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Today I look at the rally that took place from as soon as the good news on the jobs numbers came out. The market managed to rally a little bit above the 38.2% retracements on both the S&P and the Dow Jones, but as you can see, the resistance in my channel was the top of the rally, and we managed to short right at the top. With the market falling mid day, it seems like we got ourselves a potential reversal. I recommend not being too bearish just yet until the S&P channel has completely broken, but to play the channel until it fully breaks apart. Another observation on the daily, is that we seem to be forming a megaphone or expanding triangle formation, which is incredibly bearish, but has not been mentioned yet on CNBC. CNBC has been incredibly bullish, and that’s why I think a potential reversal is very possible. I feel better holding puts into monday-tuesday than calls, but I will take profits at channel support. I also talk about FIG, GS and the XLF in this video, and show that financials are way overbought and are due for a reversal or consolidation very soon.
Idan – can you share your thoughts on BAC. I am holding some Sept 17 calls that I bought at 16.75 … what are you seeing on this chart ?
Thanks in advance !!
I know you asked for Idan’s opinion, but the forecast I have for the whole financial sector is P A I N ! Get out quickly…the run is done
If you want Idan’s opinion, he keeps saying something about RSI hitting 75+.. now 80+ and that’s a sign that financials are overbought.
I had several financial plays over the past month and a half or so (BAC included) that have worked out well for me. One thing to take note of is that over the past 3-4 weeks, volume has increased as the stock rose and decreased as the stock dropped. This is often a bullish sign as it indicates more buyers than sellers are interested in the stock. Since you bought sept expiration, and august calls dont expire till next week, you still have time before extrinsic value begins to get pumped out of out of the money options. I would hold on a little longer and place my stop right around support at roughly 15.25.