Schaeffer's Trading Floor Blog

Buying Hits the Tape

by 7/11/2005 2:11 PM
Stocks quoted in this article:

The afternoon has so far been rather quiet as the major indices were more or less drifting sideways to lower...However, my alert for NYSE net ticks just triggered as a spurt of buying hit the market. Earlier this morning I noted how the SPX was touching its highs from mid-June. That area is where this morning's buying demand ran out so it will be interesting to see if this round of buying can challenge this morning's highs...

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Something to Ponder

by 7/11/2005 1:17 PM
Stocks quoted in this article:

On the lighter side...somewhat...I was forwarded a link to a website that offers a "color test". You are presented with the word "red" but it is in a blue font. Below are two buttons, one which says "red" and one which says "blue". You then have just a few seconds to click on the button that corresponds to the font's color. While not extraordinarily difficult to do, your first temptation is to click on the color represented by the word.

From a general interest perspective, I thought this was worth touching on because it highlights how our minds works. From a trading perspective I think this is worth pondering for those who like to look at charts. While chart analysis may seem straight forward enough, it is something that must be interpreted by your brain. And as this simple test shows, some situations can cause momentary short-circuits. For those interested, you can click here to go to the site...

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Index Check

by 7/11/2005 12:53 PM
Stocks quoted in this article:

We drift through lunch with the broad market indices pulling back from their highs but still holding gains...

The upper half of the graph is little changed from what we saw near the open as the broad market indices are mildly positive while select tech sub-groups lead the way...after a relatively flat open, housing stocks have perked up as the HGX hits a new high...oil related stocks have shrugged off the drop in crude to trade flat...gold stocks remain strong as the HUI sits at the resistance I noted earlier...


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Readers Respond - DNA

by 7/11/2005 12:23 PM
Stocks quoted in this article:

Doug says - "Hi Nick I enjoy reading your posts. Your insights into DNA would be greatly appreciated. DNA is expected to announce earnings today at 5:30. I noticed that the July 85 calls are about 22500 while the July 85 puts are about 700. With options expiring this Friday with so many July 85 calls what are some possible scenarios? "

My response - The chart below shows the current front-month options configuration for Genentech (DNA)...


Chart Courtesy of Schaeffer's Sentiment PowerTools

As Doug points out, 85 is the home to a large number of calls and is the peak call strike for the July series. Meanwhile, 80 is the peak put strike, but is dwarfed by the peak call strike call. While there are many ways to look at this, I tend to view these as the "lines in the sand" that option players have focused on. In "normal" trading I would expect the 85 level to serve as resistance and 80 to serve as support. However, the earnings call obviously creates the potential increased volatility.

With options expiration looming there are a number of mechanical forces at work in the options market, particularly in regard to the 85 call strike. I would expect this level to serve as tough resistance and given the sentiment below (which in general suggests a slant toward optimism) I would think it would take some stellar comments from the company to push through...

  • Percent of analysts tracked by Zacks who rate the stock with a "buy": 73%
  • Number of analysts tracked by Zacks: 26
  • Short interest as a percent of float: 2.7%
  • Short interest ratio: 3.151
  • Put/call ratio percent rank: 69.4%


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Stocks quoted in this article:

One more chart caught my eye...sorry for the barrage...but I thought it was worth noting that after bouncing off support near 195, the Amex Gold Bugs (HUI) was testing 205 which has served as short-term resistance...


Created with SuperCharts by Omega Research


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