Welcome to the StockOptionAssassin.comís
weekly video update for Swing Trading Options.
Weíre going to take a look at some monthly
and weekly charts and then weíll go into
a couple of trades that weíre looking at
with our members.
What I wanted to focus on, since we just ended
the month of May last week and as most of
you know is horrendous ñ June is starting
off to look even worse.
I wanted to just look at pure price action,
no indicators for now and no moving averages
or anything.
We just look at pure price action.
One of the best tools you can use is Fibonacci
retracements and extensions.
Letís go through that now.
First of all, I have a monthly chart of the
SPX up.
You can see this goes all the way back to
í03.
First I have this little pivot here.
Itís interesting that the pivot bounce we
had in 2008 before the big crash is right
where we came into.
Itís really no surprise that we ran into
that on the monthly chart.
Anyways, Fibonacci-wise, letís start with
the March of ë09 lows.
We had this move up.
We had a really nice leg here weíve retraced
to the 38.2 ñ very typical.
We broke back above that.
Anytime you have a pull back and you break
above it, there is a really good chance you
get to the 27 extension.
We hit that perfectly.
That ultimately failed.
We came back down.
You can see that we had this huge drop.
We closed back above here.
And then, we ultimately pulled back.
We broke back out above again.
And now, we tried to break out, ran to this
pivot.
I thought maybe we have the juice to get back
up to the 61.8 extension.
You can see how this first leg up ñ The Golden
Ratio Extension of that leg would get right
almost exactly to the previous highs here.
Again, the Golden Ratio is playing a good
factor.
Iím leaving this on here ñ this monthly
chart from the March 9th lows.
This is to April of 2010.
Iím going to leave this on here.
Ultimately, I think weíre going to be pulling
back in at least to 1220.
I think itís going to happen over the next
few weeks.
I know weíre oversold, but until something
positive comes out of Europe or the Fed announces
QE3, which is very possible (they are meeting
later in June), I think the first few weeks
of June is not going to go straight down.
But I think ultimately weíre going to retest
1220.
If we put in another Fib from the October
4th lows of 2011 through a high, you can see
that that coincides ñ You have a 61.8 retracement
around 1207, 1208.
I think this is going to be a good support
area and I think we are going to get there.
I am expecting to get there by June.
So, how do we play that?
First of all, let me show you a trade we took
that weíre actually still in.
We took this on Thursday last week.
Iím going to switch back to a daily chart.
We took this with our members.
We took in Pfizer.
We use a lot of moving averages and we use
the TTM Squeeze Indicator with our trading
here.
You can see in Pfizer, we had this head and
shoulders pattern.
The neckline started to break.
We had this move.
Youíre consolidating here ñ a little bit
of bearish consolidation.
We entered this trade basically on this day,
right in this area.
You can see what started happening was, with
the Squeeze Indicator, you can tell the bearish
momentum was kicking in.
It was going from positives to negative.
The red dots indicate that it is in the Squeeze.
The bar went from red to yellow, showing it
was holding here.
I thought maybe this thing will actually turn
around and go positive.
And then, the next day, it went back red.
We decided to take this trade.
The market was starting to fail.
This one day pop put us 40%.
We took half profits in that.
I am looking for a move ultimately down to
about the 200-day moving average, which is
this line.
This would coincide with this pivot low, just
slightly above that.
But basically, weíre around 20.80 where Iím
looking to take full profits on that.
So we are in on the bearish side.
The other thing we did is we started to nibble
on some USO.
Iím going to explain why.
Obviously, Oil is just in a complete downfall.
You have the rising dollar pushing commodities
and stocks down, as well as low demand from
jobs reports and part of Europe being back
in recession.
This was a contrarian play and we are nibbling
on the way down.
If we actually get to this double bottom,
I think this is a good entry for you guys.
Iím going to call it around 29.50.
I will be looking depending on how long it
takes to get there.
We bought some July calls already.
If we get a good bounce, weíll take those
off the table and reassess.
But if we do get a little bit of a bounce,
you could reshort Oil.
Whatís interesting is, when you look at the
dollar commodity type space, UUP was actually
slightly not bearish, but it slightly pulled
back a little bit.
It was starting to lose a little bit of momentum
here, if you look at the Squeeze.
Weíre pretty extended far away from the 13
EMA.
This is the 13 EMA, the 20, 50 and 200 simple
moving averages.
I think dollar pulled back and this is partly
why we got on Oil.
Oil was down 3% and the dollar was actually
pulling back.
I was looking for a snap back.
If the dollar does pull back to the 13 EMA,
then Oil would get that pop and we would take
some profits in those calls that we purchased.
But as far as right now as new trades, Iím
not setting anything up.
Weíre going to be watching this.
It would be interesting to see when we open
on Monday if any news comes out of Europe
that will help the euro (remember that euro
is just falling off a cliff here).
I would actually be interested in shorting
the euro via FXE.
If we can get a pull back to about 125 on
FXE, I would pull the trigger on a small position
of puts.
Probably Iíve got to see, reassess the timing.
But Iím probably at this point looking at
July puts.
And then, you could even maybe add some more
at the 126 area.
So thatís where weíre looking at this week.
Let me show you the dollar chart again.
This is the actual Futures chart.
Let me just clean up all this stuff off here.
One thing I want to point out is that if you
are in cash, you are making money.
This is very important to understand.
I know we missed some trades this week.
We were trying to get in on TLT.
It popped without us, so we were not making
any money on TLT.
Weíre looking for a pull back here.
You can see my targets in here.
We never got that.
It went without us.
We missed this trade.
IWM: We were looking for a move.
We missed this by maybe $0.50 or $1.
We were looking to reshort IWM and we missed
it.
So, what that means is weíre sitting in more
cash.
And if you look at the dollar chart, your
cash is making money.
You account is not growing, but your cash
is making money.
Thatís very important for people to understand.
You donít need to be in the market at all
times.
We have our short trade and we have our long
trade.
I think weíre set up well.
Weíre on a really nice 13 out of 14 trade
win streak here.
Thereís no need to rush this, especially
when the markets right now are breaking, barreling
through levels.
When we look back at the SPY, the market just
barreled through the 200-day and youíre starting
to get a reacceleration of momentum here.
You need to be patient.
Let this thing fall.
See where it lands.
If you want to go contrarian, look at 1220,
which is about 122 on the SPY.
Take a small trade.
Find stocks that are holding up well.
One thing Iím going to be stalking is Amazon.
Amazon pulled back to the 50.
You had this huge gap.
Ultimately, I think youíll probably retest
this 196, which will be gap fill.
But if you want to nibble here at 201 and
then nibble here and look for reversion back
up to the 20, by the end of June, if Amazon
is down at 196 here, I would be backing up
the truck and just looking for this thing
to break out.
Iíd be looking for August, September, maybe
even December calls.
This is something you keep on the radar.
You also have this serious trend line here,
which by the time this thing does get down
here, youíre going to have gap fill.
Youíre going to have this very strong trend
line support here.
Again, thatís around 196.
Thatís all I got for right now.
You guys be patient.
Let the market fall.
If youíre in your shorts, I told you where
you can look to take things off.
Youíll need to take profits along the way
because at any day the government or Europe
or some news can come out that the market
is going to have a huge rally, and you are
going to see some face ripping rallies over
the next couple of weeks.
But ultimately, you know where I think weíre
headed.
Thatís 1220 on the SPX.
You guys have a great weekend!
