Wednesday, December 17, 2014

Wednesday's Finalists: HRS, TEF, AXP, ORCL, ACN, KBH

Three symbols made it past the early rounds of analysis -- HRS, TEF and AXP -- all with bear signals. (See "Wednesday's Prospects".)

One, HRS, failed confirmation, rising back within its 20-day price channel.

TEF ran afoul of my present trading preferences. With implied volatility running high across the markets, I'm looking for a specific sort of trade: Vertical options spreads expiring in the front month or sooner if weeklys are available and sold for a credit.

I require that implied volatility be in the 60th percentile or greater of the range created by the most recent low and high. The implied volatility on TEF fell short, coming in at the 34th percentile.

AXP's volatility is extremely high, at the peak of activity for recent months. However, the company publishes earnings on Jan. 15. Rather than opening a position now, I would much rather wait until the day before earnings and then analyze it as a volatility play.

Bottom line: I intend no trades or further analysis of trading signals from Tuesday's markets.

Turning now to the five finalists among symbols publishing earnings after the closing bell today and prior to the opening bell on Thursday: Three made it to the finals: ORCL (tech), ACN (also tech) and KBH (homebuilding).

The other two fell by the wayside early on. I discarded LEN as having the lowest implied volatility of the pack. CCL has a chart trending counter to the Zacks Investment Research assessment of its prospects.

In their favor, ORCL and ACN have weeklys in their options inventories, allowing me to use the JAN1 series to construct trades that would expire in 16 days, close to my two-week idea. KHB would require me to build a 30-day position, so I set it aside.

The weeklys are always less liquid than their monthly options cousins, often limiting choice severely. Such is the case with ACN, whose JAN1 options have open interest mainly in the double digits, below my triple-digit minimum preference.

ORCL doesn't have that problem, so ORCL is my choice for further analysis, which I have completed and posted as "ORCL: Volatility play".

-- Tim Bovee, Portland, Oregon, Dec. 17, 2014


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.

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.

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