I am a bit late with my Intraday comments on my stocks and strategies for today. I have spent a large part of the time revising some of the strategy for the Trading For Pennies Strategy.Now that a lot of the work is done on the Trading For Pennies Strategy I want to move on to two other strategies that involve covered calls.Both of the new strategies are for medium-term to long-term stock holders.
The first is a look at my leap covered calls strategy which I have used for many years on large cap dividend payers like BMO Stock, BNS Stock, Nucor Stock and JNJ Stock among others.It’s a great strategy that does not require an investor to check his stocks minute by minute.
The second article is looking at my strategy of day trading in the money covered calls. Day and swing trading, in the money covered calls is interesting because overall, the strategy means that investors are already holding the underlying stock. They are therefore starting from a defensive position and are just trying to generate income or “rent” as it were without losing their shares. This is a unique strategy I have used for many years and I have enjoyed decent returns with very little worry about market collapses or rallies because I am holding the underlying security. There is no worry about margin calls, losing dividends and a host of other issues that just do not affect this strategy. It is in my books a winning strategy for long-term and medium term stock holders who like to do a bit of trading to augment their returns. Both of these articles will be lengthy but they also need ongoing trades that can be followed. For that reason and for the amount of time required to maintain the trades, articles and respond to investors with answers and suggestions, they will both be in the members section.
Stock and Option – SPX
Stock Market Action For Oct 3 2012 – Intraday
The S&P 500 is exhibiting a number of issues that could be troublesome. However the higher low held from the recent little sell-off but S&P is trending more sideways than in recovery mode. In other words there is a lack of conviction on the part of investors. They do not want to sell their positions but they are reluctant to buy new ones. Stocks have been pushed up and now investors are looking for others to lead while they want to unload their positions for higher prices. Not everyone can win at this game.
When you look at the 3 month chart below you can see that all three moving averages are continuing to climb. This may at first glance seem good, but actually the 50 day while still in an uptrend is starting to follow the movement of the S&P over the past 6 trading sessions including today. If you look at the past 3 months you can see that the 50 day indicates market movement, it does not follow market movement. When it does, normally the market will begin to trend toward the 50 day. I have seen this action in the past when markets are having trouble with gaining new investors. As the trending continues eventually the 50 day falls and easily crosses the 100 day which is of course slowing moving.
If the 50 day does fall back, it will be time for some protection including selling in the money covered calls for those investors who love to hold their stocks through thick and thin. By selling in the money covered calls on long-term holdings, investors are reducing their cost basis and enjoying some protection for a possible more severe downturn. October is a tricky month and many investors are wary of this month. That leads to volatility which can often lead to unforeseen pullbacks that can be sharp and quick. Watching the movement of the 50 day is a good way to keep an eye out for a market that can no longer climb. If a market cannot climb then you know which way it will turn – down.
The S&P 500 is exhibiting some issues that could become troublesome
Stock and Option – XOM Stock
I have mentioned XOM Stock a few times recently. Checking it today shows that XOM Stock is still trading near its 52 week high despite the continued pull back in oil prices. The stock needs to pullback to the lower Bollinger Band before entering any Put Selling trades. Personally I think investors are wrong as they continue to purchase XOM stock at these levels. Momentum is barely hanging on Na yet the stock is overbought and the fast stochastic shows a slight bearishness to the stock. Once the stock pulls back it will be interesting to see many investor may dump their shares at these levels.
XOM Stock continues to trade near its 52 week highs
Stock and Option – Apple Stock
For the first time I have some investor friends selling their stock positions. They quoted to me that insider reports show that directors of the company have sold shares since $580. They also point out that the iPhone 5 didn’t really wow them. Does this mean that Apple is moving from being the cool company to the oh-hum company? My Shark Trading Options Strategy that I use on Apple Stock sits completely undecided so I have no positions left. The last big move was a drop to $660 and then another signal to jump back in. By the end of that day it was time to get back out and since then the Shark Trading Options Strategy remains uncommitted either way.
Stock and Option – BNS Stock
Scotiabank stock remains slowly drifting lower. This is perfect but it has to be watched. This stock has a habit of drifting slowly lower and then suddenly jumping back up in a matter of an hour or two. Selling puts on BNS Stock requires a bit of watching to get in when the stock is a bit softer.
Stock and Option – FB Stock
Facebook Stock continues to defy the short-sellers. I have a lot of friends holding leap puts on Facebook but they are way out of the money now. Most bought puts when Facebook Stock was down to $18 and change, figuring Facebook Stock would fall further. The investor friends who are making the money are those selling naked calls and buying shares and selling deep in the money covered calls on those shares. The stock is too speculative for my taste and offers no dividend but I enjoy following it and looking at various strategies. I am working on an article for an investor who wrote me and has held shares since the IPO. He’s a little upset at the loss and who can blame him. He hopes I might come up with something to help him out of a tough jam. One thing though, I don’t think Facebook Stock is going to disappear, but I do think if earnings are poor the next quarter than my friends holding puts may see their losses turn into profits.
Stock and Option – Intraday End of Comments
That’s it for my Intraday comments. I am watching for opportunities but at the same time I want to see the market direction make a decision up or down, before committing more capital to my Put Selling trades. Enjoy your afternoon.