If We Pull Back, Here Are The Levels To Focus On

  • August 30, 2004
  • Mark Melin

Friday Recap: We
had a great day Friday with a profit of $275 and a great week with a profit of
$680.  Based on our recommended account size of $20,000, that’s just over a
3% return on investment in one week.

 

For
the past few days the cash Dow has been toying with resistance near 10200. 
On Friday it broke past 10200 on an intraday basis, but then gravity
pulled it back down to earth and it finished the day at 10195, up some 21 ½
points on the day and extending a nice 10-day rally in most of the major
indices.  However, before we get too
excited volume was extremely light — as it will be for much of this coming
week. 

 



 

For
its part the S+P once again moved higher, ending up over 9 points at
1107.77.  As you can see from the
weekly chart above, the S+P is testing 20-day moving average resistance. 
I think this initial test of resistance might fail and we could see a
pullback in the markets over the next few days. 


 

Prediction
for Monday:  I think the
markets will pullback Monday.   On
the cash S+P I’m going to watch for a test of the 1100 level. 
On the cash Dow over the next few days I’m going to watch for an
initial test of the 50-day moving average near 10150, then a more serious test
of the 20-day EMA and chart support near 10070-50.

 



 

Portfolio
Strategy:  We’re likely
to get a little delta negative today if the market gives us the right
opportunity.  Members, stay close to
your e-mail for details. 

 

Previous Day’s
Results and Current Portfolio Status: 

Daily Profit: $275

10100 Sept. Mini Dow Call Options

Long 5. 

Yesterday these options closed at 175, up 20. 

Profit yesterday on this position was $500.

These options expire September 17.

10300 Sept. Mini Dow Call Options

Short 9. 

Yesterday these options closed at 60, up 5. 

Profit yesterday with this position was $225.

These options expire September 17.

 

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.