Trader’s Notebook

3:45 p.m. New York time

Correction. The price targets for Wave C{-10} in the Elliott Wave section were slightly off. I’ve corrected the calculation and the text, and have added red dashed lines to the chart that shows the likely range of the wave’s endpoint.

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 moved slightly higher during the session, into the mid 3900s on the futures. No change in the analysis. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures traded in a narrow range, in the low 3900s, after trading resumed overnight.

What does it mean? The upward correction that began on May 12 from 3855 is now in its third and likely final leg.

What are the alternatives? There are two:

Alternative #1: The second leg of the correction is still be underway. The price has reached the target price range and yet could have a bit more downside left.

Alternative #2: The upward correction ended on May 17, and the decline that followed is a resumption of the downtrend that began on April 21 from 4509.

[S&P 500 E-mini futures at 3:30 p.m., 45-minute bars, with volume]

What does Elliott wave theory say? Under my principal analysis, wave 4{-9}, which began on May 12, is now in its third wave, C{-10}. In a Flat corrective pattern, the C wave is usually 100% to 165% as long as the preceding wave A. In this case, wave A{-10} was 240 points long, wave C that is 100% of that length would reach 4047.50, and at 165% of that length would reach 4203.50.

Wave C{-10} ends the corrective pattern, but sometimes corrections, especially 4th waves, will take a compound form, connecting two or three corrective patterns together within a single parent wave. The patterns are separated by connecting waves.

Under Alternative #1, wave B{-10} — the middle wave of its parent wave 4{-9} — is still underway. Friday’s low, 3807.25, was within the target price range, and the pattern can be counted as having three waves internally. Yet the rise and pause after that low could be subwaves of the third subwave within B{-10}.

Under Alternative #2, wave 4{-9} ended on May 17 at 4095. The internal wave structure is a bit muddy — trending waves and corrections seem shallower than they ought to be. Nonetheless, it can be counted as being a complete 4th wave correction.

We Are Here.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

  • Index:
  • 5{0} Intermediate, 12/26/2018, 2346.58 (up)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 1{-6} Submicro, 1/4/2022, 4808.25 (down)
  • 5{-7} Minuscule, 3/29/2022, 4631 (down)
  • 5{-8} Subminuscule, 4/21/2022, 4509, (down)

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, in the ever-changing markets, we can judge that similarity of structure only after the fact.

See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, May 23, 2022

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.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. By falling below 3855, the starting point of the first leg of the present upward correction, the price decline during today’s session cleared up one ambiguity in the chart: The wave 4{-9} correction is taking the form of a Flat, which is the most common form taken by 4th waves. That Flat is in its middle segment, wave B{-10}.

Although a 138% maximum retracement of the A wave is a common outcome of the B wave in a Flat, it’s not a firm rule, just a tendency. So the price may well move below the present 3807.50 low of the day toward the 138% retracement level, 3763.80, and might even drop lower. Or, the low of the day might be the end of wave B{-10} and the start of upward wave C{-10}.

No change in the mid-day re-analysis. I’ve updated the upper chart.

1:10 p.m. New York time

A fresh analysis. The S&P 500 reversed and moved below the May 12 low, 3855. That invalidates the principal analysis from this morning and pushes things back to Thursday’s analysis. The middle wave of an upward correction that began on May 12 is still underway.

In Elliott wave terminology, the present wave is B{-10} within wave 4{-9}. The B wave began on May 17 from 4095. B waves often retrace between 100% and 138% of the preceding A wave. This B wave has already broken through the 100% retracement, 3855, and dropping toward the 138% retracement, 3763.80.

Once wave B{-10} is complete, then this morning’s principal analysis of wave C{-10} will kick in.

I’ve retained the old chart and added a new one, with red lines marking the 100% and 138% retracement levels.

[S&P 500 E-mini futures at 3:30 p.m., 40-minute bars, with volume]

10:15 a.m. New York time

FL earnings play exit. I’ve exited my short bull put options spread on FL for 58.5% of maximum potential profit and have updated the trade analysis with results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight, retracing 38.2% of the rise from May 12 to May 17.

