Wednesday, December 16, 2009

12/16 Watchlist

Today it is 30 days before expiration of the January options, which means we're into prime time for covered calls. I'll be taking at look today and in subsequent Watchlists at high-volume stocks priced below $20 showing signals that might make them good covered call candidates. See the end of this posting.

A covered call stock needs to meet these criteria:
  • Slightly bullish to neutral prospects. I.e., I don't want the shares to come crashing down, but I also don't want them to have huge rise.
  • Price sufficiently low so that I can afford 100 shares. Calls come in 100-share units, so there's no way to sell a call against fewer than 100 shares.
  • Volume sufficient to provide liquidity. Basically, the higher the better, but not below 1 million shares.

USO is showing a bull signal on a 2.6 percent rise followed by a partial pullback. The trend has been sideways since June. Otherwise, no new indicator signals.

No new signals from the currency pairs or my holdings.

High-volume stocks and etfs priced at 20 or greater:
  • CVS, bear signal, sideways trend since a huge gap down in November
  • KR, bull, sideways since a huge gap down on Dec. 8
  • BRCM, bull on a 4% rise, up since November
  • EBAY, bull, down since September
  • CIT, bear, unknown trend after five trading days since shares resumed trading
  • ESRX, bear on a 4.7% fall, up since March; shares are trading where they were on Nov. 30, so it's not as apocalypic as it might sound.
  • MHS, bear on 4.6% fall, up since March
  • BBD, bear, up since March
  • BA, bear, up since March (with some fairly deep pullbacks)
ESRX and MHS fell on news reports that healthcare would face increased regulation under Obama's policies. Duh.

The bear signals on those two issues are counter-trend, but I shall look hard at them at the next bull signal.

BRCM's with-the-trend bull signal pushes prices to upside resistance, the second test of those levels in the past four days. A possible trade if it breaks above 32.

High-volume shares and etfs below $20 that are possible covered-call candidates:
  • GE, 15.71, bear mode, sideways since October,
  • EWJ, 10.03, bull, sideways since September (with deep pullbacks)
  • EWT, 12.40, bear, sideways since August
  • LVS, 15.88, bull yesterday, sideways since July
All of these have 200-day moving averages that are turning up. GE has a 0.39 premium on the January 16 strike calls, and LVS a 1.09 premium on the 16-strike. Of the two, I would go for the premium and sell a covered call against LVS.

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