QQQQ: Tweezer Bottom / Higher Low; ACI - Head & Shoulders - daytraded via option puts!; and A Long (Short) idea in SMN
Here's QQQQ from yesterday. I made this trade using the QLD & SSO, just like the day before. The ETFs definitely have their benefits in that they are a bit safer than a stock, especially when you can't be at a trading desk to watch each trade tick by tick.
Here's ACI just a little bit before I took my trade in it.
As you may recall, I mentioned ACI a few weeks back just as it was about to and in the process of breaking down from the ~67 area. I missed that trade and didn't enter a short in as it ran back up to the ~67/68 area and 50 day moving average on low volume. Anyhow, I had been stalking ACI for sometime and saw it was forming a head and shoulders pattern with increasing volume on the down days, and the 50 day moving average rolling over just above. Today I decided to enter in some puts shortly after it opened. I entered the puts in just above 61.
So why did I enter puts? Well there's a couple reasons.
In a stock as volatile and momentous as ACI, puts can really help define your downside risk. Since I purchased the puts, I can't lose more than what I purchased the puts for. In addition, Coal has been a very powerful momentum sector and the market is still fairly extended to the downside. ACI in theory could experience a sharp reversal or surge higher.
And while of course the initial chart shows my plan to start to close out my puts around the 50 area (near the 200 day moving average), I ended up closing them out about a half hour before the end of the day. ACI had dropped almost 7 points from my initial entry for a nice solid gain.
I used the August 50 puts to enter my trade.
I must say, part of the benefit of having a day job is that you don't watch a stock like this tick by tick and instead check in every 1-2 hrs. I ended up closing it out on my lunch break.
Here's a daily view of ACI at the end of the day.
Speaking of Coal & Material stocks, I think they put in some more downside here. the SMN (ultrashort materials -- basically its the double short ) has been looking pretty bullish lately. Here's the chart:
If that's an inverse H&S SMN is putting in, it definitely has the chance to reach $44. Keep an eye on those material stocks.
Nice trade on ACI. Did you consider the Jul 60 Put, even though they were going to expire the next day? I think your cost/risk would have been the same but you probably would have made twice the gain.
OE Trader said... July 20, 2008 at 11:24 PM
OE Trader,
Thanks. I didn't consider the Jul puts at all seeing how close we were to OE. I understand options enough to make an occasional trade, but im still not fluent in them. I knew I had a good read on the ACI setup and wanted to give it a few days incase it took some time to break down.
Good tid bit of information to know though. Thanks.
Trader M.D. said... July 21, 2008 at 8:47 PM
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