Quick Takes Pro Market Technician Michael Kahn Analyzes the S&P 500:
SPX was trading at 2,049.63 at the time of analysis, up 0.99 on the day. The “dome-ish” rounded top we’ve been watching over the last several weeks broke to the upside with a surge occurring a couple days ago. A steep short-term trendline was created that is still intact. Michael points out that until that trendline breaks, SPX should continue in the short-term direction the market is heading in. The 200-day average was also broken to the upside which Michael believes can be a good indication if you’re bullish. Michael also looked at RSI and MACD which showed the market not being terribly overbought and that there’s nothing telling us it’s over yet - no matter how risky it may seem.
Michael Kahn’s Chart of the Day: Lulu Athletica inc. (LULU):
Lulu Athletica inc. was trading around the 59.10 level during the time of analysis, below its 50-day moving average of 61.29. LULU had been on a rising trend since December until a downside breakaway gap occurred last week resulting in a serious downward move with decent volume. Looking at RSI momentum divergence, Michael points that it wasn’t strong but was still present with lower peaks in the RSI and higher peaks in price. Michael believes the new resistance level is just under $64, near the closing price of LULU the day before the gap down in September. LULU has bounced off its support twice but it’s still below its 50-day moving average and the trendline and appears to be in a breakdown in Michael’s opinion. He believes that if it continues to falter and drops below the support around $58.70, there’s no telling how far it could drop.
TradeKing “Options Guy” Brian Overby Analyzes Lulu Athletica inc.’s Volatility & Dividends:
Lulu Athletica inc.’s 30-day Implied Volatility (IV) and 30-day Historical Volatility (HV) are both rather high but the IV is increasing while HV is dropping. This is typically an indication that earnings are on their way.
Lulu Athletica inc. does not pay dividends and it’s next earnings announcement is slated for 03/30/2016.
Brian Overby Shares LULU Paper-Trading Strategies:
Both of Brian’s paper trades today were Short Call Spreads, a neutral to bearish strategy that could be useful here as we’re waiting on something to happen - specifically for LULU to drop below its $58.70 support level that was mentioned by Michael.
Brian’s First Paper Trade - Short Call Spread #1
- Buy 1 Mar 24th 2016 LULU 63 Call- Sell 1 Mar 24th 2016 LULU 61 Call
- 2 days to expiration
- Net Bid 0.30, Mid 0.35, Ask 0.39 for the strategy
- Net credit is $0.35 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: $1.65
- Maximum potential gain: $0.35
- Total commission to enter this trade at TradeKing is $6.25
Brian’s Second Paper Trade - Short Call Spread #2
- Buy 1 May 20th 2016 LULU 70 Call- Sell 1 May 20th 2016 LULU 67.50 Call
- 59 days to expiration
- Net Bid 0.41, Mid 0.51, Ask 0.61 for the strategy
- Net credit is $0.51 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: $1.99
- Maximum potential gain: $0.51
- 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.
? 2016 TradeKing Group, Inc. All rights reserved.