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“Wacky Wednesday” was an appropriate way to describe yesterday’s trading session, which included wild price swings, mixed results among the major indices and some bullish and bearish signs. Obviously, the Fed minutes were in play, and volatility was heightened, so let’s go figure it out in simple terms, or at least try to do so.
The Dow Jones Industrial Average slipped 3 points, or 0.02. The high of 17,636 cleared resistance at 17,600, but the close below this level keeps the ball in the bears’ court for now.
Meanwhile, the S&P 500 gained a fraction of a point, or 0.02%, to end at 2,047. The index held upper support at 2,040 throughout the first half of trading, but it traded to a low of 2,034 later in the day. In my Momentum Options updates, I have specifically been saying that the 2,040–2,035 area needs to hold for the bulls, and this level was breached by a point. Imagine that.
The CBOE Volatility Index (VIX) traded higher throughout Wednesday’s session, with the peak reaching 16.47. This situation remains bearish, with risk and resistance at 16.50–17.50. The fact that the bulls held the lower level of this range was bullish, but continued closes above 15 would make for a bearish situation.
Lower market lows are likely to come into play, so I see this as a good moment to add a bearish position.
Potash (POT) recently reported a mixed quarter that included earnings of $0.09 a share on revenue of $1.2 billion. Analysts were looking for a profit of $0.16 a share on revenue of $1.16 billion. The company also lowered its 2016 earnings guidance to $0.60–$0.80 versus the forecast for $0.90 a share. And the technical picture is bearish, as all of the major moving averages are in a downtrend.
Buy the POT June 15 puts (POT160617P00015000) at around $0.50 or less for exit target $1.05.
Support is at $16–$15.75. I would like to see a close below the latter by Friday’s closing bell. Resistance is at $16.25–$16.50, which are levels I want to see hold by the weekend.
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