Options and trading specialist David Nassar discusses an intriguing short-term trade based on seasonal patterms at the end of October. Here's a look from his Marketwatch Options Trader.

"The global markets are still crashing, and a highly defensive approach remains warranted until very clear signs of stabilization take shape.

"Even if the broad market were to somehow stage a strong rally, we would expect a full retest of the lows, a few weeks out. Typically, October lows are retested in December (1974, 1987, 2002, et al).

"Despite this bearish outlook, we are recommending a 'October seasonal trade.' The seasonally most bullish period of the year is the end of October and the beginning of November.

"As a result, we usually try to trade this period for a rally. Given the above bearish market comments, you might think this strange, but understand that this is just a trade.

Continue reading Marketwatch expert highlights the 'October seasonal' trade

Marketwatch expert highlights the 'October seasonal' trade originally appeared on BloggingStocks on Tue, 28 Oct 2008 10:40:00 EST. Please see our terms for use of feeds.

"Resistance on the S&P 500 chart is strong and formidable," notes options expert David Nassar, who believes a close above 1505 is needed to confirm an upside breakout. (The index closed today at 1471). That, he says, would be the final determination that the bottom has been made. Conversely, he notes, as long as that upside breakout does not occur, the picture remains more bearish than bullish.

In The Marketwatch Options Trader, the analyst explains, "The last rally stalled out at the 1480 level, but the 1490 level has been the more common failure point. Either way, that area is going to be tough to break through. The one time that it was penetrated on a closing basis was in early August, and it fell back after just one day's close."

For the technically-inclined, he notes that the equity-only put-call ratios have improved this week, and the standard ratio has officially given a buy signal. However, he counters, "Market breadth has been all over the place and we now have new breadth sell signals in place."

Finally, he notes that the volatility indexes continue to remain at fairly high levels, which he says can't be considered too bullish. Further, he adds, "Now they rate as neutral at best -- and could easily be interpreted as bearish if they continue to rise."

The advisor concludes, "We would not grade the S&P 500 chart as bullish unless and until it can close above 1505 (or perhaps a two-day close above 1490 would be sufficient). But something on that order is needed. Lacking that, the chart is neutral to bearish."

Each day, Steven Halpern's TheStockAdvisors.com features the latest stock picks and investment ideas from the nation's leading financial newsletter advisors.

Marketwatch technician sets S&P breakout levels originally appeared on BloggingStocks on Wed, 12 Sep 2007 19:16:00 EST. Please see our terms for use of feeds.

In The MarketWatch Options Trader, David Nassar takes a look at the Fed's recent actions, the outlook for the overall stock market and an options play on Sears Holdings (NASDAQ: SHLD).

He explains, "The Fed's infusion of liquidity seems to have turned the tide in favor of the bulls -- at least for now. However, lest one think that everything is 'go,' it is useful to note that 'V' bottoms in the broad market are very rare. "

Rather, he notes, it is much more typical for the first rally (i.e., the one we're having now) to eventually give way to another decline. Nassar states, "If that decline does not fall below the previous lows, then a bullish pattern can arise. This is the pattern of nearly every bottom in the last 20 years."

Therefore, he suggests, "While we respect the strength of the rally and realize that more Fed moves could result in higher prices short-term, we still think there is a reasonable chance that the closing Standard & Poor's 500 Index lows at 1407 or the intraday lows at 1370 will be retested sometime in the next few weeks."

Time-wise, he suggests, "Occasionally, these retests take longer (at the 2002 bottom, for example, the initial lows in July were retested in October -- and then again the following March). In between, strong rallies can erupt, but eventually it is the retesting mechanism that delineates the true bottom."

In the meantime, he sees upside potential in Sears Holding. He explains, "The stock has tentatively completed a bottoming formation, when it broke out over 140 yesterday."

For those familiar with options trading, he concludes, "While options are pretty expensive here, and earnings are due on August 30, we think this is reasonable speculation." The trading expert recommends the Sears Holding October 140 calls at a price of $10.80 or less. If bought, he counsels, stop yourself out on a close below $133.

Each day, Steven Halpern's TheStockAdvisors.com features the latest investment ideas and market commentary from the financial newsletter community.

MarketWatch options expert 'calls' on Sears originally appeared on BloggingStocks on Tue, 28 Aug 2007 10:49:00 EST. Please see our terms for use of feeds.