A Fourth Day of Gains: Bull Market or Head Fake?

Today, Wall Street put in a fourth day of gains. This is the market in review.

Friday the 13th wasn't a day of bad luck as it is touted to be. Overall all the markets did okay. Starting in Asia all indecies made solid gains over 4%. In Europe, only the DAX came under the wire, but only by a hair. With a five more minutes it might have gotten there. And the U.S., although diving at mid-day, ended the day with all indecies fractionally higher than yesterday.

Asia:
Nikkei => 7,569.28, +371.03, +5.15%
Hang Seng => 12,525.80, +524.27, +4.37%
Straits Times => 1,577.52, +83.99, +5.62%

Europe:
FTSE => 3,753.68, +41.62, +1.12%
DAX => 3,953.60, -2.62, -0.07%
CAC => 2,705.63, +11.38, +0.42%

U.S.:
Dow => 7,223.98, +53.92, +0.75%
Nasdaq => 1,431.50, +5.40, +0.38%
S&P => 756.55, +5.81, +0.77%

As For Me:
AMD => 2.52, +0.12
AMD DG => 0.20, +0.08 (Sold to Close @ 0.20)
F => 2.19, +0.09
FPL DI => 2.44, +0.09
NG => 2.46, -0.02

I sold out of the AMD $3Apr09Call (AMD DG) because it finally returned to profitability. Now why would I sell out of it now that it has returned to profitability? That is because $2.50 is a resistance zone for AMD since January 5th when, on huge volume, it broke over it for a few days. It has since then attempted to break over it about 6 times and failed. Today was the first time it has exceeded $2.50 but it retreated back towards it before the market closed. That kind of activity indicates that those who purchased it back in early January were selling it off.

In addition, the Stochastic indicator shows that it is nearing the 70 mark where it retreated from previously. Also, the MACD has exceeded its most recent apex. Such things at the top of a move indicate that momentum may soon reverse. And since the options are more volatile than the stock, I am not willing to risk the gains I have made.

I have, however, a sold $3Apr09Call against my current stock position (Covered Calls) that I picked up back on February 25th. I will be holding on to AMD from this point on, adding to my position on pull backs.

Speaking of Covered Calls, I also sold a $3Apr09Call against my Ford (F) position. This was done for much of the same reasons that I did it against AMD. Ford stock is nearing the top of an upward channel, the stochastic and MACD are high, and I intend on adding to my position on pull backs.

I see both Ford (F) and AMD (AMD) as viable companies, and their stock prices affordable. I also see the potential for more gains on this movement. Although it might get up to three dollars a share before the third Friday of April, I think it will pulling back below $3 before option expiration.

Nova Gold (NG) is another stock that I am trying to sell Covered Calls against. However, the next option available is the $5Apr09Call and it has not reached a price that I would like to sell at.

What can we expect for next week? Technically speaking, there is still plenty of upside left for this swing. However, if history is any kind of witness, and it usually is, There will be a pull back day coming. How strong that day is, will speak volumes about the future of the market.

If the pull back wipes out two or more days of gains, we can expect that the bottom was not quite reached and the prediction of 5000 for the Dow is still probable. If the pull back wipes out gains in small increments before putting in more days like this week, then we just might have seen the worst of it.

That is my opinion, you can take it or leave it.

Disclaimer: I am not a stock broker; I am not a financial advisor; I am not recommending to you what to buy or sell. I am just an opinionated investor. If you decide to follow in my footsteps you are taking risk. It is inevitable that I may be wrong. So if you are going to follow in my footsteps that is your own personal decision. I am not responsible for any loss that you may, and probably will, incur regardless of my opinion.