QQQ Put Hedge

QQQ retreated from the 50 SMA and is below the 200SMA.  There’s also an inverted hammer that should hold for today.  This should be a good reversal down to support at 50.  A bear put vertical could be a good play here.  The Oct 54/50 is going for about 1.10.

 

 

 

Apple Trade Strategy Post Jobs

 

Steve Jobs announced that he is resigning today, sending Apple stock lower. Apple went as low as 350 in the after hours session.  This is a pull back but may not be the time to step into the fire.

 

2011-08-24-AAPL-TOS_CHARTS

On a daily chart we have several areas to look at.  Around 350 is current support in a descending triangle.  Since there’s bearish news this could completely break down.  Goldman Sachs recommended that their subscribers Sell the January 2012 $300 PUT.  This means the seller agrees to take around $11 in premium and agrees to buy the stock for $300 regardless of how low it goes.  It’s like being an insurance company.  That idea lost 30% today so be glad you didn’t do it.  There are support levels around 325/320 and 300/295.

2011-08-25-AAPL-PROPHET

On a one year chart the 320 level corresponds to the 50% Fibonacci level and 300 corresponds to the 61.8% Fibonacci level.  300 seems like a reasonable target.  That is about the height of the descending triangle subtracted from its base.

2011-08-25-AAPL-FIB-PROPHET

A two standard deviation move from this afternoons close is 291.19.  Three standard deviations is 273.44. 

The September 290/285 Bull Put Spread could be a reasonable bet to leave a limit order on. Less likely but safer would be the 275/270 Bull Put Spread.  The order should be for 25% of the width of the spread, in this case 1.25 minimum. 

Order size would need to be according to individual taste and risk.  Buying some long puts in QQQ as a hedge with some of the proceeds of making this trade could lessen the pain if the stock plummets past either the second or third standard deviation.

Swiss Franc Setup For Rebound

 

Swiss Franc Futures have triple bottomed at an area near resistance from the end of July.  MACD, Stochastics, and RSI haven’t completely reversed yet and the Persons Proprietary Signal has not indicated a buy yet.  This may be worth watching if it goes sideways for a bit and then reverses its downtrend.  The Chaikin Oscillator is about to move above 0 so this could indicate a bullish move on the Swiss Franc in the next few days.  Any negative news item from Europe should improve the value of the currency along with any discussions of QE3 from the US.

 

2011-08-22-6S_F-PROPHET

Next Step In The Rollercoaster

 

Friday points to a very unhappy day next week.  SPY printed an inverted hammer at the close which is a bearish sign.  Volume was almost as high as the previous day which was also bad, and both days volume is higher than any of the recent good days except 8/9. 

2011-08-20-SPY-ROPHET

 

 

Other technical indicators are also pointing down, including MACD, Stochastic, and RSI.  The Persons Proprietary Signal also gave a sell on Thursday.  There may be some support around 112, but after that it could be serious sailing lower.

2011-08-20-SPY-TOS_CHARTS

 

If you have long positions that are working keep the stops tight, other positions should be cut loose until this volatility blows over.  At the very least getting delta neutral or slightly negative delta would be a good idea in the short term.  Bonds and precious metals seem to be the current hot spot for hedging or speculating.  TLT has been up for the past 4 weeks and GLD has been up for 6 weeks, both showing buy the Persons Proprietary Signal for the same amount of time. 

Some straight Bear Puts on SPY could be a good hedge or speculative position.  Shorting the ES futures is also an option.  In and out trades into some of the 3x Bear ETFs might also work here.  If you are not into trading a wild market it may be best to sell everything and sit this out until we see that things have really turned around.  That will probably be a break above 124-125 on SPY.  There we have old support from mid March, which may be some solid resistance.  Be prepared to short again if it bounces off that point. 

Don’t Invest Through Life Insurance

 

In China there is a trend of taking out a universal life (UL) insurance policy on newborn children as an investment vehicle. UL policies are a combination of life insurance and savings.  Essentially the policy holder pays for life insurance and then some.  The money that does not go toward the insurance premium becomes savings with interest.  While it makes sense to have some level of life insurance on children to pay for funeral expenses should something bad happen, UL type insurance is not the best method to save for their college or first house.  In China most policies will produce up to 4% interest on the excess cash.  Inflation is expected to be 5% which amounts to a –1% savings rate on the money invested in a UL policy.

When attempting to do a job it is always best to use the best tool to do the job.  If you want to have life insurance for funeral expenses and to help the family along if a working member of the family should pass away there are better vehicles to place your money into than UL.  Term life is a much cheaper option and better suited to most people’s situations.  Term life provides coverage at a fixed monthly rate through the term of the insurance.  The insurance cost never goes up during the term, but there is no cash out at the end of the term.  Recently there has been a price war among term life companies and coverage is extremely cheap.  A 20-year term policy for a mid 30’s male in great health will go for around $60/mo for $1,500,000 of coverage.  If you need to only cover your salary for a couple of years and pay for your funeral you will need much less.  A basic term policy for most people is as affordable as renters insurance.  If you want to make a sizable charitable donation upon your death then of course you will want one of the giant policies described above.

In the US there are many other options than UL for investing for your children’s future such as a 529 Plan.  Life insurance is best used for providing for your funeral expenses, leaving some for your family, and donating to charity.  The savings from going with a term life policy vs. a UL policy can be invested in some other vehicle that will hopefully outpace the inflation rate.