After a great string of gains, the market decided it wanted to lose its mind, and trend sideways in a tight channel. For weeks, we’ve been caught in this madness of dips and spikes. But now, as the party in China begins to wind down, and as rate hike fears reemerge, we may finally get the direction we’ve been looking for.
Unfortunately, once we price in the true economic realities, that direction could be down…
When and if the Dow – for instance – breaks the 50-day moving average to the downside the next level of support is around 17,570 – the 200-day moving average.
Hopefully, that would hold. If not, we don’t truly begin to see signs of support at less than 16,000 a test of October 2014 lows. That’s worst-case scenario. It’s why we continue to hold our DIA June 180 put.
Unfortunately, in the chaos, we have some losers I’d like to get rid of today. I hate closing losers especially after closing good wins for so long.
One of those losers is the KB Home (KBH) July 14 put. Close it. Even though the stock is overvalued here, given weakness in housing, it’s better to close it out. We’re also closing the Consumer Discretionary (XLY) June 76 put, as well.
The other week, we closed the AT&T July 33 calls for 106% gains and the AT&T January 32 call for gains of 53%. But we are still holding the June 34 put, as the stock remains over-extended and overbought at significant overhead resistance.
As for the American Express (AXP) July 80 put, let’s sell to close the position today with a slight gain.
As for new positions, Oncothyreon (ONTY) has been on a major win streak in recent weeks, as it heads into ASCO 2015. We strongly believe positive news has been priced in, and that a sell-the-news reaction could send it tumbling.
Just don’t risk the house on this trade. That’s all we ask. There is still some risk involved going into a news-heavy event like ASCO. That being noted, consider buying to open the ONTY August 2015 3 put at market.
We’ll talk again soon. Until then, take good care.
Ian L. Cooper
Rapid Retirement System