Trader’s Notebook

10 a.m. New York time

WBA earnings play exit. I’ve exited my short bear call spread options position on WBA for 53.8% of maximum potential profit and have updated the trade analysis with full results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures declined further overnight, into the upper 3700s.

What does it mean? The downtrend that began on June 28 continues and likely will carry the price significantly lower. It is a continuation of the larger downtrend that began on June 2

What is the alternative? The upward correction that began on June 14 from 3708.50 is still underway and is forming a compound structure. The present decline is a wave that will connect the just completed corrective pattern with a second corrective pattern.

[S&P 500 E-mini futures at 9:35 a.m., 170-minute bars, with volume]

What does Elliott wave theory say? Under the principal analysis, downtrending wave 5{-11}, which began on June 28, is underway. Although it could be cut short — “truncated” is the term of art — it will most likely fall below the end of the preceding wave 3{-11}, at 3708.50 on June 16, and typically it will move lower by a significant amount.

Under the alternative analysis, the wave 4{-11} upward correction that began on June 14 has completed one corrective pattern and is now in a declining connector wave, X{-12}, which will be followed by a second corrective pattern, and perhaps by a third. Once the compound correction is over, wave 5{-11} will begin and behave as described in the principal analysis.

The end of wave 5{-11} will also be the end of its parent, wave 3{-10}, which began on June 2 from 4189. The ensuing upward correction, wave, 4{-10}. A 4th wave correction typically ends within the 4th subwave of the preceding 3rd wave. In this case, wave 4{-10} would end in the range of wave 4{-11} within wave 3{-10} — between 3639 and 3950.

Wave 5{-10} will follow, carrying the price still lower. The end of wave 5{-10} will also be the end of 5th waves up to wave 5{-7}, three degrees larger. Wave 5{-7}, in turn, will be the final wave within wave 1{-6}, which began on January 4 from 4808.25. The ensuing wave 2{-6} upward correction may well retrace a significant amount of the wave 1{-6}, although that’s a tendency, not a guarantee.

The June 28 high, 3950, is as high as the S&P 500 is likely to go over the nearer term (weeks to a few months). Over the next six months or so, the 4700s are likely to be the upper limit of the market’s rise.

The end of wave 2{-6}, however high it goes, will also be the start of wave 3{-6}, a downtrending wave with all of the power that 3rd waves tend to display. Wave 1{-6} has covered about a thousand points so far.

Wave 3{-6} can be expected to cover several multiples of its final distance, although, again, with a caveat: The rule is that a 3rd wave can’t be shorter than both the preceding 1st wave and the ensuing 5th wave. If either the 1st or the 5th wave is uncharacteristically short, then the 3rd wave could turn out to be quite short without breaking the rule.

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.

  • S&P 500 Index:
  • 5{+3} Supercycle, 7/8/1932, 4.40 (up)
  • 5{+2} Cycle, 12/9/1974, 60.96 (up)
  • 5{+1} Primary, 3/6/2009, 666.79 (up)
  • 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)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 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, June 30, 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.

WBA Trade

Walgreens Boots Alliance Inc. (WBA)

Lot 2022-2

Update 6/30/2022: I exited my short bear call vertical spread on WBA, 50 days before expiration, for a $0.48 debit per contract/share, a profit before fees of $56 per contract. Shares were trading at $39.43, down $1.34 from the entry level.

The Implied Volatility Rank at exit was 83.0%, down 0.7 points from the entry level.

I exited on the day after entry because the position reached 53.8% of maximum potential profit, well above my normal exit point for earnings plays, 25% of max.

Shares declined by 3.3% over one day for a -1,200% annual rate. The options position produced a 116.7% return for a +42,538% annual rate.


I have entered a short bear call vertical spread on WBA, using options that trade for the last time 51 days hence, on August 19. The premium is a $1.04 credit per contract share and the stock at the time of entry was priced at $40.77.

The Implied Volatility Ratio stood at 82.3%.

Premium:$1.04Expire OTM
WBA-bear call spreadStrikeOddsDelta
Calls
Long47.5094.0%9
Break-even43.5481.5%23.5
Short42.5069.0%38

The premium is 41.6% of the width of the position’s short/long spread. The profit zone covers a 6.8% move to the upside and an unlimited move to the downside.

The risk/reward ratio is 3.8:1, with maximum risk of $396 and maximum reward of $104 per contract.

