Seeing financial media report the market up sharply this morning, on hope for big Pharma progress in the fight against Covid-19, had me thinking of the great song above by Bruce Springsteen and the E Street Band.
Reports such as that trigger my contrarian senses.
The character of the behavior of market price movement actually has us quite skeptical. Don’t be surprised to see stocks move south.
I view each day’s trading as a struggle between buyers and sellers for the advantage in price direction.
The character of the behavior of market price movement tells us whether a particular day is positive, negative, or indecisive.
Though yesterday’s stock market session closed little changed from Monday, its character was decidedly negative (sharply higher open only to close near the low, producing the largest give-up of gain since 2008). This sets short-term resistance and implies the likelihood of lower prices to come.
The struggle is on now with the Fed desperately printing and pouring money out (inflationary) in an attempt to quell a devastating economic decline (deflationary), spreading like a wildfire, ignited by Covid-19.
We shall see which side prevails. Until proven otherwise by price, bears retain the edge.
UC San Diego’s Geisel Library, h/t sandiegomagazine.com
“You will come to a place where the streets are not marked. Some windows are lighted. But mostly they’re darked. A place you could sprain both your elbow and chin! Do you dare stay out? Do you dare go in? How much can you lose? How much can you win?
And IF you go in, should you turn left or right… or right-and-three-quarters? Or, maybe, not quite? Or go around back and sneak in from behind? Simple it’s not, I’m afraid you will find, for a mind-maker-upper to make up his mind.” — Dr. Seuss, Oh The Places You’ll Go!
“Be patient, keep studying, and be 100% prepared. Later, at the least expected time, when all the news is terrible, winter will ultimately pass and a great new bull market will suddenly spring to life…So get prepared and do your homework. Create your own buy and sell rules that you will constantly use.”
That’s some bear market investing wisdom from William O’Neil.
Options Hotline reco update, FYI: +35% in a single session on our Micron puts!
Sensible speculators seek to buy options that will move from “out-of-the-money” to “in-the-money.” That’s where the greatest gains are made and that’s what our most recent recommendation (see 03-31-20 Options Hotline) did today.
The Micron June $40 put triggered at $3.75 and subsequently traded as high as $5.05, +35% in a single session, with an always known and strictly limited risk!
As you can see on my daily candlestick chart above, Micron, appears to be tracing out a potential “h” pattern. That’s where price has a sharp decline, followed by a bounce that rolls over and points to a likely test of the recent lows. This bearish price pattern closely resembles a lower case “h.” It’s counterpart is the bullish “y” pattern.
We recommended puts on Micron, because the character of the behavior of MU’s share price turned negative at resistance (supply). We are looking for a move toward secondary support (demand) in the low-$30s. The price action moving forward will tell us a lot about who the stronger force (buyers or sellers) really is.
I can’t guarantee all my recos will get triggered on the low or go on to reach multiplier status, but I do promise to continue to do my best to find options winners for my great subscribers.