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September 26, 2019 | Don’t Load Up on Puts Quite Yet

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

We’ve been monitoring Apple shares closely because they look very likely to rise at least 10% above their current $220 price before bulls are spent. AAPL is a powerful engine for the bull market, and a big rally in the stock would all but ensure that the broad averages get dragged higher or at least remain buoyant. The chart shows another reason why it may be premature to bet against the aging bull market, even if some key numbers for the U.S. economy, including most recently consumer confidence, have begun to weaken.

Diverging Peaks

Notice how the stochastic ‘overbought’ peaks recorded at the bottom of the chart rose in tandem with the Dow’s price peaks. Together they effect a series of non-diverging tops, a formation that usually implies that the trend will continue.  Now notice how, when the stochastic peaks diverged relative to corresponding price peaks, the corrective moves that followed were steep and painful.

If you’re been skeptical that the broad averages are capable of soaring to new highs with the global economy sinking fast, take a good look at the chart before you go aggressively against the flow.

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September 26th, 2019

Posted In: Rick's Picks

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