I sometimes put Hidden Pivots aside and trade from the gut. Right now, my gut is telling me that the bull market in this stock is a Wall Street hoax that cries out to be shorted. I’d suggested doing so a while back, but I’m ready to get serious now and will be looking for a good entry spot. For the time being, however, and to tide over traders who may be chomping on the bit, I’ll recommend putting on put butterfly spreads well below the market. Specifically, I’m recommending that you buy the January 18-20-22 put spread 100 times for a slight (i.e., 2-3 cents, to pay for commissions) credit. For each spread done, this would entail shorting two January 20 puts, buying one January 18 put and one January 22 put for a a little less than zero. If the influx of orders resulting from this recommendation rattles the market makers too much we can end-run them by trying to leg into the spread at even better prices. The inset shows the relevant bids and offer for the options we seek.
So why am I down on Yahoo? I mentioned here earlier that I do not share the Street’s reverence for the company’s CEO, Marissa Mayer. She may have been a hotshot at Google, but that kind of talent — any talent short of genius, in my opinion — is not fungible in the dot-com business. If she were the Steve Jobs of web-based marketing advertising, I’d say Yahoo! has a chance. Instead, she went out and paid $1 billion for Tumblr, a dot-comer that most of you will never have heard of. A Wall Street Journal think piece opined that $750M of the purchase price was just good will. These are some of the reasons why I think Yahoo! is headed into the dumper — and that it will get there a lot faster than that limping lump of brick dust, Microsoft.
Most recently, what has spiked my negativity toward Yahoo! is that they are using malware to insinuate their toolbars, search bars on my browsers practically every time I install an application. This could explain why the stories Yahoo! has planted with their sycophants in the news media have been able to claim that Yahoo! has been growing its market share and advertising base. Perhaps. But because they seem to be cheating to do so — to stay in the game with Google — I’d rather be short the stock than chasing it like so many crazed investors have been doing lately.
Whatever the case, it doesn’t necessarily mean this vehicle can’t be shorted — only that if you attempt it, you should do so via camouflage in order to mitigate the special risks of opposing the trend. Please note, however, that from a Hidden Pivot perspective, the September contract could get as high as 1742.50 if it gets past the 1687.00 midpoint resistance this week. The pattern I’ve used to project that target is not ideal because the dinky little point ‘A’ is too far above the visually obvious one; however, both p and D would be short-able if they beget downside reactions with the kind of abc we like. Click here to learn how you can reduce entry risk by using the ‘camouflage’ trading technique.
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