Archive for the ‘Chart of the Day’ Category

SPY

SPY

XOM

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The Long View

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Bond yields have been in a downtrend for over 30 years.  Is it about to end?  It will be a big story in 2018.

Bonds Under Extreme Pressure

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The TLT(iShares 20+ Treasury Bond Fund)rebounded nicely off Wednesday’s lows after two days of heavy selling.  The TLT has been under pressure all month and is now testing the major support zone that held in extremely well at the July and August lows.  Despite the impressive rebound after Wednesday’s deep gap lower open the long end has suffered a ton of damage.  In option land, traders are positioning for more downside, quite a bit actually.  Bob von Halle offers some color:  

Extremely large options spread executed in TLT today reflecting the view that their is significant further downside to 20 year government bonds (or conversely, much higher interest rates). With TLT approx at 123 area, the customer bought 20,000 Feb 120 puts, sold about 30,000 Feb 117 puts and lastly bought about 12,000 Feb 114 puts. It is a complex butterfly “like” strategy, but suffice it to say the max profit exists if TLT lands around the 117 zone at expiration, which is almost a 5% drop from today’s level. Bearish indeed. 

At time of publication we do not have a position in the TLT.

Schlumberger Reaches Major Gap Resistance

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SLB has had a great run already this year.  It has finished in the green every day this month as it extends the rally off the December close to nearly 13%.  Today the stock is bumping up against a very heavy resistance area near $76.00.  Back on April 21 SLB took a damaging hit after opening the session with an earnings inspired breakdown gap.  A severe downleg was underway and by mid November SLB had fallen 20%.  The current rally has lifted the stock back up to the April breakdown gap erasing the entire seven month sell off in less than seven weeks.  We believe the stock is now quite extended in the near term and is due for a healthy pullback.  We remain bullish on SLB, and energy as a whole, and will be looking to rebuild positions at lower levels.  As this plays out an option play is beginning to look very attractive.  Bob von Halle has the details:

If you are owner of SLB stock and are concerned about the chance for a significant near term pullback, you might want to consider the following options strategy. With SLB trading around $75.75 look to do the following:

Sell the Feb 77.5 calls for approx $1.55 which would be essentially a covered call strategy that lets you participate in further upside. 
Buy the Feb 75 puts for approx $2.05 cents 
Sell the Feb 70 puts for approx $. 55 cents for total cost of $1.55
So essentially for ZERO outlay other than commissions you have given yourself a bit of further upside room, while protecting yourself for a 5 point pullback in the coming weeks.
Note that SLB reports earnings on Jan 19th which happens to be option expiration date for that month. You can do a similar type trade in that month, but the above gives you much more time for this to work out. Also note that SLB has weekly option series but they are not very liquid and have little in the way of open interest, so I would recommend sticking with the regular monthly series.
At time of publication we remain long SLB in most managed accounts.

TNX (Weekly)

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Almost A Handful

Four charts to start the day.

Earnings revisions reach record(sell-side euphoria):

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Ten Year US Treasury Yield reaches a nine month high:

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Correction?  Who needs a correction:

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Just ten more days and the S&P 500 Index will break the record for longest time without a 5% pullback:

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Harley Headed Higher?

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Harley-Davidson has been trading in a narrow range as it continued to struggle with heavy resistance near its declining 200 day moving average.  A breakout could now be brewing.  Some quick thoughts:

Despite battling heavy resistance near the 200D the stock gave up little ground in December.  A downgrade last week(Longbow cut to ‘underperform’)did little damage.  HOG is working on a second straight higher monthly low as a major bottom near the $46-$45 area(July, August, September, October, November lows)has formed.

HOG will need to convincingly take out the $52.30 area to confirm a breakout.  This zone has capped the last five weekly highs.  On the downside, a close back below $49.00 would take out the January low indicating the 200 day moving average is still in control.  Until then we are positive on the set up.  With a very high short interest ratio(13.45)there is plenty of fuel to power a meaningful rally.  At current levels we believe HOG is a fairly low risk buy with a stop close only set just below this week’s low($50.70). 

HOG is scheduled to report fourth quarter results on January 30th. 

We have no position in HOG at this time. 

It Continues

Here’s how the current rally stacks up historically.  Third longest in history without a 5% pullback:

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Steady.  Higher.  Relentless

Hat tip Callum Thomas

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