Case Study: US Steel (X)

Last time we looked at this chart it was in my January archives. In fact if you click on Jan 2007, it is the first one to pop up. This was a trade I took back at $80 and been playing it ever since.

Anyhow, I want to use this as a case study. If you decide to take this trade repeat after me...

"I am a lunatic for taking anything Jeff says seriously. US Steel is my trade, and I assume the responsibility of adopting my analysis and my trading rules to this idea. "

Oh yeah, don't forget..."I am an option addict."

The art of taking a trade...

Step 1: Identify the prospect.
This should be part of your daily task is to check your watchlist and or run searches to find stocks to trade. The selection process should look for the cream of the crop, and never settle for things that look "ok." Never settle.

I love the trend, I love the stock. I am moving to the next step.

Step 2: Timing
Timing will be a little different from one trader to the next. In an uptrending stock I like to identify that a strong trend is still in motion, and that I am as close to support (low risk entry) as I can get. I don't take a trade after a stock price has been crippled, I let the stock retrace and wait for it to stop going down (hopefully at support).


Step 3: Choose your weapon

Each trade will call for a different weapon. That is because there is a different expectation for every stock out there. To chose an option I try to answer the following...

"Where is the stock going?"

"How long will it take to get there?"

For an uptrending stock like this, I don't necessarily want to pick a target price. I want to ride the trend. *Now this is different for how I treat a price pattern trade. That will be case study two.

Since this is more of a trend trade, I want to make sure I am giving myself enough time to enjoy the trend. I would look to buy no less than July...and if you are thinking July I would try to upsell you to the Sept to be safe. After you bought I would then tell you that I own the July's.

Strike price is determined by my expectation of the stock. I trade OTM options on breakouts for the most part, or for any big expected movement in the underlying. Since I can't say I am expecting anything out of the ordinary here, I would take down the 110's. Sure it is an expensive option, but it is because it is an expensive stock. If you don't want to be so conservative, 105's are nice also. Technically they are in the money, but many would call this the at the money option. Problem with these...lots of time value, little intrinsic.

JULY 100's.

Step 4: Plan My Exit

This scenario looks simple. I will hold this until it violates my trendline. If it closes below my line tomorrow, next week, next month, etc. This is where I will exit this trade. Complicated?


Step 5: Submit my order

The work is done. Now I just keep my emotions out of my decision making process and check this stock about an hour before the close each day to see if I should exit. This trade might make money, and it might not. The point is, it is a small amount of risk to back my analysis.

Again, US Steel looks like a low risk add point. I have been with this for a while and I added at the close today. This is not a new entry, but the purchase of these contracts is under the same analysis as if it were a totally new position.

Recommendation: If you choose, adopt this as your own idea.

Long: X

Short: Questions. Just kidding...I think I covered all my bases.

Very nicely done. All I need now is my massage therapist, Bretts WM's, and my prophet charts to work, and I am good to go......

very nice post Jeff, I have been trading X on and off but still do not have the nerve to hold for the trend. May be I will try it on this one to see how it work for me.


Hey Jeff

I'm not trying to be difficult here, well ok maybe a little - but nothing out of the norm.
Based on my analysis of this trade.... yes, it is bouncing off of diagonal support. However, if you look at it from a horizontal support, it broke down through support yesterday, with some pretty good volume. It didn't get back above that today.

Does this not hold much water since it is in such a strong up trend?
I see support at aprox $109.20 ish yes or no?


Love the case study on X (even more since I am in it as well). Great analysis. Very easy to understand!

I wanted to comment on something Sarah said in the last "I'm Nervous" thread (btw, I assume we alwasy post to the most recent entry from Jeff, at least I think that's how this blog thing works.).

Sarah -- about hiding the account totals.

I trade OTM options. When I buy them, due to bid/ask spreads they are always negative and show as red. Once/When the stock starts to move as I expected, they will start to turn green.

