Put Options

GMI and GMI-R are back to zero, QQQQ in new down-trend; TSYS and GLD; short or in cash

@ 10:32 pm
GMI0/6
GMI-R0/10
T210821%

The GMI and GMI-R have been zero since Tuesday’s close.   There were 3 new highs and 424 new lows in my universe of 4,000 stocks on Wednesday. The Worden T2108 Indicator is now 21% and heading down from the reading of 89% on January 6.   In the November swoon, this indicator bottomed at 1.2%.   So we have a long ways to go to hit the same depths present at the November bottom.   The QQQQ is now in the 2nd day of a new short term down-trend.

If you go back a few posts you will see that I wrote that TSYS looked like a break-out from a cup-with-handle formation.   Well, that stock continues to surge higher and hit a nine year high ($9.93) on Wednesday.   William O’Neil has said not to buy break-outs in a bear market, but this may be the one needle in a haystack that will work out.   I continue to hold a few shares of TSYS…..

I am also holding puts on some stocks in my IRA.   One cannot use margin in an IRA so I cannot short stocks there.   But I can buy put options or inverse ETF’s.   I don’t know if it is too late to short weak stocks, but I know that buying stocks that are in down-trends has not worked for me.   Then again, my friend Judy does so well buying stocks that bounce off of their lows.   In fact, she recently bought GLD in the 70’s and still holds some.   Gold and silver (SLV) have been steadily advancing.   I remain mainly in cash.

Up-trend in 7th day: T2108: 58%, out of over-sold territory; homebuilders recover; GMI: 2; GMI-R: 4

@ 7:46 am

The markets continue to improve.  The QQQQ sort term up-tend has completed its 7th day.  The Worden T2108 indicator (58%) is well out of over-sold territory, but still far from being in over-bought territory (>70%).  The GMI and GMI-R remain at 2 and 4, respectively. It is important to watch what the market is doing and to tune out everything else.

Xhb

This daily chart shows that the homebuilders ETF, XHB, is starting to recover.  It is above its 30 day average (red line) and the 10 day average (dotted line)  is now above its 30 day average.  This is the first time these technicals have looked so good, since the rise last August and September.  (About a week ago I sold  cash secured Dec. 12.00 put options on XHB.) The short term trend for homebuilders has changed to up, at least for now……..

Uptrend to continue? Writing cash secured puts on promising IBD100 stocks; GMI: 2; GMI-R: 4

@ 12:01 am

The QQQQ short term up-trend is now in its 4th day.  GMI1212

However, there were only 4 new highs and 100 new lows in my universe of 4,000 stocks on Friday.   Still, 58% of the Nasdaq100 stocks closed above their 30 day averages. The GMI closed at 2 (of 6) and the more sensitive GMI-R is at 4 (of 10).   I tend to look to buy stocks when the GMI rises to at least 3. Friday was the 4th day of the current QQQQ short term up-trend. In a few days I will have a better idea if this up-trend has legs……..

In an up-trending market (as measured by the QQQQ), I like to trade the IBD100 stocks.   The IBD100 lists contain the top 100 growth stocks that meet the stringent IBD technical and fundamental criteria.   A new list is published by IBD each Monday.   From time to time, I create a watchlist in TC2007 containing the current IBD100 list.   I now have a watchlist containing about 660 stocks that have appeared on selected IBD100 lists over the past year.   The IBD100 growth stocks tend to perform quite well when the market is rising.   Tonight, I ran a TC2007 scan I have created, on the stocks in this IBD100 watchlist and found 10 present or former IBD100 stocks that appear to be in strong up-trends: EBS,DLTR,ALGT,THOR,INT,APOL,AVAV,LHCG,SHEN,GTIV. I do own a couple of these. But I also have written cash secured put options on some of these stocks with strike prices below the support level .   I am basically betting that the stock will not break below support by option expiration this Friday.   If this technique works out, I will write more about how I do it in a future post.   Writing cash secured puts is equivalent to writing covered calls on a stock, but I do not have to start out by buying the stock.   The cash backing the puts I sell stays in my account in a money market fund and continues to earn interest.   So, I receive the premium from selling the puts AND the interest from the cash backing them.   Quite a nice (but not risk free) income generating technique in my IRA……