Recap for Tuesday, April7th by Brandon Wilson
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Analysis of S&P 500from QuickTakesPro’s Michael Kahn:
S&P 500 (SPX) – Atthe time of this broadcast, SPX was around 2088.71, up 8.09 today. Michaelmentions that he believes Monday after the long Easter weekend was more of asave than a breakout. When examining his chart, Michael mentions that the“long-term trend line is still well below.” The coiling in RSI tells us thatthe market has been going back and forth, while short-term trend lines continueshowing a choppy market, but “overall the bias is still to the upside.”
SPX is just above its 50day moving average of 2074.42 and above the 200 day moving average of 2014.53.
The Chart of the Day isDuPont (DD) -
At the time of thisbroadcast, DuPont was at 72.08, up .08 on the day. DD, part of the chemicalsector, has been doing well until March, when it appears an earnings sell-offstruck. Currently, the security sits right above the 200 moving day average of70.44, which may signal support. Looking a little closer at the short-termvolume, Michael mentions DD has horizontal support, 200 day MA support, as wellas trend line support. Although the stock has been “out of favor for about amonth and a half,” the stock has “a bullish engulfing line - a pending changefor the better,” Michael states.
It is below its 50 daymoving average of 75.34.
Analysis of DDVolatility Chart and Dividends from TradeKing’s Brian Overby -
DuPont’s 30-day ImpliedVolatility (IV) is at 21.04% and the 30-day Historical is sitting at 21.18%.Both have increased lately and are approaching the 52 week highs, probably inanticipation of earnings expected to be announced on April 21st.
The stock paid a 47 centdividend in February which would put the next anticipated ex-dividend in themiddle of may. Brian reminds us that the decent sized dividend (2.61% yield)could potentially deflate call prices and inflate put prices relatively.
Technical tools used:
- Moving Averages
- Trend lines
Brian Overby’s papertrade strategies based on Michael’s analysis -
Michael’s outlook iscautiously bullish, but waiting for a breakout to confirm. Since earnings isexpected within 30 days, Brian discusses a Short Put Spread with expirations avoiding earnings. Brian also takes a look at along-term Long Call using the next expected dividend to cheapen the call costs.
Brian’s Paper Trade - Short Put Spread
- Sell 1 April 17 2015DD 71.50 Put
- Buy 1 April 17 2015 DD69.50 Put
- 10 Days to expirationfor the April 17th
- Net Bid 0.43, Mid0.46, Ask 0.49 for the strategy
- Net credit is 0.46 ifwe get it at the Mid, may not be possible.
- Maximum potentialloss: $1.54
- Maximum potentialgain: $0.46
Total commission toenter this trade is $6.25.
Brian’s Paper Trade - Long Call
- Buy 1 May 15 2015 DD70 Call
- 38 Days to expiration
- Bid 3.00, Ask 3.15 forthe option
- Debit is 3.15 if wepay the Ask
- Maximum potentialloss: $3.15
- Maximum potential gain is unlimited if the stock goes to infinity (not likely to happen).
Total commission toenter this trade is $5.60
**NOTE: option prices are given as a per contract amount. Multiply loss andgain figures by 100 shares and by the number of contracts traded to determinethe amount of the full potential loss or full potential gain. No additionalcalculations are needed to determine commission costs.
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