• 	OPTIONSMART MORNING UPDATE: Sunday Edition
  1. OUTLOOK: The jobs report seemed to confirm other recent indications that the economy is stabilizing. On the Nasdaq, advancers topped decliners by over two to one. Electronic Arts was little changed after first-quarter results. The company posted a loss that was narrower than analysts anticipated and adjusted sales that was better than analysts expected. We expect much more volatility next week as markets seek direction in thin trading. In fact, the market is deeply overbought from a short-term standpoint. 90% of S&P 500 companies are above their 50- and 200-day moving averages. A pause or short-term dip is likely.
  2. TRADING OPPORTUNITY: n/a
  3. OUR FREE MONTHLY TRADING RECOMMENDATION AUTO-TRADABLE WITH OUR PARTNER BROKERAGES: to be published  in Aug. Our most recent Free Pick: QQQQ Sep 34/36 Debit Call Spread: Bought @1.32 on 06/22/09 and sold @1.46 on 07/16/09 with a 10.6% in 24 days!   Free Picks Track Record
  4. WISDOM NUGGETS:  HOW LARGE TRADERS RULE STOCK MARKETS Large traders rule the stock market by pushing stocks up and down. Program trading technologies make these movements surprisingly fast. In many cases, small traders are unable to follow them. Here is an example.  On Feb 22, 2008, the QQQQ stock had been struggling within a narrow trading range between 42.80 and 43.07 the entire day, until 15:20 PM ET. It happened because large traders didn't allow stock to move higher and eat up all rally attempts. They accumulated the stock for the planned upturn. Appropriate candlesticks can be seen on the following QQQQ Intra-day chart: It is interesting that this widely used trick was greatly leveraged by using call options. The most impressive was the volume of the March 44 call options, which reached 64,123 contracts, or 12 times above the average daily level. This option has been accumulated during the day at the average price of $0.76. Finally, this trick had delivered a 48% gain by the end of the day when the stock surged and pushed the option price to $1.13. Obviously, it was not a spontaneous movement, but a result of program trading. This pattern looks abnormal. Usually, reversals are built up slowly. The first sharp rise always finds sellers. Bottoms take longer to shape than tops. However, in this particular case the stock price rose almost vertically and added 2.5% in 30 minutes on huge volume. Next day, the stock extended gains, and the option price reached 1.25 and provided the 65% gain to its holders. It worked as a compressed spring. Could small traders join this game and take something from the table? In this particular game, they really could, if they understand what is going on. It would not be easy. Firstly, small traders should notice on the intra-day candlestick chart that the stock is being accumulated within a narrow trading range. The second point is to observe the unusual activity for call options, in other words, the big bet on the upturn. The third requirement is a small trader's ability to use the three-minute time window, to identify the breakout, to take the right decision, and to execute the buy order. Theoretically, it was possible, but, in practice, only professionals can operate so quickly. It is good to join this play, if you are sure that the upward momentum was really strong during the entire day, but artificially squeezed by large traders. They knew the plan and successfully used this advantage. The greatest difference between professionals and amateurs is their approach to trading. Professionals have a strategic vision and think in terms of probabilities. Nevertheless, this situation looks fair enough. Theoretically, everyone could buy the same option as large traders did and enjoy the ride. This market play was open to the public. However, the vast majority of market games are, in fact, closed to the public, because of the exclusiveness of required information and state-of-the-art software.       Interested to learn more about stock market manipulations and trendocracy? Download the e-book "Trendocracy" now!  Or order a printed copy from Amazon.
  5. SPECIAL OFFER:  Our "Momentum Plays" subscribers  took adantage of knowing what large traders were doing and really enjoyed the ride: 25 out of 25(100%) profitable trades in H1 2009 with an average 11% gain per trade (11 days long)!   Learn more, subscribe to our "Momentum Plays"  and get a 30% discount on recurring subscriptions by entering coupon code CE4F during checkout (expires on August 10, 2009). New subscribers only.  Diversify your portfolio by receiving more frequent picks and trading alerts. Subscribe to our paid services!

  August 9th, 2009 at 5:03 am

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