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March 23, 2020

Put Option Traders Take Your Pick

Is Now the Time to Buy FAANG Stocks?

Don’t ask if the FAANG stocks, including Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Alphabet (GOOG), are a buy now. This subgroup had all been leading beneficiaries of the bull market in stocks. The risk-off conditions from January 18, 2018, did not affect this favored grouping; they continued to make significant gains and made up a large percentage of the return in the averages. 

However, today they will play catch up as the need for cash increases, and the flow of investments shifts to new leadership for the new decade. 

AMZN made its all-time high on panic buying, a common occurrence this year for the averages worldwide and many of the sectors and leading shares.  But AMZN is on the verge of a high rate of change decline. The Technical Event Model is set up for the top to low range to expand in April to over 600 points from open to close of the month.

A fall below 1795 would be the first sign of the downtrend kicking off.

Facebook, is boucing off S-T support as seen in the right hand window below. A recover to the low side of I-T new resisatcen at 167 is within reason. I have highlighted the area in red where the market should find push back.

The backgriund of range expansion that begain in MArch – signaled by TEM’s rule #4 signal, calls for more of the same. Hence the 60 point high to low range that hit in March should be exceeded in April. A situation that calls for target if 90 or lower. the middle window has the L-T support zone shwoing a range from 97 to 126. I feel it is resonable for L-T support zones to be broken when new long term downtrends begin.

S-T a bounce today and Tuesday is withing the sennario buy getting above 167 and staying there is not the expecation. Traders – as always – look for success of failure if the makret can get back above that price. S-T support runs from 145 to 154, if a recover above 167 does not occur providing you with a failure short entry with a fall abck below 167, this weeks S-T support zone would be used for enttry triggers.

Googles run to new highs was post triangle, which is a terminal move, and the breakout measured by TEM called it weak and feeble. From the peak, the decline in the weekly bar has been un-interrupted. Short and hold positions would have seen very little underwater.  The I-T support zone is broken, refer to the middle window for the weekly line chart. The low end of I-T support is now new resistance at 1167.00. What is critical here for the Google market is the volatility background to go back into panic mode, after its peaking on emotional buying. That type of flip was seen at the late January peak of the Dow in 2018 

On a Short term basis, along with our Near-Term outlook for the averages, more trading range may precede the massive duty decline.  The Long Term support zone – not shown – starts at 1,000 and ends at 875.  Option traders have a look at Market Map for the scenario that is likely going into May.

A break below 1044 should set the stock on its way.

Netflix has many of the same bearish background setups as the other FAANG stocks. But what stands out to me is the triple top on the monthly chart and how TMT’s overbought-oversold model is so blatantly out of gear. A precise longer-term sell signal. The monthly chart shows the L-T support zone at 200 to 243, a price range that is equivalent to a 38% retracement of the bull market to date and a friendly target for a put trade.

NFLX has moved back into its I-T support zone, a key point of interest for traders. If it can hold and move above 345, the market may be able to grab victory from the jaws of defeat. On the other hand, a break back below 321 would be a bearish omen pointing to S-T support this week at 305 down to 284. Once the trend is intact, the target is 100 points lower from here.

Early Spring Subscription Discount

 

Great and Many Thanks,

Jack F. Cahn, CMT

A Thinking Man’s Trader Since 1989,

Copyright 1989-2018

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November 12, 2018

US Dollar Eyeing Key Breakout Level

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October 17, 2018

One day wonders dominated in 2008 & 1932

Based on the evidence this is what I know

In the wake of the extended bull market since November 6, 2016, and more recently the advance from the April lows it will be hard to resist bullish actions the day after a 500 point rally by the Dow.

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October 15, 2018

MarketMap™ 2018 Annual One Day falls (AODf)

The 8.85-year Cycle

Just like any relationship, anniversaries are important to the market, and many traders know it may cost them if they do not recognize these occasions. As a nation, there are days we will not forget, like 9/11. Just like a rock thrown into a still pond, the effects repeat over time.

The same big splash effects happen in the market, and it does not forget. Since 1885, some ten major DJIA AOD falls (≥ -3.60%) occurred between September 10 and October 31.  These are sizable price events.

There are many more than ten referred to above when you consider declines in the one-day class that are less than the 3.6% but happen with a negative geopolitical news or media event.

MarketMap draws many parallels to the 1972- 1974 period based on the events from 1973 (9-year cycle x 5) this week is the anniversary of the “Arab oil embargo” among others in the 9-year repetition.

While MarketMap came into the year headlining “Geopolitical Security threats will precipitate financial distress” it is noteworthy that the real-life headlines read “Saudis threaten retaliation after Trump warns of ‘severe punishment’” for the suspected killing of a self-exiled Journo, Jamal Khashoggi, one of Saudi Arabia’s most prominent journalists.

However, what has become the new normal in the last 18 months is nothing ever happens, the problems simple pill one on top of the other.

However, cathartic market action in the current timeframe may lead to a clearer vision of what the future has in store.

One of the “among others” referred to above is the weekly long bar low in the 3rd week of October, highlighted in this chart. That big splash in the 2nd and 3rd week of October 2000 was a 12.% decline to the intra-week low. The week of October 20, 2000, declined 6.2% before putting in a mini panic low to recover.

The dates that come up for an AOD fall are today, the16th or the 17th. They set up as panic days from open to close. The longest bar of a move tends to be the last bar of that trend. The long weekly bar that ended the move in 2000 was 6.2% the one that precedes it was 5.8%, for example.

Thus far, since the October 3 peak, the biggest decline is only 3.2%. Exceeding that daily range will suggest a low is nearby, and MarketMap will look for cross-checks to confirm a low. Also of note here, the AOD decline in February was 6.9% and in a period of great extremes, in this era of the “tremendous” where anything is the “probably the greatest ever done,”  and after 2017 a year of the lowest volatility on record, expecting an AOD decline exceeding the 6.9% this week would not be a surprise.

The scenario has not changed: risk/reward favors selling with selective long V hedges. A low here in the latter half of October followed by a failed rally into the election with another decline into the COT dates mid-November. There is the potential of an alternate or second AOD decline hitting on or about November 23.

 

October 14, 2018

Volatility Report October 15, 2018

Momentum Surge in Volatility

Looking at the CBOE perceived risk data as well as the long volatility futures ETFs (bearish investment vehicles) across the four major indices there is a momentum surge. Our chart on the left of the 3Xbull S&P ETF gives a clear picture of two failed tops at all-time historical highs followed by breakdowns. Following January peak, the February/April low pivoted when %BB-Oscillator was a divergent overbought long volatility ETF “SPXU”– right-hand Our Bollinger band oscillator is not yet at an extreme suggesting more decline to come.

What else is clear is %BB SPXU never moved above .382 during bullish trends. Looking back over the complete history of this bear ETF %BB-Osc only moved above .382 when the market moved into consolidation at least or a meaningful correction. With that being the context of the market now on an I-T basis, expect more decline.

Bottom line is our measures on V have surged past a point that implies follow through or lower prices for the major averages.

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