Thursday Morning

Gator's Chart of the Day: ESRX

 Express Scripts Inc reported earnings on Nov. 5th and the market was not impressed.  That's what precipitated the big gap down on Tuesday.  Even with a solid hammer candle on Wednesday the stock is still well below the Bollinger band which should contain approximately 89% of all closing prices.  I took a position shortly after the open and a look at the 5 minute chart below will show why and how I built the position.

ESRX 5 Minute Chart

I was sure I wanted to give this trade a shot for several reasons.  The reaction to earnings was extreme and I thought it was overdone.  The volume was about 10 times average so I didn't think there would be much more dumping and I was anticipating some bottom feeders to snap it up.  I was watching the stock trade premarket and it looked like buyers were interested.

The Trade  
Based on the delta I had selected the Dec57.50 calls as my trading vehicle and had an order ready at the open.  It actually filled in the opening minute at .77 and I could have done better as the spread was still a bit wide but it was a small bite.  I prepared a second order as I wanted to be ready for a quick move.  The second order was twice as large as the first and it filled at 9:32 for .54 and I readied a third order (same size as the second one) in case the stock continued to move quickly in my favor.  It did and the third order filled at 9:43 for .67 and my position was full and the trading day was not yet 15 minutes old. 

I considered oversizing the position as it continued to move up after lunch but with the market looking treacherous I decided to hold what I had.  Into the close the calls were trading at .92 and my average cost (with all commissions) was .64 making the trade a 43% winner so far.  Since the stock was closing well I decided to hold all of the calls overnight.  I'll look to oversize the position on continued strength.

Wednesday evening

S&P Futures Daily

Naz Futures Daily

S&P and Naz futures traded their highest daily volume today. As long as the bulls can hold that 1387ish and 2600ish level, things are set up well for a bounce. Short term indicators look ripe for buying, Rydex bull flow is looking ripe for buying, and AAPL is at potential longer term support (550ish).

AAPL Weekly

Wednesday afternoon

S&P futures have been hit hard this morning... 2m contracts and it's barely noon. The push down to 1384 looked panicky, but the real test is if the bulls can produce more than 10 points up off the low. 10 points up would be 1394 (also the daily S3), which is about 1399-1400SPX.