28th March 2010
The seven week bounce by the stock market off of the February lows appears to have run out of gas. This action improves the probability that the April options we sold to roll over our Bull Call Diagonal Spreads will expire worthless. Of course we do not want the market to make a complete about face, but a test of the support levels we mentioned last week should help these strategies. While stocks appear to be taking a breather, keep your eyes open for new opportunities to implement bullish strategies once the pull back is complete.
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22nd March 2010
Last week the financial markets continued their slow march forward into new 52 week highs. The problem with this breakout was that it was not accompanied with a lot of volume. The SP 500 should go back and test support at the 1150 level, the DJIA at the 10,700 level, and the MNX at the 190 level.
When this happens, use it as an opportunity to place some new trades. If support holds, look to use bullish spreads to reduce your risk and improve your reward to risk ratio. If it does not hold, it will be a good opportunity for bearish credit spreads.
JD
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14th March 2010
What a difference a week makes. The 50 day MA proved to be more like the ceiling between the 1st and second floor of your house than the ceiling holding up the insulation in your attic. On its second attempt the SP 500 plowed right through it almost like there was nothing there. This time it stopped right at the level of the January highs. We will soon see if this level provides more resistance, or if turns out to be made of paper like the last one.
From a technical point of view, we have now completed the handle portion of the “Cup with Handle” formation. A breakout to the upside could prove to be a good buying opportunity, while a failure should take stocks back down to the 50 day MA once again. We should know a lot more about this market on Monday.
JD
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