AI
Friday, July 08, 2005 7:27:46 PM
Trade Journal: NASDAQ 100 (QQQQ) Round-Trip Position Closed
Closed QQQQ Aug $37 Call at $1.20 for a gain of 71.43%, and also closed QQQQ Aug $38 Call at $0.60 simultaneously for a gain of 20%. Since the Aug $37 was 1/3 of the quantity of the $38 call, the combined gain for this follow-up QQQQ trade was 36.36%. This gives the entire “round-trip” trade a combined gain of 124.96% (36.36% plus the previous 88.6%).
Here’s why I set these target prices.
Although today was an impressive up-day, I had doubts whether this was a reaction from yesterday’s bombing incident in London. From the study of the language of the market, it seems to indicate this possibility.
On this 30-minute, 15-day chart, I blacked out about three quarters of yesterday’s action that appeared to be the obvious reaction to the event in London. Visually, that leaves us with the market pretty much going sideways right under the 37.20 level this morning, which was the continuation of the market trend from the day before yesterday. Coincidentally, 37.2 happened to be the approximation of the average of today’s high and yesterday’s “bombing” low.
This average seem to indicate that without the extreme low form yesterday and the extreme high (relatively speaking) from today, the market should continue to wander around the 37.20 area. Since any sudden reaction in the market tends to eventually revert back to the means, it shouldn’t come as a surprise if the market reverts back to the sideway movement along the 37 support level next week. Well, it would be a surprise if one “feels” that this was the kick-off of the “summer rally”, if there’s one.
The move of the 12-period RSI (6-hour on this 30-minute chart) to the 80’s territory also indicates this afternoon’s action was an overbought reaction. TRIN also confirms this condition. We’ll go over that later. For now, we’ll zoom in on the past 3 days of action to have a better close-up look.
Again, I’ve blacked out large part of yesterday’s action on this next chart, which clearly shows that without the attack in London yesterday, the 37 was still the support. And, this morning’s action was simply the continuation of the previous market action.
The rise of the price action channeled like a mega phone, which shows technical weakness of this upturn. It didn’t touch the upper channel resistance line in the afternoon. And, despite this uptrend, the RSI stayed leveled in the afternoon. In fact, it formed a lower high in the late afternoon, and then fell below the lower support (thin red line) briefly. The negative volume started grouping together in late afternoon as well.
Finally, we have the NASDAQ TRIN Index declined to 0.43, which indicates, again, overbought condition.
This is all the time I have for now. I’ll write this up more comprehensively along with a nice email from one of the readers and post it on my website later tonight or tomorrow.
Closed QQQQ Aug $37 Call at $1.20 for a gain of 71.43%, and also closed QQQQ Aug $38 Call at $0.60 simultaneously for a gain of 20%. Since the Aug $37 was 1/3 of the quantity of the $38 call, the combined gain for this follow-up QQQQ trade was 36.36%. This gives the entire “round-trip” trade a combined gain of 124.96% (36.36% plus the previous 88.6%).
Here’s why I set these target prices.
Although today was an impressive up-day, I had doubts whether this was a reaction from yesterday’s bombing incident in London. From the study of the language of the market, it seems to indicate this possibility.
On this 30-minute, 15-day chart, I blacked out about three quarters of yesterday’s action that appeared to be the obvious reaction to the event in London. Visually, that leaves us with the market pretty much going sideways right under the 37.20 level this morning, which was the continuation of the market trend from the day before yesterday. Coincidentally, 37.2 happened to be the approximation of the average of today’s high and yesterday’s “bombing” low.
This average seem to indicate that without the extreme low form yesterday and the extreme high (relatively speaking) from today, the market should continue to wander around the 37.20 area. Since any sudden reaction in the market tends to eventually revert back to the means, it shouldn’t come as a surprise if the market reverts back to the sideway movement along the 37 support level next week. Well, it would be a surprise if one “feels” that this was the kick-off of the “summer rally”, if there’s one.
The move of the 12-period RSI (6-hour on this 30-minute chart) to the 80’s territory also indicates this afternoon’s action was an overbought reaction. TRIN also confirms this condition. We’ll go over that later. For now, we’ll zoom in on the past 3 days of action to have a better close-up look.
Again, I’ve blacked out large part of yesterday’s action on this next chart, which clearly shows that without the attack in London yesterday, the 37 was still the support. And, this morning’s action was simply the continuation of the previous market action.
The rise of the price action channeled like a mega phone, which shows technical weakness of this upturn. It didn’t touch the upper channel resistance line in the afternoon. And, despite this uptrend, the RSI stayed leveled in the afternoon. In fact, it formed a lower high in the late afternoon, and then fell below the lower support (thin red line) briefly. The negative volume started grouping together in late afternoon as well.
Finally, we have the NASDAQ TRIN Index declined to 0.43, which indicates, again, overbought condition.
This is all the time I have for now. I’ll write this up more comprehensively along with a nice email from one of the readers and post it on my website later tonight or tomorrow.
David
#board-3693
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