Wheeee – that was fun!
As you can see, we made great money on our Russell (/RTY) Futures shorts on the way down ($5,410) and, this morning, I sent our a special alert to our Members at 6:30 am, saying about the Dow (/YM) Futures:
We failed at 28,200 and back to 28,000 on /YM, which is playable for a bounce but super-tight stops below. Lined up with 3,220 on /ES, 9,100 on /NQ and 1,630 on /RTY – I'd make sure 2 are over at least and get out if there are any failures at all (in other words, the others should cross over shortly, not fail).
We're hoping to catch a strong bounce up to the 28,280 line and that would be good for $1,400 per contract but once we're over $1,000 we should put a very tight stop on half our contracts and then stop out the rest at $750 to lock in average gains of $875. If we do fail at the weak bounce line – look out below! Once we're over the weak bounce line – that becomes our stop.
We can go bearish below our lines with the same rules we went bullish with – that's what's fun about the Futures – our stops had us risking very little to make what is already (8:07 am) over $600 per contract – not bad for 97 minutes work!
So far, this market has bounced back from everything so today will be a good test to see if its still got its mojo. Still, we set our stop here at $500 per contract ($1,000) as that's nice gains for a morning so it would be silly to lose those just because we're greedy, right? We already failed our first attempt to take back 28,200 at 3am (the EU open, Asia close) so the selling pressure is likely coming from Europe and may ease off when they close at 11:30 – we'll keep an eye on that as the day progresses.
The WHO said China’s unprecedented lockdown may have averted hundreds of thousands of cases. The United Nations agency also said that Gilead Sciences Inc.’s experimental drug that is being tested for coronavirus may be the only one that will work (we went long on GILD three weeks ago), but that would still be months away from rolling out – so not much help for the market today – but it's nice to have hope, isn't it?
GILD Long Call 2022 21-JAN 55.00 CALL [GILD @ $72.90 $0.00] 15 2/5/2020 (696) $19,500 $13.00 $7.23 $13.00 $20.23 $0.00 $10,838 55.6% $30,338
GILD Short Call 2022 21-JAN 65.00 CALL [GILD @ $72.90 $0.00] -15 2/5/2020 (696) $-12,300 $8.20 $5.20 $13.40 $0.00 $-7,800 -63.4% $-20,100
GILD Short Put 2022 21-JAN 62.50 PUT [GILD @ $72.90 $0.00] -5 2/5/2020 (696) $-4,500 $9.00 $-1.45 $7.55 $0.00 $725 16.1% $-3,775
Warren Buffett, who holds hundreds of Billions of Dollars in stocks is busy telling people not to panic (as it would depress the price of his stocks). He thinks the coronavirus won’t die off with warmer weather. “It is scary stuff — I don’t think it should affect what you do in stocks. In terms of the human race, it is scary,” he said. There may not be any people left – but at least his portfolio will be intact!
Hopefully Buffett is wrong. The virus is like the flu and the flu tends to die out in warmer weather but that, like GILD's proposed treatement, is still a few months away. Meanwhile, China’s Central Bank said it will place more emphasis on keeping monetary policy flexible as it steps up support to the real economy, according to a statement on its website. The People’s Bank of China said also it will consider new measures at the proper time to counter the impact from the coronavirus outbreak. More free money usually perks up the market – we'll see how that goes today.
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