Do You See What I See?

Here we have another stock breaking out today. It happens to be Microstrategy (MSTR). What is your analysis on this? Would this be a trade you would take? If so leave some comments on how you would trade it. I'll follow up on this later today.

I measure a 15 point move over 3-4 months. The breakout had 150% volume. It looks like a classic ascending triangle, but I will have to wait for a pullback to support or some consolidation later in the move...I need an entry with a smaller risk.

Amy

I see a resistance breakout with huge volume. Also the Imp. Volatility is at it's lowest all year which means cheap options. Had I seen this trade before the market closed, I would have definitely taken it. Oh well - I missed it :(

Ok, I will bite first. I see a good breakout on decent volume. The anticipated move is approx. 18 points over a 3 month period. Two things I don't like.
1. MSTR has already made a good move.
2. The options are expensive with 40-50 cent spreads, most likely due to low volume of shares traded daily and open interest is not that great.
That being said, I would still be interested in this trade due to the large possible move. I would look at the July 135 or 140 calls. Being the chicken I am, I would be more comfortable waiting to see what happens in after hours trading or first thing Tuesday morning. I know I risk missing a big move or even the trade, but thats just me.
OK, I broke the ice (Sorry to bring up ICE Chris!). What does everybody else think??

Sean M.
CA

Ascending triangle with strong vol/resistance breakout. I see a 18 point move over the next 3 months and at first looked at the July 135 calls. However, at that price (around $10), I would instead look to do a a bull put spread (sorry, Jeff - I know how much you love selling options :)

March 130/125 with a $1.10 credit.
Exit would be 1/2 of credit (or 0.55).

I'm still new to this, so would appreciate any feedback/comments.

Amanda

Jeff-Is this an ascending triangle?...not sure I am seeing. I do see a higher high on a trend reversal...

Ditto to the triangle. To take the trade or not? Normally I would,but now have a new rule " I don't chase the trade." With 4.45 move don't think I could hang a pullback, therefore I wait for the RETEST.

Sarah

Greg...

You tell me! :) Do YOU see a triangle?

The suspense is killing me!

Jeff

I see what others see here but am with Amy as the risk is too high at this point. So would have to wait for a retest/new entry.

Bob H.
CA

Jeff,

interestingly enough, this was on my radar as a cup with a funny handle. either way you draw it, the target is the same and it's a breakout on huge volume. I hate that i watched it climb all day long, but i took the trade around 2:45 anyway.

A retest???

Like the one we saw in X?

Hmmmm.......

I PROMISED MYSELF THE NEXT TIME
KOHLER POSTS DO YOU SEE WHAT I
SEE, I WAS NOT GOING TO MISS OUT
LIKE I DID ON X. DECISSIONS,DECISSIONS. STEVE.L

Hey everyone...
Check out the long term upper horizontal line that started 3/4/04. Tested it 3 times...looks like the stock could go to $138 and try to test it again. What do ya'll think?
Katy

I - have been watching this one develop for a couple weeks now and missed the initial break... If it retests and comes within $1 or two of support than I will be in! I personally don't like to give that much room in case the retest fails.

John

John, I am with you on that. I would love to get into this trade first thing in the morning but I do not like having that much room down to support. I will also be watching for a retest but then again, if it never retests we just missed a great trade.

Mark

I am very new at this and very directionally challenged but I'm not reluctant to express an opinion.

If it is an ascending triangle, then the current move is not very much vs the expected move. The resistance breakout was with good volume and the open interest is good enough to probably get in and out of a trade at midpoint pricing. Since I didn't get in before closing, I will (paper trade) do a buy stop order for $.25 above the high for today.

There is a trend line from the 5-year chart that could provide resistance at about $134 to $135 so I will watch it closely and exit if it bounces from that resistance.

Bob

Not to get off topic, but I would like to illustrate a point that has been made by Jeff in the past. I have been in QCOM for a week now and I have made some profit. I was happy on Friday that there seemed to be a short term flag developing and I had high hopes that the stock would go to 45 and then I would seriously consider getting out. Well.......I had CNBC on today (and yes the volume was on..sorry Jeff)and there was negative news on a contract that Nokia was going to renegotiate with QCOM and this would seriously cut into QCOM's profit. On my mind was the mantra to never let a profit become a debit so I bailed. The stock still closed down but rallied up to a support level that I would have been comfortable with. My long winded point is that if I had followed my plan to wait past intraday to make trades, I could have stayed in this stock. Again, sometimes it is a curse to be able to watch the market all day long. Tomorrow will tell if I am a genius or an idiot or just clueless. Anyway, I thought I would share my anxiety with the group. If I can help you feel better about your own anxieties, then my job here is done. Lets keep bloggin.

