Schaeffer's Trading Floor Blog
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Here's another update on 3M (MMM). The stock appears ready to close beneath its 160-day moving average for this first time since this long-term trendline came into being. This coincides with a break of support at the 76 level, which previously contained pullbacks throughout 2004 and for much of last quarter. As Nick previously pointed out, sentiment indicators on this equity aren't so rosy either, yielding a Schaeffer's Equity Scorecard rating of 1.0.

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History is Bullish

by 7/1/2005 11:46 AM
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The Traders Almanac tells us that today is the highest probability day of going higher for the entire year. The SPX has been higher 81-percent of the time, the Dow sits at 80-percent over the past 15 years, while the Nasdaq is 63-percent. You can take from this what you want, but it is also coupled with the Friday before a three day weekend and my money says we will probably finish in the green. <

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Enjoy the Breather

by 7/1/2005 11:30 AM
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Following up on John's entry below, much has ado has been made over rising crude costs lately, and with the level of volatility in the oil pits and the world market, who can blame these speculators? However, I found some comments regarding today's one-percent bound in the August crude futures contract (last seen up 50 cents at $57.00 per barrel) that were a bit more concerning than usual. In a MarketWatch article, a trader from CMC Group notes that today's bounce "is probably just a little bit of buying after yesterday's fall." "It's not really a major move in oil, so there's not really too much to be read into that at the moment. ... The trend is down in oil prices this week"

Taking a look at the chart below, we can see that the trend is in fact down this week, an astute observation on the analyst's part. But my concern lies in the fact that crude seems to be holding support near its early April highs. Furthermore, crude's recent string of higher highs and higher lows is also a sticking point. Should this pattern continue, this week's trend lower is sure to be followed by yet another rally back above the $60 mark. It's only a matter of time before another global supply issue (think Nigeria, Iraq, or conflict in any other major oil producing nation) rears its ugly head and this Thursday's surprise gain in petroleum stockpiles will be a distant memory. In my opinion, one would have to be rather brave to short oil heading into this long 4th of July weekend. Meanwhile, enjoy the breather.

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Stocks quoted in this article:
Shares of Colgate Palmolive have been in a steady decline since mid-February. In fact, the stock has fallen more than 10 percent from its 2005 high of $55.43 hit on February 3rd to its current price of $50.26. However, as the chart below shows, CL now looks like it is resting near technical support at the 50 level.

Yesterday, it appears as though an options speculator made a bet that CL would rebound off support at the 50 level. Approximately 5,500 contracts of the August 55 call (CL HJ) were added. This speculator may be hoping to use leverage to capitalize on a bounce off technical support. Investors can capitalize on the power of leverage by using options to turn a relatively small percentage gain in the stock to a more significant percentage gain in the option.

Yesterday's optimistic activity caused CL's Schaeffer's put/call open interest ratio (SOIR) to decline 17-percent to 1.30. While this particular option transaction appears to have been bullishly biased, overall option activity on CL still has a skeptical feel, as there are 44,400 open puts compared with 34,200 open calls in near-term activity.


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Despite yesterday's selloff, the QQQQ and Diamonds both saw their Schaeffer's Put/Call Open Interest Ratios continue their declines. For the QQQQ, the SOIR dropped to 1.41 from 1.47, and for the DIA, the SOIR dropped from 1.17 to 1.08. The trend in the SOIR is downward for both of these two and if history tells us anything, it is that this is not a good sign for bulls.<

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