GE: Short stop entry @ $13.00

I’ve entered a short stop order just now set at $13.00. GE is hovering above $13.10 now. S&P500 bounced back about 1.3% today, as of this writing, after yesterday’s raid. However, S&P500 merely tested 900 and failed to go above it. This is definitely a strong sign for the bears.

Thus, I have decided to add to my short with GE. Why GE? See for yourself in the figures below. It satisfy my usual criteria for a setup. In addition, the risk/reward is great!

Entry stop: $13.00.

Exit stop: $13.30, short term resistance.

Target: $10, nice round number just above the long term trendline.

Reward / risk = $3 / $0.30 = 10 > 3.

In Figure 1, note the symmetry in the daily chart. The test of resistance below $15 failed miserably. Also note the Chaikin in the weekly for a huge negative divergence.

For Figure 3, observe that the recent uptrend is breaking. My entry of $13 is at the 25% point within the channel and it’s a recent support.

Update: My order is filled at 15:38 for average of $13.0042308 for 78 shares.

Update 2: I was stopped out at $13.30 on Monday, May 18 at 10:23 am.

General Electric (long term)

GE

GE

SOLD -5 GE 100 APR 09 12 CALL @.23

I ditched my GE calls at the open today when the S&P 500 made a gap up and GE gapped open at $11.10. These options were purchased at 0.49. So that’s a loss of $56.35 + $15 for commission. However, I’m definitely out too early as GE is hanging around $11.50 as I’m writing this.

The reason for this quick exit is because the long weekend starts tomorrow so the options premium is sure to drop. Since I cleared my puts for GE on Tuesday already, I’m out of my GE strangle entirely now.

In addition to a bad entry on my part, the time decay really ate up my premiums. I should review the details of this trade another time. I am off to a long weekend soon.

General Electric

SOLD -5 GE 100 APR 09 11 PUT @.79

I’m out the short side of my GE strangle. I purchased these puts at 0.872. I loss about $41 for this trade alone. Doesn’t look too bad, but remember, I still have my calls to get rid of, and those are the real losers. I’m down $172 for the calls at this moment.

The reason for ditching my GE puts now is simply because it is refusing to go down. In fact, it is outperforming the market for the last few days even as we’re retracing in the market, see Figure 1. If a ship is refusing to sink in a storm, it is surely a sign of strength. GE has filled a gap with low volume, Figure 2. It could very well shoot back up from here.

Furthermore, this is a long weekend and there’s probably going to be little action all week. The time decay is going to really hurt me as we approach expiration soon. It has been dropping steadily already. Time is definitely not on my side for this trade. So I’ve decided to ditch it on signs of strength of GE.

At this point, I would like to clear this off of my desk and look for a re-entry.

GE vs. S&P 500

General Electric

Market is looking ready to continue its bear rally

Despite my pessimism, I think this bear rally may have steam to go even farther up in this run before the final flush down. Here’re my reasons.

1. We have touched the 38% Fibonacci retracement level precisely last week and have been making higher lows. See Figure 1.

2. As I noted in the morning, the up days have noticeably more volumes than the down days in this rally.

3. My two favourite shorts, GE and GS, are resisting to stay below their supports. In particular, Figure 2 shows that even in today’s swinging moves, they closed above their intra-day supports at noon while the S&P 500 broke its intraday support at noon, just barely. In fact, today’s move look a lot like TCK when it retraced (and when I unloaded), just to punch through to much higher later. If that’s any indication, these two (and the market) will be breaking their long term resistances within days.

S&P 500

GE, GS, S&P 500

BOUGHT +5 STRANGLE GE 100 APR 09 12/11 CALL/PUT @1.37

As I was saying this morning, I placed an order before going to work for a Apr09 11/10 strangle on General Electric (GE). My limit was at $1.31 (total) but the morning mark started at $1.37 and kept creeping up. I waited until 10 am and GE slowly gained in price. It stayed above $11 shortly and so I checked the strangle price on the 12/11 instead. It was about $1.40 too. So I just changed my order from 11/10 to 12/11 and upped my limit to meet the mid spread.

The risk profile for 12/11 is definitely different than 11/10. 11/10 would have been a good neutral position because GE is obviously congested around the $10.xx range. The 12/11 range is more short-heavy because GE was only around $11.07 when I entered. It’s at the top of a trading range. However, I took it anyway because I’m actually leaning to the short side, in case you haven’t noticed…

As you can see from Figure 1, daily on left and weekly on right, $10.5 is a major long term pivot point. We are testing it at the moment on weak volumn. Figure 2 shows the hourly on left and daily on right. As I was saying this morning, GE’s rally in March looks weaker as compared to S&P 500. The 10d MA haven’t even crossed the 40d MA yet. Add to that, last time the indicators were at this almost overbought level was last year in the $15 range. You can see what happened to that afterward. GE skidded down to $6.

However, we have broken that long term downtrend, see Figure 3. And we’re forming a long flag. This is definitely a glaringly bullish sign. After all, we can’t keep using the same channel forever.

Rather long or short, the important point is that GE is at a major junction right now. Although I’m favouring the short side, but from observing the action of the market in the past few days, there’s also a good chance GE will get lifted along with the rest of the market soon. That’s why I’ve put on a strangle to take advantage of both the long and the short prospects.

General Electric

General Electric

General Electric