The market was strong today with many growth stocks finding support at their moving averages. GMI is firmly at +6 and there were 224 new highs in my universe of 4,000 stocks. 65% of the Nasdaq 100 stocks advanced, 59% of the S&P 500 and 47% of the Dow 30. We are in day 13 (U-13) of the up-trend. However, the percentage of stocks in a short term up-trend declined to 53%, the lowest reading in a long time……………………….
Tonight Cramer panned Nike. He said that NKE would likely be hurt by the upward revaluation of the Chinese currency. I did not have to wait for Cramer for a reason to sell NKE. NKE had been weakening for several weeks. Note on June 27, NKE had a huge decline to its 30 day average (red line) on its largest volume in months. During the following 3 weeks it tried to recover and failed. When it closed below its 30 day average again for 2 days on increased volume I suspected the stock was sick and started investigating shorting it by buying puts in my IRA. I bought an August 90 put for 4.80 (actually $480 for 100 shares) on 7/25. Each put gave me the right to sell 100 shares of NKE at $90/share through August 19. If the stock fell to $80 I could buy the stock and execute the option to sell it at 90, thus making a profit of $520 per put (1000-480), excluding commissions. For every dollar that NKE falls, each put increases in value $100. One does not have to buy the stock, the put will rise in value and can just be sold at the higher price. These puts closed at $5.80 today as NKE declined. ………………………..
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