What does it mean? The overnight rise is the third leg of an upward correction within a larger downtrend that began on April 21. When the present rise is complete, it will be followed by a resumption of the downtrend that will carry the price below the May 12 low, 3855, and perhaps significantly lower.

What are the alternatives? There are two.

Alternative #1: The upward correction ended on May 17, and the subsequent decline was a resumption of the downtrend, the overnight rise being a smaller upward correction within that downtrend.

Alternative #2: The present corrective pattern will be followed by a second corrective pattern and perhaps a third, forming a compound correction.

[OUTDATED: S&P 500 E-mini futures at 9:35 a.m., 40-minute bars, with volume]

What does Elliott wave theory say? Under the principal analysis, wave C{-10} within wave 4{-9} — the third leg within an upward correction — began on May 19.

The upward potential of this wave C depends upon the pattern of the three-wave correction.

If it’s a Zigzag (A: 5 waves internally, B: 3, C: 5), then it will often cover the same distance as the preceding A wave, which was 240 points long, giving a target of 4096.

If it’s a Flat (A: 3, B: 3, C: 5), then wave C will often retrace 100% to 165% of wave A, giving a target of 4095 to 4251.

Under Alternative #1, wave 4{-9} ended on May 17 at 4095. The subsequent decline was wave 1{-10} within downtrending wave 5{-9}, and the overnight rise was wave 2{-10}, an upward correction.

Under Alternative #2, the end of wave C{-10} won’t be the end of wave 4 {-9}. Instead, the C wave will be followed by a connecting wave, which I will label wave X{-10}, and then by a second three-wave pattern, and perhaps a third in a compound correction.

We Are Here.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

  • Index:
  • 5{0} Intermediate, 12/26/2018, 2346.58 (up)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 1{-6} Submicro, 1/4/2022, 4808.25 (down)
  • 5{-7} Minuscule, 3/29/2022, 4631 (down)
  • 5{-8} Subminuscule, 4/21/2022, 4509, (down)

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, in the ever-changing markets, we can judge that similarity of structure only after the fact.

See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, May 20, 2022

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.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

FL Trade

Foot Locker Inc. (FL)

Update 5/20/2022: I exited my short bull put vertical spread on FL, 28 days before expiration, for a $0.27 debit per contract/share, a profit before fees of $38 per contract. Shares were trading at $33.07, up $2.64 from the entry level.

The Implied Volatility Rank at exit was 90.8%, down 13.2 points from the entry level.

I exited on the day after entry at 58.5% of maximum potential profit, well above my normal exit point for earnings plays, 25% of max.

Shares rose by 8.7% over one day for a +3,167% annual rate. The options position produced a 140.7% return for a +51,370% annual rate.


I have entered a short bull put vertical spread on FL, using options that trade for the last time 29 days hence, on June 17. The premium is a $0.65 credit per contract share and the stock at the time of entry was priced at $30.43.

The Implied Volatility Ratio stood at 104.0%.

Premium:$0.65Expire OTM
FL-bull put spreadStrikeOddsDelta
Puts
Long25.0071.0%20
Break-even28.1565.0%25.5
Short27.5059.0%31

The premium is 52% of the width of the position’s short/long spread. The profit zone covers a 7.5% move to the downside and an unlimited move to the upside.

The risk/reward ratio is 2.8:1, with maximum risk of $185 and maximum reward of $65 per contract.

How I chose the trade. The trade was placed to coincide with FL’s earnings announcement, before the closing bell on the day after entry. The short strikes were set to coincide with the expected move of $4.59 either way, based on options pricing, which gives a price range of $25.92 to $34.94.

By Tim Bovee, Portland, Oregon, May 19, 2022

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.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 traded in a narrow range during the session, remaining fewer than 90 points above the overnight low on the futures. No change in the analysis. I’ve updated the chart.

2:05 p.m. New York time

FL earnings play entry. I’ve entered an earnings play on FL, using options that expire in 29 days, and have posted an analysis of the trade.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell overnight to 3856, a point above the starting point of the upward correction that began on May 12, and then rose slightly.

