Quick Takes Pro Market Technician Michael Kahn Analyzes the S&P 500:
SPX was trading at 2,092.88, up 9.95 on the day. Michael thinks bull trendline is still broken with lots of resistance being present on the upside. He pointed to an article in MarketWatch by candlestick expert Steve Nison indicating there were engulfing lines present at the reversals in May, August, and November. An engulfing line is a bearish reversal signal that occurs when a stock closes up, has a small jump at the next day’s open, then closes below the previous day’s trading range. Michael didn’t personally see the first two engulfing lines, but he does trust Nison as the candlestick expert when he indicated they were there. At this point, Michael thinks there’s still plenty of overhead resistance which could prove a risky move if you’re looking to acquire new positions going into the new year.
Michael Kahn’s Chart of the Day: Walt Disney Co. (DIS):
Walt Disney, Co. was trading around the 114.34 level during the time of analysis, above its 50-day moving average of 110.71. Looking back, DIS saw a huge run-up into August followed by a gap down with big volume. It has since had a strong rally through October and November, but hit a snag at the end of the month with a dark cloud cover candle emerging. This intraday reversal occurs when a stock hits a new high then ends up closing down for the day and is usually a good indication that you’re seeing the end of a trend. Michael also points out that momentum has fallen and regardless of Disney currently sitting at a support, a further breakdown could happen at any time.
TradeKing “Options Guy” Brian Overby Analyzes General Walt Disney Co.’s Volatility & Dividends:
Walt Disney Co.’s 30-day Implied Volatility (IV) saw a jump following some negative news earlier this week about their ESPN sports channel and is currently quite a bit above the historical volatility,
Walt Disney Co. pays semi-annual dividends with their last ex-dividend date being 07/01/2015 with a 1.15% dividend yield. Their next earnings announcement is anticipated to be on or around 02/02/2016.
Brian Overby Shares DIS Paper-Trading Strategies:
Brian’s first paper trade is a Short Call Spread, a bearish strategy. His second paper trade is a Long Put Spread, also a bearish strategy. Because the 30-day IV is in the higher end of the range, Brian picked these two strategies specifically because they have a short option as one of the legs.
Brian’s First Paper Trade - Short Call Spread
- Buy 1 Jan 15th 2016 DIS 125 Call
- Sell 1 Jan 15th 2016 DIS 120 Call
- 45 days to expiration
- Net Bid 0.92, Mid 0.98, Ask 1.04 for the strategy
- Net credit is 0.98 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: $4.02
- Maximum potential gain: $0.98
- Total commission to enter this trade at TradeKing is $6.25
Brian’s First Paper Trade - Long Put Spread
- Buy 1 Dec 18th 2015 DIS 117 Put
- Sell 1 Dec 18th 2015 DIS 112 Put
- 18 days to expiration
- Net Bid 2.10, Mid 2.23, Ask 2.36 for the strategy
- Net debit is 2.23 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: $2.23
- Maximum potential gain: $2.77
- 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.
TradeKing Options Tools used:
Options involve risks and are not suitable for all investors. Prior to buying or selling options, an investor must receive a copy of Characteristics and Risks of Standardized Options, sent to you in previous communication. Additional copies may be obtained by calling TRADEKING at 877-495-KING or by visiting www.TradeKing.com/ODD.
Multiple leg options strategies involve additional risks, and may result in complex tax treatments. Please consult a tax advisor.
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.
System response and access times may vary due to market conditions, system performance, and other factors.
Any strategies discussed and examples using actual securities and price data are strictly for illustrative and educational purposes only and are not to be construed as an endorsement, recommendation, or solicitation to buy or sell securities. Past performance is not a guarantee of future results. Consider the following when making an investment decision: your financial situation, your risk profile and transaction costs.
Market timing is a complex investment strategy which involves risk and may incur additional commission costs.
While implied volatility represents the consensus of the marketplace as to the future level of stock price volatility, there is no guarantee that this forecast will be correct.
TradeKing charges $4.95 for online equity and option trades, add 65 cents per option contract. TradeKing charges an additional $0.35 per contract on certain index products where the exchange charges fees. See our FAQ for details. TradeKing adds $0.01 per share on the entire order for stocks priced less than $2.00. See our Commissions + Fees page for commissions on broker-assisted trades, low-priced stocks, option spreads, and other securities.
The projections or other information generated by TradeKing's tools regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. The calculations do not take into consideration all costs, such as commissions and margin interest which may impact the results shown. It is the user's sole responsibility to select the criteria to enter in the TradeKing's tools, or to choose among the predefined screens, and to evaluate the merits and risks associated with the use of the tools before making any investment decisions. TradeKing is not responsible for any losses that occur from such investment decisions.
TradeKing Webinars and All-Star Blog are provided for educational and informational purposes only.
All investments involve risk, losses may exceed the principal invested, and the past performance of a security, industry, sector, market, or financial product does not guarantee future results or returns. TradeKing provides self-directed investors with discount brokerage services, and does not make recommendations or offer investment, financial, legal or tax advice. You alone are responsible for evaluating the merits and risks associated with the use of TradeKing's systems, services or products.
TradeKing selects and defines as All-Stars certain independent market commentators who are recognized industry personalities and experienced traders and who provide timely market commentary via the TradeKing All-Star Blog and/or TradeKing Webinars. Each All-Star commentator's bio, related qualifications and disclosure as to their relationship with TradeKing can be found on the All-Star Roster. The selection of All-Star commentators is solely based on the quality and style of the content provided. TradeKing does not measure, endorse, or monitor the performance or correctness of any statement or recommendation made by independent All-Stars commentators. Supporting documentation for any claims made by TradeKing All-Stars will be supplied upon request by the author of the post, who is solely responsible for the views expressed. Contact TradeKing All-Stars by sending an email message to TKallstars@tradeking.com.
? 2015 TradeKing Group, Inc. All rights reserved.