Your Daily Bit of Wall Street Wit & Wisdom

whipsaw

Two men whipsawing lumber in British Columbia circa 1898 h/t Eric A. Hegg

“Consolidations are traders’ markets, in both directions.”
— Steve Rhodes

Markets move between areas of support (demand) and resistance (supply).  In a large market consolidation, whipsaw action is not unusual.  It provides opportunity for nimble traders to profit from moves up and down.

Option buyers are the only ones who possess the Superleverage power of unlimited profit potential with an always known and strictly limited risk.

Good luck in your trading!

Best regards,

Steve

Your Daily Bit of Wall Street Wit & Wisdom

market correction

h/t Adobe Stock Images

“A correction is any move which is against the prevailing trend, regardless of magnitude…Let go of the silly 10% notion.”
— Tom McClellan, @McClellanOsc

Yesterday afternoon, a notification popped up on my phone.  It was from a financial media outlet reporting the NASDAQ dropped more than 1% on the day to enter “correction territory,” as regulation fears battered big Tech.

Such reporting is a pet peeve I share with market technician Tom McClellan.  If the current market’s primary trend is up, the correction began just over a month ago.  If the prevailing trend is now down, a coming rebound will represent the correction in price ahead of a move to lower lows.

I may be a stickler about it, but you should have the correct understanding of corrections.

Best regards,

Steve

Your Daily Bit of Wall Street Wit & Wisdom

stock market sentiment chart

h/t SentimenTrader, @sentimentrader

“Nothing like price to change sentiment.”
— Helene Meisler, @hmeisler

Measures of investor anxiety/fear and complacency/greed can provide valuable information in your analysis of the current market condition.  View them as a technical tool to add to your weighing of evidence.

The chart above shows pre-market fear reaching levels seen at bottoms in 2002 and 2008.

This morning, Wall Street bulls are set to try for a market bounce before they bounce out to the Hamptons for their annual holiday weekend.

Enjoy yours!

Best regards,

Steve

Let the Chips Fall

Micron stock chart

h/t stockcharts.com

Options Hotline Update, FYI: +140% in 2 months on Micron puts

This morning, financial news was blaring about continued US/China trade tensions pressing Tech stocks to the downside. The move lower in Micron reached our $33 price target (see 03-24-19 Options Hotline) and our readers received an email Profit Alert that we would consider the position closed.

The Micron July $40 put, triggered 03-25-19 at $3.00, traded 05-23-19 at $7.20, +140% in just under 2 months, with an always known and strictly limited risk!

That’s the Superleverage power of our method on display.

You can see on my daily candlestick chart of Micron (MU) above, subsequent to our recommendation MU had a quick decline and rebound.  Shares then settled into a consolidation, before breaking down, over the past few weeks, to our objective.

Over the years I’ve found that patience tends to pay.  If this type of options action is for you, subscribe to Options Hotline today.

Let me know if you have any questions. My email never sleeps.

Best regards,

Steve

The Superleverage Power of Call Options

Avengers Endgame poster

Avengers Endgame Chinese Poster h/t Disney/Marvel

Disney June $115 call

Options Hotline, March – April, 2019

The Superleverage Power of my method was on display this week, as Options Hotline subscribers multiplied their money with our call recommendation on shares of Walt Disney Co.

On Friday, DIS soared like Captain Marvel going full binary.  Following the unveiling of its streaming service, DIS rose 11% from the previous day.  This action helped shares reach our $130 per share price objective (see 03-10-19 Options Hotline and 04-12-19 Options Hotline Alert).

Our recommended DIS June $115 call, triggered 03-11-19 at $4.50, with DIS at $114, traded 04-12-19 at $17.00, with DIS at $130.  That’s +278% in a month, on a 14% move in the underlying shares, with an always known and strictly limited risk!

We’re always seeking to stay a step ahead of the crowd.  Here’s what it looks like on my daily candlestick chart for Disney:

Disney price chart

My daily candlestick chart for Disney, h/t stockcharts.com

So Sarnoff, what is Superleverage?

Continue reading

Your Daily Bit of Wall Street Wit & Wisdom

money sheet

h/t shutterstock.com

“Earnings, dividends, book value… none of these really matter for moving the overall stock market. The only 2 fundamentals that matter are:
1. How much money is there?
2. How much does that money want to be invested?
Change either of those, and you move prices.”
— Tom McClellan, @McClellanOsc

Follow the money, the big money, the sovereign money.

Central bank monetary largesse provides liquidity that juices markets.

In the latest reporting period, there was a central bank balance sheet contraction.

That’s a clue.

Best regards,

Steve

 

Your Daily Bit of Wall Street Wit & Wisdom

low tide

Low tide at San Felipe, Baja California, Mexico h/t MexInsurance.com

“You can’t eliminate tidal ‘lunatic’ biases. They make folks bullish at tops and bearish at lows.”
— Chris Carolan, @spiralcal, spiralcalendar.com

Psychology plays an enormous role in markets.  Traders and investors struggle to get a handle on their biases.

Failure to check your built-in biases can trip you up in and out of the market.  They can flare up at inopportune times in many of your decisions, from the grocery store to the voting booth.

Often we’re unaware of outside forces exerting influence on human activity.  Don’t be surprised when major world events and market turning points coincide with key cycle dates.  After all, look at what the root of the word “lunatic” is.

Wishing you a safe and sane start to your week.

Best regards,

Steve

 

Your Daily Bit of Wall Street Wit & Wisdom

bearish sentiment chart

h/t Helene Meisler, @hmeisler

“Nothing like price to change sentiment.”
— Helene Meisler

Sentiment in the stock market refers to its mood, whether investors are optimistic or pessimistic.  Sentiment indicators are used to quantify and measure the market’s state of mind.

The notion is that retail investors are a contrary indicator, buying when bullish sentiment has peaked and selling when bearish sentiment has reached its summit.

Overly optimistic or pessimistic readings can point to coming price reversals.

Sentiment indicators can be used as an arrow in your quiver, helping you to target your trades.

The current 10-week rally in stocks is swinging sentiment toward an extreme.  That is worth considering.

Happy Friday and here’s to heading to the weekend in a good mood.

Best regards,

Steve