Technical Analysis. Nasdaq 100, |
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Highlight Investments Group |
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April 6th, 2004
Our mid-term index options trader traded S&P 500 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.
| Security | Return |
| Call #1 (S&P 500 March) | +64.00% |
| Call #2 (S&P 500 May) | +38.46% |
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Total Profit: |
+$26,000 |
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S&P 500 Indicator |
Even though the trades shown above were not entirely without risk, they resulted in a profit of $26,000
Should I try to paper trade before trading options?
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':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. 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.
| Trade | Volume Motivation |
| Buy Call #1 01/29/2004 |
On
1/28/2004 the market began a swift decline throughout the rest of the
afternoon. During this decline the market generated a very large amount
of supportive volume to the downside, which was focused in two peaks,
one at 14:45 and the other at 15:45, shortly before closing.
On 1/29/2004 after opening, the market began to move lower as it continued its decline in reaction to the accumulation of resistive volume from over the past couple of weeks. During the market's descent, it encountered several supportive VMA spikes to the downside at 10:15, 11:45 and at 13:45. |
| Sell Call #2 02/11/2004 |
On 2/11/2004 shortly after the bull rally began, the market encountered a substantially large resistive VMA spike to the upside, which peaked at 11:30. Despite the large resistive VMA spike, the market's rally was not stopped, but it did slow. A secondary resistive VMA spike at 12:15 helped slow the market's advance even further. By 14:00 the market encountered a third large resistive VMA spike to the upside, which all but stopped the market's advanced, but it was not enough to immediately cause a change in the market's trend. |
| Buy Call #2 03/11/2004 |
On
3/10/2004 at 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, but again this supportive VMA spike only caused a
temporary halt in the market's descent. By 14:45 the market began to decline
again, generating another moderately large supportive VMA spike to the
downside by the end of the day.
On 3/11/2004 a moderate amount of volume at 14:00 caused a temporary advance in the market, but it was not enough to stop the market from continuing its decline after 14:15. Throughout the rest of the day the market continued to decline, spurring a moderate end-of-day supportive VMA spike to the downside, but despite this supportive volume the market closed at its lows of the day. |
| Sell Call #2 04/02/2004 |
On 4/2/2004 the market moved higher throughout the morning and into the early afternoon, when two large resistive VMA spikes to the upside appeared, one at 11:45, the other at 12:30. Although these resistive VMA spikes slowed the market’s ascent, they did not bring it to a stop. By 14:00, the market had generated a further resistive VMA spike to the upside. Although it was not nearly as large as the previous spikes, this third resistive VMA spike brought about a short-lived down move. A relatively small amount of supportive volume to the downside at 14:45 then counteracted, pushing the market higher again for the remainder of the afternoon. The close was at the highs and was, in fact, the highest closing level seen in several weeks. |
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:
Date |
Trade | Strike | Expiration | Contracts |
Contract Price |
Amount | Profit |
| 01/29/2004 | Buy Call #1 | $1125 | March | 10 | $25 | -$25000 | |
| 02/11/2004 | Sell Call #1 | $1125 | March | 10 | $41 | +$41000 | +$16,000 |
| 03/11/2004 | Buy Call #2 | $1125 | May | 10 | $26 | -$26000 | |
| 04/02/2004 | Sell Call #2 | $1125 | May | 10 | $36 | +$36000 | +$10,000 |
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Total: |
+$26,000 | ||||||
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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