Technical Analysis. |
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Highlight Investments Group |
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August 5th, 2004
This "Short-Term Trade" was based on our volume indicators.
This “best Short-term trade”
is a continuation of the
previous best trade,
where we left a QQQQ Call position open.
NOTE: We discuss our “best trades” 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 “best trade”,
"Buy QQQQ Calls #1,2" are opened
in order to close it later with profit if
the index moves in our favor.
|
NASDAQ 100
Indicator NYSE
Advance-Decline Volume Ratio |
Sometimes your trades involve larger, sometimes smaller amounts of trading capital. Is this a marketing strategy or a trading tactic?
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':The varying amount of capital we allocate to each "Trade of the Week" is not random, nor is it a marketing gimmick. The amount we invest in a particular trade correlates directly to our interpretation of a specific volume signal. The stronger a signal, the more contracts we buy. Conversely, when our volume indicators are not as strong, or when other factors come into play (e.g., the geopolitical situation, options expirations, FED announcements, and others), we enter a trade with a smaller number of options contracts. We may hold back some cash (i.e., “keep some powder dry”) in anticipation of being able to purchase further contracts at “better” price in the near future. For instance, better prices may result from a “delayed volume reaction”, a situation where index movements do not show an immediate reaction to the appearance of a (significant) volume spike. Another reason why we may hold back some capital when faced with a weaker than usual volume signal is if we think the market could turn against us – in such a situation, a lower capital investment has the benefit of reducing potential losses.
| Trade | Volume Motivation |
| Buy Call
#1 08/03/2004 Was left opened in previous "Best Trade" |
The market did move lower today, and in the process of doing so it also generated a good deal of supportive volume to the downside. Initially the market opened slightly lower this morning. As the market moved lower it began to produce an increasing amount of supportive volume to the downside by 13:15. However, the market continued its decline and as a result, the market produced an even larger supportive VMA spike to the downside at 14:15 and 14:50 . By 15:45 the market resumed its decline, catalyzing the production of an even larger supportive VMA spike to the downside, which came to a peak by the end of the day. The market closed at or near its lows for the day. |
| Buy Call
#2 08/05/2004 Left Opened |
During the market's decline it produced of a larger supportive VMA spike to the downside, which came to a peak at approximately 12:15. As the market continued in a sideways trend it generated a substantially large supportive VMA spike to the downside at about 15:00 and 15:45. |
These are the trades which netted the returns shown above:
|
Date |
Trade | Strike | Expiration | Contracts |
Contract Price |
Amount | Profit |
| 08/03/2004 | Buy Call #1 | $34 | September - QAVIH | 75 | $1.35 | -$10125 | |
| 08/05/2004 | Buy Call #2 | $34 | September - QAVIH | 100 | $1 | -$10000 | |
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Total: |
0 | ||||||
For this week’s “trade of the
week”, "Buy QQQQ Calls #1,2"
are 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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