Technical Analysis. Nasdaq 100, |
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March 28th, 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.
Even though the trades shown above were not entirely without risk, they
resulted in a profit of $400 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. The principles discussed above also apply when trading the NASDAQ 100, the
S&P 100, the Dow Jones, as well as other indexes. These are the trades which netted the returns shown above: Total:
To see
any of our past best trades, simply select from
the list below.
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':
Trade
Volume Motivation
Buy Call #1
03/05/2004
Was left opened
last weekWith
the decline came a large supportive VMA spike to the downside, which
peaked at 11:15. This supportive VMA spike was larger than the
previous resistive VMA spike.
Buy Call #2
03/08/2004
Was left opened
last weekBy
11:00 there was a moderate supportive VMA spike to the downside, but it was
only enough to halt the market's decline until 12:00, at which point the
market began its decline anew and with more veracity. At 12:45 the market
ran into a slightly larger supportive VMA spike to the downside, but again
this was only enough to cause a short reaction in the market. After 13:15
the market's decline quickened, but at 14:15 it hit upon a very large
supportive VMA spike to the downside.
Buy Call #3
03/10/2004
Was left opened
last weekAt
11:45 the market encountered moderate supportive VMA spike to the downside,
but this supportive VMA spike only enabled the market to halt its descent
temporarily. By 13:00 the market began to move lower again, but this time
the descent was more pronounced than earlier on in the day. During the
market's decline it encountered a very large supportive VMA spike to the
downside at 13:30.
Sell Call #1,2,3
Buy Put #4
3/18/2004 As
the market declined, it didn't encounter much supportive volume at all until
approximately 12:30 where a large supportive VMA spike to the downside,
combined with the al Qaeda news, helped cause the market to move quickly
higher. During the market's quick ascent, it encountered a very large and
sharp resistive VMA spike to the upside, which caused the market to
begin moving lower after 13:15.
Sell Put #4
Buy Call #5
03/22/2004 The
market continued to decline throughout the morning and early afternoon,
until about 13:30 where it began to generate a large amount of supportive
volume to the downside. This supportive volume was concentrated in two large
VMA spikes: the first at 13:30 and the second at 14:15.
Sell Call #5
03/25/2004 Two
large and broad resistive VMA spikes were seen during the day -- the first
at 12:45 and the second at 13:30. These spikes were bigger than any seen
in quite some time, but they were only able to impact the market by
slowing the market's advance for a short period. Despite the resistive
volume today, the market continued its advance and closed at its highs for
the day. By the end of the day the market had generated another
moderately large amount of resistive volume to the upside.
Date
Trade
Strike
Expiration
Contracts
Contract
Price
Amount
Profit
03/05/2004
Buy Call #1
$36
April
100
$1.5
-$15000
3/18/2004
Sell Call #1
$36
April
100
$0.7
+$7000
-$8,000
03/08/2004
Buy Call #2
$36
April
70
$1
-$7000
3/18/2004
Sell Call #2
$36
April
70
$0.7
+$4900
-$2,100
03/10/2004
Buy Call #3
$36
April
100
$0.8
-$8000
3/18/2004
Sell Call #3
$36
April
100
$0.7
+$7000
-$1,000
03/18/2004
Buy Put #4
$35
April
100
$0.75
-$7500
03/22/2004
Sell Put #4
$35
April
100
$1.4
+$14000
+$6,500
03/22/2004
Buy Call #5
$35
April
100
$0.5
-$5000
03/25/2004
Sell Call #5
$35
April
100
$1
+$10000
+$5,000
+$400
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