Stock And Option -Intraday Comments For Oct 02 2012 – INTC and IWM

The stock markets remain choppy and so far I guess my outlook that the market is more bearish than bullish might be right. The question of whether the markets are just consolidating for a move higher or they are busy making a top needs to be considered. I have an article I will post this evening looking at how to spot a market top. The article studies the market collapses of 1973-1974, 1987, 2000-2003, 2007-2009. I went through all of those bears and I learned quite a lot. Over the years I made a chart book which I review where I keep all my charts from the past to remind myself what to watch out for.

One of those signals is when a lot of my friends go long. Last Thursday almost all went long. My records show that when most go long, the market turns back down. I will have that article up around 10:00 PM this evening Eastern Standard Time.

Today though there is just 1 stock and 1 ETF I want to review:

Stock and Option Intel Stock (Symbol INTC)

When a stock rises it breaks resistance levels and those resistance levels become support. For example when Intel Stock broke through $22, that $22 became support. When it broke $23, that became support. The opposite happens on the way down. When a stock collapses and breaks through support, that support becomes resistance. This is only natural as a declining stock must regain the confidence of investors that the rally back is more than just a “dead cat bounce” as they say.When a declining stock tries to recover, those investors who bought the stock on the way down have become nervous and they just want out on the next rally. They bought the stock on the decline figuring that the stock was just “pulling back” and they were going to profit on the rise back up. But when Intel Stock fell many investors bought at and around $23.00 and many investors at that range have become worried. They have seen Intel Stock rise above $23.00 only to pull back to $22.60, which is a long way from $23.25.

Therefore every time Intel Stock rises these people dump their shares. They want to “break-even” and get out. Many believe that they will just buy back in when Intel Stock falls back to $22.60 and then ride it up to $22.90 or maybe even $23.00 and make a bit of money. The problem is they don’t buy back in because once they have dumped their shares they are nervous. This leads to very choppy trading and keeps the stock contained in a very narrow trading range.

As that trading range tightens, which is what is happening right now to Intel Stock, the range will break either up or down. Normally the route of ease is that chosen by investors which is down. However Intel Stock is strong, has a great record of rising dividends, is the leader in their field with no one even close to their capabilities for the products that they sell. On the flip-side investors are concerned that the PC market is eroding rapidly and Intel Stock may fall as earnings fall.

Therefore put sellers need to be aware of all the ramifications before selling puts. In my last trade I sold to the $21 strike. If Intel breaks lower and falls through the $22.00 support it will easily move to $21. The key to watch for will be a break of the recent lows in Intel stock around the $22.50 valuations. The stock has tested this level at various times last week. The good news is the last few times Intel Stock pulled back it did not fall as low as previous and indeed tried to hold more to $22.70. This may seem like a small victory, but it actually is. It starts to rebuild confidence among investors and that is what a stock needs in order for investors to “trust” it again and place more capital at risk.

This is why for put sellers it is important to consider the trust factor when selling puts. You, yourself, must have confidence that not only is the strike you have sold puts against is of value to shareholders, but it should be of value to yourself as well as often in a declining stock you end up owning shares you have sold puts against.

Stock and Option IWM ETF and Trading For Pennies Strategy

Yesterday I did a lot of trades in the IWM ETF to test out a few adjustments to the strategy. One thing is certain, the need to believe in the overall market direction. This morning’s article looks at picking the right time for using the Trading For Pennies Strategy. I did one trade this morning based on my latest findings. It was double the ordinary returns. While never a guarantee, little by little through continued tweaking this strategy could be excellent for those who love day trading for decent returns.  For Fullyinformed Members you can read that article by logging in to your account. Select this direct link to the article and log in. Select this direct link to review this morning’s IWM ETF Trade. For non-members you can join through this link or review the members home page through this link to see the type of content so far. The members section has been up just a few days.