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I can never tell without looking at the price action as it goes. My gut says "no." But then, my gut would short HOV.
Originally posted by ForeverInvesting
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New-born,
I'm sure you can answer this question. Certain publications warn against 4th or 5th stage bases being prone to failure. I'm not sure in what time frame they are referring to , but BMHC has got to be in at least it's 5th stage or more this year. Does that mean I should bail sooner than I normally would at any sign of weakness?
billyjoeComment
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Elliott
Your question has to do with Elliott Wave theory. Spike addressed this question on this thread. See page 132 and 134. Yes, BMHC has been hot--tremendous chart--until recently. It has stalled. Everyone is confident that she is going to $110+. The Point and Figure charts call for it. And look at the options chain. Today I sold Dec $90 calls for $11.80. They paid me $11.80 to buy this stock in December for $90! Compare that to RIO. RIO $45 calls for Oct were a measley $.90 on a $44.10 stock. In other words, you get nothing!Originally posted by billyjoe
My view: BMHC is stalled right here, and every day that she doesn't bust out to new heights is another day that threatens that she is going to roll over and drop back to $80. Yes, she COULD be forming the right side of a cup. But I don't know that. So I sold the calls. That's a lot of money to ignore. I just took the money and I don't have to worry about what is going to happen next.
Chartwise: she was lower on lower volume, a continuation pattern. And she fell to the previous 4 days' support level. Nothing to alarm in that. All normal.
But the STO is touching right now--in no man's land--right next to the 80 line. I am watching her closely.Last edited by New-born baby; 09-30-2005, 10:24 PM.Comment
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NBB,
What is your plan if BHMC does happen to go to $102 or so from today's close of $93.26.THE SKIRACER'S EDGE: MAKE THE EDGE IN YOUR FAVOR
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BillyJoe,
I think the logic behind 4th or 5th stage bases being more prone to failure after the breakouts from those stages is that the stock is usually at or closer to the end of it's run up at that point in it's life cycle. For example if a stock like VPHM were to breakout like it has recently and continues up for some period of time then consolidates into it's 2nd stage base from the initial breakout, I believe O'Neil states at least 8 weeks of basing, then breaks out again from the second base and does this 3 or 4 times each successive base will be more prone to failure especially the later stage bases like the 4th and 5th. The reasoning being that the stocks earnings growth will eventually run itself out which is the driving force behind anyone's interest in buying or taking a position in the stock. As sales and earnings growth diminish, which happens with all stocks after some period of time for whatever reasons, the strength that drives the stock upward lessens and the stock eventually will stall and fall. The time period will vary with every stock as do the internal factors that drive the stock up in the first place. I think the only thing anyone can do is to make themselves aware of the stage or cycle that a specific stock may be in and to protect themselves as best they can before the stock does stallout. If you're in a position that is trending up from a later stage base and breakout there is no reason to exit just because of that but it makes sense to place stops, trailing stops, or hedge the position in some other way with options perhaps, to insure and protect your gains.
All winning stocks will eventually run out of gas so it's important to keep that in mind and where it is at in it's life cycle. But as you know the most important thing is to protect and keep your gains. At some point in time every position will require that you exit it and move on to another or others.THE SKIRACER'S EDGE: MAKE THE EDGE IN YOUR FAVOR
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Anytime
Spike,
You can call me a nut anytime
Thanks for the chart.
Do you think I am nuts for taking $101.80 for a $92 stock?
What is your price target?Comment
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let it ride
BillyJoe,Originally posted by skiracer
Just let it ride.Comment
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NBB,
I was just curious to hear what your plan was if BHMC does start to move up strongly. As I stated I'm not crazy about the stock but that comes more from it's relation to the building sector and what it does than the chart itself. Personally I think that the play is quite a gamble moreso than a developed plan or strategy with the risk/reward ratio edge in your favor. That's the only reason I was curious to hear your plan if it does go the other way on you. In the meantime good luck with it.THE SKIRACER'S EDGE: MAKE THE EDGE IN YOUR FAVOR
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Spike and Newborn,Originally posted by spikefaderForeverInvesting and Newborn,
I'd call that a descending triangle.