How I chose the trade. The trade was placed to coincide with WBA’s earnings announcement, before the closing bell on the day after entry. The short strikes were set to coincide with the expected move of $1.77 either way, based on options pricing, which gives a price range of $38.89 to $42.33.

By Tim Bovee, Portland, Oregon, June 29, 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 has traded in a narrow range during the session, keeping to the low- and mid-3800s on the futures. No change in the analysis. I’ve updated the chart.

10:50 a.m. New York time

WBA earnings play entry. I’ve entered a short bear call vertical spread on WBA, using options that trade for the last time on August 19, and have posted a trade analysis.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell in overnight trading, pausing in the low 3800s.

What does it mean? The sharp decline is a resumption of the downtrend that began on June 2 and is the downtrend’s final leg. The downtrend resumed following the end of preceding upward correction, on June 28 at 3950

What are the alternatives? There are two.

Alternative #1: The decline is an internal movement within the third leg of the upward correction, which is still underway.

Alternative #2: The upward correction is taking a compound form, and the decline will connect the first corrective pattern with a second corrective pattern to come.

[S&P 500 E-mini futures at 3:30 p.m., 170-minute bars, with volume]

What does Elliott wave theory say? Under the principal analysis, the upward correction, wave 4{-11}, ended on June 28, and the ensuing wave 5{-11} resumes the downtrend, wave 3{-10}, that began on June 2.

Under the first alternative analysis, wave 4{-11} is still underway, and the decline is a subwave of the corrective pattern’s third and final wave, C{-12}.

Under the second alternative analysis, wave 4{-11} is forming a compound correction. Wave C{-12} ended on June 28, wrapping up the first corrective pattern. The ensuing decline is a connector, wave X{-12}, which will be followed by a second corrective pattern within wave 4{-11}.

In any case, the end of wave 4{-11} is followed by wave 5{-11}, a resumption of the downtrend that began on June 2.

A 5th wave has no rules limiting how far down it can go, although it must fit in reasonably with other waves a similar degree. A move below the start of wave 4{-11}, from 3708.50 on June 14, will strengthen the case that the 5th wave is underway. If the decline ends up with five waves internally, that will confirm that the decline is wave 5{-11} .

If the decline ends up with three waves internally, then the second alternative is confirmed. The decline is wave X{-12}, a connector wave in a compound correction.

If the decline reverses from the present level and moves above the June 28 high of 3950, then wave C{-12} within wave 4{-11} is still underway.

Whichever scenario plays out, wave 5{-11} when complete, will also mark the end of wave 3{-10} and the beginning of a significant upward correction, wave 4{-10}. A 4th wave tends to retrace between 66% and 81% of the preceding 3rd wave, which at a minimum will cover 480.5 points, and will perhaps move much further. So I expect wave 4{-10} to give the S&P 500 a significant boost to the upside from the end of wave 3{-10} before the following wave 5{-10} carries the price further down into the cellar.

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.

  • S&P 500 Index:
  • 5{+3} Supercycle, 7/8/1932, 4.40 (up)
  • 5{+2} Cycle, 12/9/1974, 60.96 (up)
  • 5{+1} Primary, 3/6/2009, 666.79 (up)
  • 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)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 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, June 29, 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 peaked today, nine minutes after the opening bell, at 3950 on the futures, and began a sharp decline that so far has carried the price down to the low 3800s.

Under my revised principal analysis, the last leg of the upward correction that began on June 14 ended at today’s high, also bringing the upward correction to an end. The subsequent decline is a resumption of the downtrend that began on June 2. Rising wave C{-12} and the upward correction, wave 4{-11}, have ended, and downtrending wave 5{-11} has begun.

Under my first alternative analysis, today’s high is the end of a subwave of rising wave C{-12}, the last leg of the upward correction, wave 4{-11}, which is still underway.

Under my second alternative analysis, today’s high ended the first corrective pattern within a compound correction. Wave C{-12} has ended, and the subsequent decline is a connector wave, X{-12}, which is still underway, all happening within wave 4{-11}.

Bottom line: There is a lot of ambiguity at this point. I see close to equal likelihoods for the principal analysis and either of the alternatives. The velocity of today’s decline persuaded me to choose as the principal analysis the scenario that says that the upward correction has ended and the downtrend has resumed. That could change in the days to come.

I’ve added a new chart so as to allow comparison with this morning’s now outdated analysis.

