Technical Analysis. Nasdaq 100, |
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Highlight Investments Group |
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August 15th, 2003
Our mid-term index options trader traded QQQQ options for this best trade of the week, but one could have traded NASDAQ 100 index shares or options using the same method. These trades were based strong volume signals and our Market Commentary.
This week's Best Trade of the week is a continuation on our previous best trade where we left a QQQQ put position open. It turned out to be an excellent call, as the market moved in the desired since last August 5th and our mid-term options trader, trading NASDAQ 100 options, came out with a good profit in the end.
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 |
| Put #1 (QQQQ October) | +7.3% |
| Call #2 (QQQQ October) | +8.0% |
| Call #3 (QQQQ October) | +14.8% |
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Total Profit: |
+$3,775 |
Even though all the above trades were not entirely without risk, we came out on top with a profit of $3,775
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 options will not change when trading something like NASDAQ 100 index
options, futures or 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.
I trade 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.
What is a 'VMA spike to the upside'?
Simply put, that means that most of the volume spike was connected with the
index while it was moving up.
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 the motivations that led to the above trades as clear as possible; therefore, we have created what we call a 'Table of Motivation', in which we try to make the purpose behind each of the above trades as clear as possible.
| Trade | Motivation | MV's Commentary on Members Home Page during the trade |
| Buy Put #1 | As predicted, there was supportive volume as the market declined in the morning, but as the market moved higher there were several large resistive VMA spikes to the upside. We didn't buy more puts on the first spike as it was about the same size as the VMA spike that caused the market to move higher, but the second VMA spike to the upside was quite large and was an excellent signal to but more short-term QQQQ put options. | A moderate resistive VMA spike to the upside occurred at 13:15 as the market moved higher and caused the market to pull back to its lows of the day. Overall, today's volume was fairly light and we could see the market move slightly lower in the short-term in order for it to pick up more supportive volume. Otherwise, our mid-term outlook still remains positive. |
| Sell Put #1 | The Market Commentary suggested that the supportive volume seen on the previous day could cause the market to begin moving higher in the short-term. As a result, we decided to close our open QQQQ put position and wait for a new signal before entering into the market again. | As the market declined further in the later afternoon, we saw two large supportive VMA spikes to the downside at 14:15 and the end of the day, which will cause the market to move higher in the short-term. Overall, the supportive volume seen today outweighs the resistive volume seen yesterday. As a result, the market should move higher in the short-term and if there is little resistive volume to the upside, the market will move higher in the mid-term as well. |
| Buy Call #2 | The Market Commentary was fairly confident that the market would generate more supportive volume to the downside, which would make for another good buying opportunity. The market proceeded pretty much as the Market Commentary predicted, so we purchased some QQQQ call options based on the supportive volume seen in the morning today. | There was a small supportive VMA spike to the upside at the end of the day, which may cause the market to open higher tomorrow. Overall, we believe that the resistive volume seen today will cause the market to move lower in the short-term, but as the market moves lower we expect to see more supportive volume to the downside, which should help the market move higher again. |
| Buy Call #3 | Despite the previous day's supportive volume, the market moved lower in the morning today and generated even more supportive volume. This turned out to be another great buying opportunity so we purchased more QQQQ call options as the Market Commentary still stated quite strongly that the market should continue to move higher in the short-term. | As the market moved lower it encountered two supportive VMA spikes to the downside, the first of which was split between supportive and resistive volume at 13:30 - the resistive portion being at 13:15. The last supportive VMA spike to the downside occurred at 14:45 and helped bring the market higher by closing. Overall, we believe that the supportive volume seen in the afternoon today will move the market higher in the short-term. |
| Sell Call #2 | The market moved higher again the previous day and didn't generate much resistive volume at all and the Market Commentary also stated that the market will continue to move higher as there was little resistive volume to the upside, but as the market move higher on the next day (today), there was quite a large resistive VMA spike to the upside. Based on this resistive volume we decided to sell half of our open call positions as we were still somewhat confident that the market would continue to move higher. | As the market moved higher throughout the rest of the afternoon it did not encounter much resistive volume at all. The fact that the market didn't see much resistive volume during the afternoon's rally is a good sign for the market to continue moving higher. Overall, today's supportive volume by far outweighed any resistive volume seen during the day; as a result, the market should continue to move higher in the short-term. |
| Sell Call #3 | The Market Commentary mentioned that due to the resistive volume seen yesterday afternoon that the market could move lower in the short-term. As the market moved lower there was some supportive volume so we did not immediately sell, but in the afternoon there were two moderately large resistive VMA spikes to the downside. We didn't immediately sell on the initial resistive VMA spike, but we decided to play it safe and sold all our remaining QQQQ call options on the last resistive VMA spike to the upside. | Overall, we believe that the resistive volume seen this afternoon could cause the market to move slightly lower in the short-term in order to generate more supportive volume. As of yet we have not seen enough resistive volume to warrant a change in the mid-term uptrend, but the fact that options are expiring on Friday will cause volatility in the market until next week. |
The same principles mentioned above works for trading NASDAQ 100, S&P 500, 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 |
QQQQ Value |
Strike | VMA | Amount | Profit |
| 08/04/03 | B P1 | 65 | $2.05 | 1272.95 | $31.66 | 32 | 1,409,200 | $13,325 | |
| 08/06/03 | S P1 | 65 | $2.20 | 1276.59 | $30.39 | 32 | 1,209,600 | $14,300 | $975 |
| 08/07/03 | B C2 | 100 | $1.25 | 1210.19 | $30.10 | 31 | 1,057,900 | $12,500 | |
| 08/08/03 | B C3 | 100 | $1.22 | 1207.80 | $30.11 | 31 | 1,059,700 | $12,200 | |
| 08/12/03 | S C2 | 100 | $1.35 | 1240.08 | $30.86 | 31 | 1,031,200 | $13,500 | $1,000 |
| 08/14/03 | S C3 | 100 | $1.40 | 1248.92 | $31.05 | 31 | 1,256,500 | $14,000 | $1,800 |
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Total: |
+$3,775 | ||||||||
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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