Wrap up post coming

Including some of the charts I mentioned in the AAPL Puts post. I have a lot of charts and a dinner appointment in 1.5 hours, I'm going to try to get it out before then.

AAPL Charts

AAPL isn't the only reason for the PUT position and I rarely use options unless I feel the timing is VERY close.

However, here are a few AAPL charts.

 Short term I like the action today, I like there's no apparent accumulation on the 15th and I like the trend.

 The same goes for this chart, a different timeframe, but very similar results. Today's action is why I chose a put.

 The 5 min chart's trend is interesting to me because to open AAPL up to buyers. The red trendline would have to be crossed, there's accumulation at the lows, apparently to get that job done, but as soon as AAPL is above the trend is very strong and consistent. In other words, it looks like to get AAPL longs interested, they had to make a show of it, they did, but as they did it seems they wasted no time is moving out.

 The long term charts are what I based the core AAPL short on, actually the first divergence to the left was the core short entry, the May accumulation was the biggest period and as I have said many times, it seems they have just been selling those shares since in to higher prices. Also the same breakout area talked about above is showing a horrible reading negative/leading at the breakout.

The 60 min chart is what the original position was based on, AAPL is at the same relative price area as March/April, 3C is not close and it isn't above the June highs.

AAPL Sept. $650

Opening AAPL Put

I'll get back to you with the strike/exp.

Doing some spring cleaning-Closing TECL Hedge

TECL is one of the hedges used in the equities model portfolio, I'll be closing that now.

It did its job.

SPY Pin $142

While the $142 area seems to be the obvious pin, I just took a quick look at what the open interest looked like.

The range has been pretty locked in, I can't remember the last options expiration week that wasn't boring, you'd think they'd shake it up once in a while.

However technically where we are and why I think has more to do with making that move to the breakout high, even though volume is completely lacking and there's no follow through, it may just have been the best of both worlds for a pin and as we have seen so many times before, the more important a had fake move, the more effective it is, or "The bigger they are the harder they fall", it completely changes market psychology.

As for Calls, it wasn't too exciting, but PUTS had a lot more open interest.

 The thing that struck me about the calls was just the overall lack of open interest, not just around max pain, but everywhere.

Contrast that with the puts, much more activity.

 At $143 there's literally almost nothing there, but below it's quite busy, in fact I needed two captures.

Here's the second. That's a lot of contracts expiring worthless where Wall Street gets to keep the premium.

Dow Theory Request

Dow Theory was one of the most difficult concepts to teach while I taught Technical Analysis, but one of the simplest components is confirmation between the Industrials and the transports, how can the goods producing Industrials do well and the economy do well if the transports that deliver the product are not doing well, and while Dow Theory and the components of the Industrials have changed since way back when, it still works pretty well and I was asked to show Dow Theory and this seems like a perfect time as the market seems to be in an options expiration PIN which  is simply the fact that most retail traders buy options, not write them and the majority of options expire worthless, the PIN is finding the right price level to make the most number of options expire worthless on expiration day (today) allowing smart money who is the primary write or seller of options to retail, to keep the premium, op-ex pins have almost NOTHING to do with the market and what comes the next trading day.

 First here's the yearly chart for the Baltic DRY Index, these are the prices Dry Goods Shipping companies receive, when they are low, demand for shipping is low, as we saw this week, the Port of Hamburg which is the second largest dry goods harbor in Europe, just saw a huge decline in shipping activity, which matches the GDP activity also seen this week. Prices are at the same level as Feb. or at a 1 year low, it's actually much longer than 1 year.

However for our purposes of Dow Theory which is more immediate in this case, I'll use IYT (Transports) and show you some DJ-20 (Transports) as well , first vs the Dow. In Dow Theory the two should have good correlation, when correlation slips/diverges, you are likely at a turning point in the market.

 The Dow in green and Dow-20 in red, the green boxes show excellent correlation and trend confirmation, the red boxes show divergences.

 The Dow-30 vs IYT (Transports)

Now a look specifically at IYT, Transports

 Since the 24th there has been a bad leading neg. divergence in IYT. (2 min trend)

 This appears to be the same chart, it's not, this is a different timeframe, 3 min.

