Quick Takes Pro Market Technician Michael Kahn Analyzes the S&P 500:
Continue Reading Below
SPX was trading at 1,986.31 at the time of analysis, down 10.57 on the day. Michael began with pointing out that nothing’s really changed with SPX from last week.There was a short-term rally following the breakout from the double bottom pattern. SPX then rallied for a couple of days and now we’re at a pause day. Volume had been trending down through much of February when volume saw an increase then spiked at the end of the month. After the spike, volume dropped again as SPX rallied into March with a second spike occurring on another down day. Michael believes this activity may indicate that the argument that volume had been falling during the rally isn’t really valid. Finally, Michael points out that as SPX continues to approach its 200-day moving average, it’s nearing resistance and may be getting close to slowing down. He doesn’t believe we’re in a great place to buy new stocks for the first time as the risk/reward may not be worth the new investment at this stage in the rally.
Michael Kahn’s Chart of the Day: Whole Foods Market, Inc. (WFM):
Whole Foods Market, Inc. was trading around the 33.43 level during the time of analysis, above its 50-day moving average of 30.32. A few months ago, this was the stock that everyone loved to hate. Since then, Michael points out that a basing pattern has emerged with the stock moving sideways. There’s been a lot of damage to the stock, but it’s waiting for a breakout above $35 and is flirting with it’s 200-day moving average since it dropped a year ago. Michael likes this stock for a number of reasons: lower lows in price, higher lows in RSI bullish momentum divergence, the MACD curve is curving higher, and it’s seeing positive on-bounce volume for the first time since WFM began falling a year ago. He thinks overall it’s a good set-up, particularly if it breaks out above $35.
TradeKing “Options Guy” Brian Overby Analyzes Whole Foods Market, Inc.’s Volatility & Dividends:
Whole Foods Market, Inc.’s 30-day Implied Volatility (IV) is currently at 31.5%. It has seen a small spike up recently, but is in the lower half of the 6 month range.
Whole Foods Market, Inc. pays dividends quarterly and it’s next earnings announcement is slated for 05/04/2016.
Brian Overby Shares WFM Paper-Trading Strategies:
Brian’s first paper trade was a Short Put Spread, a bullish to neutral strategy that’s similar to a short put, but there is some limit to your risk should the underlying stock drop.
His second paper trade is a Long Calendar Spread with Calls. The strategy is set up with an out-of-the-money call strike which turns this “normally” neutral strategy slightly bullish.
Brian’s First Paper Trade - Short Put Spread
- Sell 1 April 15th 2016 WFM 32 Put- Buy 1 April 15th 2016 WFM 30 Put
- 38 days to expiration
- Net Bid 0.36, Mid 0.43, Ask 0.49 for the strategy
- Net credit is 0.43 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: $1.57
- Maximum potential gain: $0.43
- Total commission to enter this trade at TradeKing is $6.25
Brian’s Second Paper Trade - Long Calendar Spread with Calls
- Sell 1 April 15th 2016 WFM 37 Call- Buy 1 May 20th 2016 WFM 37 Call
- 38 and 73 days to expiration
- Net Bid 0.56, Mid 0.61, Ask 0.66 for the strategy
- Net debit is 0.61 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: $0.61
- Maximum potential gain is limited to the premium received for the back-month call minus the cost to buy back the front-month call, minus the net debit paid to establish the position. NOTE: You can’t precisely calculate your potential gain at initiation of this strategy, because it depends on how the back-month call performs at the front-months expiration date.
- 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.