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Option Millionaires was started in February 2008 to provide traders with information about option trading. Led by three career option traders, whose pseudonyms are JimmyBob, UraniumPintoBeans, and Vantillian, they started one of the most popular option trading communities on the web. Now, Option... More
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  • Cabot Oil & Gas (COG) – Technically Ready For A Breakout

    Good afternoon everybody! Hopefully, everyone had a wonderful holiday and is ready to get back to this confusing market. The fiscal cliff has once again taken the front seat, but the technicals still call the entire ordeal as a non-event.

    The state of the market in the short term, however, is still vulnerable to an overbought downswing, which could last until early January. During this downswing, we should look to buy stocks that have been relative outperformers, which would be expected to continue outperforming into the next rally.

    One stock I found, Cabot Oil & Gas (COG), fits this criteria. The energy sector, as a whole, tends to exhibit similar behavior. During bull markets, the sector is relatively flat until inflation starts to become a problem. Once inflation kicks in, the sector shoots off like a rocket. Watching bond prices, it looks like this inflationary time period is about to start.

    COG, on the other hand, has outperformed the market for years, even when the energy sector was underperforming. Therefore, in a technical position to break out in the short term, and an economic position to outperform in the long term, COG's a buy.

    To see the video analysis, including price targets, entry points, and stop levels, click here. Remember to switch to full screen HD mode for the best viewing experience!

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Dec 26 3:22 PM | Link | Comment!
  • Genworth Financial - Here Comes The Correction! (Technical Signals)

    By Christopher Diodato - TradersBase.com

    I must say, the GNW call might have been my best trade year to date, rising over 30% in under four weeks. That said, with such a parabolic rise, there has to be a correction around the corner. For those who bought with me in November around $5.50, the consecutive 3-5% daily rises have been exciting, but it seems that sellers have stepped in. The stock is, for at least the short term, now vulnerable to a decline. Here's what I'm looking at.

    Long Term

    From the long term perspective, GNW still seems like a strong buy, with a breakout from a two year descending triangle pattern, and other, shorter term breakouts from bullish rectangle continuation patterns.

    (click to enlarge)

    Still Likely To Correct

    The price action today showed that supply had stepped into the market, with a long legged or "rickshaw man" doji on high volume. Price advanced to new intermediate term highs this morning, flattened off, and then fell back to opening levels. While, still up nearly 3% for the day, this action of sellers stepping in during late afternoon is alarming.

    In addition to these supply/demand issues, price has been diverging with momentum on the 30 minute time frame.

    (click to enlarge)

    I have, at this point, correction targets at around $6.30, and then at $6. I'm still extremely bullish on this stock for the longer term, so I will likely just ease my current position (long $6 calls, short $5 puts) by covering my short put position, and then selling $6 puts once the price reaches those lower levels. If I see a break above today's trading range, I will be back on the bull train, if not, it's time to let the stock take a break.

    Happy trading!

    ~Chris Diodato

    Disclosure: I am long GNW.

    Additional disclosure: Holding a bullish synthetic spread on GNW

    Dec 11 9:14 PM | Link | Comment!
  • Predicting Gold's Next Move – Descending Triangle Gives 8% Swing Target

    By Christopher Diodato

    Since the start of September, gold has been floundering around in a well-defined trading range between about 1610-1750, not really deciding to trend in either direction since. Since that time, however, the gold market has been consolidating into a price pattern that allows us to project intermediate-term targets. The pattern I see is a descending triangle.

    (click to enlarge)

    There are two targets on this chart. The bull target would be activated once the price breaks above $168.50, corresponding to $1685 for the actual spot price of gold. The bear target is activated once $161 is broken, and confirmed as a strong sell signal once $159.50 is broken.

    Which direction do I see price breaking out? Well, it's looking bullish in the very short term. First off, today's price action represented a "bullish engulfing" candle pattern. After these patterns occur, there is, at least, some follow through with a short term price rise.

    (click to enlarge)

    Other momentum indicators show minor divergences in price, which usually precede a price rise. Still, that price rise might not be sufficient to trigger a breakout. What I would like to see is an advance on high volume, such as the volumes seen in the August-September rally when gold rose over $250 in one month Average daily volumes on both rallies and declines is current about half the Aug.-Sept. levels. Once that buying interest comes back, it's time to catch the gold bug again.

    Happy trading!

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Dec 06 9:37 PM | Link | Comment!
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