Technical Analysis.

Our short-term trader has made some profitable trades recently. Based on our advice and analysis, he was able to make a $4,800 return over one week!

Over the past week, our professional short-term options trader was able to take advantage of MarketVolume's many Volume Signals and Market Commentaries  in order to make several profitable options trades. Signals issued this past week have been excellent  for our traders, as we have had many signals that the market will be moving lower in the short-term. Our Market Status report in our Market Commentary has been consistent with our belief  that the market is still in a downtrend. Because of the downtrend, our trader went short on the market by buying puts, as there were no points where he could have gone long based on our volume signals. It is always safer to go short in a down-trending market even if you are a day-trader.

This Chart of the Week is an excellent example of MarketVolume's abilities to predict the market!

Motivations behind Trades: The primary motivation for all of the above trades was the fact, as outlined in MarketVolume's Market Status in the Market Commentary, that the market is in a downtrend and will continue to be  until there is enough supportive volume  to change the trend, which, to date, there hasn't been. The first of the above trades was performed mainly because of the fact that there was a rather large VMA spike as the index was moving higher; this signals that the market is losing support and that it will likely move lower in the short-term. As for concluding the first trade, that was mainly done because of the moderate supportive volume to the downside, and the fact that MarketVolume's Market Commentary was expressing some concern that the market may move higher in the short-term. Even though the market did not move higher, it was a good exit point and it laid the path for the second trade on March 7th. Once again, as before, the second purchase of puts was done mainly because of the large resistive volume to the upside, except that in this case there were TWO large VMA spikes to the upside in sequence; this signals that there was a good change that the market would move lower in the short-term and somewhat dramatically, which it did. The conclusion to the last two trades was more based on taking some profit rather than volume; as you can see, the volume spike for which the last trade was concluded was not particularly strong, but it did provide for a good exit point and some good profit for our short-term options trader. Another  factor in the decision to close all options positions on a weak volume signal is the fact that the UN is going to vote on a new resolution regarding Iraq very soon. This could  introduce a destabilizing factor in the market, which can be difficult to predict.

How can this chart be used by me?
Our main reason for publishing these charts is to allow our members to learn by another trader's example  how they can make trades based on our volume signals and Market Commentary. Members can gain a better understanding of how to enter and exit the market, based on when a signal is generated. To learn from these charts, you don't need to trade the specific security mentioned in this publication, but whatever security you feel comfortable with. The principles for trading QQQQ shares will not change when trading something like S&P 500 futures.

Should I try to paper trade before trading options?
Yes! We suggest that anyone who is new to our signals and analysis try doing some paper trading to start, at least until they are comfortable with interpreting our signals.

Why buy puts that are so far 'out of the money'?
The reason we decided to go with April SPX puts with a strike of 725 is simply because those happened to be the most liquid (easy to buy and sell quickly at a reasonable price) put options available for March.

I trade the S&P 500 / SPDRs. How does this apply to me?
The S&P 500 and NASDAQ 100 indexes have generally the same behavior. If you overlaid a chart of each of them during a short period such as this one, their general dynamic would be the same. Because of this, you can trade S&P 500 index shares, and options.

Conclusion: Our short-term options trader, based on our Market Commentaries and Volume Signals, thinks the market will probably continue on a downtrend, as there has been a lack of any supportive volume signals. But to play it safe -- since MarketVolume's Market Commentary mentioned that we may be entering a support corridor -- and to take his short-term profits, he  decided to close his outstanding positions based on a small amount of supportive volume and a looming vote by the UN in regards to Iraq.

The same principles mentioned above work for trading S&P 500, S&P 100, Dow Jones, and other indexes.

Here is a detailed list of our investor's trades, which netted the above returns:

To see any of our past best trades, simply select from the list below.

To see any of our past best trades, simply select from the list below.