What does it mean? The upward correction is in its second leg, and how much further the price can fall will depend upon what form the correction is taking. Under my principal analysis, the correction is a Flat and could reach as low as the 3760s.

What’s the alternative? Under my first alternative analysis, the correction taking the form of a Zigzag, which never moves below the start of the first leg of a correction. The downside potential is one point, to 3855.

Under a second alternative analysis, the entire upward correction ended on May 17 and there is no specified limit to the downside.

[S&P 500 E-mini futures at 3:30 p.m., 35-minute bars, with volume]

What does Elliott wave theory say? Wave 4{-9}, an upward correction, began May 12 from 3855. On that all three possible analyses agree.

Under my principal analysis, the first wave within the correction, wave A{-10}, has three waves internally, meaning that the correction is taking the form of a Flat, with three subwaves within the A wave. This is the more common form of a 4th wave correction. The B wave of a Flat often will retrace 100% to 138% of the preceding A wave (the dotted red lines on the chart), bringing the price potentially as low as 3763.80. This is the scenario shown in the chart.

Under my first alternative analysis, wave A{-10} has five waves internally meaning that the correction is taking the form of a Zigzag. The A-wave count is a bit messy, and I can see it as five waves or three, depending upon how I define the degree of each movement within the wave. The B wave of a Zigzag never moves below the start of the preceding A wave. The B wave’s overnight low, 3856, is one point above the start of wave A (the top dotted red line on the chart).

Under my second alternative analysis, the rise from May 12 to May 17 is the entirety of wave 4{-9}, with three waves within it. Under this scenario, the decline now underway is wave 5{-9}, and there is no limit to how low it can go, beyond the need for waves of the same degree to be more or less proportionally similar to each other.

What the chart shows as wave B{-10} is consistent with both the principal and first alternative analyses, and with the second analysis, if the wave is renumbered to wave 5{-9}. A dip below 3855 would eliminate the first alternative — the Zigzag scenario. A move below 3763.80 would most likely eliminate the principal analysis — the Flat scenario. If both are eliminated, then the 5th wave scenario remains.

We Are Here.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

  • Index:
  • 5{0} Intermediate, 12/26/2018, 2346.58 (up)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 1{-6} Submicro, 1/4/2022, 4808.25 (down)
  • 5{-7} Minuscule, 3/29/2022, 4631 (down)
  • 5{-8} Subminuscule, 4/21/2022, 4509, (down)

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, in the ever-changing markets, we can judge that similarity of structure only after the fact.

See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, May 19, 2022

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.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 fell during the day in the downward middle wave of an upward correction that began on May 12. The correction is wave 4{-9}, and the middle wave is B{-10}. Fourth waves tend to be Flats,. and that’s how I count wave 4{-9}.

The B wave within a Flat tends to retrace from 100% to 138% of the preceding A wave. Wave A{-10} was 247 points long. If this B-wave retracement behaves normally, it will end between 3855 and 3763.80.

No change in the analysis. I’ve updated the chart, with red lines showing the 100% and 138% retracement levels.

2:20 p.m. New York time

LOW earnings play exit. I’ve exited my short bull put vertical spread on LOW, for 75.6% of maximum potential loss, and have updated the trade analysis with results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures stayed close to the 50% retracement mark in overnight trading, and then declined as the opening bell drew near.

What does it mean? The first leg of the upward correction that began on May 12 ended at yesterday’s high, 4095. The second leg, a downward move, can be expected to retrace at least 90% of the first wave and perhaps as much as 138%.

What’s the alternative? Although the first leg appears to have met the requirements for completion — three subwaves within a Flat pattern — there’s enough ambiguity on the chart to suggest that the first leg may still be unfinished.

[S&P 500 E-mini futures at 3:30 p.m., 35-minute bars, with volume]

What does Elliott wave theory say? Under my principal analysis, wave A{-10} within wave 4{-9} ended at Tuesday’s peak, 4095, and wave B{-10} to the downside has begun. Fourth waves tend to take a Flat pattern — although not always — and Flats internally have three subwaves within the A wave, three within B and five within C. However, if wave 4{-9} turns out to be a Zigzag, then subwave A{-10} must have five waves internally and will rise ore before reaching completion. That possibility is my alternative analysis.

