Technical Analysis. |
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April 22nd, 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
20% 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.
| Security | Return |
| Call #1 (QQQQ June) | +20.00% |
| Call #2 (QQQQ June) | +38.46% |
|
Total Profit: |
+$6,000 |
|
Nasdaq 100 Indicator |
Even though the trades shown above were not entirely without risk, they resulted in a profit of $6,000
Notes:
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':Chart Different Views: To put the magnitude of a volume spike in perspective, it is essential to look at charts spanning various time periods. For instance, while a volume spike may look imposing and seem critical on 1-day or 5-day chart, that same spike may not loom as large on a 30-day chart, and it might perhaps even seem insignificant on a 60-day chart. Volume spikes that appear noteworthy on short-term charts must thus always be placed in the context of the higher time periods, so that misinterpretations of their potential impacts on mid- or long-term trends can be avoided. For instance, a prominent spike appearing on a 5-minute chart could well affect an index in the short term, but it may not necessarily have much of an impact on the prevailing long-term trend.
| Trade | Volume Motivation | Market Commentary on Members Home Page during the trade |
| Buy Call #1 04/15/2004 Was left opened last week |
After a slight move down, the market almost immediately generated supportive volume to the downside and picked up after 9:45. A moderately supportive VMA spike to the downside at 13:45 helped slow the market’s decline. Whereas the S&P 500 traded more or less sideways after this supportive volume, the NASDAQ 100 maintained a slight downward bias for the remainder of the afternoon. Shortly before the close, both indexes generated a further, albeit modest supportive VMA spike to the downside. | We believe that in the mid-term, the NASDAQ 100 may stage a more vigorous recovery than the S&P 500, as it tries to compensate for the noted discrepancy. In the mid-term, we anticipate the market will continue to move higher, as we have not seen a significant accumulation of resistive volume that would bring about an end to the bullish mid-term up-trend. |
| Buy Call #2 04/21/2004 |
Initially the market opened higher in the morning, but immediately began to move lower to retest its lows. During this initial move it encountered additional supportive volume to the downside, which helped the market move higher until 10:15. At this point the market ran into a moderate amount of resistive volume to the upside, causing it to move lower once again. As the market descended again, it ran into a large supportive VMA spike to the downside, which came to a peak at 11:30. | We still feel that the market will continue to move higher in the mid-term. The crux of this assumption is based on the large amount of supportive volume to the downside that we've seen over the past several weeks, specifically large supportive VMA spikes on April 20th, 15th, and 13th (see a 15-day chart with a 120-min VMA). |
| Sell Call #1, 2 04/22/2004 |
As the market
moved higher, it quickly generated a very large resistive VMA spike to the
upside, which came to a peak at 11:30. This resistive VMA spike didn't have
much of an impact on the market other than to slow its advance throughout
the rest of the morning and early afternoon. The market continued its advance until 13:30. At this point the market generated another large resistive VMA spike to the upside |
Today's resistive volume does introduce the chance for the market to move slightly lower in order to accumulate more supportive volume |
The principles discussed above also apply when trading the NASDAQ 100, the S&P 100, the Dow Jones, as well as other indexes.
Following is a detailed list of the actual trades
made by our investor.
These are the trades which netted the returns shown above:
Date |
Trade | Strike | Expiration | Contracts |
Contract Price |
Amount | Profit |
| 04/15/2004 | Buy Call #1 | $36 | June | 75 | $1.5 | -$11250 | |
| 04/22/2004 | Sell Call #1 | $36 | June | 75 | $1.8 | +$13500 | +$2,250 |
| 04/21/2004 | Buy Call #2 | $36 | June | 75 | $1.3 | -$9750 | |
| 04/22/2004 | Sell Call #2 | $36 | June | 75 | $1.8 | +$13500 | +$3,750 |
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Total: |
+$6,000 | ||||||
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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