Most of my trade setups are aggressive and I set my loss target at $0 (I risk the entire premium). This also helps me to position size (I ask myself, "Do I mind losing this entire premium?" before I place the order). If I can't then it's too big of a risk ($ amount, % of account, etc.)

Then, during the day, I basically ignore the red trades and only focus on the green ones.

Each morning before market open, I review them all to see if they are within the expeted patterns and plan accordingly.

Anyway, it's been working for me.


Sweet! I bought X at the close today as well.

Thank you for taking the time to document your thought process. This is extremely valuable!

Thanks, Jeff.


Difficult I can handle. I think your point is a valid one. However, higher highs & lows don't have to correlate to one another. Obviously trend support is so much stronger than horizontal. Why? Because the stock hasn't tested this idea more than once. If it had, it would win me over and I would go that route. Always apply your idea to the stock. If the stock shows that it consistently bounces off prior highs, then yes this would make sense. When compared to the ascending support, I see a better consistency here.

Agree to disagree?

last nights market cast talked about log vs. non log. Take X, draw support line, then check and uncheck Log a few times, arguably you could draw different lines???
What say the rest of you?

Jeff, I know you do not put much emphasis on this, but it seems like it could be argued that support has been broke with a line drawn while log is on?


Broken support should be visualized as an event, not an interpretation. If support is strong, it will make an impact on the stock if it is truly broken. (i.e. it would be a bigger deal in the price action)

My opinion.

Nope.... agree to agree.

Thanks Jeff


That wasn't difficult?!


Hey guys, somebody mentioned the idea of keeping track of the different "threads" going on the blog. We mentioned this a while back but here's a reminder if you're interested.

I subscribe to Jeff's blog's comments RSS feed. This continually delivers every comment from the blog in chronological order no matter what post it's on.

The fastest responding application I have found for this is IE7. If you wish to do this, here is what you can do:

1) Open IE7
2) Put this address in the address bar: (It will pull up a list of the comments)
3) Find the "subscribe to this feed" link (I think on the upper right of the page.
4) Click the yellow star upper left to open your "favorites" and then click on "feeds". This will keep a list of your subscribed feeds visible on the left.
5) Hover over the feed name and you'll see a little arrow to the right, click it and it will check to see if any new comments have been posted
6) Right click on the feed title and select properties and you can set the time interval to automatically check the feed. The quickest you can set it 15 minutes.

For me, this makes keeping up with all of the comments so much easier, and when i want to reply, i click on a comment and it takes me to the post on which that comment was posted.

Anyway, just thought I'd throw that out if anyone is interested.

You can also do this in a host of other applications and browsers, but IE7 is the fastest I've found.

great blog...has anyone thought of doing a put spread...say 95/100 on x...take the credit and see what happens


Spreads suck.

I'm saving it for next time....


Thanks Jeff! 20 - 30 more of these and I should start to get the hang of it! ;-)

Seriously, awesome post - just what I was looking for.

Hey Tim,

What is IE7? I'd like to be able to get a live feed. remember me I'm on the mac. BTW thanks for the help from before.

BTW the Jeff, love the case study and love X!. It's funny because last week Mark Larson(at advanced options) kept talking about the market being over extended especially steel and to be ready to buy puts! Somebody always has to be the the bear,I guess.

Nice to see X on the radar Jeff. I'm in it and down overall. Up today but I'll continue to hang on....only by my own free will and choice though!

ISIL - Thanks for your help all. My conclusion is that I have not been nailing the longer term supports. I had $29.70 as support and then moved it up.
X - I have been in and out of this trade (the out part due to those bad stops again). Jeff, you make a perfect case for SEP 100 (I think you meant OCT) and then do July 100s why? I would be the one doing the OCT 105 although I would probably not take this trade yet as I would look for a close above previous day > $0.20. Maybe I am getting in too late like Brett suggested. Hummmm...crippled may be just the word, Jeff.

