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Predetermined Results

Veteran traders see it day in day out, but newer traders may not be familiar with what the famous adage "buy the rumor, sell the news" actually looks like. Yesterday we had reports of a substantial drop in initial jobless claims, but did it truly warrant the strongest day year-to-date for the S&P? Today's decline would suggest that it did not.

When jobless claims came out yesterday many investors felt that this would point to an undeniable rise in payroll jobs. They continue to initiate long positions in hopes that Friday's report will continue to push us higher. However, something happened that they may have not taken into account. For one, the payroll consensus was increased from 180,000 to 200,000 leaving us to actually hit the target today as opposed to surpassing it. Another factor affecting the report is a slight miss in hourly earnings. Given that this follows a strong January, it's not quite as much of a red flag, but still a number worth noting. Crude futures have also aided in easing prices in stock indexes as we've finally been able to crack through our 2008 highs.

Crude Weekly
Source: TradeStation

Following through with our expectation of higher crude prices (I've included a weekly chart in crude that's worth noting), I want to take a look at another trade in the energy sector that fits our trading criteria and is currently riding in a solid uptrend. Joy Global ( (JOYG); $97.14 as of 11:00 a.m. EST) is in the service mining industry and stands to benefit from an increase in demand for energy products as we move into the summer months. We've also the Bollinger Bands and Keltner Channels almost trading within each other, showing that we could be getting ready for an expansion in volatility.

Joy Global (JOYG) Daily
Source: TradeStation
View Chart

I'll be taking today as an opportunity to initiate a call position in the stock and look for a test of our most recent highs. Here I'll be moving out into April options with the 90 calls and stops around $94.00.

Joy Global (JOYG) Options Chain

Source: TradeStation

View Chart



Trade: Buy to open JOYG April 90 calls for $9.40, with a stop at $94.00 and a target of $100.00.


At the time of publication, John Carter was long JOYG calls.

John is a Commodity Trading Advisor with Razor Trading. McGraw Hill commissioned him to write a book entitled Mastering the Trade, which was released in January 2006. Carter has also been featured on ABC Money. He and Hubert Senters founded and run the Trade the Markets web site.

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