Market Direction, Stock And Option – Intraday Comments For Jan 04 2013 – ABX, AGQ, LULU

Market Direction this afternoon is showing some strength and many signs of consolidation. Volume remains reasonable and the advance versus decline issues is quite good. The market direction remains overbought but that can be a good sign as the market tries to hold the recent gains.

The Federal Reserve news that they may stop their bond buying program has not impacted many stocks or the market direction today but commodities are weak. In particular gold and silver are down on the news as were Treasury notes and bonds.

Market Direction and Analysts

Market direction remains intact and many analysts are still bearish which can be a good sign. Meanwhile analysts are becoming more bearish on commodities, including gold, silver and copper. taking the contrarian stance, this could be a sign that some commodities, particularly gold is reaching a bottom. I never trade against the trend but when analysts become bearish it is often worth looking for opportunities.

Barrick Stock (ABX Stock) 5 Year Chart

While by and large the gold stock companies have been poor performers throughout 2012, two stocks I like to keep my eye on are Yamana Resources which trades on Toronto under the symbol YRI and Barrick Gold Corp which trades under the symbol ABX. The ABX Stock 5 year stock chart below is from the TSX. It also trades on New York under the same symbol.

You can see just how bearish the stock is in the chart below. It is heading back to prices seen in the market collapse of 2008 to 2009. I am watching the $30 put strike as an entry price. Presently the $30 January 2014 leap put strike is at $2.50 yielding 8%, but I am sure it will get better as gold falls back further.

Barrick Stock 5 Year Chart

Barrick Stock 5 Year Chart

AGQ Silver Ultra ETF 5 Year Chart

I also enjoy the AGQ Silver Ultra ETF which provides 2X silver’s move. If Silver follows Gold lower this will make the $36 put pretty attractive. Below is the 5 year AGQ Chart.

AGQ Silver

AGQ Silver Ultra ETF 1 year chart

The June $36 put for AGQ is at $2.55 for a 7% return for the next 6 months. Done twice in a year would bring in 14%. I think there is a pretty good chance AGQ could get that low so I will be watching for that.

Meanwhile all this bearish talk has me also looking at the calls for AGQ. Selling naked calls is not something I normally do, but doing call credit spreads certainly has its advantages. If I see anything I like I will be sure to post it. Presently though I am more interested in Put Selling against both AGQ and ABX.

Lululemon Stock (LULU)

Lululemon stock is down big on the downgrade by Credit Suisse today. Personally I do not follow this stock. It does not meet my criteria but I have a lot of friends who have traded it for the past 3 years. Presently they are put selling against the February $65 put for $1.80 to $1.90. They feel it has a lot of support at $65 and they cannot see it falling much below $65.

Market Direction Outlook Into The Close

Into the close the market direction looks to be quite promising and I think the market direction up remains in tact. The growth in the economy remains weak as far as employment is concerned as the US added another 155,000 nonfarm payroll job in December but it was above the estimates of 151,000. The problem is the economy needs months of 250,000 job creations to really get the economy bubbling again and that has not happened in a very long time.

Enjoy the market direction close.