Technical Analysis. |
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Highlight Investments Group |
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February 8th, 2004
This week's “best trade of the week”
is a continuation of the previous week’s best trade,
where we left a QQQQ Call position open.
This trade was closed with
15% of profit.
NOTE: We discuss our “best trades of the week” here mainly for educational purposes. The trading examples we illustrate are based principally on our volume indicators and market commentaries. Our main intent is to show you how you can apply our volume indicators and to explain the specific correlations that exist between volume spikes and the movement of the indexes. We do not mean to imply that you should follow our exact trades, but rather wish to suggest that you may make use of our volume analytics to develop your own trading style. We also urge you to paper trade before committing your money to the markets.
For
this week’s “trade of the week”, "Buy QQQQ Call
#2" is opened
in order to close it later with profit if the index moves in our favor.
| Security | Return |
| Call #1 (QQQQ March) | +15.38% |
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Total Profit: |
+$2,000 |
Even though the trades shown above were not entirely without risk, they resulted in a profit of $2,000
Why were only call options were purchased?
In the following, we would like to show you the motivating factors that led us to take above trades. For this purpose, we have created what we call a 'Table of Trade Motivators':It's very risky to buy put options when general market trend is defined as an up-trend. This is because the market does not always react to supportive volume in a timely manner, or sometimes the reaction is not as large as expected. In the majority of the case, the market will react to supportive volume during an uptrend, but resistive volume will be somewhat diluted, unless it is a very large amount of resistive volume.
| Trade | Volume Motivation | Market Commentary on Members Home Page during the trade |
| Buy Call #1 01/29/2004 Was left opened last week |
During the market's descent, it encountered several supportive VMA spikes to the downside at 10:15, 11:45 and at 13:45. | We still expect that the market will continue to move higher in the mid- and long-term as it continues in its bullish up-trend. |
| Sell Call #1 02/02/2004 |
During the market's late morning rally it encountered two large resistive VMA spikes to the upside at 12:00 and 12:45, the second of which was the point at which the market began to descend. | We believe that today's large resistive VMA spikes to the upside will likely cause the market to continue moving lower in the short-term in order to generate more supportive volume to the downside. |
| Buy Call #2 02/04/2004 Left opened |
During the markets descent, it generated a relatively large supportive VMA spike to the downside at 14:15. This supportive VMA spike stopped the market from descending much further throughout the rest of the day, in effect it set the day's support level. | We currently do not seen any need to alter our bullish mid- and long-term prospectus as we haven't seen the amount of resistive volume one would need to change the mid- and long-term's current up-trend. |
These are the trades which netted the returns shown above:
Date |
Trade | Strike | Expiration | Contracts |
Contract Price |
Amount | Profit |
| 01/29/2004 | Buy Call #1 | $37 | March | 100 | $1.3 | -$13000 | |
| 02/02/2004 | Sell Call #1 | $37 | March | 100 | $1.5 | +$15000 | +$2,000 |
| 02/04/2004 | Buy Call #2 | $37 | March | 120 | $1.05 | -$12600 | |
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Total: |
+$2,000 (+15.4%) |
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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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