Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures spent the day crossing and recrossing the 23.6% retracement level. Just as a rough guess, based on several waves that don’t really go anywhere, each with three internal waves, wave C{-11} might well be taking the form of a Triangle, perhaps a Descending Triangle (flat lower boundary and descending upper boundary). At this point, though, it’s quite ambiguous, and I’m not proposing it as my principal analysis, which is unchanged this afternoon. I’ve updated the chart.

11:20 a.m. New York time

AAPL earnings play exit. I’ve exited my short bull put options spread on AAPL the day after entering the position as an earnings play. The return was 32.5%. I’ve updated the trade analysis with the result.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures again declined below the 23.6% Fibonacci retracement level, with the overnight low, 4266.25, coming with 54 points of the January 24 low. The price then rose slightly as the opening bell approached.

What does it mean? The upward correction that began on January 24 from 4212.75 is still underway and is now in its 3rd and possibly final leg.

What are the alternatives? There are two.

Alternative #1: It’s possible that yesterday’s high just above the 38.2% Fibonacci retracement was the end of the correction, although the internal structure of the rise to that high point doesn’t appear to support such a reading of the chart with a great degree of clarity. Nonetheless, it’s conceivable.

Alternative #2: Although corrections come with three waves internally, there are variations. It’s possible that the present correction will form a compound structure, attaching a second corrective pattern to the first.

[S&P 500 E-mini futures at 3:30 p.m., 55-minute bars, with volume]

What does Elliott wave theory say? Under the principal analysis rising wave C{-11} within the upward wave 4{-10} correction is still underway.

Alternative #1: C waves in a Flat — the pattern of the present correction — have five waves internally. I can only count three in wave C{-11}, with a very minuscule correction in the middle. Nonetheless, if I squint real hard, it can be counted as five waves.

Alternative #2: If the wave 4{-10} correction expands into a complex pattern, then wave C{-11} will be followed by an X-wave, which will connect the two patterns, and then by a second corrective pattern.

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it this way 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, January 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
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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.

AAPL Trade

Apple Inc. (AAPL)

Update 1/28/2022: I exited my short bull put spread earnings play on AAPL 49 days before expiration, for a $0.80 debit per contract/share, a profit before fees of $26 per contract. Shares were trading at $166.78, up $4.28 from the entry level.

The Implied Volatility Rank at exit was 54.7%, down 9.4 points from the entry level.

I exited because the position reached 25% of maximum potential profit, my normal exit point for earnings plays.

Shares rose by 2.6% over one day for a +961% annual rate. The options position produced a 32.5% return for a +11,863% annual rate.


I have entered a short bull put options spread on AAPL, using options that trade for the last time 50 days hence, on March 18. The premium is a $1.06 credit per contract share and the stock at the time of entry was priced at $162.50.

The Implied Volatility Ratio stood at 64.1%.

Premium:$1.06Expire OTM
AAPL-bull put spreadStrikeOddsDelta
Puts
Long145.0070.0%25
Break-even151.0666.5%28.5
Short150.0063.0%32

The premium is 42.4% of the width of the positions short/long spread. The profit zone covers a 7% move to the downside and an unlimited move to the upside.

The risk/reward ratio is 3.7:1, with maximum risk of $394 and maximum reward of $106 per contract.

How I chose the trade. The trade was placed to coincide with LVS’s earnings announcement, after the closing bell on the day of entry. The short strikes were set to coincide with the expected move of $5.53 either way, based on options pricing, which gives a price range of $156.97 to $168.03.

By Tim Bovee, Portland, Oregon, January 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
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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 futures spent much of the day at or below the 23.6% Fibonacci retracement level. Wave C{-11} within an upward correction, wave 4{-10} appears to still be underway. However, the first alternative — wave B{-11} is still underway — deserves consideration as long as the price is stalled well below the January 26 peak, 4446.25. No change in the analysis. I’ve updated the chart.

