3/12 Daily Market Note: Markets defy stubborn CPI report and squeeze short-sellers
Is this rally sustainable?
Note: Today’s note is a form of my personal journaling based on my own observations to share research and education.
Hi Folks -
Grateful for a good day with my Community.
Yesterday in our Daily Market Note, after I did an ORCL DCF in my own research hours, I shared my opinion that Oracle was offered at good value pre-earnings. The firm released the narrative I was looking for — which was that “AI is accelerating”. If we hear that catch phrase discussed on a company trading at a reasonable valuation region, that will ignite the Herd to pile in.
My DCF model gave me a reading that reaching over >120 in the coming months was a decent probability. For that reason, 120 was the Strike I chose for ORCL calls which I shared with members.
As education for both my public readers and private members, my target price IS my option strike price. The more conservative our target price, the greater the probability our strike will be met.
My formula that I have shared with members is the following:
A 2-4% move on a 3-month Call Option expiry that is 2-4% out-of-the money will produce a 15-30% move, depending on the Option’s IV. So, if I can identify a move larger than this range, I then am able to potentially hunt for Calls that could move up significantly.
Per my personal formula’s estimate, 3-month expiry Oracle calls advance 100%+ on a 10% move.
Now that my high-probability target is met, to battle theta decay and a market that is too dependent on Semiconductors, I will reposition the ORCL Calls into either a Call Spread or close the Calls and buy the stock directly to avoid time decay.
Longer-term, I do think ORCL sees the 140 region. But that’s longer-term.
Today, after the opening bell, we witnessed a massive failed breakdown for U.S. markets around the 10am area which ended up trapping short-sellers and staging a massive rally.
My key level shared with members this morning in our pre-market was 5200 for ES.
Breaching below this area would trigger a fast cascade lower
Reclaiming it would represent a powerful potential to push much higher.
For this morning session, we can see that pivot velocity was determined at 5200.
Upon a reclaim of this key level 5200 for ES (SPX Proxy), I attempted a small call option on SPX with an OTM strike on today’s expiry as conservative way to capture some upside.
I caught a move from 3.0 to 4.3, and missed the entire journey to 12.
Yes, a $300 call that would later turn into $1200 would be epic, but I was content with a 35% gain in what was at most 5 minutes.
My personal journal illustrates that there are plenty of opportunities in the market if you participate in different timeframes.
There is truly no need to FOMO. Danger awaits at areas where “everyone wants in”.
I will continue to provide thoughtful education and research for our members.
Support our work and get our best ideas to help navigate a market filled with noise.
-Larry
Disclaimer: My investment community is not investment, financial, or trading advice, but for educational informational purposes only. I am happy to share my personal opinions which I provide as my personal journal. Trading of any kind of securities involves a lot of risk. No guarantee of any profit whatsoever is made. Investors may lose everything they have. Practice extreme caution. No profit is guaranteed whatsoever, You assume the entire cost and risk of any trading or investing activities you choose to undertake. You are solely responsible for making your own investment decisions. Owners/authors of this publication are NOT registered as securities broker-dealers or investment advisors either with the U.S. SEC, CFTC or with any other securities/regulatory authority. Make sure to consult with a registered investment advisor, broker-dealer, and/or financial advisor.