect your longs here..and play it safe...keep your stops in place...and do not get greedy...always "SELL TOO SOON"...
A lot of people have been asking me about the "why's and wherefores" of these markets...Folks for all intents and purposes..i do not have the answers..besides, it simply does not matter WHY???..what matters is to recognize the trend and trade it to the n'th degree...Please forget the noise, the whys, who cares???..we all know the historical PE's are ridiculously high right now, because the corps are not earning much money...in fact they're losing money...but if the street wants to run this stocks up the flagpole far be it for me to stand aside..those of you that become so frozen in your seats because your trying to analyize the whys and wherefores will miss these fabulous moves up and down...just relax...don't become overly technical...don't do anything to extreames...it always works against you...ignore as many people and pundits you can...please...tune out the crap...
OK let's talk stocks....our current list will stay for now...and those nice little ones too...special situations will arise as we move thru each week...i will try to keep you posted on current events IF they materially change the current thinking...
I was at dinner with some friends this weekend...2 of my semiconductor contacts were there...the comments were as follows..."there is no NEW orders as yet"...however...we feel the worst is over...as our customers have stopped all cancelations, and pushouts have slowed...They said the trend has not changed right here..but that this quarter will be the bottom...in fact they said they feel many companies will MISS their projected numbers...
So fwiw..take that to heart..we are NOT investing as yet..no big money trades...and expect short falls and warnings to continue at least thru July...Expect most companies to miss...we may nibble if they get really beaten down at that time...Remember the FED has cut now heavily and will again this month..my thinking is .25 basis points with a solid forward guidence of accomodation...on down the road...
1...AMAT---IT'S RIGHT AT R AT 55/56 AREA...I WOULD WATCH 58/59 FOR THE TOP..60 IS A BIG BREAKOUT....53 IS THE 3 BOX REVERSAL DOWN, TO TEST 49/50..GEE I WISH IT WOULD GET THERE AGAIN<G>..I HAVE STOPS IN PLACE...I AM CURRENTLY LONG THIS STOCK AND MAY WRITE CC'S ON IT..I'LL SEE...FOR DAYTRADERS...56 1/2 THE BUY TRIGGER...54 THE SELL SHORT(SS) TRIGGER...
2...CHKP---NOTHING HAS CHANGED IN MY THINKING OF CHKP...IT LOOKS LIKE A GREAT SHORT AGAIN..DCB RALLY HERE..AND IF IT CONTIUES UP..JUST WAIT FOR THE ROLL OVER...HEAVY R AT 55 NOW...THE TRIPLE BOTTOM AREA...I THINK IT COULD BREAKDOWN AND TEST 40 AGAIN...51 3/4 IS THE BUY TRIGGER WITH 55 THE TOP...48 3/4 THE SS..WITH THE BREAK OF 46 TAKING IT TO 40..IT COULD BE A SOLID SWING SHORT PLAY...
3...CIEN---IT'S MAKING LOWER TOPS TOO...ANY RALLY UP SHOULD BE SHORTED AS LONG AS IT DOES NOT BREAK A DOUBLE TOP AT 62...I DOUBT THAT...A 3 BOX REVERSAL UP IS 59 WITH 60 HEAVY R...51 IS A TRIPLE BOTTOM BREAKDOWN THAT COULD TAKE THIS MUCH MUCH LOWER...SET ALERTS FOLKS...FOR THE DAYTRADER...57 1/2 THE BUY TRIGGER...YOU KNOW THE REST....55 IS THE SS WITH 1ST STOP AT 52 THE TRIPLE BOTTOM..51 WOULD BE SUPER NICE IF YOUR IN THE SS TRADE...
4....PDLI---THE STOCK IS CORRECTING HERE...AND COULD SEE 80/81 AREA...THE ORIGINAL BREAKOUT...I HOPE<G>...SUPER SOLID SUPPORT AT 72...DOUBT WE SEE IT THERE...85 3/4 THE BUY TRIGGER...87 3 BOX UP WITH 90 THE NEW DOUBLE TOP..WOW!!!!...83 THE SHORT SALE...WITH 80/81 1ST TARGET...IF IT PULLS BACK ALONG WITH THE MARKETS...WAIT FOR THE REVERSAL UP IN FRONT OF THE FOMC AND BUY THAT POP...
5...HGSI---WHAT A CHART..HAVE I SAID THIS BEFORE????..MAN THE BIO TECHS ARE GREAT TRADERS...IT'S PULLING BACK NOW MAYBE TOWARD THE BREAKOUT AREA FIRST...70ISH...WE'LL SEE...75 1/2 THE BUY TRIGGER...77 THE TEST..78 BYE BYE CITY...ON THE DOWNSIDE...72 3/4 THE SHORT SALE...70 SUPPORT...67 STILL OK...
