The Arena
The S&P looked set to march lower last night only to fight back throughout the day and end little changed. It does seem as if tomorrow could be more of the same. A tall glass of uncertainty garnished with bearishness and lime. Price has stabilized at this level but the technical analyst is sure to notice the wedge pattern forming. We witnessed something similar earlier this month before notching 3 consecutive and equally large declines. Price has held this current level for several sessions now and some “experts” are suggesting the worst is over. Will the market continue its plunge into the abyss or do we fight higher from here? We’re going to find out…
The Materials sector is currently out behind the wood shed and papa made em’ pick their own switch. Additionally, papa’s investment portfolio is in the tank and he’s drinking again so I’m not sure how quickly this one can get up. Looking specifically at the Dow Corporation (DOW), my assumption is price has returned to a “fair” market value, albeit rather quickly. In that light I’ll be considering a bullish play in the near term and by all accounts a bearish play is likely more accurate. Can this stabilize or even move higher from here?
The Coach
Fundamentally, the Dow Corporation is a buy by my assessment. I’m currently holding several shares in my investment portfolio. If you’re interested you can view my entire portfolio in the Investment Locker room or follow along with all OptionBoxer’s options trades in the Options Locker room.
DOW sales growth looks strong by last years data and with cash on hand I think the stock is capable of climbing higher. Unfortunately however, markets can remain irrational far longer than we can remain solvent so try to look alive. On the premise that price has returned quickly to its regularly scheduled programming I’ll be considering a bullish trade in the near term with the thought investors are viewing this decline and the healthy dividend as a potential buying opportunity. That said, this fall is of the double top variety and that isn’t usually followed by anything good. Tighten up those stops!
Here’s a little more from Yahoo Finance: Dow Inc. (DOW) Gains But Lags Market: What You Should Know.
The Attack
With the Dow Corporation having shed approximately 2 years worth of gains and price currently holding a previous support level I think the worst is over. You should take notice though that since the high in April Dow Corporation has dropped nearly 30% of its value which doesn’t exactly make me feel all warm and fuzzy.
Will this kid get up and shake off the beating to meet his buddies at the park or is he simply headed for another switch? Time will tell…
Bullish assumption
| Buy To Open | Sell To Open | Entry Order | Total Risk | Prob. of 50% Profit |
| 19 AUG 22 55 Call | 19 AUG 22 57.5 Call | $82.00 | $82 | 63% |
Bearish assumption
| Buy To Open | Sell To Open | Entry Order | Total Risk | Prob. of 50% Profit |
| 19 AUG 22 52.5 Put | 19 AUG 22 47.5 Put | $164.00 | $164.00 | 60% |
God Bless,
Jeff
