With not much else out there to move the market, it looks like all eyes are on tomorrow's unemployment report. Whatever the outcome of the report, we should start to see a move one way or the other. If we do end up breaking above 1131 tomorrow, don't run out and start buying calls on everything. One more decent move up would put the market a good distance away from its 50 day MA, making it vulnerable to a pull back. Start looking for some bullish trading opportunities. I'm watching INTC. It has a nice possible bullish ABC pattern with about a 50% retracement (56.4% to be exact). It is just below a convergence of its 10, 50, and 200 day MA's. If we break above 1131 on a big move up, this stock could move above all three of those moving averages. This would be a pretty good bullish signal. I will emphasize that you must wait for it to get above those MA's. If we start a major sell off, this stock could end up going much lower. I got into two range bound plays today near the market close. I bought puts on IBM and placed my stop above 133. This stock has moved in a range for the last 8 months between about 132 on the upside and around 122 on the downside. It is currently around 132. If it fails to move down this time around, it will be a small loss. If it does move back down to 122, the trade would have about a 5:1 reward to risk. On the opposite end, I bought calls on PG. This stock has been in a range for about the last year between 59 on the downside and about 64 on the upside. The stock is near 60 and my stop is below 59. Again, the reward to risk is fantastic. Not quite a 5:1 like IBM, but it is around a 3:1 reward to risk. If we move up or down from here, one of those positions will make some nice money...enough to offset any loss in the other. If they both work out (which is very possible), it would be fantastic. NFLX is also on my list of possible bullish trades, but I'd like it to get back above its 50 day MA. For those that want to play the wheat news, try ADM. I don't know that I would chase it immediately after today's move, but I am looking into using a Bull Call Spread or maybe a Bull Put Spread. You can also look to play the fertilizer stocks like MOS, POT, AGU, CF, IPI, and SQM. They all need to pull back a bit, but start watching them. I got out of my trade on GLD a few days ago when we moved up above the resistance at 116. If we move back down below 116, I might get back in. A move below 116 should signal a continued move back down to around 102. I think that the big signal for another move down would be a gold close below 1156. I've mentioned a few ideas to open the blog tonight, but I'll still recommend that students sit on the sidelines for at least another day or so. Don't be afraid to sit out for a while until a clear trend emerges. Many of the trades I am doing right now are hedged positions. I highly recommend using ATM or ITM options right now and give your trades plenty of time. October expiration might be better for some of you (if that month is available...use September if it isn't). I'm prepared for a possible move above 1131. The sideways price action of the market over the last three days points to at least another move up. That is just a probability, it doesn't mean the market has to do that. If we have a decent sized sell off, check the VIX for a big spike up. If there is a lot of fear behind a move down, it will be more likely that there will be more selling to come.
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