Post feedAnticipating the Bounce
For the most part I trade price pattern breakouts. But it is common to go long periods of time between trading signals. Because of this I also trade support and resistance bounces. Each Monday morning I run my four favorite searches to find bullish & bearish bounces. I combine this with a weekly review of may watchlists to find patterns that are forming or have already formed and are trading outside these patterns. This is how I find my stocks to trade.
Earlier this week I entered a few bounces since the breakouts I traded this week were minimal. Many of the emerging patterns have yet to confirm and a few have failed before signals were given. Here is a list of a few trades that I might have an underlying interest in. Majority of these were entered as of Monday.
Bullish
KSS- Nov 70's
WCG- Nov 60's
STA- Nov 50's
SHLD- Nov 170's
YUM- Nov 55's
C- Nov 52.50's
JBX- Nov 55's
OMG- Nov 50's
Bearish
BHI- Nov 65's
MLM- Nov 80's
UPL- Nov 45's
EOG- Nov 60's
RTP- Nov 180's
As you can see, my positions are weighted to the trend of the market. My bearish positions are based on groups that are struggling with stocks that have great reasons to be bearish on them. Of course today's movement in the market was great for my bull stocks, but my bears slightly offset my gains. Only by a little though. Most of these stocks have moved quite a bit already, so be cautious in taking positions in any of these. This post was in response to a suggestion I received earlier about what I think looks good in the market.
Earlier this week I entered a few bounces since the breakouts I traded this week were minimal. Many of the emerging patterns have yet to confirm and a few have failed before signals were given. Here is a list of a few trades that I might have an underlying interest in. Majority of these were entered as of Monday.
Bullish
KSS- Nov 70's
WCG- Nov 60's
STA- Nov 50's
SHLD- Nov 170's
YUM- Nov 55's
C- Nov 52.50's
JBX- Nov 55's
OMG- Nov 50's
Bearish
BHI- Nov 65's
MLM- Nov 80's
UPL- Nov 45's
EOG- Nov 60's
RTP- Nov 180's
As you can see, my positions are weighted to the trend of the market. My bearish positions are based on groups that are struggling with stocks that have great reasons to be bearish on them. Of course today's movement in the market was great for my bull stocks, but my bears slightly offset my gains. Only by a little though. Most of these stocks have moved quite a bit already, so be cautious in taking positions in any of these. This post was in response to a suggestion I received earlier about what I think looks good in the market.
Jeff,
I know you have MLM as a bearish trade, but i see a confirmed double bottom (on volume) along with a bull flag setting up now.
Possible?
Posted by
Anonymous |
10/04/2006 03:37:00 PM
Brett,
There are about 6-7 bottoms at this support level. Which two are considered the "confirmed double bottom?"
Posted by
Option Addict |
10/04/2006 03:40:00 PM
Fair enough. But what about the flag?
Posted by
Anonymous |
10/04/2006 03:45:00 PM
I like your post, because I was curious what your trades were when you were waiting for price patterns to confirm. I did have a question though:
By looking at your bullish watchlist, it appears as though you are using the moving average as your support level on several of the trades. This was confusing based on your post a couple of weeks ago warning against that.
Could I get some clarification on your trading rules for the bounces? What is your trading signal, when is it considered failed, etc.? I know your rules for the price patterns, and would like to learn what your rules are for these kinds of trades.
Posted by
Anonymous |
10/04/2006 03:47:00 PM
Brett,
Okay...how about the channel? Support/Resistance?
Posted by
Option Addict |
10/04/2006 05:05:00 PM
Mike...
Allow me to reply with an excerpt from that article...
"A moving average can act as support, but there needs to be evidence that this is the case. If I look at the chart and see historically that the stock has bounced off my moving average as support and going back I am convinced of its repetition, then feel free to assume."
Do these trades you see use the moving average as support? If not, could you replace the moving average with a trendline to illustrate support?
Perhaps my intention on the moving average post misfired.
Posted by
Option Addict |
10/04/2006 05:07:00 PM
Hey Jeff,
Seems like every one of these options is one strike or so OTM. I know you do this to avoid the high ATM IV/Theta/Vega.
Do you consult the IV chart at ivolatility.com on each play before buying? If IV is really high, how do you compensate for that when you buy an OTM option?
Or all these entries with low IV?
Many thanks.
Matt
Posted by
Anonymous |
10/05/2006 12:01:00 AM
Jeff,
Great blog and you did me well with the post on moving averages. It helped clear some confusion. Do you see an ascending triangle in JLL? I'm seeing resistance around 88.30 with a potential price move of around $15. What's your take?
Danny
Posted by
Anonymous |
10/05/2006 07:56:00 AM