Tim Bovee, Private Trader: Tuesday's Finalists: MCD, LVS, INFY, COST

Tuesday, December 9, 2014

Tuesday's Finalists: MCD, LVS, INFY, COST

This has not been a day of easy choices. Of the 11 survivors of my early rounds of analysis (see "Tuesday's Prospects"), many survived the later screens that I applied, leaving me with a wide choice as I tried to narrow the field down to a single finalist.

In the end, I've selected the gaming and resort hotel company Las Vegas Sands (LVS) as having the strongest chart out of the three that made it to the finals, and I shall post an analysis today prior to the closing bell.

Of the others, TEX failed confirmation, and four had charts that were insufficient to support a trade: EDZ, MGM, CSOD and HTS.

I then summarily eliminated from pack symbols with average volume of under a million shares a day. CNX, DDD and FE were tossed out at that stage.

My reasoning is that at this point, I'm looking for short term plays, in anticipation of the next earnings season, which begins Jan. 8. For those, I need to build short vertical spreads, sold for a credit. That structure requires a high degree of liquidity, and even better, I'll be able to pick a symbol that has Weeklys in its options inventory. It also requires high implied volatility, with preference going to those that are in the 60th percentile or higher of the prior up trending range.

The volume cut left three: MCD, LVS and INFY.

I tossed INFY because it lacks Weeklys in its options inventory. Both MCD and LVS have bearish charts.

MCD had a huge decline on Monday and is adding to it today, increasing the chance of an upward reactions as the bottom feeders swoop in. The decline has brought MCD near support.

LVS is further away from support and has been declining at a more measured pace.

Regarding potential volatility plays keyed to earnings:

My analysis after the close showed no suitable candidates. In trading this morning, implied volatility on COST has brought it within my guidelines and I shall post an analysis today.

The addition of COST has put me way behind, so I'll be taking whatever shortcuts I can manage in order to get the analysis done, but of course without compromising quality. My analyses are guides to my own trading, which I post about openly, so I have a horse in this race. If I do a sloppy job, then I pay the price.

-- Tim Bovee, Portland, Oregon, Dec. 9, 2014

References

My shorter-term trading rules can be read here. My longer-term trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here. My volatility trading rules can be read here.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.