• Background Image

    CT Journal

    FAANG

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

Contrary Thinker  1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-618-3820 or  25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its clients trading futures and offers no warranties expressed or implied. The opinions expressed here are my own and grounded in sources I believe to be reliable but not guaranteed.

— Pricing is subject to change without notice.  My indicators and strategies can be withdrawn for private use without notice, at any time.

— Contrary Thinker does not refund policy all sales are the finale.

–Trading futures and options involve the risk of loss. Please consider carefully whether futures or options are appropriate for your financial situation. Use only risk capital when trading futures or options

October 22, 2018

Fanng stocks losing their bite

It is becoming more doubtful the bell weather Fanng stocks will reverse a series of sell signals from the high pivots in September. Failures to hold new intermediate term (IT) support along with a break below classic neckline formations add to the bearish outlook. The red arrows hight light these breakdowns. Both Amazon and  Google broke below I-T support and continue to trade under that level, a bearish indication.

GOOG is sitting on long-term (L-T) support (old L-T resistance) where the inability of this market to get back above this level would further the bearish outlook.

One of our favorite shorts is Netflix.  Of interest in the above daily bar chart is the 100 point risk the stock has until it reaches the high side of our L-T support zone.

 
Once the neckline breaks the head and shoulders top targets a decline of 100 points or better. Further, our measures of rational vs. emotional buying peg all of the buying from 190 into its historical pivot as panic or FOMO motivated. As such, it will flip easily once the decline puts pressure on these traders.

These diverse methods provide price targets clustering, which adds confidence. Now, its a matter of market dynamics to provide insights into when a forceful move can be expected.

Netflix’s background or set up on a long-term basis is similar to the Dow/S&P peak in late January when it peaked on panic buying followed by a mini-crash on panic selling. With Netflix, the panic buying into June provided a pivotal high with a decline that did not lead to panic selling, at least not yet and there has been no new long-term TE. From an I-T point of view, the dynamics only mostly support a forceful trend this week and S-T the market has not worked off its panic selling.

Puts

NOVEMBER 2018 (EXPIRATION: 11/30)

Strike Last Net Bid Ask Vol Int
NFLX1830W337.5-E  16.20 +0.74 20.45 21.50 1 59
             

My initial trading experience used only high delta puts and calls. These are deep – I mean deep – in the money options. Today it is difficult to avoid time premium, without giving up lots of liquidity – as inferred by the volume/open interest.  The weekly November 337 ½ put is 5 ½ points in the money and with six weeks to work has 16.00 premium. I would look deeper and keep an eye open for any OI.

However, the potential is there with a conservative target of 264 leaving the puts 60 points in the money.  The bid/offer spread is a full point; some option brokers are better than others.

It’s easy to get started, and the only thing that will keep you from quitting is your success. 

Premium Publications Merging Strategies into Forecast. The newest and most reliable risk, asset and strategy management advisory in the industry. No matter your size or investment policy, the volatility report will put you at an advantage. These are individual and student rates.

ContraryThinking Starts Here

Great and Many Thanks,

Jack F. Cahn, CMT
A Contrary Thinker Trader Since 1989,
Copyright 1989-2018

Contrary Thinker 1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA.  800-618-3820

— Thinking Man’s Trader does not assume the risk of its clients trading futures and offers no warranties expressed or implied. The opinions expressed here are my own and grounded in sources I believe to be reliable but not guaranteed.

— Pricing is subject to change without notice.  My indicators and strategies can be withdrawn for private use without notice, at any time.

–Thinking Man’s Trader does not refund policy all sales are the finale.

–Trading futures and options involve the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options.

NO WARRANTY / NO REFUND.TMT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, On ITS PRODUCTS AND At this moment EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL CBI BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE PERFORMANCE OR USE OF ANY  PORTION OF ITS PRODUCTS.

October 9, 2018

Volatility Report October 9, 2018

INTEREST RATES

1. Long-term RSI is at the lowest oversold readings since 2000, such a surge in momentum implies a new bear trend and further downside momentum.

2. Our volatility model has the market in panic selling, but not an extreme yet. The panic index is not over 65 where 70 is normally the signal near the end of panic.

3. Prices have broken below the I-T support zone – see daily chart – the next price level of interest is June low at 131 17/32 just below L-T outside support seen on the monthly chart.

4. There is a COT due in mid to late October.

5. %BB- $SRVIX reflects a volatility breakout support the current trend.
Outlook remains bearish

CRUDE OIL

On a near-term basis, crude has some un-resolved business getting to 79-80. TEM for all three-time horizons are signaling the trend is persistent and old. Until there is a fresh TE to change the trend condition, the trend is higher.
True North is long the Crude futures.

PRECIOUS METALS

Keep in mind the big picture always, “The bull market that began with the 9/11 terror attacks ended in 2011. Volatility Reports expects new Geopolitical events over the next two years, yet gold is not discounting them at this point, and the events remain an “unknown- unknown.”
It may not be so “unknown” today, I did point out in the 10.8.18 update that China and the US may be on a collision course.

1. Along with the moving averages the descending steps of fixed S&R point out the clear downtrend for gold.

2. Systems remain short, and the S-T TEM remains on a TE#2 supporting breakout or trend trading. However, prices are in I-T no man’s land trading inside the I-T fixed S&R zones.

3. If implied volatility – measured by %BB in the right-hand chart can spike to a higher level to reflect a greater amount of perceived risk while prices continue to hold, difference, that would be a bullish signal

4. As stated in last month, there is no clear panic at this time. So the gold market is on hold, not knowing which way the market will break and not much in TEM background to support a big sustainable move.

