Technical Analysis. Nasdaq 100, |
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Highlight Investments Group |
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February 15th, 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.
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
33% 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.
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 #2 (QQQQ March) | +33.33% |
|
Total Profit: |
+$4,200 |
Even though the trades shown above were not entirely without risk, they resulted in a profit of $4,200
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.
Why were only call options were purchased?
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':It's very risky to buy put options when general market trend is defined as an up-trend. This is because the market does not always react to supportive volume in a timely manner, or sometimes the reaction is not as large as expected. In the majority of the case, the market will react to supportive volume during an uptrend, but resistive volume will be somewhat diluted, unless it is a very large amount of resistive volume.
| Trade | Volume Motivation | Market Commentary on Members Home Page during the trade |
| Buy Call
#2 02/04/2004 Was left opened last week |
During the markets descent, it generated a relatively large supportive VMA spike to the downside at 14:15. This supportive VMA spike stopped the market from descending much further throughout the rest of the day, in effect it set the day's support level. | We currently do not seen any need to alter our bullish mid- and long-term prospectus as we haven't seen the amount of resistive volume one would need to change the mid- and long-term's current up-trend. |
| Sell
Call #2 02/11/2004 |
Volume levels today, for the first time in a week, rose above the relatively low levels that we have been seeing. Shortly after the rally began, the market encountered a substantially large resistive VMA spike to the upside, which peaked at 11:30. | We still expect that the market may begin to pullback as it reacts to today's large amount of resistive volume |
| Buy Call
#3 02/13/2004 Left opened |
A large VMA spike to the downside occurred at 10:45, but this supportive volume brought only a temporary reprieve, as by 11:45, the decline resumed, although not quite as pronounced as earlier in the day. A large supportive VMA spike to the downside appeared at 12:30. |
We expect a move lower in the
short-term followed by a strengthening of the ongoing mid-
and long-term uptrend. |
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 |
| 02/04/2004 | Buy Call #2 | $37 | March | 120 | $1.05 | -$12600 | |
| 02/11/2004 | Sell Call #2 | $37 | March | 120 | $1.4 | +$16800 | +$4,200 |
| 02/13/2004 | Buy Call #3 | $37 | April | 60 | $1.4 | -$8400 | |
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Total: |
+$4,200 (+33.3%) |
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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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