By: Tom Gentile
on March 1st, 2023
Originally published via our newsletter previously. Subscribe for early access!
A Strong January for the Markets Followed by a Weaker February
It seems what investors feel about the continued fight the Fed is going through to stave off inflation and how that affects the ongoing rate hikes will determine if February is a consolidation period before price go higher or not.
— Tom Gentile
C1P: Chief 1-Percenter
Corners of the Market
SPY – SPDR S&P 500
TLT – iShares 20+ Year Treasury Bond ETF
The peak charts have populated two support lines near where TLT is trading right now.
This past month equities and bonds (SPY and TLT) have traded in a more correlated manner, which is atypical to what they more often than not tend to do and that is trade inverse to each other.
The markets are currently in a 4-day slide and TLT is now bouncing slightly higher.
I pointed out in the image above’s annotation that it is in a a small bounce, but know bounces in TLT have been sold off before.
I can’t predict what will happen but should the slide in equites continue that could lead to higher price action in TLT. The most recent pivot low is support and if it breaks that lower the next picot low is really close.
UUP – Invesco DB US Dollar Index Bullish Fund
A bit of education on the Darknet ‘S’, Stop or Stall signal.
In the early days of showing Darknet it was said the S signal is a Sell signal, but over time we realized people may take that as the signal to either sell short or sell to close their position.
We say the ‘S’ signal is now a Stop or Stall signal, meaning the security could stop its current run up or it may stall a bit before continuing higher.
Please don’t take this to mean sell short or stop out of a trade. If you see that S signal do your own assessment at that time if you feel you want to exit a trade or initiate a bearish trade – talk it over with your broker.
The S signal has seen the security stall, consolidate and then continue higher so please know that.
USO – United States Oil Fund, LP
The Darknet B signal from last week was tested yesterday. It gapped up today from that support level and is thus far in a holding pattern for today.
The peak chart lines are brought in for this weeks Weekly Newsletter to help visually emphasize more clearly support and resistance price levels.
A close at the low if yesterday’s price range was bearish, but the gap up today shows the support level ‘may’ hold.
We are in the start of the seasonally bullish 5-month pattern for oil so that may help this price level hold.
Should a breach of that support level lower happens it’s possible the next support level down at the price of 63 holds.
GLD – SPDR Gold Shares
Tools and Observations
Darknet plus Fibonacci
Since I have been highlighting the Fibonacci retracement zones in the chart images of some of the charts in the Corners of the Markets section of this Newsletter.
One thing that can be done with the charts of securities that come up in the Darknet scans is plot a Fibonacci retracement view on it.
The Darknet scan already accounts for securities testing multiple (different time interval) channel support levels.
If you want to see one extra layer or visual example of a potential support for that security you can look at the chart of the security that pops up on the Darknet scan results list and then plot the Fib tool on it.
If the security is also testing a fib support level maybe that gives you an extra bit of confidence in considering the option trade on it.
Here is the first 10 listing of a current Darknet Scan search:
The security meets the Darknet scan criteria and it is testing a fib retrace level.
If this appeals to and you look further into consideration of the option the Darknet Scan and tools finds that has the lowest percent to double calculation.
“Percent to double is a reading showing how much of a percentage move higher (in this case) and the corresponding price that percentage equates to.
It’s that percentage / price that the security has to be at come options expiration for the premium of that option to be at a valuation of a double.
Click on the green hyperlink of the option in the Darknet scan results table for the option it shows.
I highlighted the risk and Entry Debit as they are both the same at $0.60, and $60 per contract.
Position-size up to your max risk threshold to determine the number of contracts. If one doesn’t want to spend/risk $300 on the trade the max number of contracts would be 5, (5 x $60 = $300).
A piece of analysis one can accomplish with my tools is calculate where the stock needs to be at certain time intervals between the time one enters a trade until expiration day in order for the value of the option premium to double.
If one bought to open this option shown at $0.60 then a double would be if it was at $1.20.
We look at worst case scenario in that what if you had to wait until options expiration for it to get to the price needed to double at that time.
That data is found at the bottom of the Risk Graph page title Statistics and Probability.
What the above chat shows is at expiration (O days left) the security would have to be up 5.3% or at the price of $36.20 in order to see the potential double in valuation of the option.
Again, discuss this with you broker if you are considering it before actin on it as we are NOT registered investment advisors, and this is NOT a recommendation.
— Tom Gentile
C1P: Chief 1-Percenter
Stock and options trading has large potential rewards, but also large potential risk.
You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.
This is neither an offer to buy/sell/ or recommend a particular stock or option.
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.
No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
Disclaimer of Warranties and Liabilities Tom Gentile and TomsTradingRoom, LLC including employees, consultants, and editors (“Publisher”) cannot and do not warrant the completeness or accuracy of the content found in our areas, or its usefulness for any particular purpose.
Tom Gentile and TomsTradingRoom, LLC also make no promises that our content or the service itself will be delivered to you uninterrupted, timely, secure, or error-free. Under no circumstances will Tom Gentile and TomsTradingRoom, LLC be liable for direct, indirect, incidental, or any other type of damages resulting from your use or downloading of any content on our site.
This includes, but is in no way limited to, loss or injury caused in whole or in part by our negligence or by anything beyond our control in creating or delivering any portion of Tom Gentile and TomsTradingRoom, LLC.
You are agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that Tom Gentile and TomsTradingRoom, LLC will not be liable for any investment decision made or action taken by you, or others based upon reliance on news, information, or any other material published by Tom Gentile and TomsTradingRoom, LLC.
Tom Gentile and TomsTradingRoom, LLC relies on various sources of information that we believe to be accurate and reliable. However, we make no claims or representations as to the accuracy, completeness, or truth of any material contained on our site.
Tom Gentile and TomsTradingRoom, LLC are educational portals, providing content for educational and informational purposes only. Neither Tom Gentile nor TomsTradingRoom, LLC are a broker/dealer. Investors need a broker to trade stocks and options and must meet certain requirements. All securities, futures, and investments data and ideas are offered to self-directed investors. All prices in USD unless noted otherwise.
A full disclaimer can be found here: http://www.tomgentile.com/legal_disclaimers.html.