Technical Analysis. Nasdaq 100, |
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Highlight Investments Group |
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February 29th, 2004
Our short-term index options trader traded QQQQ options for this week’s “best trade of the week”, but could instead have traded NASDAQ 100 index shares or options using the same method. This trade was based on our volume indicators and our Market Commentary.
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 #3" is opened
in order to close it later with profit if the index moves in our
favor.
| Security | Return |
| Call #1 (QQQQ April) | +6.25% |
| Call #2 (QQQQ April) | +13.33% |
|
Total Profit: |
+$2,100 |
Even though the trades shown above were not entirely without risk, they resulted in a profit of $2,100
Recommendation:
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':If you trade options, we recommend you invest only a small portion of your assets - an amount that will fit your personal trading needs and risk tolerance. In our opinion, that amount should be about 10% of your total portfolio; it should never exceed 30%
At the same time, we do not recommend that you commit more than 30% of your options portfolio to a single trade. If the market doesn't move in your favor, but indicators remain strong, you may choose to invest another 30% of your options portfolio on a second signal, and perhaps even on a third signal. By proceeding in this way, each time you enter the market in a better position, and usually the profit from the last trade will more than compensate for the loss from your first trade.
| Trade | Volume Motivation | Market Commentary on Members Home Page during the trade |
| Buy Call
#1 02/23/2004 |
After 11:00 the market continued its decline, but it also encountered a very large supportive VMA spike to the downside, which came to a peak at 12:15. | The mid-term and long-term market will only likely be strengthened by today's large amount of supportive volume to the downside. Consequently, the mid- and long-term market will likely continue in its current bullish up-trend. |
| Sell
Call #1 02/24/2004 |
As the market moved higher it generated a large resistive VMA spike to the upside, which came to a peak at approximately 10:30. | Despite today's supportive volume to the downside, we still believe that the market can move a bit lower, but if it does it will not move much further. Our reasoning for this standpoint is that we feel the market may first react to the resistive volume seen this morning before it begins to move higher again. |
| Buy Call
#2 02/24/2004 |
During the market's afternoon descent, it encountered a large supportive VMA spike to the upside at 14:15, which resulted in the market bouncing off the support level it has set during the past couple days. | Our mid-term and long-term outlook remains bullish as we see no reason for the market to deviate from its current mid- and long-term up-trend. |
| Sell
Call #2 02/26/2004 |
As the market ascended, it encountered two resistive VMA spikes to the upside, one at 11:30 and the other at 12:45, the latter of which was a relatively large resistive VMA spike when compared to those we've seen over the past several days. | Today's resistive volume to the upside may simply be the catalyst the market needed in order to move lower in the short-term. |
| Buy Call
#3 02/27/2004 Left opened |
The supportive VMA spike that occurred today at 11:45 was one of the largest seen in quite some time. | Our mid-term and long-term forecasts remain bullish, particularly in view of today's significant accumulation of supportive volume. |
These are the trades which netted the returns shown above:
|
Date |
Trade | Strike | Expiration | Contracts |
Contract Price |
Amount | Profit |
| 02/23/2004 | Buy Call #1 | $36 | April | 70 | $1.6 | -$11200 | |
| 02/24/2004 | Sell Call #1 | $36 | April | 70 | $1.7 | +$11900 | +$700 |
| 02/24/2004 | Buy Call #2 | $36 | April | 70 | $1.5 | -$10500 | |
| 02/26/2004 | Sell Call #2 | $36 | April | 70 | $1.7 | +$11900 | +$1,400 |
| 02/27/2004 | Buy Call #3 | $36 | April | 100 | $1.5 | -$15000 | |
|
Total: |
+$2,100 | ||||||
For this week’s “trade of the
week”, "Buy QQQQ Call #3" is opened
in order to close it later with profit if the index moves in our
favor.
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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