Thanksgiving Week market thoughts and new set-up is compelling
Master Income Update -
Tuesday, 24 November 2009
Good morning,
Dissecting yesterday’s big move – it all came in on smaller than
normal volume.
I suspect it may be because of a holiday week and shortened trading
and all that jazz.
While the market cycle has turned up again to the upside- what’s been
missing (so far) is any kind of budge on the accumulation/distribution
grades. The ones I look at are on the Nasdaq and S&P 500.
By the way – the acc/dist grade is proprietary to IBD – and that’s
where I keep track of my market cycle stuff.
In layman’s terms – this new push up in the market is letting out a
collective yawn so far.
Why do I mention the market cycle and comment on it? It’s because
it provides us a compelling edge we want to use in our MIT trading.
3 out of 4 stocks go the way of the overall market cycle. And tucking
away this edge – it helps us craft our MIT orders/trades to give us
a better edge than the average Joe.
Speaking of edges – there is an individual stock that pre-announced
better than expected earnings yesterday evening – and it is feeling
the love from investors right now, this morning.
Volume is off the hook. The price action is compelling. And the
stock is hitting a 52-week high, after having gone sideways for
several months. Anyway – every piece of this set-up I like for a
bullish edge.
The stock is ADI.
ADI also carries a near 3% dividiend yield.
The only drawback to it is the premiums for December aren’t fetching
that much. I like to see this higher.
It could be that the Thanksgiving holiday (basically an extra loooong
weekend is being factored in. Plus, we’re dealing with less than a
full month for December getting in here).
But I love the setup. Enough that I’m going to trade this one with
some straight out calls…
With ADI trading here at: $29.78, up $1.84…what I’m doing with a
very small (relative to my account size) amount is buying some Jan
27.50 calls.
I’m doing this because there is a strong edge that this stock moves
north at least a couple bucks between now and then. And I can decide
if I want to exercise these call options and turn it into stock (and
basically start an MIT trade off with an extra bang and profit kicker),
or just cash in the calls and make money that way.
Either way – I love this trading setup this morning!
(if you were to go with a pure MIT trade right here – I would buy
the stock, and sell Dec 30 calls…then look to buy half of some
3-4 month out puts – most likely at the 25 strike price).
by the way – CTRP is moving up nicely today. The calls I bought on
CTRP are moving higher as well. I may decide to cash these in
today for a quick profit.
Amazingly, I am not doing any moving around with my current MIT
trades! Usually there is at least a move or two every day. But for
two days it looks like my fingers will be motionless on the keyboard!
(expect for writing all this that is!!)
Hope this finds you well.
–Preston