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Well Traders, another down day on the $NDX, a GREAT way to start my weekend! Yesterday I mentioned a Bearish Engulfing Pattern, which was the second one in 5 days. Today, the $NDX was in a pretty good struggle, but at the end of the day, the Bears won. The index finished down just over $4 points to end the day at $1,772. At this point, it looks like $1,771 is going to hold as support. The STO and MACD are indicating that an uptrend in close at hand, but only next week will confirm that. This being Friday, I get two more "free" days of time-value burn off.I am beginning to sense another Ascending Channel may be forming here, though at a substantially shallower climb that the previous one. I have already indicated the upper resistance of the channel and marked it as "New Diagonal Resistance" on the chart. Conceivably, a new bottom may be drawn using 12/26 (or 1/3 to be extreme), and whatever the bottom of these next few days is. Should that occur, then that sets up March's Iron Condor beautifully because shallow to neutral trends are an Iron Condor's best friend!I am off to Salt Lake City on Saturday for further training at INVESTools. I should have some updates next week as well.Have an enjoyable weekend!Happy Trading!
Well Traders, THAT was a pleasant surprise! The $NDX was up almost $7 points at the get go, only to freefall the rest of the day. The index ended up falling almost $25 points to end the day at $1,777.75. That is only $2 points from my sweet spot...sweet!So what does this mean? Well, for one thing, the 30DMA once again comes into play as resistance since the $NDX has fallen below it today. Add to that, another Bearish Engulfing Pattern (highlighted in Yellow) has formed, indicating there may be more downside ahead.The MACD and STO are in a more Bullish position, than Bearish, but today's action indicates that isn't always an accutate short-term indicator. I still fully expect the index to bounce from around here at some point in the near future. As I mentioned in an earlier pots, I still feel the "support area" indicated on the graph will hold up, and we'll move from there. Notice that the $1,771 area is also still holding, and may at as support. We'll wait and see.At this point, there would have to be some really incredible action for this trade to fall apart. That is not to say it isn't possible, it just isn't as likely. A moderate move on friday will lead me into a nice weekend burnoff, further putting time value on my side, or at least the erosion of it.Happy Trading!
Well Traders, it was bound to happen. Today the $NDX bounced and gained almost $30 points to end the day at $1,802.23. By looking at the MACD and STO positions, this is a "classic" bounce.The 30DMA has now been eliminated as resistance and is now considered support.The next resistance level is $1,824, which was pretty solid two of the last three run-ups. After that, we have the diagonal resistance which is vital to preserve this trade.Time is starting to be more on my side. With less than a month to go, even a big day like today didn't take too much off the table for my trade indicating that time value is really my ally at this point. Of course, 2-3 more $25 point up days and that could move the trade in the House's favor. We'll wait and see how things shake out.Happy Trading!
Well Traders, I have hit the "sweet spot" on my Iron Condor. What does that mean? It means I am right back to where I originally placed the trade 3 weeks ago. This would be the ultimate closing price because it is basically smack dab in the middle of the credit spreads I used to make this trade.The $NDX was up as high as $1,790, but was unable to break through. This is significant because that is right where the 30DMA is, and as I mentioned yesterday, this would act as resistance for me, which it did.The STO seems to have bottomed out here which may mean we could see some support and maybe even a bounce over the next few days. I see the $NDX moving down to the "support area" shaded in gray on my chart. There may even be some support at $1,771 since it has stopped there the past two days.All in all, this trade looks beautiful right now, let's hope we can bring her home!Happy Trading!
Well Traders, the day started with a little hope for the Bulls, but that was quickly dashed as the $NDX fell $25 points at one point before "rallying" at the end for only a $17.79 loss for the day. This puts the index at $1,779.02 which is very close to my "sweet spot" of $1,775.The MACD and STO are still showing weakness, so I think there is a few more days of downside left, perhaps to the $1,750-$1,761 support area? Also, the 30DMA was pierced today giving me another "ally" to slowing any move to the upside. The more barriers the better as far as I am concerned.Today's action also created a "Bearish Engulfing Pattern" which according to Investopedia, is "A chart pattern that consists of a small white candlestick with short shadows or tails followed by a large black candlestick that eclipses or "engulfs" the small white one. As implied by its name, a bearish engulfing pattern may provide an indication of a future bearish trend. This type of pattern usually accompanies an uptrend in a security, possibly signaling a peak or slowdown in its advancement. However, whenever a trader analyzes any candlestick pattern, it's important for him or her, before making any decisions, to consider the prices of the days that precede and follow the formation of the pattern."
This may seem to indicate that Friday's little bounce was an aberration, and more Bearishness is imminent.
At this point, my trade is already profitable and the prospects for a close out for maximum profit seem excellent. As always, we always play defense because what the market giveth, the market taketh away.
Happy Trading!
