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Options Trade Recommendation - 2015 04 02

Updated on May 4, 2015

JPM CALL MAY 60 - Current Price $1.96

The above recommendation is based on a technical trigger. The technical indicator is the 5 Day Money Flow. This is the 5 day moving average of the Money Flow Index. For JPM (since 2010) when this indicator goes positive, the stock price increases 3% in the next 4 weeks 72.7% of the time.

JPM is currently trading at $60.52 (as of Apr 2, 2015). This means that the CALL MAY 60 is already in the money by $0.52. A 3% move in the stock price would be $1.95 move. bringing the stock to $62.47. At $62.47, the option would have $2.47 in real value - an increase of $0.52 or almost 25%. However, the total option value could be anywhere between $2.47 and $3.20, depending on how much time is left before the option expires.

With this trade, the goal would be a 50% profit. Therefore, as soon as you purchase the option, you can immediately place a limit order for 50% above your purchase price.

2015 04 02 Overall Market Conditions

The above mentioned recommendation is for a CALL (for the stock price to go up). However, I believe we are in a longer term down trend, so this recommendation goes against the overall market.

In addition, markets are closed tomorrow (APR 3rd - Good Friday). However, the jobs report is scheduled to be reported tomorrow. New jobless claims and continuing claims came in THURS below expectations (good news). However ADP's report WED on jobs created came in well below expectations, leading to concerns that FRI's payroll report will be disappointing.

The GDP numbers for the 1st quarter have also been lowered due to the strength of the dollar. Together, these data point to an economy that is not as robust as previously thought. This is leading to a growing concern that earnings for the 1st quarter may slow even further than already expected.

How to proceed?????

Not every recommendation needs to be followed. This one is a strong one for the individual stock, and JPM is one of the few Large Cap stocks that I follow that had positive technicals overall, even as the market was dropping this past week.

It is possible that the payroll numbers come in better than expected, or any disappointment could be already included in the stock prices. Therefore, you can evaluate the news on FRI and see the market's reaction (watch pre-market MON AM to see how the markets are poised to open). If the markets look to open up, then by all means go into this call. If not, hold off and wait for the next indicator to trigger.

Update based on Jobs Report on April 3, 2015

Well, the jobs report came in very disappointing. Only 126k jobs created in MAR vs. expectation for 244k. The Pre-Market is down almost 1% as stock trading is closed today.

So, what to do.....

I am more bearish overall, and this news supports a lowering of stock prices. So, I would do nothing, or wait for the markets to find some support, and then get in.

I will continue to share technical triggers with you, but that doesn't mean you need to follow every one. I would be selective and not follow this one (at least not yet).


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