HOT TRADING STRATEGIES FOR A COLD MARKET
Daily Stock Market Equity and Options Trading Commentary

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Thursday, July 8, 2010

Time for Another Bounce? Three Stocks I'll Be Watching Today

Morning traders, I'd like to see a follow through of yesterday's price-action. If we get a move higher today, I think we could bounce back as high as 1150 on the S&P 500. Watch 106.77 on the SPY as it is a gap we need to fill. If we fill it and start heading lower, I think we could sell off. However if we fill it and keep rallying we could be heading as high as 1100 very short term. Three stocks on my watch list today are: Teva Pharmaceutical (TEVA) which put in a nice doji, Sourcefire (FIRE) which put in a very nice hammer, and Gafisa (GFA) which broke out yesterday and the chart predicts it back as high as 16 a share. Sphere: Related Content

Wednesday, July 7, 2010

Doji Confirmed! SPY Option Straddles Paid Off Big!

As stated this morning I expected a major move in the equity markets based on Tuesday's price action - I just didn't know the direction. As stated I was looking at opening option straddle positions on the widely traded S&P 500 SPDR (SPY). An option straddle is ideal for this type of situation.

Many use straddles before big events such as earnings, but be careful as the volatility will collapse following earnings and if the stock moves less than the derivative market is anticipating (which happens more times than you may think) you could lose much of the premium paid. To learn about straddles check out my Advanced Option E-book! But getting back to today's trade, once the market volatility came in from the initial spike at open, I took a slightly bullish bias and straddled the SPY by purchasing the 104 weekly put options and the 104 weekly call options. These new weekly options are ideal for this type of trade (closed at the end of day) as the premiums paid are very small. I am glad to say I closed my position at roughly 3:55 PM banking a very nice one day gain! Happy trading! Sphere: Related Content

S&P 500 Chart Predicts a Major Move

Happy lucky 7's day (7/7)! I'm expecting a big move in the major indices today as the S&P 500 had a doji candle pattern yesterday. Doji candle patterns do not predict the direction of the move, they just predict the magnitude. The S&P 500 index closed 0.03 below the open price which is a major doji on an index of 1,000 plus! Last time I noticed a doji was on the S&P 500 ETF (SPY) was on May 19 and that was followed with a huge move the following day. I now see a major doji on the actual index so time will tell if it works again. I'll look at opening straddles on both the S&P 500 and the Powershares QQQ at open today. The chart below is the of the S&P 500 and you can see the doji candle pattern we had on July 6, 2010.

Click chart to enlarge
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