Recap for Tuesday, November 20th
Did you miss Tuesday’s TradeKing Midday Market Call? Here’s a quick recap. Don’t miss another session, register here today!
Analysis of S&P 500 and Nasdaq Composite from QuickTakesPros’ Michael Kahn:
S&P 500 (SPX) – At the time of this broadcast, SPX was around 1389 up about 2.33 from Monday’s close. It broke down below the 200 day moving average of 1382 last week, but has since rebounded. However, the low volume could indicate it is not a strong rebound. Right now, the 200 day moving average still looks like a resistance area and we have another big resistance level around the 1400 mark. To Michael, this looks to be more of a “dead cat bounce” heading into resistance overhead.
Nasdaq Composite ($COMP) – is trading around 2912.48 down about 3.59. A couple weeks ago it has broken below its trendline that was started way back in October 2011. It is now also below its 50 day and 200 day moving averages of 3047.17 and 2984.87. Much like SPX the Nasdaq has had a small rally on low volume with a lot of resistance overhead.
Analysis of Volatility Index from TradeKings’s Brian Overby:
S&P 500 Volatility (VIX) – is around 15.21, below its 50 day moving averages (MA) of about 16.18. The story with the VIX is, and has been for some time, that there’s just not a lot going on here. January contracts are trading around 18, which is above just around its 200 day moving average. Because the VIX is consider a mean reverting index it is common for the shorter term futures to trade near the 50 day MA, mid term to trade near the 100 day MA and the longer term to trade near the 200 day MA. This is the case currently, so once again nothing too exciting about the VIX.
Stock for the day is Nokia (NOK)
Discussion from QuickTakesPro’s Michael Kahn – At the time of this broadcast, NOK was up 7 cents (2.21%), trading around $3.01. It is between its 50 and 200 day moving averages of $2.73 and $3.30 respectively. It has, however, broken through on the positive side of its Bollinger Bands, which could be a bullish sign for the stock. It’s next resistance level is around $5, but could be long term before it starts reaching that level again.
Brian Overby’s strategy based on Michael’s Forecast – Long Stock
Since the stock is below $5 and both implied and historical volatilities at around 50%, Brian is shying away from the options. A possible long term strategy (past January) could be to go long on the stock. If there is a possible option strategy, it could be to sell a covered call off it in January near-the-money.
Possible Trade – Long Stock
– Buy NOK
– Bid 2.99, Ask 3.01
– Total debt is 3.01 per share if we take the ask
– Maximum potential loss is $3.01/share
– Maximum potential gain is unlimited if the stock
goes to infinity (Not likely)
– Total commission to enter this trade is $4.95.
Possible Additional Trade – Sell Covered Call
– Sell 1 Jan 3 call
– Bid .26, Ask .28
– 60 Days to Expiration
– Total Credit is .26 cents if we hit the bid
– Maximum potential loss is 2.74
– Maximum potential gain is limited to the net credit received or 26 cents
– Total commission to enter this trade is $12.55
**NOTE: option prices are given as a per contract amount. Multiply loss and gain figures by 100 shares and by the number of contracts traded to determine the amount of the full potential loss or full potential gain. No additional calculations are needed to determine commission costs.
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