In 2017, as Investment Research Group, Inc. d/b/a www.stockbarometer.com expands its borders, we will be launching a new service called Stock Barometer Australia. Visit our site to start up.  Below is their weekly commentary:

Stock Barometer Australia Commentary week ending 12/23/16

ASX 200
We are seeing signs which warn of a potential down move. We are still in BUY mode, but if we close below 5510 then go to cash.

ASX

 

EWA
We are in cash here. This one is a little tricky as we had the dividend this week, but we exited immediately after this and remain in cash. With the dividend this trade was either a very small loss or gain depending on when one entered.

EWA

IWM
We remain on a SELL signal, and this past week saw the predicted retest of highs – and this appears to be setting up bearishly. We need a break below the 12/14 lows to confirm this.

IWM

DBA
This past week we had a buy signal then due to a lack of follow through we immediately sold (to cash in our case).
In this case it always seems hard to exit, after all, why not hold on and see what happens – bad idea. The close below the Monday lows on Friday is showing we did the right thing here.

dba

NCM
We are now on a BUY signal on the daily system having reached this on Thursday. The weekly system is a way off triggering, but we would advise taking profits on a short position if you are still in one. This represents a 13% gain.

NCM

SGG
We are still on a SELL signal here.

sgg

JJC
Further downside this past week as we are still not yet at a buy point. As we see in the chart below however we are sitting at the 38.2% Fibonacci retracement. It is no surprise to see a halt to the slide here. We could yet make a higher low and move higher, so stay tuned…

jcc

CBA
CBA has moved up this past week, and our stop has followed. We are still on a BUY here but will move to a sell with a close below 82 (marked in purple). This one has been frustrating but this trade will almost certainly result in a gain (barring a black swan event…)

cba

BHP
We are still on a SELL signal and are now at potential support, see white line after more falls this week. However, we could still see a move further to the yellow support line.

bhp

AUDNZD
We did not see the breakout this week and went to a SELL position during the week, for minimal loss or gain. On Friday we saw further downside.

audnzd

USO (or OIL)
We are still on a SELL signal and ended the week as we started pretty much.

uso oil

TLS
We went to cash this week for a small loss. Stay that way as we see which way this one will move. We believe there is a downside bias but lets wait for the stock to indicate the direction.

tls

GLD
We remain on a SELL with gold. The same arguments as last week prevail.

gld gold

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Traders be on the look out for a top forming this week. This is one of our 300 market timing indicators to help traders and investors identify potential buy and sell points.

Nyse Crash Hindenberg Omen

For the above signal from the Hindenberg Omen to be valid, we need to see the McLellan Oscillator to be negative…it is:

McLellan Oscillator

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Traders be on the look out for a top forming this week. This is one of our 300 market timing indicators to help traders and investors identify potential buy and sell points.

AAII Stock Market Signal

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Traders be on the look out for a top forming this week. This is one of our 300 market timing indicators to help traders and investors identify potential buy and sell points.

Market timing cycle indicator

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Traders be on the look out for a top forming this week. This is one of our 300 market timing indicators to help traders and investors identify potential buy and sell points.

Stock Market Timing

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Good morning Traders,

Here is our TOP 100 Covered Calls for the S&P 500.

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top 100 covered calls S&P 500

 

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In stock market timing, there are very complex indicators and some indicators that are very simple.  Here’s a simple one.  The Nasdaq Arms Index, develeoped by Richard Arms, is a ratio of advancing and declining breadth over the ratio of advancing and declining volume.  Here’s what it looks like right now:

Nasdaq Arms Trin

It is reaching a relative low level, which would suggest we’re closing in on a bottom.  Based on this and some of our other research, I would expect a low formed this week.

By the way, it’s called the TRIN as well, because it was referred to as the Trading Index – or TR-IN…

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Selling covered calls can help you profit more from your stocks!  We do the work for saving you research time!  As a member of the Daily Stock Barometer System, you get Covered Call trading advice for up to 5 of your own stocks.

How’s it work?  Just CLICK HERE to sign up for our advisory (only $1 for the first 4 weeks) and email me your 5 stock pics and you’ll get up to weekly advice on which Covered Calls are the best to sell – boosting profits on your current stock portfolio.

The covered calls advice will be featured in our tables and organized by potential profit.