It looks like I read a chart right for a change. If only we could develop chart reading skills like Spike, then we all would be millionaires.
Thanks for the clarification, Spike.
See chart below (from earlier in this thread).
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Forever Investing,
You might not become a millionaire but you wouldn't have to rely on others to feel comfortable in your analysis of any chart. Pick up a copy of Bulkowski's "Encyclopedia of Chart Patterns" and start studying the charts of every stock that you think you might like. Also compare other peoples analysis of a specific chart and then compare it to his analysis in his book. You'll eventually get pretty good at it. I thought you were right on the money from the beginning with the descending triangle assusmption. Of course then figuring out what to do with your opinion is another thing.THE SKIRACER'S EDGE: MAKE THE EDGE IN YOUR FAVOR
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Skiracer,Originally posted by skiracer
Thanks for the words of encouragement. I will be sure get a copy of "Encyclopedia of Chart Patterns." If you or anyone else knows any other worth while book on Technical Analysis, please let me know.
MikeComment
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Martin Pring's, "Introduction to Technican Analysis", is as good a place to start as any. Bukowski's book isn't one that you are going to sit down and read from front to back. It's more of a reference on basically every type of chart pattern and everything about those patterns. You'll find it interesting and more than helpful if you plan on staying in this. Pring's book is a great start to picking up and learning the basics of technical analysis. Good luck and don't quit your day job yet.THE SKIRACER'S EDGE: MAKE THE EDGE IN YOUR FAVOR
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No, I think you're nuts for opining BMHC stock/option prices are going to fall from hereOriginally posted by New-born baby LOL My target is 105-110 in the next few weeks. A more booming parabolic move could go to 120 in the same time frame. IMH(umble)O there's very strong reason to call it long, and nothing I see to call it short yet. I really hope I'm wrong by the way. Perhaps I'm just too bullish on BMHC for my own good. But it's just not ACTING like a weak stock that will give you much on the short side. Those things on the chart I've already drawn up, little ascending going on the last 8 days, might could turn into a bigger 20 day ascending triangle soon, consolidating vol by price at current levels....not things that favor writing calls
You make it sound like you've received more than the stock is really worth, but it may be wiser to think in terms of how much the option is worth relative to the option market. You've received the time premium (for a fairly volatile low volume stock by the way) that if the chart pops $110+ stock price, that call is going to pop very nicely indeed (perhaps $140-150) as those calls are bid up from emotion/fear sellers feel as they scramble to get out. So the call holder either cashes out and makes you pay $400 to $500 more than what you sold 'em for, or take delivery of your BHMC shares worth then $110+ for the low price of $90. That person may have paid a premium for the 'premium' you received, but people do that so they have TIME - to be right; TIME for the stock to move. If it doesn't MOVE one doesn't profit from an option - the time premium withers away. BMHC is a likely big mover in the next 8 weeks considering all things. On top of that, if one is wrong about direction in a big way, the value to exit is often much higher, so the seller often pays the premium to get out at market prices during a fast move (remember the runaway gap for BMHC now on the big vol day, and the stock's relative low volume). I'm just highlighting caution for the timing of this BMHC setup. There will be another time I'd be 100% behind you on it. Say if there was a low volume gap day there and a low volume bullish run up, and some signs of weakening in the chart, then I would encourage selling covered calls during any strong up day up near R2 intraday and catch the ride down to the gap fill.
Options are a tricky business, that's for sure. I do NOT know too much about 'em. They get very tricky and complicated REAL fast Emotion can kick in real fast. One has to be VERY disciplined, especially when time is running out on them. It is entirely possible for one to profit buying put options while the stock price rises! And at another time buying put options and losing money while stock price falls! I know........it's happened to me often enough.
Good luck with it dude. Give me an uppercut if I'm wrong, but if BMCH pops up like I expect, you'll either pay $1500+ for a call you sold for $1020 for OR if that doesn't happen and the call is not bid up, you'll deliver stock to someone who's going to make 22%+ from the stock price movement because they bought a call for $90.
Best to ya dude, and tell me to shut up if I'm too obnoxious about this fun stuff. It's all good though
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