We Are Here.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

  • Index:
  • 5{0} Intermediate, 12/26/2018, 2346.58 (up)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 1{-6} Submicro, 1/4/2022, 4808.25 (down)
  • 5{-7} Minuscule, 3/29/2022, 4631 (down)
  • 5{-8} Subminuscule, 4/21/2022, 4509, (down)

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, in the ever-changing markets, we can judge that similarity of structure only after the fact.

See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, May 18, 2022

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.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

LOW Trade

Lowe’s Companies Inc. (LOW)

Update 5/18/2022: I exited my short bull put vertical spread on LOW, 30 days before expiration, for a $257 debit per contract/share, a loss before fees of $97 per contract. Shares were trading at $180.15, down $11.25 from the entry level.

The Implied Volatility Rank at exit was 81.8%, down 11.2 points from the entry level.

I exited on the day after entry, for 76.6% of maximum potential loss, because the position moved against my trade and was unprofitable.

Shares fell by 5.9% over one day for a -2,145% annual rate. The options position produced a 37.7% loss for a -13,776% annual rate.


I have entered a short bull put vertical spread on LOW, using options that trade for the last time 31 days hence, on June 17. The premium is a $1.60 credit per contract share and the stock at the time of entry was priced at $191.40.

The Implied Volatility Ratio stood at 93.0%.

Premium:$1.60Expire OTM
LOW-bull put spreadStrikeOddsDelta
Puts
Long180.0066.0%29
Break-even186.6062.0%32.5
Short185.0058.0%36

The premium is 64% of the width of the position’s short/long spread. The profit zone covers a 5.1% move to the downside and an unlimited move to the upside.

The risk/reward ratio is 2.1:1, with maximum risk of $340 and maximum reward of $160 per contract.

How I chose the trade. The trade was placed to coincide with LOW’s earnings announcement, before the opening bell on the day after entry. The short strikes were set in consideration of the expected move of $10.62 either way, based on options pricing, which gives a price range of $180.78 to $202.20, balanced against the need for a low risk/reward ratio and a sufficiently high premium to make the trade worthwhile.

By Tim Bovee, Portland, Oregon, May 17, 2022

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.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 rose six points above the overnight high, to 4089.75 on the futures. The price declined to a 38.2% retracement of the decline from May 4 to May 12 and then moved back up to a 50% retracement. The upward correction, wave 4{-9}, continues. No change in the analysis. I’ve updated the chart.

1:30 p.m. New York time

LOW earnings play entry. I’ve entered a short bull put vertical spread, using options that expire on June 17, and have posted an analysis of the trade.

12:55 p.m. New York time

HD earnings play exit. I’ve exited my short bull put options spread on HD for 64.9% of maximum potential profit and have updated the trade analysis with results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to rise overnight, reaching into the 4080s.

What does it mean? I’ve revised the principal analysis to accommodate the length of the rise. The March 12 low marks the end of the downtrend that began on May 4 from 4303. The subsequent rise is an upward correction that has so far retraced 50% of the decline. I’ve placed a Fibonacci retracement grid over the chart.

What’s the alternative? If the price moves above 4303, the high of May 4, then the count may require a revision. I discuss the reasoning behind that conclusion in the Elliott wav theory section below.

[S&P 500 E-mini futures at 3:30 p.m., 30-minute bars, with volume]

What does Elliott wave theory say? The Elliott wave theory rule that required a reanalysis imposes a limitation on 4th waves: They never move beyond the end of the preceding 1st wave. Under my previous analysis (see yesterday’s Trader’s Notebook), the uptrend that began May 12 was labeled as wave 4{-11}. Its overnight move beyond the end of wave 1{-11} meant the labeling no longer matched the chart — the map no longer matched the territory.