2:15 p.m. New York time

Earnings play entry, AAPL. I’ve entered a bull put options spread on AAPL, timed to coincide with the company’s earnings announcement after the closing bell today 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 to 4263.25, 50 points above the January 24 low, and then reversed, rising more than 100 points.

What does it mean? The upward correction that began on January 24 continues. The overnight low was the middle leg of the correction, a retracement to the downside, and the subsequent rise is the final leg of the correction.

What are the alternatives? There are two:

Alternative #1: Yesterday’s high, 4446.25, marked the end of the upward correction, the subsequent decline is a resumption of the downtrend and the overnight rise is a low-level correction within the downtrend.

Alternative #2: The overnight rise is a continuation of the middle leg of the correction.

[S&P 500 E-mini futures at 3:30 p.m., 55-minute bars, with volume]

What does Elliott wave theory say? The upward correction that began on January 24 is wave 4{-10} — on that both the principal analysis and the alternatives agree. The disagreement is about the waves within that wave.

Principal analysis: Wave B{-11} ended with the overnight low and the subsequent rise is wave C{-11}, the final wave within wave 4{-10}, unless it forms a compound structure, a not uncommon occurrence in 4th waves.

Alternative #1: Wave 4{-10} ended with yesterday’s high, the subsequent decline is wave 1{-11} within wave 5{-10}, a resumption of the downtrend, and the rise that followed is wave 2{-11}, an upward correction.

Alternative #2: Wave B{-11} within wave 4{-10} is still underway.

If the price remains above the January 24 low, 4212.75, then either the principal analysis or the second alternative is correct. If the price falls below 4212.75, then the first alternative is correct.

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it this way 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, January 27d, 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.

LVS Trade

Las Vegas Sands Corp. (LVS)

I have entered a short bull put options spread on LVS, using options that trade for the last time 51 days hence, on March 18. The premium is a $1.19 credit per contract share and the stock at the time of entry was priced at $45.23.

The Implied Volatility Ratio stands at 66.8%

Premium:$1.19Expire OTM
LVS-bull spreadStrikeOddsDelta
Puts
Long37.0080.0%16
Break-even43.1970.5%24.5
Short42.0061.0%33

The premium is 47.6% of the width of the positions short/long spread. The profit zone covers a 4.5% move to the downside and an unlimited move to the upside.

The risk/reward ratio is 3.2:1, with maximum risk of $381 and maximum reward of $119 per contract.

How I chose the trade. The trade was placed to coincide with LVS’s earnings announcement, after the closing bell on the day of entry. The short strikes were set to coincided with the expected move of $2.00 either way, based on options pricing, which gives a price range of $43.24 to $47.23.

By Tim Bovee, Portland, Oregon, January 26, 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
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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 began to fall during the trading session, about 10 minutes after Federal Reserve Chair Powell began his news conference. The Fed’s Federal Open Markets Committee today declined to raise interest rates in response to higher inflation.

The futures fell from the 38.2% Fibonacci retracement level, where they had lingered during the early hours of the session, to below 23.6% Fibonacci retracement level. As a best guess, the peak at the 38.2% retracement looks like the end of wave A{-11} and the subsequent decline as wave B{-11}, all within the upward correction, wave 4{-9}.

It is a rule of Elliott wave analysis that a B wave cannot move beyond the start of the preceding wave A, which sets a lower boundary of 4212.75 or above.s

No change in the analysis. I’ve updated the chart.

2:45 p.m. New York time

LVS earnings play entry. I’ve entered a long bull put options spread on LVS, timed to coincide with the company’s earnings announcement after the closing bell. I’ve posted an analysis of the trade.

11:55 a.m. New York time

BA earnings play exit. I’ve exited my short bear call options spread on BA, one day after entry, for a 33.5% profit. I’ve updated the analysis with details of the exit.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures barely moved in overnight trading, remaining at a 38.2% retracement of the preceding 12-day decline.