I've been reading this blog since January when I started trading real money. Thanks to all of you for your ideas and support. And lots and lots of thanks to Jeff for all the help you give all of us. It's time for me to jump in and this is a good place. I got into X at the close today also. It felt so good to check here and see Jeff's analysis. It was very clear and now I better understand why I did what I did! I bought the Oct 100 because I'm new and like to buy extra time. I've made money on X before and been stopped out each time. I'm learning patience and to place wider stops. Thanks again.
Katherine Smith
Molalla, Oregon

Hey Tim-

Any suggestions for us that don't like using Internet Explorer. I use Mozilla Firefox because I don't get the pop ups like on Explorer and I don't get as much Adware. Plus, I just like it better.


pasadena, ca

Liz, you can do the same thing in Firefox (just paste that address into the address bar and you will see it), but I have found it more cumbersome to manage and not as quick to respond. I, too, am a Firefox fanatic, but the one thing I use IE for is this blog. So, since that the only thing I use it for, I just make the comments feed my home page and it's very easy to access.

Sarah, IE7 is internet explorer 7. Sorry for my insensitivity to the Mac users. As mentioned above, you can do the same thing in firefox and I would guess also in Safari or Opera. Most all of the modern browsers are getting feed reading built in. I have not tested on the Mac however, but I can if you need help. Just email me at

Also, you can use other feed readers like, which is what I use for all of my other feed reading, but it is often slow to pick up new posts (often delayed an hour or more) and that is unacceptable on this blog.

The browsers read the feed in real time so that's a better way to go.

Hope this helps.

Thanks Tim.

Ya, I tried doing the same thing for firefox and it looked really weird so maybe I'll do the IE7 thing. Hey, what's one more window open on my computer?! ;-)

pasadena, ca

Looks like EMC broke out today, is it the time to get in?

A couple days ago when X was at $109 and change, I added to my current position with the July $115's.

Happy Trading everyone, I'm off to Cabos to hang with my wife without children and drink beer and margaritas!

Have a good holiday weekend.

It is a coincidence that I also purchased X otm 110 yesterday. Must I say at it's high of the day. I'v been tracking X since I first heard about it on the blog. Looking for a good entry point I saw one off diangonal support and a slight pull back. I also recognized it was a flag pattern. I'm looking @ a 5.00 move to the upside. Now about news I hear there is going to be a retracement in metals today on MNBC. This could be interesting trade to follow with the blog.

Tuck, I had checked the 95/100 bull put spread on X also and it looks good though the credit was too small for my tastes. I would balance that against what a standard call could do first. MikeH

I got a few emails about AVB, so i'm going to give my crack analysis:

First we had a head and shoulders breakdown of $125.

Then we built a short-term base at $120 and successfully retested $125. (Yes, INTRAday the stock climbed over $127, but we don't care about intraday).

Then we made a new low at $115 and successfully retested $120. (Yes, INTRAday the stock climbed over $120, but we don't care about intraday).

Now the stock is heading lower, probably to $110 if the 'every $5 theory holds).

See the pattern here? See what I'm getting at? Read this post again with a chart of AVB in front of you and perhaps you will enhance your trading of head and shoulders patterns and downtrends.


I'd like to direct your attention to ANF looking to break out of it's ascending triangle after earnings. Great risk/reward for a decent intermediate-term play.


I was looking at ANF the other day and I noticed that it has been forming an ascending triangle for about 7 months so you could play this for intermediate or longer term, right? I calculated about a 20 point move or so in about that time.

pasadena, ca


While it does LOOK like a breakout, and it may very well be one, I see a potential 2pt move. It has already made a lerge jump in price, if it holds thruout the day. Is this good risk/reward at this point is the question. For me, no. I like the setups on other trades better. I like buying AT a support or resistance line myself. I guess it all depends on ones rules.

Liking X......

Been watching GOOG. If it breaks 480, I think it has great potential.

Also, PSA and KIM look good today if somebody is looking for bearish plays.

Randall and Michelle

ISIL is looking for support somewhere...possibly the gap.

I'm gonna go get a massage, maybe that will turn things around ....

