Exploring All Options
One of the true advantages of the TradersWire in
my opinion, is that all of the tools, some of the time, can provide you with valuable
trading information even if they are not something you focus on or instruments
you trade yourself. Sometimes the options alerts we provide in the Insights
From The War Room can tip the observant trader off to impending strength or
weakness in the underlying equity, at least for the short term.
Yesterday’s 13:36 Options Alerts noted
that the volume in the April 125 puts was much higher than usual in relation to
open interest in the Biotech Holders ETF
(
BBH |
Quote |
Chart |
News |
PowerRating):.
13:36:30
Options Alerts
    Abnormal Volume
Relative to Open Interest
- Biotech Holders (BBH);
The biotech holders ETF has been in a downtrend since the end of
January. There is unusual activity relative to open interest in the April
125 puts. BBH is currently 2.19 at 121.80.
A glance at the daily chart could have told you to keep the BBH on the radar
for continued action to the downside. In addition to the bearish surge in
in-the-money put volume you had a downside break out of a pullback from low two
days earlier, an attempted reversal of that breakdown the following day, and
finally what Jeff
Cooper calls a Kaiser Soze (from the movie “The Usual
Suspects”) or a reversal of the reversal. All of this action is taking
place within a flag pattern at low, so with the underlying trend being down the
stage is set for a continuation entry on today, the following session.
Daytraders on the open today get immediate gratification, as the
BBH gaps slightly to the downside, upticks for the first five minutes, and then
plummets for a 4 point gain for short-sellers. After the initial probe to low
the stock retraces approximately 61.8% of the first move before falling another
4+ points, giving a second shot at a profitable trade to the short side.
Swing traders have hit a homer with this setup, as the exchange
traded fund is down 8.60 to 108 at the time this is being written. They can now
lock in profits on half the position, move their stop to breakeven and trail any
additional profit on the remainder of their shares.
While it is impossible to use all of the indicators on the TradersWire
all of the time, when you take a look at the chart of the stocks or ETF’s
as the alerts appear, multiple signals will often bias toward future movement in
one direction or the other. When you get several pieces of the puzzle pointing
in the same direction, you have just increased your odds of adding to your
account balance.
Until tomorrow,
Duke