Technical Analysis. |
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Highlight Investments Group |
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August 14th, 2002
This week our professional trader was able to capitalize on our volume signals for the S&P 500 index which signaled that the market would move higher.
| Security | Return |
| Call 1 (SPX Sept) | +41.9% |
| Call 2 (SPX Sept) | +58.8% |
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Total Profit: |
+$18,610 |
Even though all the above trades were somewhat risky, we came out on top with a profit of $18,610!
Why didn't you buy any Puts?
Although there were some volume signals that pointed towards short-term
downtrends, we found that it was better to keep current call positions open
since there was not yet enough volume to move the market much lower at those
points. Also, MarketVolume's Market Commentary signaled that the market
would continue to decline.
Why buy expensive September Calls?
Even though September Call options are more
expensive, they tend of to be less volatile in reaction to market swings,
and they don't devalue as quickly as a current month option. By trading
options that are at least one month ahead, we protect ourselves from
unforeseen short-term fluctuations in the market. Also, if the uptrend
continues on a long-term, one can hold these options for a longer period as
they increase substantially in value.
We would like to make it clear to our members what the motivation was to make the above trades; therefore, we have created what we Call a 'Table of Motivation', in which we try to make it clear the motivation that was behind each of the above trades.
| Trade | Motivation | MV's Commentary on Members Home Page during the trade |
| Buy Call 1 | Based on the fact that the NASDAQ 100 has almost reached it's support level, and that there was a good deal of supportive volume to the downside, decided to take a chance that the NASDAQ 100 will bounce off this level and the S&P 500 will follow the trend. | Today the S&P 500 and NASDAQ 100 indexes continued their decline, and the NASDAQ 100 has almost reached it's support level. There is a chance that the NASDAQ 100 will bounce off this level and the rest of the market will follow. By doing this the market could confirm an uptrend. |
| Sell Call 1 | Since there was a good deal of volume to the upside as the S&P 500 index began to go up there was a good chance the market would go down from this point, so decided to play safe and close all open call positions. | Today we saw some supportive volume on the NASDAQ 100 and S&P 500 indexes in the mid afternoon, and this supportive volume to the downside helped move the indexes higher and into positive territory today. |
| Buy Call 2 | Due to the fact that the S&P 500 index declined substantially along with a great deal of volume to the downside, the chances were high that the S&P 500 would rebound shortly and dramatically. | Today the S&P 500 and NASDAQ 100 indexes moved quite a lot lower due to the cumulative effects of volume to the upside over the past several days. Today there was quite a lot of supportive volume to the downside signaling that there is a chance for the indexes to move higher soon and perhaps continue their uptrend. |
| Sell Call 2 | The S&P 500 index did rebound, and did go up dramatically, but there was a HUGE amount of volume to the upside, leading to the decision that all open call positions should be closed since there is a high chance that the market will move lower in the short-term from this point. |
The same principles mentioned above works for trading NASDAQ 100, S&P 100, Dow Jones, and other indexes.
Here is a detailed list of our investor's trades, which netted the above returns:
| Date |
Put/ Call |
Ctrcts |
Contract Price |
Index Value |
Strike | VMA | Amount | Profit |
| 8/5/02 | B C1 | 10 | $20.75 | 839.52 | 870 | 3,063,600 | $20,750 | |
| 8/7/02 | S C1 | 10 | $29.45 | 864.29 | 870 | 3,362,400 | $29,450 | $8,700 |
| 8/14/02 | B C2 | 10 | $16.85 | 883.67 | 920 | 4,134,200 | $16,850 | |
| 8/14/02 | S C2 | 10 | $26.76 | 912.03 | 920 | 4,381,800 | $26,760 | $9,910 |
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Total: |
+$18,610 | |||||||
To see any of our past best trades, simply select from the list below.
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QQQQ Trading System QQQQ, SPY and DIA trading signals for conservative mid- and long-7 term traders ...
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