What does it mean? The upward correction that began on January 24 is still underway. It is happening within the early states of a larger downtrend that began on January 4 and will last for months and probably years.

What’s the alternative? The decline from January 4 is a downward correction within a larger uptrend that began on February 23, 2020, at the end of the market crash early in the pandemic.

[S&P 500 E-mini futures at 3:30 p.m., 85-minute bars, with volume]

What does Elliott wave theory say? Under my principal analysis, January 24 marked the end of wave 3{-10} within a series of 1st waves of increasingly larger degree. It is a new downtrend that eventually will reach below 2000.

The preceding uptrend ended on January 4 at 4808.25. Wave 3{-10} has been followed present upward correction, wave 4{-10}. Internally, it looks as though wave C{-11} is now underway, although this early in the correction it’s hard to accurately judge the degrees of internal waves. This is all happening within downtrending wave 1{-9 } within downtrending wave 1{-8}, which both began on January 4.

Under the rules of Elliott wave analysis, a 4th wave must remain below the end of the preceding 1st wave. In this case, wave 1{-10} ended on January 10 at 4572.75 and wave 4{-10} cannot move above that price.

Under my secondary analysis, the January 4 peak was a stopping point within a still ongoing wave 5{-8} and larger uptrending waves. The subsequent decline at lower degrees, which the S&P 500 is still in today, is a correction that in fact may have ended on January 24. Under this scenario, the subsequent rise — small so far — is the early portion of a resumption of the uptrend and will exceed 4808.25.

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it this way 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, January 26, 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.

BA Trade

The Boeing Co. (BA)

Update 1/26/2022: I exited my short bear call spread position on BA 51 days before expiration, for a $2.12 debit per contract/share, a profit before fees of $71 per contract. Shares were trading at $195.93, down $4.59 from the entry level.

The Implied Volatility Rank at exit was 66.3%, down 10.5 points from the entry level.

I exited because the position reached 25% of maximum potential profit, my normal exit point for earnings plays.

Shares declined by 2.3% over one day for a +836% annual rate. The options position produced a 33.5% return for a +12,224% annual rate.


I have entered a short bear call options spread on BA, using options that trade for the last time 52 days hence, on March 18. The premium is a $2.83 credit per contract share and the stock at the time of entry was priced at $200.52.

The Implied Volatility Ratio stands at 85.6%

Premium:$2.83Expire OTM
BA-bear call spreadStrikeOddsDelta
Calls
Long225.0079.0%27
Break-even217.8374.0%32
Short215.0069.0%37

The premium is 56.8% of the width of the positions short/long spread. The profit zone covers an 8.6% move to the upside and an unlimited move to the downside.

The risk/reward ratio is 2.5:1, with maximum risk of $717 and maximum reward of $283 per contract.

How I chose the trade. The trade was placed to coincide with BA’s earnings announcement, before the opening bell on the day after entry. The short strike was set to coincide with the expected move of $9.50 either way, based on options pricing, which gives a price range of $191.02 to $210.02.

By Tim Bovee, Portland, Oregon, January 25, 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 declined during the session, with the futures remaining more than 50 points above yesterday’s low, and then rose again, remaining below the overnight high. Wave 4{-9}, an upward correction, as been underway since yesterday, and the wave pattern is consistent with an A wave within wave 4{-9}. No change in the analysis. I’ve updated the chart.

11:10 a.m. New York time

BA earnings play entry. I’ve entered a short bear call options spread on BA, whose earnings will be announced Wednesday, January 26, before the opening bell. I’ve posted an analysis of the trade.

10:50 a.m. New York time

GE earnings play exit. I exited my short bear call options spread on GE the day after entering for a 74.4% profit, as shares fell sharply after earnings were announced. I’ve updated the analysis with details of the exit.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose in overnight trading, retracing 38.2% of the decline from January 12.

What does it mean? An upward correction of that decline is now underway. The 38.2% retracement is a Fibonacci level, a not uncommon turning point within corrections. I expect this correction to remain below 4572.75. More on that expectation in the Elliott wave section, below.