Under the new analysis, I’ve raised the degree of waves within the decline that began on May 4 — wave 3{-9} — and labelled the low of May 12, at 3855, as the end of that decline. The subsequent rise is wave 4{-9}, an upward correction that will likely take the form of a Flat.

Wave 4{-9}, of course, has the same limitation as any 4th wave: It can’t move beyond the end of wave 1{-9}, which is 4303, attained on May 4.

One quirk of the labeling is the placement of waves 1{-10} and 2{-10}. That 2nd wave is extraordinarily small. It doesn’t mean it’s wrong, but it is unusual, perhaps showing the power of the bearish sentiment in early May. I chose that labeling to ensure that wave 3{-10} wouldn’t be shorter than both wave 1{-10} and 5{10}.

We Are Here.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

  • Index:
  • 5{0} Intermediate, 12/26/2018, 2346.58 (up)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 1{-6} Submicro, 1/4/2022, 4808.25 (down)
  • 5{-7} Minuscule, 3/29/2022, 4631 (down)
  • 5{-8} Subminuscule, 4/21/2022, 4509, (down)

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, in the ever-changing markets, we can judge that similarity of structure only after the fact.

See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, May 17, 2022

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.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

HD Trade

The Home Depot Inc. (HD)

Update 5/17/2022: I exited my short bull put vertical spread on HD, one day before expiration, for a $1.10 debit per contract/share, a profit before fees of $66 per contract. Shares were trading at $308.87, up $17.32 from the entry level.

The Implied Volatility Rank at exit was 68.8%, down 21.3 points from the entry level.

I exited on the day after entry, at 64.9% of maximum potential profit, well above my normal exit point for earnings plays, 25% of max.

Shares rose by 5.9% over one day for a +2,168% annual rate. The options position produced a 60.0% return for a +21,900% annual rate.


I have entered a short bull put vertical spread on HD, using options that trade for the last time 32 days hence, on June 17. The premium is a $1.87 credit per contract share and the stock at the time of entry was priced at $291.55.

The Implied Volatility Ratio stood at 90.1%.

Premium:$1.87Expire OTM
HD-bull put spreadStrikeOddsDelta
Puts
Long280.0059.0%35
Break-even286.8756.5%37.5
Short285.0054.0%40

The premium is 74.8% of the width of the position’s short/long spread. The profit zone covers a 1.6% move to the downside and an unlimited move to the upside.

The risk/reward ratio is 1.7:1, with maximum risk of $313 and maximum reward of $187 per contract.

How I chose the trade. The trade was placed to coincide with HD’s earnings announcement, before the opening bell on the day after entry. The expected move after the announcement is $15.09 either way, based on options pricing, which gives a price range of $277.95 to $308.13. I moved closer in than the price range would suggest for the sake of a lower risk in comparison with the reward.

By Tim Bovee, Portland, Oregon, May 16, 2022

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.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 traded in a narrow range during the session. The wave 4{-11} upward correction is still underway. It lie within a series of increasingly larger downtrends — wave 3{-10} within wave 3{-9} within wave 5{-8}. No change in the analysis from this morning. I’ve updated the chart.

10:05 a.m. New York time

HD earnings play entry. I’ve entered a short bull put vertical spread on HD, using options that expire in 32 days, and have posted an analysis of the trade.

Sunday

Bitcoin analysis. Over the weekend I posted an Elliott wave analysis of Bitcoin. The cryptocurrency, which has been the subject of much bearish anxiety in recent weeks, is on the last leg of a downward correction that began on May 14, 2021 from 65,520. When the correction is complete, the price will rise above last year’s peak, most likely by a significant distance.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose after trading resumed after the weekend.

What does it mean? The rise is a low-level upward correction within the downtrend that began on May 10.

What’s the alternative? It’s possible that the correction is one degree larger than my principal analysis has it. If so, it would mean that the downtrend that began on May 10 ended on May 12, although the larger downtrend that began on April 21 is still underway.

[S&P 500 E-mini futures at 3:30 p.m., 2-hour bars, with volume]

What does Elliott wave theory say? Under the principal analysis, wave 3{-10} within wave 3{-9} within wave {5-8} is is still underway. The present upward correction is a subwave of 3{-10}.

