Here is the $NDX chart:
As you see, the diagonal resistance (formerly diagonal support on the Ascending Channel) is still holding. However, with the big run-up today, and the usual 4th quarter rally seemingly heating up again, I have decided to use the median line of the Ascending Channel designate my Bear Call spread at $1925/$1950. I have three resistances going for me at this time. The first is the aforementioned diagonal resistance line. The second is the previous high at $1824, which has only been tested once, so it isn't really strong resistance at this point. The third and final resistance is the Median line in the Ascending Channel, which does intersect the Expiration Date line at $1931 making it a little higher than the $1925 Short in my Bear Call. Call it a calculated risk.
For the Bull Put, things were a little easier. I chose a Bull Put at $1625/$1600. There are three supports protecting it: the first at $1761-$1750, a previous strong resistance (now considered strong support), the second support is at $1695, and third, there is very strong support at $1630 (trust me, you'll see it on a one-year chart).
I could have also gone Uber-conservative on the Bear Call by playing a $1975/$2000 spread, but there is no money in it. I could also choose a $1950/$1975 Bear Call, which would place it above the Median line intersect, but again, there is no money in it. The key is to find some balance of risk to reward that makes the trade worthwhile without being too risky. Remember, I have had to roll-out the last two months, and I'd like to get into plays where that isn't necessary. I hope this is my first one to accomplish that.
Tomorrow, I'll share the analysis sheet I created on EXCEL to show you the trade layout.
Happy Trading!
1 comment:
I've had pretty good luck so far! Here's to another month. I am working on my SPX IC, but I am skittish due to the possible continuation of the trend and a HUGE mystery about when we will reverse. I am more comfortable on the NDX due to the consensus that it is lagging the SPX and keeping well tied to the DOW. I'm busy marking away at my own charts and will let you know waht I come up with. At first glance, theone you set up doesn't seem agressive enough for me. Did rolling your trade the last 2 months hurt a lot? Is that why you are being more conservative?
I'll spend Saturday deciding what to do, but won't trade until Monday, just for that feeling of confirmation. I'm thinking bullish for now, trying to forecast if/when the pullback. I'll let you know!
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