Where Do We Go From Here?
For
a big portion of Friday's trade it really looked as though bulls might find a
way to build on Thursday's big gains. The market began weak but quickly
moved back into positive territory following a series of positive comments from
Wall street analysts. In fact, Wall Street analysts have been overwhelmingly
bullish throughout the recent string of weak sessions. To
their credit, they have been correct -- at least they were well rewarded
Thursday. We have been looking for a technical rally of some
significance. All of the popular moving averages have been moving higher
and that is positive. The most recent weakness should be little more than
a long overdue correction within the context of a rising market. That's
the theory anyway. Friday we got a rally very close to the 20-day moving
average at 549 but the market settled just off the session lows -- barely lower
for the trading day. While the close was clearly disappointing given the
strength through the middle of the session, the daily chart still looks great --
with respect to a short-term rally oversold rally. Given that both the
Slow Stochastic and the MACD indicators are both turning higher, we are looking
for the rally to resume in the early part of this week.
Sector Analysis
There
is a real battle taking place on trading desks throughout the world. The
bulls would have us believe that the world economy is strong and getting stronger
and that very high commodity prices are justified. Bears would us believe that higher commodity prices are the result of government meddling with the
value of the US Dollar. We won't speculate on the economics but we have
been very comfortable on the long side of gold and the short side of
energy. We are not ready to make changes -- yet.
The Philadelphia
Gold and Silver Index ($XAU) had a strong session on the back of a big rise in
the price of gold. Gold mining stocks have lagged somewhat but we are
still quite confident we will get our price for the recommended calls.
Oil Service Holders Trust (OIH) bounced back strongly Friday. We are
looking to be short into strength as we feel that the index is making a major
top formation. We now have a completed head and shoulders top
pattern. We just need a rally back to the "neckline" of this
pattern.
The Semiconductor Holder Trust (SMH) was just a small fraction lower
Friday. We are looking for only modest gains in the immediate future and,
the path of least resistance is lower so we need to be careful. The secret
when trading against the bigger trend is to not allow yourself to get
greedy. We have a new stop level.
Sector
Portfolio
| *
reflects closing
transaction |
|
|
|
(s) reflects a short sale |
|
|
Stock Analysis
We
had a good session Friday as gold mining issues progressed nicely on strength
for the yellow metal and Chinese Internet stocks came to life once again.
There is a great deal of debate about the true value of Chinese Internet stocks
and truth be told, despite our position, that is not our concern. We like
the stocks because they have corrected substantially in established up
trends.
Newmont Mining (NEM) continued to advance nicely
Friday. We are still looking for gains in the days ahead. We see no
reason to "panic" just yet. We like prosperity.
Netease (NTES) began the session lower and that should have been more than enough
opportunity to add a new call position. As suggested above, the true
"value" of Chinese Internet issues is not our concern. We are
playing the momentum game. Netease looks as though it will make a new
high.
Stock Portfolio
| Symbol |
Option |
Pay/Bought |
Current |
Target |
Stop |
(+/-) |
|
| NEM
FG |
NEM JUN 35C |
10.00 |
11.50 |
12.00 |
3.75 |
11.50% |
| NQG
EI |
NTES
JUN 45C |
5.90 |
6.60 |
10.90 |
3.00 |
11.86% |
For Active Traders
We
closed our position in the OEX calls Friday for a small but solid profit.
We are not normally so quick to close winning trades but one must be careful on
Friday afternoons after gigantic Thursday rallies. We "chalk-up"
our extremely tight stop level Friday afternoon to just that. On the charts
we got a pullback to support at OEX 542. This level is support at both the
20 and 50-hour moving averages and should hold. If this level fails bulls
have further support at the recent breakout level at 539. At any rate we
are looking to add calls again at some point in the early part of this
week. The daily charts suggest that bulls still have room on the
upside. That is our focus.
Traders'
Portfolio
| Symbol |
Option |
Pay/Bought |
Current |
Target |
Stop |
(+/-) |
|
| *OEB
DJ
|
OEX
APR 550C |
3.70 |
5.00 |
N/A |
N/A |
35.14% |
The above mentioned recommendations are deemed accurate
they are not guaranteed nor can it be said that these strategies or recommendations will
result in a profit. The Principals of the OEX Advantage may have or may in the
future have positions in the securities mentioned above. Past performance is not
necessarily indicative of future results. Before trading options you should understand the
risks including the fact that when an option is purchased the entire premium is at risk.
In addition, anytime an option is purchased or sold, transaction costs including brokerage
fees are at risk. No representation is made that any account is likely to achieve profits
or losses similar to those shown, or in any amount. Any account may experience different
results depending on factors such as timing of trades and account size. Bedford &
Associates does not offer refunds for subscriptions in whole or in part.
Copyright
© 200
Home > Advisory Services > OEX Advantage > Recent Sample 
Home >
Advisory Services > OEX
Advantage > Recent Sample
