Thursday’s Levels
Technical Analysis and Trading Strategy
By Mark Melin, technical analyst
 Thursday,
June 24
Wednesday Recap: We had yet
another great day Wednesday with a profit of $438.Â
In our report posted Wednesday morning before the
open of the cash market, when the pre-open futures were pointing lower, the
prediction said the cash Dow would move higher and in fact we said that the
resistance zone from 10400-30 could be broken. That occurred, although it
didn’t always look that way. As you can see below, we posted yesterday’s chart
with the only addition Wednesday’s price action. The cash Dow started the day
lower, then moved higher and spent most of the morning testing our predicted
resistance zone near 10400. When this didn’t break, the cash Dow moved down to
find buyers near 10360. Buyers then pushed the Dow to once again test the 10400
resistance level. When this broke late in the trading session, buyers got
courage and took the Dow to close on its highs going away, ending at 10479, up a
stiff 84 points on the day.Â
Charts from
www.stockcharts.com
The NAS lead all markets higher once again,
breaking 2000 as predicted and closing near our target. Below you can see
yesterday’s posted chart, with the only addition Wednesday’s price action.Â
Within the NAS the Sox was the strongest performer, up close to 2% on the day.Â
So long as the semis continue to find buyers, this market will keep moving
higher.Â
Prediction for Thursday: I think
ultimately we’re going to test resistance on the Dow at 10500-50 and the S+P at
1150. We could test this resistance tomorrow, before the end of the week, and
if not then by the end of the month. While I expect higher levels to be tested,
I also expect a move lower at some point and a test of the previous break-out
points of 10430-00 and 1142 on the S+P. 10400 on the cash Dow should prove
particularly strong support.
Portfolio Strategy:Â When the
market gets close to 10500 were going to sell our mini Dow future, and on the
first touch of 10550 we’re going to get a little negative. Depending on the
market set-up, when the Dow tests the previous break-out point at 10400 we’re
going to potentially get additionally positive.Â
Previous Day’s Results and Current
Portfolio Status:Â Â
Daily Profit: $438
9900 July Mini Dow Put Options, Long 4:Â
Yesterday it closed at 15, down 12. Loss yesterday with this position was $240.
10300 July Mini Dow Put Options, Short 5.Â
Yesterday it closed at 60, down 30. Profit yesterday with this position was
$750. We are now short 5 put options.
10600 July Mini Dow Call Options, Short 2:Â
Yesterday it closed at 55, up 15. Loss yesterday with this position was $150.Â
Mini Dow Futures: We came into the day flat the
mini Dow future. We bought one mini Dow future at 10456. The mini Dow closed
at 10470. Profit on the day with this position was $70. We are long one mini
Dow.
Estimated margin requirement (may vary broker to
broker): $11,660
Delta: +131.4
Gamma: -68.20
For questions e-mail,
subscriptions@dowoptionstrader.com
Trading Method:Â 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.