State of Calm...

The Nasdaq and the S&P are right at their trendlines and the S&P still has to take out it's all-time high, so let's just relax while the Bulls finish stretching and get ready to storm the court.

I think ISIL is going to settle at that 28.80/28.90 level. Right where it started on 4/19.

I think I'm going to go get a WM. It seems to work for Brett.

pasadena, ca


better make it a double.

Anyone have any thoughts on ATI?

Higher highs, higher lows. Lots of Yuengling.

Markets doing what they are supposed to do as far as I can see.


Just got off the phone with the Matador. He's ready to open the gates.


I had been watchng ATI for a breakout to the upside. Glad I did not ANTICIPATE it's move. Thank you Jeff and Brett on that lesson.


I am waiving my red flag and waiting...


You gonna grab some more BNI..I did.

Just got a wiff of something. Smells like Bull...

My account is getting pounded. Bring in the bulls.

Randall and Michelle

Don't look at your account. Higher highs, higher lows. Patience...

Or throw things at your monitor like I do..

I am not trying to be funny. Are you guys playing ATI as a put play?

Randall and Michelle

How about a triple!

Waiting it out... waiting it out... breathing...

pasadena, ca

ATI has been in a strong uptrend. I have support at around $109.50

If ATI breaks it trend, which it might be, I'll play it safe and wait for a retest at a level of resistance.

Song of the day

Relax by Frankie Goes to Hollywood:

Relax don't do it
When you want to go to it
Relax don't do it
When you want to come
Relax don't do it
When you want to come

etc., etc., etc....


Love this blog. I am sitting here thinking..."oh, I should have sold days ago", and then I read people are adding to their positions in BNI. I was looking at it like this pullback has taking away some of my virtual profits, and Bob is looking at it like a great time to add to his position. I am learning so much.
Sitting on my hands today, and learning a ton.
Thanks to everyone!

mike h..tks for your insight on x put
appreciate your thought..tuck.

Stephen, that was funny! Good motto for today. I feel emotions rising..... I'm only in AVB right now - thankfully.

Breathe Liz, breathe..... do some kickboxing or something - stop looking at the monitor!

We had a heavy snowfall last night. That is out of the ordinary even for us Canucks.... Just so you know, it's not all roses here.

Have a day of some sort...



I bought BNI on 5/16. My line in the sand is a close below $90.50, so I see today in a market that needed a pullback a good time to grab some more BNI, a low risk entry point. If the trade is wrong, a minimal loss. My target is $100

Ok so I'm new. I'll use that as an excuse. So don't crucify me for what I am bringing up but no one has said anything about it. I look at the Dow and see each day for the last 4 days that it has opened up a little lower, the bulls have pushed it a little higher each day and then the bears have come in with more strength each day and have pushed it lower. It appears that each day the bulls push harder and the bears push back with more strength. Today we actually have a shooting star forming. All I read about is bullish plays. Is no one really concerned about a major market correction? I know one day does not make a trend but this appears to be a strong pattern emerging. Jeff, Brett and all the other experienced traders WHAT SAY YOU? Am I full of sh@* or is this something to be concerned about?



When you sneezed on BIDU yesterday I think you gave it a cold. It doesn't want to get out of bed today.


Just make sure you can viaualize the difference between a pullback, and a "major market correction." It could happen, it is going to happen, but can you honestly say this is what it would look like?

Good day all,
I haven't been able to catch up on the last three day's blogs... but here are a few thoughts on what has occured in my reasonably sedate (not sedated) life.

I am blown away by PCP. It continues to rise regardless of the market. It may not be an especially great time to enter the trade (I have June options and don't want to have to sell) but this thing just won't quit.

I'm concerned about BNI. I don't hold it so my unbiased opinion on it is that it could very well be forming a double top here. There has been a lower high, although a higher high has occurred since then. I would wait for some kind of confirmation before diving in.