Under the alternative analysis, wave 3{-10} ended on May 10 and the low of May 12 is the end of wave 3{-9}. Under this scenario, the upward correction is wave 4{-9}.

For both analyses, a firm rule of Elliott wave theory is guiding the wave count. Wave 3 can never be shorter than both waves 1 and 5 in a trend, and the 3rd wave is almost always the longest of the three. So if I see a 3rd wave that’s shorter the preceding 1st wave, I tend to change the count. True, that change might be unnecessary; the 5th wave could be shorter than the 3rd, and in that case the Elliott wave rule would be satisfied. Nonetheless, the odds are that the 5th wave will be longer than the 1st wave, so changing the count is usually the more accurate decision.

We Are Here.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

  • Index:
  • 5{0} Intermediate, 12/26/2018, 2346.58 (up)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 1{-6} Submicro, 1/4/2022, 4808.25 (down)
  • 5{-7} Minuscule, 3/29/2022, 4631 (down)
  • 5{-8} Subminuscule, 4/21/2022, 4509, (down)

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, in the ever-changing markets, we can judge that similarity of structure only after the fact.

See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, May 16, 2022

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.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

BTC/USD Analysis

11:25 a.m. New York time

What’s happening now? Bitcoin futures continue a decline that began on March 28 from 46,550, reaching a low of 25,350 before rising slightly.

What does it mean? By my principal analysis, Bitcoin is on the last leg of a downward correction that began on April 14, 2021 from 65,520. When the correction is complete, the price will rise above the April 14 peak, most likely by a significant distance.

What’s the alternative? Corrections sometimes have more than one three-wave corrective pattern, linking together two patterns or three. If that should occur here, then the rise above the April 14 peak will be delayed. The first corrective pattern has so far lasted for more than a year, and I would anticipate that a second and perhaps a third pattern would each last a similar amount of time.

[BTC/USD futures at 11:25 a.m., daily bars]

What does Elliott wave theory say? Bitcoin is presently within wave 4{-1}, a downward correction that began on April 14. The correction is happening within uptrending wave 5{0}, which began on December 14, 2018 from 3,120.

The correction has taken the form of a Flat pattern, with five waves in the first internal movement, wave A{-2}, and three the the next movement, wave B{-2}. The final movement in the Flat, wave C{-2}, is now underway, has completed two waves internally, and is now on its third and final wave.

Fourth waves have a higher likelihood of a compound correction, with two or three corrective patterns, each tied together with a connector, called a X wave, than are 2nd-wave corrections. So while the most likely outcomes for wave 4{-1} is a single pattern, a compound correction of two or three waves isn’t out of the question.

However many patterns there might be, when wave 4{-1} is complete, it will be followed by a resumption of the uptrend, wave 5{-1}, which almost certainly will carry the price above 65,520. Fifth waves have no limit on how far they can travel, beyond the need to be more or or less of a similar magnitude as waves of the same degree. A 5th wave can be truncated, in which case the price will remain below 65,520, or it can be extended, in which case the price will rise far beyond present expectations. Or it could be a normal 5th wave, with five waves within it, which would carry the price a good distance above 65,520.

It is said that things are always darkest before the dawn, and the corollary to that is that dawn is always followed, eventually, by sunset and the dark of night.

Wave 5{-1} is the final leg of wave 5{0}, which began on December 14, 2018 and will end years from now. And the end of 5{-1} and its parent wave 5{0} will mark the beginning of a large-scale downtrend in Bitcoin, that will carry the price well below the wave 4{0} starting point, 3,120.

We Are Here.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

  • Futures:
  • 5{0} Intermediate, 12/14/2018, 3,120 (up)
  • 4{-1} Minor, 4/14/2021, 65,520 (down)
  • C{-2} Minute, 11/10/2021, 69,355 (down)
  • C{-3} Minuette, 3/28/2022, 46,550 (down)

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, in the ever-changing markets, we can judge that similarity of structure only after the fact.

See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, May 15, 2022

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.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.