DDS / RTH & NDAQ for Options Expiry

To follow up on between the bar's well thought out and approriately timed comments about Dillards (DDS) last week I wanted to talk about the DDS chart and its relation to the Retail Holders ETF (Exchange Traded Fund) with ticker symbol RTH. The RTH is just an equity that represents a mix of retail stocks plus a small fee to Merril Lynch. It basically represents the combination of all the big department-type stores including stocks like Wallmart, Home Depot and Federated (Macy's) among others (but not DDS as far as I can tell). In any event read the previous post if you want to hear more about retail's fundamentals. I have above the DDS stock price divided by the RTH which is guaging DDS's performance relative to the RTH (the sector). Areas where this fraction rises is when DDS outperformed the retail sector and areas where is fell are when it underperformed the sector. What you see is similar but slightly different from the actual DDS chart, which in this case turns out to make a large difference in the message. Essentially, on this ratio DDS appears to be at very fierce resistance here with the 50 day moving average above along with the upper BB's which are flat. This compares with something of a cunfusing breakout on the real DDS chart. And from a longer term perspective the 50 and 200 dma's in this ratio chart have been important technically as seen above. Long story short, when we remove the recent boost in the entire sector from the DDS chart it looks more like DDS is rolling over than breaking out like the real chart might suggest. This of course lines up with the fundamentals which have been drastically under performing the sector.
Just to keep us focused on the real equities here, I have the 10 day hourly DDS and RTH charts side by side above. In the DDS chart I have drawn in approximately to the best I can the real 50 day moving average and the DDS/RTH ration 50 day moving average. You can see that now really would be a great time to get short and if you want to be more conservative expect and wait for DDS to break it's actual 50 dma at 34.60, but by then it should be moving fast and the 35 puts (March or Even Feb) will be significantly more expensive. On a side note the RTH looks ready for some downside anyways, look at that huge volume sell off a few hours before the close last Friday...


Now I know there are some readers who are here looking for an options play. Trading options just before expiration is a good way to lose alot of money real fast, but every trade has a winner and a loser so that means someone else is making a bunch of money real fast. Anyways, NDAQ jumps out as kind of a no brainer. Its all over the news this weekend that their bid for the London Stock Exchange failed. And NYSE (NYX) has been seeing downgrades lately over volume concerns weighing on the sector. Furthermore, NDAQ is the dog in the sector and the fact that it is trying to breakout now so late in the rally is suspect. But why this week? Well options expire Friday and max pain on NDAQ is 32.50... uhh yeah that is about 5 points lower. This is a no brainer short/put play up here above it's upper bollinger band in my humble opinion. At least to$ 35 by Friday. By the way, make sure you click on the images above to zoom in for a better look. And don't forget to sell those February options this week!! Questions and comments are most welcome!