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What is a Covered Call?  You own stock shares, and you sell calls at a strike greater than or equal to the stock purchase price. You profit if the stock rises or moves sideways but your upside profit is limited. You lose if the stock moves somewhere below your initial stock purchase price. The loss is offset by the sell call credit.

Here is a summary on how you can put covered calls to work for you.

Covered Calls

The basic covered call is a relatively simple strategy. The owner of a security sells the right to have their security purchased at a predetermined price in the future in return for money now. If the security price does not fall over the life of the option, the call writer will keep the premium collected when the call was sold. The call writer’s profit is limited in exchange for the premium.

Strategies for covered call writing depend on the objective.

· Supplement Return

Covered call writers interested in supplementing the return of existing holding will tend to sell covered calls out of the money. The expectation is not that the security price will rise, but that it will not fall. The seller of out of the money calls often expects to continue holding the security, but hopes to reap some extra return from the proceeds of selling the call.

·       Hedge Against Loss

Covered call writers can protect against downside price movement by selling in the money calls. This is commonly done after a rise in a security that is already held, to protect some of the gains that were already made. Although less time premium is collected on the call, the risk of loss is lessened by the amount that the call is in the money.

·       Speculative Strategies

There are strategies that set objectives such as Doubling in 2 Years, or earning 10% a Month. A portfolio can be doubled in two years by successively selling covered calls that return 50% time premium for a term that last approximately 1 year. It is also possible to sell covered calls that return 10% in approximately one month. Both of these strategies require that the underlying stock price is at or above the strike price at expiration, and that this goal can be achieved repeatedly. Theoretically, a stock will lose some value 50% of the time.

How to interpret these lists

Each list is sorted by the Return Rate to Expiration.  As you can see, some covered calls can produce a potential annualized return rate of 75 to over 100% – so you can see why this is such a lucrative endeavor!  Second consideration is the probability of a profit.

Probability of Profit is the probability that the predicted stock price falls within the option trade’s profit zones. The predicted stock price distribution is computed by projecting the stock price randomly into the future using the SV.

Upside Breakeven: An option trade almost always has a point where the value of the trade goes from losses to profits. The stock price where the profit crossing occurs is referred to as the breakeven price. Many option spreads have two breakeven prices. The higher breakeven price is the upside breakeven and is usually above the stock price. The downside breakeven price is the lower stock price crossing of the option expiration risk curve.

How to trade a Covered Call

By selling a call you grant the buyer the right to buy 100 shares of the underlying stock or index at the strike price any time prior to expiration. You receive the option premium from the call buyer, and the brokerage house takes its cut from both of you. The actions that may occur include: you later sell the option, the option expires and you keep the premium, or the buyer exercises the call and you must provide the shares.

You own 100 shares of a stock or index. Using TXN in the prior example, you decide you would not mind selling it at an option Strike price of 110. Your desired strike price is 110. You sell a TXN Jan00 call at 110. Owning the stock and selling a call is an example of a covered call option trade.

In this covered call option trade you receive 3.25*$100 = $325 dollars into your account (minus brokerage commissions). The Jan00 110 call on Dec 10 has no intrinsic value; hence the $325 is all time value.

If the buyer of the call never exercises it before expiration, you get to keep the $325 dollars, the option premium, and your TXN shares. If the buyer of the call exercises it, you sell your TXN index shares at 110 to the buyer and again keep the $325 premium. You might wonder how a covered call loses money. The call buyer probably exercised the option, because TXN rose above the 110 strike price. The call seller does not participate in price movement above 110 and also loses the 100 shares of the stock.

·       Risks of Covered Call Writing

Writing covered calls is generally considered a conservative option strategy. This only holds true if covered calls are written on conservative stocks. The covered call writer will suffer losses if the underlying security price drops. The most significant measure of this risk is the volatility. Writing covered calls on stocks with low volatility is conservative. Writing covered calls on highly volatile stocks is inherently more risky.

·       Effect of Dividends on Calls

When a stock pays a dividend, the price of the stock is reduced by the amount of the dividend. For example, if Frontline (FRO) closes at 41.50 and pays a $2.00 dividend, the open price will be adjusted downward prior to the open to $39.50. There may appear to be an advantage to the call writer, since it is known that the price of the stock will drop. Why not sell the $40 call when it is known that the stock will drop $2? The short answer is that the call is discounted to reflect the impending drop in the stock price.

Regards,

Investment Research Group, Inc.

www.stockbarometer.com