Quick Takes Pro Market Technician Michael Kahn Analyzes the S&P 500:
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SPX was trading at 2,073.44 at the time of analysis, up 20.79 on the day. Michael indicated that we’re still seeing a lot of overhead resistance that SPX will have to fight through on the long-term, but there does appear to be short-term movement. He points to a bull-flag breakout pattern following a pullback with a one-day rally appearing above the flag pattern. Volume, however, is still relatively low which leaves Michael skeptical on the overall market.
Michael Kahn’s Chart of the Day: Chicago Bridge & Iron Company (CBI):
Chicago Bridge & Iron Company was trading around the $35.85 level during the time of analysis, below its 50-day moving average of $37.20. Following a peak in early 2014, CBI has been trending downward and has been bearish for the last two years. The bear-market trendline has been nearly on top of the 200-day moving average all year, with the 50-day moving average appearing right in the middle of the rising channel that appeared in early February. Michael believes that pattern alone could be a bearish-flag pattern in the big picture. The February rally failed not only at the long-term trendline and the 200-day moving average but also at the top of the rising channel pattern. CBI continued to try to break down today but the strong market appears to be keeping it propped up for the time being. CBI is still riddled with bearish signals and Michael suspects this stock will continue to decline in value with a further breakdown being imminent.
TradeKing “Options Guy” Brian Overby Analyzes Chicago Bridge & Iron Company’s Volatility & Dividends:
Chicago Bridge & Iron Co.’s 30-day Implied Volatility (IV) is middle of the range for a stock of this price while also being near a 6-month low. Brian doesn’t expect volatility crunch to be a problem.
Chicago Bridge & Iron Company pays quarterly dividends yielding about 0.78% annually and its next earnings announcement is anticipated to be on 07/28/16.
Brian Overby Shares CBI Paper-Trading Strategies:
Brian’s first paper trade was a Short Call Spread a that is neutral to bearish on the marketplace. His second paper trade was an at-the-money near-term Long Put Spread that has a higher risk-reward but he considers the more speculative of the two paper trades.
Brian’s First Paper Trade - Short Call Spread
- Buy 1 Jul 15th 2016 CBI 40.00 Call- Sell 1 Jul 15th 2016 CBI 37.50 Call
- 52 days to expiration
- Net Bid 0.60, Mid 0.70, Ask 0.80 for the strategy
- Net credit is 0.70 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: 1.80
- Maximum potential gain: 0.70
- Total commission to enter this trade at TradeKing is $6.25
Brian’s Second Paper Trade - Long Put Spread
- Buy 1 Jun 10th 2016 CBI 37 Put- Sell 1 Jun 10th 2016 CBI 35 Put
- 17 days to expiration
- Net Bid 0.80, Mid 1.00, Ask 0.1.15 for the strategy
- Net debit is 1.00 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: 1.00
- Maximum potential gain: 1.00
- Total commission to enter this trade at TradeKing is $6.25
Important notes: 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.
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