[S&P 500 E-mini futures at 3:30 p.m., 90-minute bars, with volume]

10:10 a.m. New York time

NKE earnings play exit. I exited my bear call spread on NKE for 37% of maximum potential profit and have updated the trade analysis with full results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell in overnight trading and then reversed, so far remaining below yesterday’s high, 3948.

What does it mean? The upward correction that began on June 14 continues and most likely is in its final leg. The correction will be followed by a decline that is likely to carry the price into the mid-3600s or lower.

What are the alternatives? If the correction forms a compound structure, connecting two or three corrective patterns, then the last leg of the present corrective pattern will be followed by a connector wave, and then a second corrective pattern. Altogether, compound corrections can link together up to three corrective patterns. After the compound correction is over, a decline will carry the price into the mid-3600s or lower.

The Chart. I’ve superimposed a Fibonacci retracement ladder in red, showing the Fibonacci levels of the upward correction’s retracement of the prior downtrend, which began on June 8 from 4164. Yesterday’s high was slightly above the 50% retracement level, and the overnight decline brought the price close to the 38.2% retracement level. The Fibonacci levels above yesterday’s high is the 61.8% level, at 3990, and 78.6%, at 4066.52. Either would be a reasonable ending point for the upward correction now underway.

(3:30 p.m. New York time: Note that the chart below has been outdated by the day’s developments. See the revised analysis and a new chart, above.)

[S&P 500 E-mini futures at 9:35 a.m., 90-minute bars, with volume]

What does Elliott wave theory say? The upward correction is wave 4{-11}, and the corrective pattern is in its 3rd and perhaps final wave, C{-12}.

If wave 4{-11} forms a simple correction, then wave C{-12} will be the end of the upward correction and the start of wave 5{-11}, a resumption of the downtrend that began on June 2, wave 3{-10}. If wave 4{-11} forms a compound correction, then wave C{-12} will be followed by a connector wave, X{-12}, and then a second corrective pattern, most likely consisting of three subwaves.

How high can wave 4{-11} rise? Under the rules of Elliott wave analysis, a 4th wave can’t move beyond the end of the preceding 1st wave. In this case, wave 1{-11} ended at 4076 on June 7. If the price within wave 4{-11} rises above that level, then the count no longer matches the chart and will require a reanalysis. On the chart, the end of wave 1{-11} is 29 points plus change above the 78.6% Fibonacci retracement level.

Once the correction is complete, whether compound or simple, wave 5{-11} will begin, resuming the wave 3{-10} downtrend that began on June 2. There is no limit on how far a 5th wave can travel, beyond the need, under the rule of proportionality, for the distance traveled to be consistent with other waves of the same degree. Wave 5{-11}, when complete, will mark the end of the parent, wave 3{-10}, and will be followed by an upward correction, wave 4{-10}, which is one degree larger than the present correction.

This is all happening within wave 5{-9}, which began on May 30 from 4202.25, and its ancestors, wave 5{-8}, which began on April 21 from 4509, and wave 5{-7}, which began on March 29 from 4631. The parent of them all is wave 1{-6}, which began on January 4 from 4808.25, the start of a major downtrend.

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.

  • S&P 500 Index:
  • 5{+3} Supercycle, 7/8/1932, 4.40 (up)
  • 5{+2} Cycle, 12/9/1974, 60.96 (up)
  • 5{+1} Primary, 3/6/2009, 666.79 (up)
  • 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)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 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, June 28, 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.

NKE Trade

Nike Inc. (NKE)

Update 6/28/2022: I exited my short bear call vertical spread on NKE, 52 days before expiration, for an $0.85 debit per contract/share, a profit before fees of $50 per contract. Shares were trading at $107.22, down $3.77 from the entry level.

The Implied Volatility Rank at exit was 98.8%, up 11.9 points from the entry level.

I exited on the day after entry because the position reached 37% of maximum potential profit, above my normal exit point for earnings plays, 25% of max.

Shares fell by 3.4% over one day for a -1,240% annual rate. The options position produced a 58.8% return for a +21,471% annual rate.


I have entered a short bear call vertical spread on NKE, using options that trade for the last time 53 days hence, on August 19. The premium is a $1.35 credit per contract share and the stock at the time of entry was priced at $110.99.

The Implied Volatility Ratio stood at 86.9%.