 The 5 min chart's trend showing the history of divergences and the reversals from those, this current divergence would be the largest on the chart (price neg. divergences are in red, positive in white). Note how consistently smart money buys the lows and sells the highs, it has a lot to do with supply and demand.

 The 15 min chart's trend, and I show the trend so you can see how low and large the current leading negative divergence is compared to previous divergences. If you look to the far left at the first white positive divergence, if you were o have bought at the first sign of the divergence around $91.20, even as price headed lower in the positive divergence to the $88.80 level, you still would have made money up at the $94.40 level. We try to get the best entry possible, but very often this is how these charts play out, price often moves well in excess of where the divergence first started.

I don't want to over run you with charts, but I thought it would be interesting to see how similar some of the DJ-20 divergences are to IYT.

 That same date of the 14th comes up on this 3 min chart.

On the long end, the 30 min chart, gain this is the largest divergence on this chart comparing relative price/3C levels and on an important timeframe.

URRE Position

There isn't much in the way of options for URRE so I went ahead with an equity model portfolio long, it is speculative in size which is half the size of a normal position, although I like URRE for the long haul, this is just a trade looking for a quick pop.

URRE

The other day I mentioned that it looked like URRE was getting ready to make another run to the upside, a member just alerted me to increased volume and thus far a bullish candle.

I may look at an options position here (buy a call) for a quick trade, but this is VERY speculative.

IOC Follow Up

Well, I'm selling the last contract in the IOC Put position.

 Wednesday I closed 80% of this position at a 73+% gain, today, even though prices are lower and technically in a worse place, the Put is only worth 43%. Volatility is a bit lower today, but not a whole lot lower, it does contribute to the faded value of the put. However this is the reason I took 80% off the table as I saw a short term reversal coming and I'd much rather start a new position than sit through a correction and this is one good reason why. While I did trade 200 times a week at one point, I AM NOT a day trader and found that out the hard way. I'm not trying to be a day trader with options here, I'm trying to use the tools we have the best way I know how to make the most on a trade. I'd much rather be trading a trend like the core short positions, which IOC is a core short in the equity model portfolio and that hasn't changed at all, still the same size position with no intention of changing it because it is not leveraged.

 Here's the reversal we saw Wednesday that caused the sale of the majority of the put position, we saw it in 3C first earlier in the day and then the closing candle was bullish with large volume which is a good example of the reversal concept I talk about so much-remember I saw "It just means high probability reversal, there's no target or time" and as you can see so far it only lasted a day before IOC made new lows today BELOW the support level I REALLY wanted to see broken, but we have not closed below this level yet and the chance of a day like today happening is the reason for probably the first time ever, I partially closed an options position to see if this move would come.


 Intraday look at the volume on the moves below and above the key level, the volume down hit a lot of stops and few retail traders buy a move like this, which means the buyer of last resort, the Specialist had to absorb any market orders there were no matches for, thus that specialist probably wants to get rid of those shares, but needs higher prices to do it. Yesterday on a break above resistance he/she got some demand and higher prices, but it doesn't appear to be enough to have cleared out the inventory.
 

 The 3 min 3C chart shows the positive divergence which was the reason for closing 80% of the position at a 73+% gain, then the negative sending IOC lower, right now 3C is about in line with price, there's no strong signal here.

 The 5 min chart also shows the positive divergence, the reason to close the put position and again a negative and reversal, but again, 3C is not low enough to convince me that this low will hold without some more loitering around the resistance area to let the specialist exit the inventory that they have to buy by law if it is at market.

 The 10 min chart shows all the same, it is a little deeper, but not deep enough. I wouldn't enter a put position on these signals so why should I hold one?

The 15 min showing the bigger reversal from what I believe to be a head fake pivot, still not a leading divergence which is what I'd need to see to hold the options position, the equity short will stay in place.

I'll keep an eye on IOC and report back any major changes.
As for volume...

There's the volume figures for the last 3 days, obviously the specialist isn't holding all of the shares, but the last 2 days thus far haven't been enough to allow a specialist to unload a position they may have been forced to take on, thus until volume picks up, support stays broken and 3C tells me, I'll wait for a new put position.