6...QLGC----HAS ROLLED OVER AND DOWN HERE..I HAVE A DOWNSIDE TARGET OF 50ISH...IT ACTED VERY STRONG LAST WEEK...SO WATCH ANY SHORTS...57 1/2 THE BUY TRIGGER...60 IS THE DOUBLE TOP..LET'S SEE IF IT MAKES ANOTHER LOWER HIGH???...55 IS THE SS WITH 50 A GOOD SHOT SOUTH...
7...FCEL---IT LOOKS LIKE THIS STOCK "COULD BREAKDOWN"...LOWER TOPS 3 TIMES NOW...79 1/2 THE BUY TRIGGER WITH 81 THE 3 BOX REVERSAL UP AND 83 HEAVY R THERE...77 1/4 THE SS...WITH ANY BREAK OF 76 GETING SERIOUS...72 THE NEXT STOP...
8...EBAY---HIT THE DOUBLE TOP AT 66..I LOVE EBAY...ROLLED OVER HERE AND STOPPED ME OUT FOR A NICE 3 POINT GAIN AGAIN..I WANT MORE..."IF" IT HOLDS THE BOTTOM...
64 1/2 THE BUY TRIGGER..WITH THE HEAVY R AT 66 AGAIN, BUT 67 IS A GIGANTIC BREAKOUT...62 3/4 THE SS...60 IS SUPPORT..ANY BREAKDOWN OF THAT TAKES IT MUCH LOWER LIKE 55ISH...
9...QCOM---LIKE I SAID ANY RALLY UP HERE IS A SHORTERS DREAM..IT TRIED TO BREAK THAT DT AT 65 AND FAILED..ROLLED OVER AND DOWN HERE....SO HERE'S THE PLAYS IF A DAY...62 1/2 THE BUY TRIG...64 SHOULD BE TROUBLE...65 FOR SURE..TIGHT STOPS IF YOUR LONG...60 1/4 THE SS...WITH 59 PLUNGE CITY IF YOUR SHORT..HOLD IT ALL THE WAY DOWN TO 56...SOLID SOILD SUPPORT..GOOD SWING SHORT...
10...BRCD---BOUNCED BEAUTIFULL FOR ME EVEN THOUGH THE CHART SAYS TROUBLE AHEAD...I COUGHT THE REVERSAL UP AND ROAD IT TO THE TOP..I'LL BE STOPPED OUT BELOW 43...IT HAS ALREADY REVERSED DOWN 3 BOXES..WE'LL WATCH IT TOGETHER...46 THE BUY TRIGGER WITH ANOTHER TEST OF 48 FOR SURE...44 1/4 THE SS..WITH A BREAK OF 43 A CONTINUATION SS...COULD SEE 39 AGAIN..I HOPE...
AS FOR THE LITTLE ONES...
TIBX---SATC---FIBR---SEAC---EXEL---CPWR---CSCO...ALL LOOK OK SO FAR...SET STOPS AND RELAX...ALWAYS TRY TO SET STOPS ONCE THE STOCK RUNS UP TO BREAKEVEN..DO NOT LOSE MONEY...
OK I AM DONE FOR THE DAY..LOOKING FORWARD TO A SLEW OF ECO REPORTS THIS WEEK..SHOULD ROCK AND ROLL US A BIT..ALONG WITH OPTIONS EXPIRATION OR TRIPLE WITCHING...A FUN WEEK AHEAD
GOOOOOOOOOOOOOOOOOOOOO....6 ER'S...GOOOOOOOOOOOOOOOOOOOOO
BEAT LA..
BEST TO YOU ALL
WARMEST REGARDS
JERRY
Economic Releases
Indicator Date Time Estimate Previous Actual Country
ECRI Weekly Leading Index for 06/01/2001 06/12/2001 1:00PM 120.6 US
Richmond Fed Manufacturing Survey for May 06/13/2001 10:00AM -25.0 US
Beige Book 2:00PM 06/13/2001 US
Oil and Gas Inventories for 06/08/2001 06/13/2001 9:00AM 324.4 MB US
Import and Export Prices for May 06/13/2001 8:30AM -0.5% US
MBA Mortage Applications Survey for 06/08/2001 06/13/2001 7:30AM no data US
MBA Mortgage Applications Survey for 06/08/2001 06/13/2001 7:30AM 521.5 US
Retail Sales (MARTS) for May 06/14/2001 8:30AM 0.2% 1.3% US
Jobless Claims for 06/09/2001 06/14/2001 8:30AM 432,000 US
Business Inventories (MTIS) for April 06/14/2001 8:30AM -0.1% -0.3% US
PPI for May 06/15/2001 8:30AM 0.2% 0.3% US
Consumer Price Index for May 06/15/2001 8:30AM 0.3% 0.3% US
Industrial Production for May 06/15/2001 9:15AM -0.5% -0.3% US
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Jerry Olson
Master Class Trader...
buyitbuyitsellitsellit.com |