Premium:$1.35Expire OTM
NKE-bear call spreadStrikeOddsDelta
Calls/Puts
Long125.0081.0%25
Break-even121.3576.5%30
Short120.0072.0%35

The premium is 54% of the width of the position’s short/long spread. The profit zone covers a 9.3% move to the upside and an unlimited move to the downside.

The risk/reward ratio is 2.7:1, with maximum risk of $365 and maximum reward of $135 per contract.

How I chose the trade. The trade was placed to coincide with x’s earnings announcement, after the closing bell on the day of entry. The short strike was set to coincide with the expected move of $8.50 either way, based on options pricing, which gives a price range of $103.77 to $118.22.

By Tim Bovee, Portland, Oregon, June 27, 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 has declined during the session, falling from the overnight peak of 3948 on the futures down at one point to below 3900. The upward correction, wave 4{-11}, continues, as does its rising subwave, C{-12}. The C wave has met all requirements for completion, meaning that the overnight high may have been the end of the corrective pattern, or there may have further upside ahead. I’ve updated the chart.

10:35 a.m. New York time

NKE earnings play entry. I’ve entered a short bear call vertical spread on NKE timed to coincide with an earnings announcement, using options that trade for the last time on August 19, 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 continued to rise in overnight trading, reaching into the mid-3900s before pulling back slightly.

What does it mean? The upward correction that began on June 14 continues and is in its third leg, which may be the final segment of the correction. The correction has retraced 50% of the preceding decline.

What is the alternative? The correction may form a compound structure, composed of two or three corrective patterns.

The Chart. I’ve placed a Fibonacci retracement ladder on the chart, in red. It shows the extent to which the upward correction has retraced the decline that preceded it.

[S&P 500 E-mini futures at 3:30 p.m., 160-minute bars, with volume]

What does Elliott wave theory say? Wave 4{-11}, the upward correction that began on June 14 from 3708.50, has retraced 50% of the preceding decline, wave 3{-11}, which began on June 8 from 4164. The correction is tracing a Flat pattern, which is in its 3rd wave — wave C{-12}. Corrections tend to end close to Fibonacci retracement levels. A 50% retracement (3636.25) is one of the Fibonacci levels. So are the 68.8% (3990) and 78.6% (4066.52) retracements.

Most corrections end with the third wave. In this case, wave 4{-11} will be followed by wave 5{-11}, a resumption of the downtrend that began on June 2. The 5th wave can be expected to carry the price below the lowest point of the preceding 4th wave, 3639, although that’s not always the case. Sometimes a 5th wave will come up short, a condition called “truncation” in Elliott wave terminology.

Some corrections form a compound pattern. If that happens with wave 4{-11}, then subwave C{-12} will be followed by a connecting wave, X{-12}, and then a second corrective pattern. Some compound corrections contain three corrective patterns.

Whether wave 4{-11} is a simple structure or a compound one, it will be followed by wave 5{-11}, as described above.

This is all happening within wave 3{-10}, a downtrend that began on June 2 from 4189. That 3rd wave, in turn, is a child of wave 5{-9}, which began on May 30 from 4202.25. All are subwaves of wave 5{-8}, which began on April 21 from 4509.

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.

  • S&P 500 Index:
  • 5{+3} Supercycle, 7/8/1932, 4.40 (up)
  • 5{+2} Cycle, 12/9/1974, 60.96 (up)
  • 5{+1} Primary, 3/6/2009, 666.79 (up)
  • 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)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 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, June 27, 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 has risen during the session, reaching the upper 3800s on the futures, a level above the upper boundary of the price target range. By my count wave C{-12} has fulfilled all of its requirements, and its just a question of how far the final subwave, a 5th, will travel.

11 a.m. New York time

FDX earnings play exit. I’ve exited my short bull put options spread on FDX for 38.7% of maximum potential profit, exceeding my normal goal of 25% of max, 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 reached into the mid-3800s in overnight trading.

What does it mean? The upward correction that began on June 14 continues, is in its last leg, and is trading within the likely price target range of that final segment, between 3773.50 and 3860.93. The correction will be followed by a resumption of the downtrend that began on June 2.

The upper and lower boundaries of the price target range are marked on the chart by dashed lines.

What is the alternative? Some corrections form a compound structure, containing two or three corrective patterns. If that occurs, then the end of the present rise won’t be the end of the correction but will instead be followed by a connecting wave and then a second corrective pattern.

