Thursday’s Levels

  • June 17, 2004
  • Mark Melin

Technical Analysis and Trading Strategy

By Mark Melin, technical analyst

Thursday,
June 17

Wednesday Recap:  We had a good
day Wednesday with a profit of $105.

In our prediction for Wednesday, we said the
markets would touch both sides of the flat line with an upside bias.  In fact on
Wednesday, all major indices touched both sides of the flat line and two of the
three indices ended to the upside.  For the S+P the day started with a small gap
higher that was quickly filled.  Buyers found courage near the 1131 level on
several occasions, as the market traded in a coil fashion in positive territory
for most of the day, ending up 1.55 to close at 1133.56. 

Charts from
www.stockcharts.com

PPI Report: You’ll recall that
we said inflation was going to come in hot and in fact we said that the PPI
report would come in particularly hot.  Well, the PPI was released today and the
numbers were significantly hotter than expected, up 0.8% in the headline number
and up 0.3% in the core.  Its interesting the timing of this release.  If this
number came out before the CPI – which was the initial plan before last Friday’s
national holiday – it would have had a much more significant impact on the
market.  As it is, the CPI will rule the roost and the PPI will have muted
impact on the market.

Prediction for Thursday:  I
expect that Thursday and Friday we’re going to touch both sides of the flat line
with a potential negative bias Thursday but a positive bias on Friday.  Before
the week ends I expect a test of 10430 on the cash Dow.  If that breaks, we
could move to 10500-50.  However, I think a test of 10430 might provide a
selling opportunity.  On the downside, we’ll watch the 10350 level.  If this
breaks, we’ll watch the 10300 level and then the 50-day moving average near
10264.

Portfolio Strategy:  Right now
we’re delta positive.  We might get close to neutral or even negative depending
on the price action on Friday. 

Previous Day’s Results and Current Portfolio
Status:  

Daily Profit: $105

 

10100 June Mini Dow Put Option:  We are short one put option.  Yesterday it
closed at 1, down 4.  Profit yesterday with this position was $20.

 

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 120.  Profit yesterday with this position was $60.

10600 June Mini Dow Call Option: We are short one call option.  Yesterday it
closed at 1, down 1.  Profit yesterday with this position was $5.

10600 July Mini Dow Call Options:  On 6/10/04 we sold 2 call options for 64. 
Yesterday it closed at 50, down 2.  Profit yesterday with this position was
$20. 

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

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.