ISIL and ATI are the only two that I have right now that I'm concerned about. We'll see what happens at the end of the day before making a decision... but they're both pushing the limits on my rules (and my patience.)

YIKES!!! as I was writing this my account went from being down $400 to down $1300. Hmmmmm what is that ringing sound that I hear? Time to check my rear-view mirror for the car that may be trying to run me over. At least the puts are doing well today. Too bad I don't have enough of them.


What I learned from 2/27 is that you should always be concerned about a correction and balance your account accordingly. Even though we have been in a strong bullish trend, you should always protect your account with some puts. Right now my puts are my bigger winners. I adjust my call/put ratio to reflect the current trend. My other advice is to get into an all cash position if Jeff has another baby. If I remember correctly, "Crash Kohler" was born on 2/27.


Is a song about premature ejaculation supposed to help us through a day like today?

Hopefully it's just a metaphor for the bears' actions.

I see the markets as making higher highs, higher lows. I am not anticipating anything. I'll read the charts and let them tell me what is happening versus me guessing. I am not a good guesser.

Besides, I bet Brett is in the corral right now talking to the bulls, getting ready for the upcoming run after the pullback.

Did everyone think the Dow was going to have a major correction on 5/10??

Or BNI is re-testing its breakout and forming an ascending triangle :)


Speaking of kickboxing... Got a class right before closing bell and I'm so glad!!!

C&C-I think my husband is going to get out the bag of hammers when he sees POT.

It seems my portfolio gets disproportionably thrashed when the market is down compared to growth when the market is up. Anybody else have this experience? Is it just me, or are options more susceptible to dropping on down days compared to growing on up days? Trying hard to not look at the $s.

Peter V

I am glad we did a case study on X. However, I am not in the trade.
It is a situation like the one presenting itself in X that leaves me wondering what to do. I see the price sitting at support. Is their a line in the sand that traders say, "I am getting out," or is it just a defined break in support with high volume? My rules seem so defined that a setup like this leaves me following my rules, but shooting myself in the foot a day later. Like I mentioned, I am not in the trade, but experience this type of "teasing support" often.

I was thinking the same thing (laughter.) Thanks for saying it.

Randall and Michelle

By BUCY got stopped out, along with my FMX, along with my .... okay.

Now, is the time to go do something productive and not look at my account.

Hey, no one wants the trigger pulled too soon, whether in options or other things...

Excuse me Brett??

It's time the gate..


Don't worry, they're out there...stalking, waiting for the right time to pounce. Just like Sayid, Bernard and Jin last night. Hopefully there are no misfires.

Enjoy your fun Bears. The stampede is coming.

I just got an "aha" moment. I have three small children under the age of 5. If I don't get their lunch on time, they start fussing like they haven't eaten in days. I'll bet (to a seasoned trader like yourself), we sound like a bunch of fussy babies. Oh, my gosh, the market is down 30 points, what are we gonna do?

I am speaking for myself, because I know I need to not let these market corrections affect me the way they do. Does it get any easier? Did you used to freak out like we do when our trades are at support or down some?


I DID NOT see lost last night..will catch it tonight on TIVO...

Classic comments Brett.
Still giggling at my computer.

Peter V

I like you even more. I love that show, Lost. I hardly watch TV at all, but I watch that show.
One of the best I've seen in a long time.

Randall and Michelle

Hey, I've got some good news, looks like PSA and KIM are entry points for those who aren't already in these put trades. GS looks like a good entry point. I have been playing this stock, and it is excellent.

Okay. I'm signing off for a while. Gonna put the kids to nap and leave them with my husband while I go to Home Depot for mulch.

Happy Trading,

Well, I am working on the “Patience” thing, instead of watching my account I turned on the 11 am news here in Arizona to learn that monkeys are being abused at a private animal sanctuary.

It somehow seemed an appropriate story to share given some of the previous posts and the general market conditions today.

Trying to ignore the choppy market and stick to my rules,


Monkeys being abused; didn’t someone write a song about that?

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About me

  • I'm Option Addict
  • 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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