The Play Of The Day
06-18-99 06:55 AM EST.
Good Morning Stock Fans!
Today's Play of The Day is: America Online (NYSE:AOL) JULY 100 PUTS, Option Symbol: (AOOST)
BUT NOT OFF THE OPEN! YOU WILL HAVE TO READ YET ANOTHER ONE OF MY THEORIES TO FIND OUT WHERE!
Stock Fans! I figured why not make it a double dip this week! And call AOL CALLS TUESDAY and WIN BIG!!! over 100% in just two days as I called (AOL:NYSE) at just EXACTLY IT'S LOW! Tuesday! Posted below under "Play of The Day!" June 15th, 1999) and go against the grain, and my word? Yes, and "bet!" on "The Online Giant!" (NYSE:AOL) to go down today!
OK, OK ....Before you think I am out in left field on this one let me first explain my thinking here. First of all (NYSE:AOL) in its journey back up from the depths of $90.00 and below ...$89.50 to BE EXACT! I called it just 4 days ago! For a 100 (NYSE:AOL) forgot to retrace in its tracks shares prices between $94.50 and $97.50. It missed this area because it theoretically opened Wednesday, July 16th higher then it closed one day prior at $106.3750 on no shares traded or zero volume. A stock going up on less volume and one that opens higher because of a "gap up" is generally a bearish signal. What is even more bearish is a stock that does go up on less volume and (NYSE:AOL) did that yesterday.
Now, remember that gap I spoke of earlier. I point out here that NYSE:AOL) last level of down trending support took place at $97.50. Does this number sound familiar? Yes, that is exactly the end of the open graph that (NSYE:AOL) to this point on its retracement higher has left open. Stocks that sell down on less volume and retrace this area they missed on their trading charts generally are healthy from the stock. Also the faster a stock retraces the more bullish it becomes. and you want to in turn want to buy these types of stocks as this behavior is considered to be extremely healthy as establishes it levels of support (less buyers then sellers) and its are of resistance (more sellers then buyers)
I calculate (NYSE:AOL) to trade (if it is to have similar volume today ( yesterday's volume was :( 31,946,800.00 ) in a rage today of $101.66 on the low side to $114.9375 on the high side. I also want to point out (NYSE:AOL) went higher yesterday on LESS VOLUME then it had on the previous day ( 33,977.00) Stock Fans, I A stock that goes higher in price then the previous day and has less volume is generally considered bearish.
I calculate today's trading range on (NYSE:AOL) by taking (NYSE:AOL's) average per minute volume at 106,700 shares and correlating this number with (NYSE:AOL) current 30 day average volume of just under 23 million shares. If it is a little less then that on average per minute then (NYSE:AOL) looks in my mind to goes a bit higher then $114.93750 in its trading range today and in turn a little high to the low side of $106.66 per share.
My guess is we see the same type of volume today as yesterday. If this is to be the case then (NYSE:AOL) on the high side will just miss that crucial level $115.00 per share. If this happens I suspect it to close today just over $105.00 per share another key level in (NYSE:AOL) current graph.
With (NYSE:AOL) closing right in that area tomorrow I look for use the same formula for Monday witch in turn gets (NYSE:AOL) back down under $100.00 per share.
