-- Posted Tuesday, 29 April 2008 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Tuesday, April 29, 2008
“Phenomenally accurate forecasts”
We’ve been bullish on the stock market in recent weeks, but not very. It’s hard to get worked up when you’re convinced, as we are, that the rally may be setting up stocks for a crash from even higher heights. At the moment, however, Hidden Pivot analysis points at least somewhat higher, implying there is a strong but perhaps brief rally ahead that could bring the broad averages to an important top. We haven’t been touting this target as a possible Mother of All Tops because, frankly, that game got old a long time ago. But we are confident nevertheless that our target will be short-able if it’s reached, since the S&Ps have been dancing with Hidden Pivots on the hourly chart recently as though they were Pavlova and Nijinsky.
Yesterday, for instance, the E-Mini S&P hit a 1404.50 rally objective that we’d been touting since mid-April, when the futures were trading 35 points lower. In the recommendation that went out Sunday night, we suggested shorting there with a three-tick stop-loss, risking about $40. As it happened, the high of the day occurred at exactly 1404.75, a single tick above our target. And although the subsequent pullback was relatively gentle, if the short had been covered at the low, it would have returned a profit of about $450 per contract -- more than ten times what we had risked, in theory, on entry. Officially, we covered for a profit of $350 per contract. This was done by way of an intraday update disseminated on the Web site when the futures were trading at 1397.50.
We cannot predict whether 1404.50 will turn out to be an important high, but we are pretty confident that if the E-Mini gets past it by more than a few ticks, the rally target alluded to above is likely to be reached, and precisely. If so, it has a good chance of coinciding with rally targets we disseminated earlier for three bellwether stocks: Citigroup, Apple and IBM. Like the S&Ps, each has a bit farther to go before reaching what looks to be daunting Hidden Pivot resistance.
This is the first time such an alignment has occurred in quite a while, and that’s why we’ll be watching closely as the respective targets are approached. We’ve recommended shorts in each, along with specific strategies. In the case of Apple, we already went short last week by naked-selling some May 170 calls for $690 apiece. Because the stock looked so feisty as the week ended though, though, we added a long hedge to our position near yesterday’s lows, buying 100 shares @ 170.50 for every two calls we’d shorted earlier. If you do the math, you’ll see that, come May expiration, the position would be profitable with Apple shares trading anywhere between $157 and $183. Our maximum profit would be with Apple trading for $170 at expiration (it closed yesterday at 172.10), implying a gain of about $1330 per combo.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Tuesday, 29 April 2008 | Digg This Article | Source: GoldSeek.com
