The market direction outlook for Wednesday was for stocks to show weakness but for any dips to be opportunities for more trades. I expected any dips to be bought by investors which is what happened throughout the day. For FullyInformed Members, the market direction portfolio did especially well today as I was stopped out several times and bought back in three times during the day.
McDonalds Stock
Among the stocks worth considering are McDonalds Stock which has been in a decline for months now. Yet despite the decline the stock is holding the $92.50 level on each pullback. This continues to be a major support level for the stock. With the stock now overbought, it appears that it may pull back again. Already the March 22 $92.50 traded as highas 81 cents today. This put strike could easily earn 90 cents to $1.00 if an investor kept an eye on the stock.
Mondelez Stock
Another favorite stock is Mondelez Stock. Not overbought but not oversold as well, the stock is pushing back away from the Middle Bollinger Band today pushing up the $32 put premiums which traded as high as 42 cents today. The $32 has decent support but if it should be broken, this stock trades in one dollar increments making rescue or repair strategies easy to apply. $31 has significant support and at $32 the stock would be traded below 21 times PE.
Johnson and Johnson Stock
Another great trade from today was Johnson and Johnson Stock which fell as low as $91.95 during the day. I sold the March 22 $90 put strike today for $1.05. I won’t be surprised if tomorrow the stock moves lower pushing up the premiums on the March puts.
These are just three stocks from the many that are sitting at inflection points which are helping to keep put premiums elevated. Days like today are designed for selling puts and trading within the Ultra ETFs and the Trading For Pennies Strategy.
S&P Market Direction for Feb 12 2014
Today was a perfect sideways day. The SPX made several lower highs during the day and lower lows. The early morning high ended up being the high point for the day. From the early morning rally stocks fell back despite a second rally around 11:00 AM. That rally ended with the market putting in a morning low which was retested in the afternoon. The rally in the afternoon failed to break through to any new ground. In the end, the S&P ended pretty well where it started.
Advance Declines For Feb 12 2014
Momentum is still to the upside. 55% of stocks were advancing on Tuesday versus 42% declining. There were 120 new highs and 77 new lows. The number of stocks back setting new highs is starting to rise, indicating that the momentum remains to a continuation of the uptrend.
Market Direction Closings For Feb 12 2014
The S&P closed at 1819.26 down just 0.49. The Dow closed at 15963.94 down 30.83. The NASDAQ closed at 4201.29 up 10.24.
The IWM ETF closed up $0.44 to $112.47
Market Direction Technical Indicators At The Close of Feb 12 2014
Let’s review the market direction technical indicators at the close of Feb 12 2014 on the S&P 500 and view the market direction outlook for Feb 13 2014.
The 1750 level is holding the S&P up. The 1800 was easily broken through yesterday and the market held the gains made following a sideways day today. This is a great sign that the direction up is still intact.
For Momentum I am using the 10 period. Momentum has been the best indicator over the past two months, replacing MACD as the most accurate indicator. Momentum is continuing to climb.
For MACD Histogram I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9. MACD (Moving Averages Convergence / Divergence) issued a buy signal on Feb 11. The buy signal was strongly confirmed today. The next move should be higher for stocks.
The Ultimate Oscillator settings are Period 1 is 5, Period 2 is 10, Period 3 is 15, Factor 1 is 4, Factor 2 is 2 and Factor 3 is 1. These are not the default settings but are the settings I use with the S&P 500 chart set for 1 to 3 months.
The Ultimate Oscillator is very overbought. This doesn’t mean the market direction will turn down immediately but it does indicate that the move up could stall here for another day.
Rate Of Change is set for a 21 period. The rate of change is back negative today. While not a concern it should be watched.
For the Slow Stochastic I use the K period of 14 and D period of 3. The Slow Stochastic is signaling again today that the market direction is up and it issued a buy last Thursday.
For the Fast Stochastic I use the K period of 20 and D period of 5. These are not default settings but settings I set for the 1 to 3 month S&P 500 chart when it is set for daily. The Fast Stochastic is also indicating that the market direction is up for the sixth day and it also issued a buy signal on Feb 6 which helps to confirm the buy signal from the Slow Stochastic.
Market Direction Outlook And Strategy for Feb 13 2014
The direction is now clearly up. This means I am back trading the market to the upside. I sold puts today in a variety of stocks as explained above. The momentum trades such as the market direction portfolio are all being slanted toward the upside. This makes it easy to step in and pick up additional shares on dips and then try to unload them in rallies.
For Thursday I am expecting another day of sideways movement but with a bias to the upside.
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