What are the alternatives? Alternative #1: The upward movement that began on January 24 is a lower level correction within the downtrend, rather than a correction at the level of the downtrend. That sounds obscure, but it’s not. A higher level correction will move higher and take more time to complete than will a lower level correction.

Alternative #2: The downward movement that began on January 4 is a correction within an ongoing uptrend. A move above 4572.75 will increase the odds of this scenario being correction, and a rise above 4808.25 will confirm it.

The chart. I’ve drawn a grid showing the Fibonacci retracement levels over the price chart, in red. See this Investopedia entry on Fibonacci levels for an explanation of what they are and how they relate to prices.

[S&P 500 E-mini futures at 3:30 p.m., 85-minute bars, with volume]

What does Elliott wave theory say? Under my principal analysis, wave 3{-10} within wave 1{-9} ended on January 24, at 4512.75, and the present rise is the early stage of wave 4{-10}. All of this is happening within wave 1{-8} a larger downtrend that began on January 4, the end of wave 5{-8} at 4808.25. Under the rules of Elliott wave analysis, 4th waves never move beyond the end of the preceding wave 1, which in this case ended on January 10 at 4572.75, slightly above the 61.8% retracement level. Given the tendency of corrections to fit within the structure of Fibonacci retracement levels, an upside target of 4538 — the 61.8% retracement — would be a reasonable expectation for the 4th wave’s ending point.

Fourth wave corrections tend to be of the Flat pattern, although not always. If this one is a Flat, then the A wave will have three subwaves, as will the B wave, and the C wave will have five subwaves.

Alternative #1 sees the present rise as an upward correction, but at a level below degree {-10}. A quick reversal to prices below 4512.75. would confirm this scenario.

Alternative #2 sees the January 24 low as the end of a correction within an ongoing uptrend, wave 5{-8}. A move above the January 4 high, 4808.25, would confirm this scenario.

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it this way 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, January 25, 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.

GE Trade

General Electric Co. (GE)

Update 1/25/2022: I exited my short bear call options spread on GE 52 days before expiration, for a $1.25 debit per contract/share, a profit before fees of $93 per contract. Shares were trading at $89.19, down $4.87 from the entry level.

The Implied Volatility Rank at exit was 49.3%, down 6.6 points from the entry level.

The stock fell sharply after earnings were published, and I exited at 43% of maximum potential profit, well above my 25% goal for earnings plays.

Shares declined by 5.2% over one day for a 1,890% annual rate. The options position produced a 74.4% return for a 27,156% annual rate.


I have entered a short bear all spread on GE, using options that trade for the last time 53 days hence, on March 18. The premium is a $2.18 credit per contract share and the stock at the time of entry was priced at $94.06.

The Implied Volatility Ratio stands at 55.9%

Premium:$2.18Expire OTM
GE-bear spreadStrikeOddsDelta
Calls
Long110.0088.0%16
Break-even102.1878.5%26.5
Short100.0069.0%37

The premium is 43% of the width of the positions short/long spread. The profit zone covers a 7.8% move to the upside and an unlimited move to the downside.

The risk/reward ratio is 3.6:1, with maximum risk of $782 and maximum reward of $218 per contract.

How I chose the trade. The trade was placed to coincide with GE’s earnings announcement, before the opening bell on the day after. The short strikes were set to coincide with the expected move of $4.39 either way, based on options pricing, which gives a price range of $89.54 to 98.32. I chose a bearish position because recent analyst revisions have suggested the greater possibility of a negative earnings surprise.

By Tim Bovee, Portland, Oregon, January 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.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 fell sharply for the first three hours of the trading session, reaching a low of 4212.75 on the futures, 4222.62 on the index, and then reversed, climbing more than 120 points. The decline, wave 3{-10}, has met the requirements set forth in Elliott wave theory, and so the rise could be the first steps of wave 4{-10}. I’m leaving the chart marked as wave 3 underway, as I analyzed it this morning, and will defer declaring wave 4 to have begun until I see a bit more upside and some internal wave patterns to confirm it. I’ve updated the chart.