Well Traders, not a bad day. The $NDX didn't move very much after its precipitous drop yesterday. The index gained a mere $3.13 to end at $1,796 for the week. Days like this are terrific since most of what happens is time decay burnoff, which is exactly what I want. Now that Options Expiration Day for January has come and gone, time value should burn off at an increasing pace. Still, I must be cautious at all times because what the Market giveth, the Market taketh away!Looking at the chart, it looks like we still have some downward pressure based on the MACD and STO. It looks to me that we have 2-4 more days of a downturn before we may see a bounce and reversal. The questions is, how far can this fall before it turns again?Have a GREAT weekend!Happy Trading!
Well Traders, today was better than expected. The $NDX took a major hit of $34 sending the index to below $1,800. While I expected the index to fall some, I didn't expect this much this fast, not that I am complaining because today's action put my February Iron Condor in a very favorable position.First, the $NDX broke back below $1,824, which was previous support (now resistance), providing another barrier to a run-up before the February 16 Expiration Date. So now i have $1,824 as resistance, as well as the newly formed diagonal resistance. These may be too tough for the index to break through which is fine by me since that will make the trade successful.Second, the $NDX hit the 30DMA and stopped, meaning it could be acting as support. We'll have to wait and see what the future holds regarding that.Finally, the MACD and STO are still showing signs of weakness meaning there still should be some downside to this run, which is fine by me. I am approaching the "sweet spot" of $1,775 which is basically where I started the trade, and puts me $125 to the Bear Call, and $150 to the Bull Put. With only 4 weeks left, that should be enough to make this trade a success, but if the market can fall $34 in one day, it certainly can rise $34 in one day. I still need to be vigilant with my defense. Tomorrow is Options Expiration day for January, so starting next week, the time value should start picking up steam.Happy Trading!
Well Traders, the moment I anticipated has arrived. The $NDX has finally begin pulling back. You will see on the chart (click on it once or twice to enlarge, then use the "back" icon on your browser to return to the blog) that several weakness indicators have formed. First and foremost, the index itself has peaked and has begun to fall. By doing this, I am now able to establish a new diagonal resistance line based on the last two peaks. As you will note, if things go as planned (which is usually a 50/50 chance in the markets), then this trade should be successful by the angle of the diagonal resistance. You will see, it falls below my Bear Call before the Expiration Date meaning this trade would be successful.
Second, the MACD has peaked and is now showing weakness.
Third, the STO has peaked and is now showing weakness.
Now comes the interesting part. How firm is the $1,824 support going to be? Remember, this used to be resistance, and the rule goes, former resistance, when broken, becomes support. You can see the index did hit that level today, then retreated, meaning the support held. We'll have to see what happens in the upcoming days/weeks and see what holds true.
As of now, from what I can see developing, things look to be okay for this trade. Let's hope that remains true for 4 more weeks.
Happy Trading!
Ugh! Well Traders, here we go again it looks like. The $NDX got a bug up its ass and took off today, ending up over $18 points. That wasn't such a big deal, but what WAS a big deal is that the index broke through previous resistance at $1,824. That could be huge, and dangerous for my trade since there is nothing really holding the index back at this point. You would have to go back to July 2001 to find these levels! My only saving grace at this point may be the MACD and STO and that next week's Options Expiration is typically a down week too, but who knows? I need to be ready to move if the $NDX hits $1,860 which is certainly not too far away. I certainly liked this when it was rangebound. Let's see how well the $125 point I initially set up holds out.
Happy Trading!
Well Traders, the $NDX took a nice little $20 point pop up today on some good tech news. The index finished at $1,814 putting it just $8 below the $1,824 resistance point I have shown on my chart. The next few days should be interesting as the MACD and STO are pretty high indicating a possible downturn may be just around the corner. Personally, I would love to see a downturn for a few days and head toward the $1,750-$1,761 support I have shaded in Gray. At this point, it is just a waiting game to see if resistance holds. Stay tuned.
Happy Trading!
Well Traders, another fairly calm day when all was said and done. There is still a pretty good battle between the Bulls and Bears on the $NDX. Apple's big announcement bouyed the index (and the iPhone looks pretty darn sweet IMHO) as that stock soared over 8% to an all-time high today.
You can see the STO has just about peaked at this point. A downturn seems inevitable in the next day or three. The MACD hasn't "peaked" just yet...just a matter of time.
There is still plenty of time value in my Iron Condor, so there hasn't been much movement on the options just yet. That won't happen until we get past the January Options Expiration Day a week from Friday. Still, I am VERY happy with the way the $NDX is just waffling around here, not doing much one way or the other. I hope this duldrum continues for a few more weeks.
Happy Trading!
Well Traders, we have had two days of calm in the $NDX on Friday and Monday. These are GREAT days for the trade because they just burn off time value, and we are all about burning off time value.
