The market this week pulled back into Thursday as the Fed and ECB both disappointed traders by not starting any new stimulus for the struggling economies and debt crisis. But it seems the threat of action has kept the market afloat and in tradable channel. This video outlines the next major resistance levels we’re looking to short next week using Fibonacci analysis, moving averages, and support and resistance. It also includes a couple long trade ideas in INTC, BA, and CAT.
Weekly Market Wrap Video Transcription:
Welcome to the StockOptionAssassin.com’s weekly video for Swing Trading Options. This is Eric. Today is August 3rd 2012. We’re about 20-30 minutes before the close today. Let me go ahead and do video here.
I’m going to start off with the SPYders. Basically, just to recap the week, we had the Fed come out. Their meeting was Tuesday and Wednesday. Basically, they’re not doing anything yet. Then you also have the ECB which had a big threat last week. You can see the surge we got last week. Then as we pull back during the week, we came right back into support. ECB disappointed yesterday. There was a little bit of a selloff. Then today, there’s a just a big pop and we’re actually starting to pull off the highs. We’ll see how we actually close today. But right now, we’re definitely off the highs. We’re still up 1.8%.
What’s interesting is that the….
[spoiler] Central Banks, the Fed – they’re not actually doing anything but they’re threatening to do something. That alone is keeping the markets afloat. You are getting a little bit better than expected numbers out of some economic things recently. Jobs data was decent today. A little bit of expansion in some areas. There’s a little bit of positive news at least in the United States. Global markets manufacturing is down with Global PMI coming out this week. So this is a huge amount of information.
Let’s just look at some levels. With our Market Timing Service members, what we’ve been focusing on is this channel as a lot of people. But what we’ve been pointing out is that we have this uptrend. At the bottom of the channel here, we came into support here. We actually broke this level, did not confirm below, and then popped back up. We actually entered a little bit of a short here. We ended up getting stopped back out. But we closed back up in the channel. We popped up and now we pulled right back. So this channel is still intact. We did technically closed below yesterday, but you can see obviously we’re back in the channel. We’re right in the center here.
We have the up trending channel part. All the moving averages here are in somewhat bullish mode where you have the faster moving averages fanned out over the slower ones. You have the 13 EMA as the purple. You have the yellow 20 simple, the 50 simple as blue here, and then you have the 200 here. What I’m looking for – I talked about this in last week. Last week’s video I was looking for a pop up into 139.50 (somewhere in there) and I wanted to short, and we never got there. So now that we’ve retraced, we have to set our potential high even higher. One way I’m going to do that is by using my Fibonacci retracement tool.
You can see last week we had this pop and we pulled back, basically had a 61.8 retracement of last week, and we’re closing above the high. Well, let me say we still have a few minutes before the close. But essentially if we close above this high, then there’s a good chance we’re going to get to the 27 extension in this move. That’s going to put you at 140.65. Coincidentally, that level is going to wind up relatively well with these previous highs at this pivot. So what I would be looking for next week is continuation potentially Monday and I would definitely be shorting the 140.65 area. You could do that with the SPYders itself. We might actually do that.
However, what I would also do – You do have the potential, if things really get going, to retest the highs. I would enter a smaller short here and then I would add to the position here and look for some kind of retracement, at least back to the moving averages. Maybe we don’t totally break down, but basically you’re shorting the upper side of this channel and looking for a move back into the bottom part. You would take profits down here. If you do break out, a good profit taking area on the put side would be at the 139 level. So if you do short up here and you retrace, you want to take profits here, leave the rest with the breakeven, stop and see if we can break down or not. That’s what I’m looking at at the SPYders.
Intel Corporation ($INTC)
Let me talk about a long trade I took this week I’m actually still in. I’m holding over the weekend. That is Intel. Again, I talked about this with my members. You can see Intel earnings are over. We had earnings here. We popped, we pulled back, retested the lows. We’re getting bullish divergence with the Squeeze indicator. There’s some other proprietary stuff we do with our members but you can see here with this. But we get a bullish divergence here. We’re consolidating above the mean. It took some Intel calls – the September 26 calls. So we’re up about 40% here. I do have some shorts as well that are not doing so well, so I’m actually relatively well hedged here. But if we do get some continuation, I would look for – (Let me bring my Fib back in here.) This was the last move before the consolidation here. You have the 27 extension which goes with this pivot. And I would potentially look for a move back up to 26.80 (whatever that is). So that’s what I’m looking at for Intel. You have the moving averages around there too.
Caterpillar Inc. ($CAT)
A couple of other plays that we do not actually trade but we’re looking at was Caterpillar – similar situation. We had earnings, bullish divergence, popped up, pulled back and consolidated here. You’re getting a nice little pop on Caterpillar today. I’m not completely convinced that we’re going to get back to the 200 up here anytime soon. But I would not be surprised to see 87.50, potentially 89 (call it 90) here. That’s a reasonably good target. Again, if you put a Fib on this move and we pulled back at a 61.8 retracement, 89 would put you at the 27 extension. So if you can’t get up there, it’s reasonable to expect a move to $89.
The Boeing Company ($BA)
Another one we’re looking at is Boeing – again had earnings, had a little bit of pop after earnings, is now trading at the bottom of the channel. Not as bullish today, but I think this channel is still intact. You are in a Squeeze here, which makes this a little more interesting to where you’re not getting a huge variance here. What I mean by variance is you’re not able to really break out and oscillate. We’re chopping around the zero level. That means that this thing could go either way. But as of right now, you did make a new high. The Squeeze did not make a new high. I look at this as more of a range trading. You could take a smaller trade, look for a move back to the upper top of the range here (let’s call it 76), and then I would look to potentially take profits, potentially short back to the bottom part of the range (we’ll call it 72/73).
Those are a few ways we’re looking to play the market this week. We actually really took it light and we’re really trying to be patient with our trades this week because the market is just so unpredictable. But one thing I am noticing is that the market is starting to shrug off – not starting, but it has been – shrugging off bad news and also rallying on good news. You’ve got to give the bulls some credit here. I’m still in the bearish camp that we’re going to roll over and retest the 200-day at some point on the SPYders. But until that happens, we’re just going to be waiting. Look to play the ranges. Look to play the upper part of the trend channel still. Until that pattern breaks, I think that’s a good strategy for you guys.
That’s A Wrap:
Hopefully that helps. You guys have a great weekend. I will talk to you next week! [/spoiler]