1:35 p.m. New York time

A note on share positions. Every share of stock that I own is underwater, and I plan to exit some of them in order to lower my losses. Based on my principal analysis of the S&P 500 chart, my plan is to wait for the 2nd wave, wave 2{-9} to carry price up toward the January 4 high and exit there. Wave wave 4{-10} should be starting its upward correction movement soon, and it it goes high enough, then I’ll exit as close as I can get to that wave’s endpoint.

1:30 p.m. New York time

GE bear call spread earnings play. I’ve entered a short bear call spread on GE timed to coincide with Tuesday’s earnings announcement before the opening bell, and have posted an analysis.

1:15 p.m. New York time

ACI short iron condor partial exit. The short put on my ACI iron condor was in-the-money the day before the stock goes ex-dividend, and that created a risk that the puts would be assigned, dumping short shares into my account. To avoid assignment, I’ve exited my ACI puts, leaving the calls in place as a short bear call spread. I’ve updated the analysis with results of the puts exit.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures declined into the low 4300s in overnight trading.

What does it mean? The downtrend that began on January 4 from 4808.25 is still in its first leg and eventually has much further to fall, with the decline being interrupted, as is usual in the markets, by the occasional upward correction. The next correction might well retrace much of the decline but will remain below the January 4 high.

What’s the alternative? The decline from January 4 is an exceptionally robust downward correction within a long-running uptrend. When the correction ends, the price will reverse to the upside and eventually will reach news highs above 4808.25.

[S&P 500 E-mini futures at 3:30 p.m., 115-minute bars, with volume]

What does Elliott wave theory say? Under my principal analysis, which I consider to be by far the more likely scenario, the January 4 peak of wave 5{-8} has been followed by wave 1{-9} within wave 1{-8}. Internally, wave 1{-10} is in its 3rd wave, which reached 4311.50 before the opening bell.

Wave 1{-9} will be followed by an upward retracement, wave 2{-9}. Second waves often take back much of the previous decline and, typically, cause traders to question whether the downtrend is really underway. It’s a head-fake, and they become convinced of the downtrend only when the subsequent 3rd wave takes the prices still lower.

Under the alternative analysis, wave 5{-8} and larger 5th waves didn’t end on January 4, and the present decline is a downward correction that typically will consist of three waves.

The principal analysis will be proven wrong if the price breaks above 4808.25, the January 4 high. The alternative analysis will be proven wrong if the price remains below 4808.25 and reverses to lower lows.

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it this way 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, January 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.

HAL Trade

Halliburton Co. (HAL)

I have entered a short iron condor spread on HAL, using options that trade for the last time 56 days hence, on March 18. The premium is a $1.75 credit per contract share and the stock at the time of entry was priced at $27.44.

The Implied Volatility Ratio stands at 32.7%

Premium:$1.75Expire OTM
HAL-iron condorStrikeOddsDelta
Calls
Long34.0091.0%14
Break-even30.7578.5%28
Short29.0066.0%42
Puts
Short25.0066.0%27
Break-even21.7578.5%16.5
Long20.0091.0%6

The premium is 35% of the width of the position’s short and long spreads. The profit zone covers a 12.1% move to the upside and a 26.2 move to the downside.

The risk/reward ratio is 1.9:1, with maximum risk of $325 and maximum reward of $175 per contract.

How I chose the trade. The trade was placed to coincide with HAL’s earnings announcement, before the opening bell on January 24, after the weekend. The expected move was exceptionally narrow, at $0.36 either way, based on options pricing. So I went wider than the implied price range, $27.12 to $27.84.

By Tim Bovee, Portland, Oregon, January 21, 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.

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Based on a work at www.timbovee.com.