Technical Analysis. |
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Highlight Investments Group |
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July 25th, 2003
Our mid-term index options trader traded S&P 500 index options for this best trade of the week, but one could have traded S&P 500 index shares using the same method. These trades were based strong volume signals and our Market Commentary.
NOTE: This chart of the week is meant mainly for educational purposes. We don't recommend that our customers follow these exact trades. We suggest that you develop your own trading style and try doing some paper trading before using our volume analytics.
| Security | Return |
| Call #1 (SPX October) | +3.7% |
| Call #2 (SPX October) | +10.9% |
| Call #3 (SPX October) | +19.7% |
| Call #4 (SPX October) | +9.5% |
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Total Profit: |
+$7,000 |
Even though all the above trades were not entirely without risk, we came out on top with a profit of $7,000
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 S&P 500 index options will not change when trading something like QQQQ
shares.
Should I Trade Options?
Only very experienced traders should trade
options because of the high risk involved. You can always trade index shares
instead of options and still make a decent profit, but returns will not be as large.
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.
Can I trade Rydex or ProFund index funds using your Market
Commentary and signals?
Yes, our system is meant for index traders, and there are many Mutual Fund
options to choose from when trading indexes. So yes, our
indicators are good for trading Mutual Funds, especially dynamic Rydex funds.
When should I pay attention to the Market Stage in your
Market Commentary?
If you are planning to do long-term or even some longer mid-term trading,
then we suggest that you follow the trend that is set in our Market Stage
section of the Market Commentary. The Market Status section is mostly meant for
mid- and short-term traders who have trades that last less than a week or two.
We would like to make clear to our members the motivations that led to the above trades. We have created what we call a 'Table of Motivation', in which we try to make clear the purpose behind each of the above trades.
| Trade | Motivation | MV's Commentary on Members Home Page during the trade |
| Buy SPX Call #1 | MarketVolume's Market Commentary indicates that the market is likely to continue to move higher in the mid-term, which, in combination with a large supportive VMA spike in the afternoon, led to the purchase of some S&P 500 index call options in the afternoon. | Overall, supportive and resistive volume today was mixed, but our analysis tends to lean towards there being more supportive volume today. As a result of our analysis, we believe that the market can still move higher in the mid-term, mostly because of large supportive VMA spikes seen last week. |
| Buy SPX Call #2 | MarketVolume's Market Commentary indicated that the market could move lower in the short-term, which it did. There was a moderately large supportive VMA spike as the market moved lower in the morning, which lead to the purchase of these call options. | As the market shot up, it encountered a large amount of resistive volume to the upside, which caused the market to abate its move up at 12:00. As the market moved lower in the early afternoon it encountered a large supportive VMA spike to the downside, which added support to the market and moved it higher once again. At the end of the day there was another small supportive VMA spike to the downside, which may help the market open higher tomorrow. Overall, the resistive volume seen today may cause the market to move lower in the short-term, but we still think that the market will move higher in the mid-term. |
| Buy SPX Call #3 | Despite the previous supportive VMA spike, the market moved slightly lower and generated another supportive VMA spike to the downside. Based on this VMA spike, more call contracts were purchased to average down the price of all currently held call options. | |
| Sell SPX Call #1 | The market reacted to the supportive volume in the morning and early afternoon, but as it moved higher it generated a large resistive VMA spike to the upside. Sold two thirds of all open call contracts because of this resistive volume, but left some contracts open because MarketVolume's Market Commentary indicates that the market is still likely to move higher in the mid-term. | |
| Sell SPX Call #2 | ||
| Buy SPX Call #4 | The market moved higher in the morning despite the previous day's resistive volume, but in the afternoon the market quickly moved lower. This was likely a delayed reaction to the previous day's resistive volume combined with some resistive volume in the morning today. There was a substantially large supportive VMA spike to the downside generated during this move down, as a result more call contracts were purchased because this was another good opportunity to average down the price. Bought double the amount of call contracts than in previous trades due to the strength of this supportive VMA spike. | A large supportive VMA spike to the downside at 12:15 caused the market to begin moving higher again, which it did with quite a bit of strength. As the market moved higher in the later afternoon, another large VMA spike to the upside was generated, which helped stop the market from moving much higher after 14:30. Overall, we still believe that the market will move higher in the mid-term, but the resistive volume seen in the later afternoon today may cause the market to move lower in the short-term. |
| Sell SPX Call #3 | After initially moving lower and generating more supportive volume, the market generated more supportive volume to the downside, which in combination with the previous day's volume helped the market to enter into a nice rally. As the market moved higher, it encountered more resistive volume to the upside, almost as much as the supportive VMA spike from the previous day. Because of this large resistive VMA spike, it was a good point to close all existing positions before the market moved lower again. If the market moves lower next week, it will be another good point to enter into a new call position. | The sharp decline in the afternoon today was catalyzed by yesterday's resistive volume as well as rumors on the street that some large banks have been selling off futures. Overall, the past week has been fairly good for short-term traders (day traders) as they have been able to capitalize on intraday movements that were preceded by sharp spikes in the VMA. Our outlook remains fairly similar, as we believe that the market will continue higher in the mid-term to retest its highs and also in the short-term in response to the very large supportive VMA spike seen in the afternoon today. |
| Sell SPX Call #4 |
The same principles mentioned above works for trading NASDAQ 100, S&P 100, Dow Jones, as well as 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 |
| 07/22/03 | B C1 | 5 | $27.58 | 985.00 | 995 | 3,237,700 | $13,790 | |
| 07/23/03 | B C2 | 5 | $25.79 | 981.53 | 995 | 2,670,400 | $12,895 | |
| 07/23/03 | B C3 | 5 | $25.10 | 980.06 | 995 | 2,830,400 | $12,550 | |
| 07/23/03 | S C1 | 5 | $28.61 | 987.51 | 995 | 2,956,800 | $14,305 | $515 |
| 07/23/03 | S C2 | 5 | $28.61 | 987.51 | 995 | 2,956,800 | $14,305 | $1,410 |
| 07/24/03 | B C4 | 10 | $27.45 | 985.62 | 995 | 3,296,600 | $27,450 | |
| 07/25/03 | S C3 | 5 | $30.05 | 990.75 | 995 | 3,032,400 | $15,025 | $2,475 |
| 07/25/03 | S C4 | 5 | $30.05 | 990.75 | 995 | 3,032,400 | $30,050 | $2,600 |
|
Total: |
+$7,000 | |||||||
To see any of our past best trades, simply select from the list below.
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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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