5. There is a COT date expected in Mid to late October.


US DOLLAR AND FX

A new high by the dollar index – above 101.62 – would confirm a longer-term bull market is in place. A bull market that began in 2011 it has L-T resistance from 102 to 106 1/2.

1. I mentioned last time that: “It falls into line with “hyper-correlation” that volatility will affect all the markets at the same time. So, it is no coincident that our volatility modeling – is in sync across all time frames and supports a dynamic trend from here.” The L-T and the I-T models have stayed on the TE #2 supporting a dynamic trend. S-T has not reached any other extreme as well, while it is close to moving into a persistent old trend mode.

2. The Intermediate-term trend is up, prices remain above long-term averages and the I-T S&R zones – right-hand chart – are stair-stepping higher.

3. True North is long the DX, and HedgX Superfund is long as well, both coming off support zones.

4. The wild card going into October is the expected Geo-political events, in a month notorious for market panics, our bias remains bullish on the USD. Will the dollar or gold or cryptocurrencies or something other is considered a haven.
We remain bullish on the buck.


S&P SECTORS WITH RELATED ETFs

Most of the sectors appear to be modestly bearish with 11 of the 16 position’s short on a long-term basis and evenly split on an I-T basis. We view this as a better indicator then the A/D line, which is now out of gear on some of the major indices.

1. The previous leadership from the high-tech sectors is now in the early states of a mini-panic sell off and no signs of a low, yet. IVG, for example, should test L-T support at 180, at least.

2. I pointed out on LinkedIn the problems the biotech sector had; it is now in a full-fledged decline just now entering panic mode. I do not post much inside info in the public social sphere. However, it is the only marketing I do, so please consider giving my newsletter to a capital manager you know. XBI has already broken I-T support, and a move much below 89 takes out the L-T support. Long Term support is below 60. The March lows around 80 may be the risk this time around.

3. The health care sector (XLV) is persistent here with a little momentum on the upside and no set up for a trend on the downside either. Waiting to suggest a long volatility hedge pending the next signal from TEM for a change in dynamics.

4. The financial media is trying to talk up banks and brokers sector (XLF) group, which had a rally as a result recently. They took advantage of the S-T panic to get a bounce. However, this key sector has failed twice to reassert its bull market since the January peak and has failed. Prices are mid-range without direction and little background technically to use as a springboard either direction. L-T TEM remains on a TE 2, but the I-T and S-T do not support a trend.

FAANG WITH RELATED ETFS AND OPTIONS

1. Apple is the strongest out of the bunch with the others completing top formations. Here are a few examples. The risk is considerable, and TEM provides the context for trending moves here based on all three-time frames.

2. Berkshire is showing good RS here and new highs. It is a place the capital manager seem to trust in the face of a pending decline. Please keep in mind hyper-correlation here. BRK will not avoid the bear market.

NOTE to Capital Managers. Cash or kind sometimes is a good place to be. With that in mind, relative strength analysis works best during bear trends. To see where the next leadership is emerging. As they say, “cream rises to the top.” Volatility reports will keep you posted.

OFFSHORE STOCK AVERAGES WITH RELATED ETFs

Last issue I pointed out that “Excluding the Nikkei and the FTSE, the remainder of the foreign markets are in bear markets are finishing their topping process. Value type investors are talking about buying China, but on a technical basis they are early, there is no sign of a panic low yet.”

Here is a recap of the Volatility Report update Sep 13, 2018
“After the February spill, it was unclear if the Japanese stock averages had put I a clear peak and kicked off a cyclical correction like the Dow and S&P. TMT had deemed the advance from the 2009 low the beginning of a new secular bull market that would rival the big bull run from 1950 into 1989.” And

“The …. – the multi-month horizontal triangle is a pattern that is resolved by a high rate of change trend when prices break out of it. At the time I pointed out that “TEM model on the weekly bar supports a high rate of change trend with Technical Event #2.

The market gave us what we expected, a 2500 point near the vertical run. Now the Nikkei has made it final top and has begone a new bear market.


Over the next 18 months to two years, it targets the bar chart resistance in late 2016. The bear market ETF for the NK is Ultrashort MSCI Japan EWV @ 25.70. CT is long this ETF today target 38-42.

Capital Managers Note: The very long term of the Japanese market is bullish and preceding the timely accumulation of shares the yen looks bullish today. If investment policy allows moving cash into the yen to maintain its buying power for the accumulation of Japanese shares looks favorable. A special report is forthcoming.
More offshore:

The only Bric nation with bullish technicals is Brazil, which will be monitored during the current downturn for positive money flow, good buying

V-Reports on the 24th of September pointed to the Nifty Indian index represented by its oldest ETF, Investco India with its topping pattern. The head and shoulders formation mixed in well with the weakness seen in the remainder of the chart. The call was for risk to 17 – 18 or 25%.”

However, the real-time PIN is in an I-T and S-T mini panic, typical of a low. This does not mean the market is not going lower longer term. The long-term chart’s Volatility modeling supports more monthly range expansion, hence lower prices. The October range thus far has broken out of its historical band, so another 10% is likely. The TEM set up is 4-1-1.

The Hang Seng is about to place catch up with its big brother. The risk is 30% from current levels. After looking at the historical chart from 1963, a cyclical correction is overdue. Context supports a period of range expansion backed up by the dynamic trend. Prices have failed to hold its bar chart breakout as well as its fixed ratio L-T new support zone. Shifting to long Volatility investment vehicles here is suggested.

What is curious is one of the most popular ETFs in Hong Kong a bear ETF. According to Blomberg “ The CSOP Hang Seng Index Daily Inverse Product has attracted some $148 million worth of cash in 2018, the biggest inflows for any fund trading on the city’s exchange.”

error: Content is protected !!