Wednesday, November 03, 2010

Technical Picture - New Multi-Month Closing Highs Post FOMC

Early weakness post election was followed by erratic trade in the initial 20-30 minutes following the FED QE2 announcement. The announcement was roughly in-line and slightly better than expectation, which helped push equities to multi-month closing highs (52 week highs for the Compq.) Bonds,as measured by TLT, were crushed.

However, the $USD held up better than expected and GLD wasn't able to fully recover from high volume weakness earlier in the session. A bit of a red flag.

After hours, the Canadian gov't rejected BHP's bid for POT. POT sold off and should be a good buy the dip candidate. Earnings winners QCOM and WFMI will be on my focus list tomorrow as well.

Today's trades started with BO longs - MYGN, FFIV (HCPG pick), followed by support long - AGU and RIMM. Long ABX twice post FOMC, but it didn't rally as much as anticipated.





10 comments:

chin said...

Hi Jamie,

139.68 seems to be a good support for POT. Would you step in now into POT ?

thanks

Jamie said...

Chin,

Gap support is $139.19 but that level seems irrelevant now that the BHP bid is off the table.

Probably a good idea to scale in.

chin said...

What would that mean. I am quite a beginner to these terms actually. Apologize for being so naive..

Does it mean one could buy POT around these levels for a long term hold ?

thanks

Jamie said...

It means don't be in such a hurry to buy POT. If you are planning to buy 1000 shares, you could scale into the trade. Start with 300 shares.

Last night POT traded as low as $136.00. If the overnight trendline doesn't hold, it could retest those prices.

I am scaling in. There are too many unknowns.

chin said...

thank you and thank you.

chin said...

Hi,

Number of puts on POT 140 is huge. Does this mean there is a bearish sentiment on POT for the short term ?

Thanks

Jamie said...

Chin,

Not sure what you mean by number. The price of POT Nov. 140 put is down on the day (-0.62) as I write this. That implies they are losing value.

I'm not an options trader. If you are worried that POT will retest last night's lows, I think you want to buy 135 options. They are on sale for $0.75.

I sold my POT for 1 pt. gain. I don't like the price action just yet. I was hoping they would capitulate in early trade, but they didn't.

chin said...

I meant volume of 140 puts sold was 10K+
Does this not indicate that people are trying to protect their underlying from falling further ?

Jamie said...

Okay, so now you want to compare that number against the open interest to determine implied volatility.

Jamie said...

Looking at POT 140 put options on Yahoo finance I see open interest of 55.7k vs. volume of 33.3k. I'd say that is not particularly bearish.