[S&P 500 E-mini futures at 3:30 p.m., 160-minute bars, with volume]

What does Elliott wave theory say? On the upper chart, wave C{-12}, the third and most likely final subwave within an upward correction, wave 4{-11}, is itself in its final segment, wave 5{-13}.

Most 4th waves end with the third subwave. Sometimes the correction creates a compound structure of two or three corrective patterns separated by connecting waves. If that occurs within wave 4{-11}, then upward wave C{-12}, the end of the first corrective pattern, will be followed by downward wave X{-11} — the connector — and then a second corrective pattern. Such an expansion is called a compound correction in Elliott wave terminology and can contain up to three corrective patterns.

Wave 4{-11} has taken the form of a Flat, and the C wave of that pattern tends to be 100% to 165% as long a the preceding A wave.

The dashed lines show the likely price range wherein wave C{-12} will end. The lower boundary, at 3773.50, would have made the C wave as long as the preceding A wave, 134.50 points. The price has already exceeded that level. The upper boundary, at 3850.93, is 165% of wave A’s length.

Once wave 4{-11} is complete, it will be followed by wave 5{-11}, the final wave of the parent wave 3{-10}, which began on June 2 from 4189. Working up the family tree, wave 3{-10} is the middle wave within wave 5{-9}, which began on May 30. The end of wave 5{-9} will also be the end of two larger waves, wave 5{-8}, which began on April 21, and wave 5{-7}, which began on March 29, and also of wave 1{-6}, which began on January 4.

After wave 1{-6} reaches completion, it will be followed by an upward correction, wave 2{-6}, whose rise will retrace a portion of the decline since early January. Corrections, of course, are classic head-fakes. Wave 2{-6} will be followed by an energetic wave 3{-6} that will carry the price down by an impressive amount.

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.

  • S&P 500 Index:
  • 5{+3} Supercycle, 7/8/1932, 4.40 (up)
  • 5{+2} Cycle, 12/9/1974, 60.96 (up)
  • 5{+1} Primary, 3/6/2009, 666.79 (up)
  • 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)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 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, June 24, 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.

FDX Trade

FedEx Corp. (FDX)

Update 6/24/2022: I exited my short bull put vertical spread on FDX, 21 days before expiration, for a $0.92 debit per contract/share, a profit before fees of $58 per contract. Shares were trading at $236.52, up $10.07 from the entry level.

The Implied Volatility Rank at exit was 79.1%, up 0.1 points from the entry level.

I exited on the day after entry because the position reached 38.7% of maximum potential profit, exceeding my normal 25% of max exit point for earnings plays

Shares rose by 4.4% over one day for a +1,623% annual rate. The options position produced a 63.0% return for a +23,011% annual rate.


I have entered a short bull put vertical spread on FDX, using options that trade for the last time 22 days hence, on July 15. The premium is a $1.50 credit per contract share and the stock at the time of entry was priced at $226.45.

The Implied Volatility Ratio stood at 79%.

Premium:$1.50Expire OTM
FDX-bull put spreadStrikeOddsDelta
Calls/Puts
Long210.0071.0%26
Break-even216.5067.0%29
Short215.0063.0%32

The premium is 60% of the width of the position’s short/long spread. The profit zone covers a 4.4% move to the downside and an unlimited move to the upside.

The risk/reward ratio is 2.3:1, with maximum risk of $350 and maximum reward of $150 per contract.

How I chose the trade. The trade was placed to coincide with FDX’s earnings announcement, after the closing bell on the day of entry. The short strike was set to coincide with the expected move of $11.57 either way, based on options pricing, which gives a price range of $215.45 to $238.59.

By Tim Bovee, Portland, Oregon, June 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. The S&P 500 traded within a narrow range in the upper 3700s during the session, remaining in the neighborhood of the lower boundary of the target price range for the rise that began on June 17. Wave C{-12} within an upward correction, wave 4{-11}, is still underway. I’ve updated the chart.

12:40 p.m. New York time

FDX earnings play entry. I’ve entered a short bull put vertical spread on FDX, using options that trade for the last time on July 15, 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 and rose again in overnight trading, staying within a fairly narrow range at the lower boundary of the target price range of the rise that began on June 17. The target range is marked on the chart by dashed lines.

What does it mean? The third and likely final segment of the upward correction that began on June 14 is still underway. Internally, the segment will have five subwaves and is now nearing completion the 3rd wave.

What are the alternatives? There are two.

