Since tonight is my night off from Master Talk, I figured I would review the three trades we took last week to discuss how to handle the trades from here. Last week we made three trades...SHLD, GS, GRMN. Here are the details...
Symbol: SHLD
Trend: H&S Reversal Pattern
Target: $135ish
Trade: Bought Aug 150's @ 7.20
Why: Bear market, bear pattern, beautiful confirmation of the H&S on 7/12, amazing Risk/Reward!

The option hit our target range yesterday pushing this contract to it's high of the day at $15 per contract. If you have not gotten out of this trade as of yet, you might want to reconsider riding the correction here with the market. You'll likely give the majority of those gains back.

Symbol: GS
Trend: Downtrend
Target: $138ish
Trade: Bought Aug 150 puts for $7.50
Why?: Resistance Bounce, bear market, nice risk/reward

GS hit our target price on 7/14. The option would have sold for roughly $12 on that exit we discussed last week. If you are still in this trade and did not get out on the 14th when our stock hit it's target, I would watch how resistance holds up. If it breaks out of the downward channel it is in, I would take the loss at that point.

Symbol: GRMN
Trend: Uptrend
Target: $109
Trade: Bought Aug 90's for $8.50
Why?: Nice re-test of an old resistance level as new support (50 MA as support also). Strong stock, good movements.

The stock has moved nicely in our favor, but I am concerned about the lack of movement on the markets rally today. Everything was up strong today, except this already bullish stock. Sign of weakness? Perhaps. Keep a close eye on this one, this doji may show a sign of weakness and a reason to take our profits. Aug 90's are@ $11.80.

A very nice position to be in going 3 of 3 last week. What is very important in the analysis of these trades is exits. Entry points are easy, but it is closing the trade that most struggle with. Pay close attention to target prices. Use easy to reach support/resistance levels, or average movements to create target prices. This provides a blueprint to follow, and if you do not follow your plans, it is easy to know where to place the blame.

Posted by Option Addict on 7/19/2006 at 4:47 PM | Permalink