Sean M.
CA
ps. I apologize now for all and any spelling errors that my keyboard makes now and in the future.

On MSTR I would wait for a retest.

CME appears to be at an interesting point. Resistance point of downward channel in the last month. Horizontal support. Resistance point in a long term up channel. If it continues down and breaks 535 I'm looking for 505 which is the 200 DMA .... But look out for the bounce here. I'll wait one more day and trade whichever direction tomorrow brings.

Dave

CME --- Support points ..... sorry

Just placed an order for the July 140 strike with a limit of 8.10 and a contingent order to buy only if MSTR > 132.5 (after hours last price). If the price opens lower then I will look for an intraday bounce to buy. I have 1% of my portfolio at risk and will let it ride....

Jeff - I am still in X! -- So far this trade alone has paid for 1/2 of my upgrade from the Masters to PHD program. I am hopeful that MSTR will pay for the other 1/2 :-) It was nice to meet you and the others in Orlando - I came home totally psyched to make my trading plan work. So far I am up 12% since Jan despite some corrections -- I am finding that a few good bearish trades help immensely with damage control when the market takes a step back for a breather.

Some other trades: I placed an order to buy the March 42.5/40 bear call spread on SNDK tomorrow -an easy 16% over the next 3 weeks if it stays below 40. I also entered a June in the money call on RIMM before the market closed today.

Allen from Myrtle Beach, SC

MSTR is definitely a trade I would take, here is why....
MSTR is in a short term uptrend as well as a long term uptrend as seen on the 5 yr chart. It is breaking out of an ascending triangle, formed over the past 2 months. With support at 129.50, calculating a 17.50 move based on the price pattern formation, puts the target at 147.

Even though MSTR had a huge break out today, it is not too late to get into this trade. I calculated a risk to reward ratio of 1:3.65 if entry were at today's closing price of 132.40, with a stop loss at 128.40.

After using the Black Scholes calculator, the highest probability of profit was an April 135 call. With the last EPS on January 26, buying an April option would also get me out of the trade right before the next EPS announcement. With implied volatility being low for the stock, options are fairly priced right now, anticipating that implied volatility will rise as the next EPS nears.

I also looked into MSTR's industry group, software/programming, which has been uptrending since Aug. If you compare MSTR to it's industry, it has been outperforming it.

If the NASDAQ continues to fall, it may affect the stock, but with a stop loss in place and appropriate position sizing, the calculated risk would be only about 2%, yet if the stock continues to uptrend as anticipated, profits could be really good, close to 150%. Therefore, based on all of these calculations and observations, I would closely watch for an entry and take the trade tomorrow.

Danuta
PS....I always enjoy reading everyone's insights.
Jeff....Thank you for providing us with these exercises. They are an excellent teaching tool. I look forward to interpretation.

I don't see a really good triangle, but I do see a breakout of a 52 week high on great volume. The fundamentals and group could be stronger and the big chart numbers are pretty weak, but... it is a breakout. I also see a Bollinger Band "squeeze play" happening with a pop to the upside and a positive 7 day RSI on good volume. I wish I had seen this before the close today, but I am likely in first thing tomorrow AM. Looking at the April 130 call at 7.6/7.8. Target is 150 and my mental stop would be ~128.5 . I realize this stock has already made a big move so I will watch very closely for signs of weakness.
Mark P

CME - I agree with Dave. There is good support in the 535 area. I also have a Fibonnaci retracement at that support level.

I am looking for a bounce but that has to do with the lower wing of an iron condor (520/510) I will have to move rather than any technical reason.

Bob

I see a breakout of an asc triangle on strong volume. The move up should match well with the market rally coming in the next day or two.

I took a small position in the Mar 140's. MSFT can get there no problem if the pattern holds, small loss if not.

Does anyone want to comment on the pre-market trading??? Looks like China tanked. I'm in NYX and it's down over $3.00 this morning in pre-market.

I've been watching this one instead of having an automatic stop, but with the possibility of losing a ton here due to a gap, I'm wondering if it's wise to wait and see if a intra-day rally helps me out?

Any thoughts???...Jeff, I hope today's the day for the 50 point rally!!

Gary
Boston

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  • From Saratoga Springs, Utah, United States
  • I am a professional trader and an instructor for Investools. I've had relations with the markets for 9 years. Born in Concord, CA, but reside in Saratoga Springs, Utah. Father of THREE, Husband of one.
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