Alternative #1: It’s possible that yesterday’s peak, 3805.50, was the end of the correction and the subsequent decline, the resumption of the downtrend that began on June 2.

Alternative #2: Or, 3805.50 may have ended the first three-wave corrective pattern within a compound correction, which strings together two or three corrective patterns.

[S&P 500 E-mini futures at 3:30 p.m., 160-minute bars, with volume]

What does Elliott wave theory say? Under the principal analysis, yesterday’s peak, 3805.50, is the end of wave 5{-14} within wave 3{-13} within the third segment, C{-12}, of the upward correction, 4{-11} that began on June 14. The subsequent decline is part of wave 4{-13}.

Under the first alternative analysis, yesterday’s high is the end of the upward correction, wave 4{-11}, and the subsequent decline is a first tentative step in wave 5{-11}, which resumes the downtrend.

Under the second alternative analysis, wave 4{-11} is forming a compound structure. Yesterday’s high ended wave C{-12}, but the the parent, wave 4{-11}, is still underway. The decline off of that high is the beginning of wave X{-12}, connecting the first corrective pattern with a second one that is yet to come.

Whichever scenario plays out, when wave 5{-11} ends, it will also mark the end of the larger downtrending wave 3{-10}, which began on June 2, within wave 5{-9}, which began on May 30. When wave 3{-10} is complete, it will be followed by an upward correction, wave 4{-10}, which will be larger than the present wave 4{-11} upward 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.

  • S&P 500 Index:
  • 5{+3} Supercycle, 7/8/1932, 4.40 (up)
  • 5{+2} Cycle, 12/9/1974, 60.96 (up)
  • 5{+1} Primary, 3/6/2009, 666.79 (up)
  • 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)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 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, June 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. The S&P 500 has risen during the session, returning to the upper 3700s on the futures. The rise can be counted as wave 5{-13}, the final wave within wave C{-12}, which in turn is the final wave within the wave 4{-11} upward correction, which began on June 14. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell in overnight trading, returning to the low 3700s.

What does it mean? The downward movement is the fourth of five segments within the final rise of an upward correction that began on June 14. When that final rise is complete, the downtrend that began on June 2 from 4189 likely will resume, unless the correction forms a compound structure linking several corrective patterns together.

What is the alternative? The upward correction is small in comparison with the larger downtrend that it is correcting. That raises the possibility that the correction is of a lower degree than I’ve it on the chart.

[S&P 500 E-mini futures at 3:30 p.m., 160-minute bars, with volume]

What does Elliott wave theory say? The upward correction is wave 4{-11} within a downtrend, wave 3{-10}. Within the 4th wave, the last of three waves, C{-12}, is underway. The C wave will have five internal waves. By my principal count, the 5th wave — wave 5{-13} — is now in progress.

Wave 4{-13} will be followed by the final wave in the corrective pattern, rising wave 5{-13}, whose end point will also mark the end of the parent, wave C{-12}, and perhaps of the upward correction, wave 4{-11}. I’m hedging the end point of wave 4{-11} because it’s possible that the correction will form a compound structure, containing two or three corrective patterns, each separated by a connector, wave X.

In any case, once wave 4{-11} is complete, wave 5{-11} will begin, a downtrending wave that is the final segment of wave 3{-10}, a downtrend that began on June 2.

My alternative analysis recognizes the possibility that what I’ve called wave 4{-11} is actually one degree small, wave 4{-12}. The A wave within 4{-11} is only 134.50 points long, and the entire upward correction so far is only 204 points long — low to high. By contrast, the preceding downtrending wave, 3{-10}, is 481 points long from its starting point to the presumed start of wave 4{-11}. It doesn’t break any rule of Elliott wave analysis, but it’s a weak correction.

On the other hand, the high point of 4{-11} so far is within the 4th subwave of wave 3{-11}, which precedes it, and that’s one of the tendencies of 4th waves identified in Elliott wave theory.

All of this is happening within wave 5{-9}, which began on May 30, within wave 5{-8}, beginning on April 21, within 5{-7}, beginning on March 29, within wave 1{-6}, which began on January 4.

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.

  • S&P 500 Index:
  • 5{+3} Supercycle, 7/8/1932, 4.40 (up)
  • 5{+2} Cycle, 12/9/1974, 60.96 (up)
  • 5{+1} Primary, 3/6/2009, 666.79 (up)
  • 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)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 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, June 22, 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.