Recap for Tuesday, December 18th by Kevin Corrigan
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Analysis of S&P 500 and Nasdaq Composite from QuickTakesPro’s Michael Kahn:
S&P 500 (SPX) – At the time of this broadcast, SPX was around 1440.95, up about 10.59 from Monday’s close. The SPX broke down through its trendline going back over a year to last October, but recently the market has been creeping back and now seems to be following just below that old trendline. The trendline still is officially broken on downside, but in the last month and a half there has been a decent rally back towards that it. Just the other day it jumped above one resistance level around 1424 and now it looks like there's a chance it could break through another resistance level at around the 1440 mark, according to Michael.
The Nasdaq chart isn’t quite the same pattern, but it broke through a resistance level of around 3040 and above both its 50 and 200 day moving averages, both around 2990.
Analysis of Volatility Index from TradeKing’s Brian Overby:
S&P 500 Volatility (VIX) - is around 15.77, down about .57. The story hasn’t changed much in the VIX in recent months. It is below the 100 day and 200 day moving averages of about 16.11 and 17.46, respectively.
The VVIX (VIX of the VIX) is also near its yearly lows. VVIX is around 79.99, still well below its 100 day moving average of 89.47.
Brian Overby interprets that this could be indicative that the market is not as concerned about the Fiscal Cliff as the media seems to be.
Stock for the day is Kohl’s Corp (KSS)
Discussion from QuickTakesPro’s Michael Kahn - At the time of this broadcast, KSS was $44.45 up about .26 on the day. It is below its 50 day, 200 day moving averages of around 49.88 and 49.44. The one big thing to look at is the long term support level of 42.70 going back to 2005. This level has seemed to be very important to this stock and could possibly give some protection if the stock were to drop. However, if the upside continues, Michael speculates it might be possible to fill the gap back some.
Technical tools used:
- Moving Averages
Brian Overby’s strategy based on Michael’s Analysis – Short Put Spread
Since Kohl’s appears to be stabilized from its recent downturn on bad news and earnings concerns, we will look at a neutral to bullish trade. Its implied volatility levels are in the middle of the range. They jumped up on that recent downturn, but are now settling down a bit. The 10 point actual drop in the stock price caused the 30-day historical volatility to jump to around 40%. The 30-day implied level is just above 25%.
Possible Trade - Short Put Spread
- Sell 1 Jan KSS 43 Put
- Buy 1 Jan KSS 41 Put
- 32 days to expiration
- Net Bid .40, Ask .55, Mid .47
- Total net credit is 0.40 if we can get filled at the Bid.
- Maximum potential loss is $1.60
- Maximum potential gain is $0.40
- Total commission to enter this trade is $6.25
Possible Additional Trade - Long Call
- Buy 1 Jan KSS 45 Call
- 32 days to expiration
- Net Bid 1.05, Ask 1.10
- Total debit is 1.10 if we can get filled at the Ask.
- Maximum potential loss is $1.10
- Maximum potential gain is Unlimited if the stock goes to infinity. (Not going to happen)
- Total commission to enter this trade is $5.60
**NOTE: option prices are given as a per contract amount. Multiply loss and gain figures by 100 shares and by the number of contracts traded to determine the amount of the full potential loss or full potential gain. No additional calculations are needed to determine commission costs.
TradeKing Options Tools used:
- Detailed Quote
- TradeKing Short Put Spread
- TradeKing Long Call
- TradeKing Volatility Charts
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At the time of publication and in the preceding month, TradeKing and/or Michael Kahn did not have ownership greater than 1% in any stocks mentioned; did not have any other actual, material conflict of interest known at the time of publication; have not received compensation from a public offering nor from investment banking services related to any companies mentioned within the past 12 months, nor expect to receive any in the next 3 months; nor engaged in market making in the securities mentioned.
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