Here is Friday's chart:
As you can see, the MACD and STO are moving up towards the overbought levels, but still have a few days left before they reaches that. Still plenty of room before my first roll point.
Here is Monday's chart:
As you will note by the candle, there was a pretty good Tug-of-War between the Bulls and the Bears, but at the end of the day, the move was negligible...which I LOVE! Now, five more weeks of this neutral trend, and the February Iron Condor will be golden!
You will notice now that the STO has just about reached the overbought area, which will indicate that a downturn may be near. Based on the current height of the $NDX, we may have a lower high, which may indicate a trend reversal to the Bearish side. We'll just have to wait and see.
Happy Trading!
Well Traders, we are six (6) weeks until February's $NDX expiration date and I entered that month's Iron Condor today.
I placed my Bear Call at $1,900/$1,925 and my Bull Put at $1,625/$1,600 for a 275 point spread. That is pretty wide, so we'll see how it does over the following weeks. Why did I use these strikes? On the bottom, I liked the fact that there are three supports that can slow the index down. The first one is pretty major at the $1,761-$1,751, level which is highlighted in gray. The second is a lighter support at $1,695 and third is a very strong support at $1,630. I gave the Bull Put the extra $25 point buffer because when I entered the trade, the 30DMA was beginning to turn over and head downward, indicating a possible trend reversal. So I used that, plus the fact that folks panic sell, not panic buy as my reasoning.
On the top, basically it was a mathematical decision. In order to make the IC worthwhile in a risk/reward sense, the 125 point distance from the $NDX price (it was at $1,775 when I made the trade, and before the big run-up today) was the furthest point in which the trade still made sense.
I love the fact that the index has been somewhat neutral for the past few weeks, an Iron Condor dream...we'll see if it holds.
Here is my Analysis Sheet I created on EXCEL. You'll see, it has all the pertinent information on here in which to play the trade: the entry, the risk/reward, and rollover points. "Plan your trade, trade your plan." Now all I need, is for the $NDX to follow suit and maintain a neutral course and it will be another profitable trade.
Happy Trading!
Well Traders, Wednesday was a wacky day. It seemed like it started with "irrational exhuberance" as the market soared in early morning trading. The Dow was up over triple digits at one point, and the NAZ was up over 30 points.
Then half-time came at 12:00 pm.
It was almost eerie watching the complete reversal of the markets. The Dow plunged to -30 points and the NAZ was down almost -20 at one point. That is a pretty huge swing in one day IMHO. The markets both ended up for the day when all was said and done, the Dow almost 11 points and the NAZ a little over 7 points.
So what does this mean for February's trade? Well, at one point, the $NDX broke through support at the $1,750 level and I was beginning to believe that we had possibly reached a peak and we were heading downhill. However, since the $NDX ended the day abovemy support area, technically, support has held. Combine that with the MACD and STO positions and the $NDX may have found a temporary bottom here.
Since the index seems to be somewhat sideways trending, which is a beautiful thing for an Iron Condor, February's trade looks to be a straight mathematical one, with maybe 125 to the top, and 150 to the bottom. I have two reasons for padding the bottom. First, the 30DMA is beginning to roll over, which means there may be some bias towards the index heading down, not up. Second, people sell faster than they buy, so the bottom pad helps me with any "panic sells."
I'll give you the Analysis Sheet for the Entry, Exits, Risk/Reward and Profit Potential later today.
Happy Trading!
Well Traders, I hope you had an enjoyable holiday this year. I did, capped off with a wonderful Rose Bowl victory for my beloved Alma mater, USC.
Since my last post on December 20, the $NDX has been in kind of a stalemate. The index has been sort of rangebound between $1,750 and $1,824. If you were a gambler, you could try an $1,850/$1875 Bear Call and an $1,725/$1,700 Bull Put for a pretty good risk/reward ratio, but I wouldn't. While the $NDX looks all warm and fuzzy in its new range, how much of this stagnation was due to two very long weekends with two major holidays? Right now I wouldn't put too much stock in it.
I should be getting into February's Iron Condor trade this Thursday, January 4, which will be six (6) weeks away from the February 15/16 Expiration date for the $NDX. Since the market is closed today, I'll start my risk/reward analysis tomorrow and post it for all to see.
Until then, R.I.P. President Ford (and your Michigan Wolverines!)
Well Traders, another down day on the $NDX, a GREAT way to start my weekend! Yesterday I mentioned a Bearish Engulfing Pattern, which was the second one in 5 days. Today, the $NDX was in a pretty good struggle, but at the end of the day, the Bears won. The index finished down just over $4 points to end the day at $1,772. At this point, it looks like $1,771 is going to hold as support. The STO and MACD are indicating that an uptrend in close at hand, but only next week will confirm that. This being Friday, I get two more "free" days of time-value burn off.