You can't see that happening imagine this? You are long (NSYE:AOL) with your shares and the price of (NYSE:AOL) that you bought at $107.00 lets say a share over the past 2 days now today dips down close to $105.00 per share. You have lost profits at this point. However you say to yourself "AOL! it is a great stock. I hear it supposed to go to 200.00 this year" So you hold your stock at $105.00 or so a share. OK lets say (NYSE:AOL) now drops under 105.00 a share do you hold here how about 103.00 nope now it is $102.00 it moves faster as more short term shareholders just like you ponder over your same dilemma do I sell? If you are still holding here perhaps $101.00 drives you out? Know you are down to much here to sell OK OK... you decide to hold as it is about to break under $100.00. "Surely you say as well as the many other brave hearts that were not driven out of (NYSE:AOL) just like you yet "This is mighty AOL it will hold 100.00? Will it? I bet not and now it break $100 and by this time you and those left have your phone in hand or your mouse in place to sell (NYSE:AOL) down some $7.00 plus points then where you bought it less then 2 days ago. You do the math fast in your head at this point as more panic sets in and when you finally say I am out and sell (NYSE:AOL) it dropped like a rock now through 99.00- and 98.00 you sell here and... On no (NYSE:AOL) now has more buyers and sellers has retraced and somewhere between $97.50 and $94.50 AOL stops it violate downward motion and begins to churn higher now and fast and before you know it your shares as you just sold them in the nick of time before (NYSE:AOL) fell completely apart... You feel relived at this point for about oh 5 seconds it is literally by this time you see those shares you just sold see stop if only for a split second... and then changes it direction completely and seconds later you watch (NYSE:AOL) go right back up!
Ever happen that way? I bet if it does today. Even reading this you sell your shares as panic takes over your mind acts quickly and without direction and you push YOU SELL SELL SELL!!! Hey, ever heard the this before? "if want to be successful in the stock market you better buy when others sell lower and sell when other buy higher. In others words here is a new one "BUY LOW SELL HIGH!" OK, heaven forbid you can now forget. You might own shares of (NYSE:AOL) in this scenario stop shaking! Wipe the sweat off your brow! REFOCUS! and get back to the rest of this...... so you know just how I plan to play AOL today!
I really think that the above theory and scenario is very likely to hold true. It makes sense as to want the trading rage and volume of late has shown. It establishes the fact that (NYSE:AOL) must retrace to go higher then it currently is and soon. It also makes sense to me as (NYSE:AOL) about this time should begin its famous run into to earnings coming in mid July.
So Stock Fans! today I watch the (AOL) volume close. i wait for it to top out. i fell just under 115.00 per share. and when others decide to by July (AOL) $120.00 Call Options betting on (NYSE:AOL) to higher. I come in at this point and buy up July (NYSE:AOL) PUTT OPTIONS about my guess is a dollar or so less where they closed yesterday at $4.6250 per contract.
Yes, Stock Fans! My theory is to be buying when the mass sells and to sell when the mass buys ... the ones by the way that do against what the mass is doing (individual investors) are the pros... the Market Makers! and trust me you and I, and analysts, and even my goodness your broker are wrong are wrong a lot more often then they are!
Buy Area: (NYSE:AOL) near it top
Estimate: $114.3750-$114.9375 per share Option Contracts are about $3.43750
Target: $ 95.1250-97.50 - AOL JULY 100 CALL OPTIONS should be worth more then double what we paid!... Oh and one last thing.. when we sell those we will be picking up AOL CALL OPTIONS as this GAME! is so much FUN! we can play it down and up!
BONUS PLAY: US WEB CORP (NASDAQ:USWB)
Stock Fans! I stayed up late... or was it early last night or this morning..well it was one of those 2 to hold support above $21.00. i have now averaged down myself more then once as i watched in amazement more volume come on (NASDAQ:USWB) and in turn taking the stock lower.
I don't like playing the game "How low can you go!" not a FAN! Of the "Hooky Poky" nor of stock that just seems like it will never find the bottom. So I took a pencil and paper to (NASDAQ:USWB) and this is what we came up with.
We figure (NASDAQ:USWB) trades similar volume then it did yesterday today. With this applied we see (NASDAQ:USWB) going as low as.... I know it is hard to believe... $16.75 per share. Again this price is based on similar volume as yesterday. If the volume is more on average then it bit lower if less then average perhaps a bit higher. But somewhere near our target BUY AREA: of $16.75 per share. It seems logical to us as we figure most will sell before this level or near it therefore we buy it here or buy more a here as it stabilizes and then goes higher.
Buy Area: $16.50 to $16.8750 or perhaps $17.00 even a share at worst.
Sell Stop: $ $16.1250
Target: Back up near old support$ 21.00 to $22.00 per share in a matter of a 3-5 trading days.
OK READY BREAK!