Today’s Interesting Targets
Tuesday, April 6
Tuesday Recap:
We had a good day Tuesday with a $190 profit.
While the Dow had an up day, it was a down day
for the market. On the day the Dow was up some 12 points while the S+P was down
2.41 and the Nasdaq was down 19, close to 1%, the worst performing index of the
day. Decliners beat up advancers 21 to 12 on the big board with down volume
besting up volume by close to 2 to 1.
The cash Dow started the day gap lower, trading
around 10520 for much of the morning. Then just after lunch in New York, the
Dow broke into new daily highs, ending the day at 10570.
Prediction for
Wednesday: I think we are going to see some downside
continuation on Wednesday. In fact, there are a lot of interesting targets to
the downside, and let’s look at them one at a time.
On the S+P, I’m going to watch an interesting
support region we identified above (A) near 1043-45. If that is broken, we
could see the S+P try to close the gap (C). If that gap is filled, a likely
scenaro would be for the S+P to find support at the 50 day MA, currently just
above 1033. That should be pretty strong support. If the S+P does find
support, on the upside I think Tuesday’s highs could serve as significant
resistance, with any rally running into sellers near 1050-49 (B).
On the Dow, we’ll watch the 10510-00 region. If
this is broken, we could see a touch of the lower trading channel (A) that was
identified as a target in yesterday’s prediction. If this is broken, watch the
50 day moving average, and you’ll recall we predicted a few days ago this could
be weak resistance. We’ll have to see. If the 50 day MA is broken we’ll first
watch the 10420 level, then the 20 day MA, currently near 10370. If buyers
don’t get confidence at any of those levels, keep an eye on the first Fib
retracement level near 10351 for buyers to get some courage. If the Dow finds
support, it could move to the upside, yet I think 10610 could keep a cap on any
excitement the bulls might muster.
The fact that the Naz negatively diverged from
the Dow yesterday wasn’t good for the market. Further, you’ll note that selling
has occurred before the tech index touched the 70 level. That’s not good for
market bulls, either. That, in conjunction with the relative negative
candlestick when considered in perspective to the recent uptrend, could lead to
an attempt to fill the gap (E) that was created a few days ago (see chart at top
of this report). A likely support point would be the 50 day MA, currently just
under that gap at 2019. If the NAS does find buyers, watch it to lift the
entire market. However, I think the Bollinger band and upper level resistance
under 2100 could keep a cap on this market over the next few days.
Portfolio Strategy:
Right now we’re slightly delta positive, and we may look to get a little
negative intraday depending on how the market sets up.
Trading Results from
Previous Day and Current Portfolio Status:
Daily Profit: $190
10500 April Mini Dow Put Options: On 4/5/04 we
sold one mini Dow put options for 66. We are now short two put options.
Yesterday this option closed at 70, down 5 points from the previous close (each
point is worth $5). Profit yesterday with this position was $50.
10000 April Mini Dow Put Options: We are short
four put options. Yesterday this option closed at 8, unchanged. Profit
yesterday with this position was $0.
10400 April Mini Dow Call Options: We are short
two call options. Yesterday this option closed at 165, down 10. Profit
yesterday with this position was $100.
9700 April Mini Dow Put Options: We are long 2
put options. Yesterday they closed at 4, unchanged. Loss on the day with this
position was $0.
10400 April Mini Dow Put Options: We are short
two put options. Yesterday this option closed at 40, down 5. Profit on the day
with this position was $50.
9900 May Mini Dow Put Options: On 4/2/03 we
bought two mini Dow put options for 69. Yesterday this option closed at 49,
down 1. Loss on this position was $10.
Mini Dow Futures: We are now flat the mini Dow
future.
Projected Net Maintenance Margin Required
(Minimum amount required to
trade this position, may vary broker to broker. Amount specified is
derived from our options analysis software): $12,707
Current Projected Delta: 27.51
Current Projected Gamma: -79.77
Please feel free to
email me with your comments
or questions.
Trading Method: Mark Melin
strategically short sells options and then directionally trades within this
short options portfolio, always hedging one position against another to generate
consistent profits.