Monday’s Levels

  • May 24, 2004
  • Mark Melin

Friday Recap: In our predictions
last week, we said the cash Dow would likely move higher going into options
expiration Friday.  Further, in our prediction for Friday we said one good place
to sell this market might be when it moved higher and reached the Dow’s 200-day
moving average.  In fact on Friday, the cash Dow started out of the gates
higher, eventually moving to touch the 200-day moving average – which was the
high of the day.  From here the Dow steadily moved lower to end the day at 9966,
up some 29 points on the day. 

^next^

Prediction for Monday:  The cash Dow will likely move higher
early in the morning and test – and potentially break – its 200-day moving
average.  After this I’m going to want to see the Dow clear and hold the 10050
level.  This could also happen on Monday.  If the cash Dow holds 10050, we could
be headed for a good week with higher price action, which ultimately might take
the cash Dow first to level B and then level C on our chart.  Also note that the
MACD and the Stochastics are getting ready to generate buy signals on the daily
charts – and that could happen at the end of trading today.   

Like the Dow, the cash S+P started the day higher and closed lower.  On the
day it got close to touching resistance near it’s 20-day exponential moving
average.  That level also corresponds to chart resistance (B) on the chart
above.  I expect the S+P to be tested, with our next long yterm target the
50-day MA level. 

 

Portfolio Strategy:  We’re going to get delta positive this
morning.

Yesterday’s Results and Current Portfolio Status:  

Daily Loss: $45

 

10100 June Mini Dow Put Option: We are short 2 put options.  We bought one back
at 245.  Yesterday it closed at 245, down 5.  Profit yesterday with this
position was $50.

 

10600 May Mini Dow Call Options: We are short 2 put options.  This option
expired worthless.  Profit yesterday with this position was $10. 

 

10600 June Mini Dow Call Option: We are short two call options.  Yesterday it
closed at 9, up 4.  Loss yesterday with this position was $40.

Mini
Dow Futures: We came into the day short one mini Dow future.  Friday the
mini-Dow future closed at 9967, up 13.  Loss yesterday on this position $65.  We
are flat the mini-Dow. 

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.

 

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