Friday’s Levels

  • June 18, 2004
  • Mark Melin

Technical Analysis and Trading Strategy

By Mark Melin, technical analyst

 

Friday, June 18

Friday Recap:  We had a good
day Thursday with a profit of $160.

In our prediction for Thursday, we said the
markets would touch both sides of the flat line with a negative bias on
Thursday.   In fact, the markets started the day gap down Wednesday, but then
stair-stepped higher, with the Dow ultimately testing resistance in positive
territory near 10400 before selling off to close at 10377, down just 2 on the
day. 


The most significant loser on Thursday was the NASDAQ.  Leading the NAS lower
was the SOX, which was down nearly 3 ½ percent on the day.  If this continues,
market bulls might run for the hills. 

Prediction for Friday:  We’re likely going to start the day
to the downside testing support.  But I’m expecting a touch of both sides of the
flat line on Friday with an upside bias.  I’m going to watch for bulls to
potentially take the Dow to touch the 10400-30 level – and this might be a point
to lighten up on equities.  On the downside, we’ll once again watch for a test
of 10350, then 10300.  If we break 10300 we could test some important support at
the 50-day moving average.  If the Dow breaks 10300, then its time to take a
look at the NAS – it will likely be trading under its 200-day moving average at
that point.  If the NAS holds under its 200-day MA I think the markets could be
in for some trouble. 

On the S+P, I expect a touch of higher price action and a potential touch of
1137.  On the downside, let’s watch to see if yesterday’s lows at 1122  holds. 
If not, we could see a test of the 20-day EMA and then chart support near 1122. 

Portfolio Strategy:  If the market touches resistance on
Friday, we may get additionally.  Further, at the end of the day Friday we may
get additionally negative if the market looks likes its going to end on the
upside. 

Previous Day’s Results and Current Portfolio Status:  

Daily Profit: $160

 

10100 June Mini Dow Put Option:  We are short one put option.  Yesterday it
closed at 1, unchanged.  Profit yesterday with this position was $0.

 

9700 June Mini Dow Put Options: On 5/24/04 we sold one put option for 70. 
Yesterday it closed at 1, Unchanged.  Profit yesterday with this position was
$0.

10300 July Mini Dow Put Options:  On 6/16/04 we sold 4 put options for 123. 
Yesterday it closed at 117, down 3.  Profit yesterday with this position was
$60.

10600 June Mini Dow Call Option: We are short one call option.  Yesterday it
closed at 1, unchanged.  Profit yesterday with this position was $0.

10600 July Mini Dow Call Options:  On 6/10/04 we sold 2 call options for 64. 
Yesterday it closed at 40, down 10.  Profit yesterday with this position was
$100. 

Mini Dow Futures: We came into the day flat the mini Dow future and remain flat
the mini Dow. 

Charts from www.stockcharts.com

For questions e-mail,
subscriptions@dowoptionstrader.com

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.