Tuesday’s Levels
Monday Recap: We had a good day
Monday with a profit of $125. In our prediction for Monday, we said the cash
Dow would touch both sides of the flat line with an upside bias. That occurred,
as the cash Dow started the day higher, moving above the downtrend line we
identified, before being slapped down to the 10450 level, where buyers once
again gained courage to test – and fail – at the downtrend line. From here the
Dow moved down to end the day at 10444, down some 28 points.
Charts from www.stockcharts.com
The S+P looked a lot like the Dow, except it was
a little more negative, and this mirrored the big board where decliners beat
advancers 10 to 6. Despite the fact that the market opened slightly higher and
moved to short-term resistance at 1145 on the S+P, the market hit the skids when
the interest rate sensitive new home sales report that came out. The markets
then bounced right to resistance, retested, but then made new lows after lunch
at 1132-33 zone on the S&P 500. The balance of the day was slop and chop with
back and forth price action in a consolidation pattern with a downward bias. In
a late firming move and some short covering, the we bounced off the rising
40-day moving average on the hourly charts, which in addition to the support
level probably had something to do with the late move higher.
The NASDAQ was the worst performer of the day,
down some .63%. The tech-laden index moved right into our predicted chart
resistance level, couldn’t clear and then closed just above our predicted chart
support level.
Prediction for Tuesday: We may
make another run at the downtrend line on the cash Dow and S+P. However, if we
clear the downtrend line this time, we have an 85% that we’re going to keep
moving higher and potentially touch our upside targets. You’ll note that in the
one minute chart at the Dow above, the market couldn’t hold above the downtrend
line. In fact, at the time of the intraday move above the downtrend line and at
the time of the second test of the downtrend line, the time/price opportunities
favored sellers. That’s why if we can’t clear resistance levels, we might once
again explore downside support. On the NAS, if we can clear point A on the
chart above, I’d expect a challenge of the upper level Bollinger band and
resistance just under 2100 near point B. If we can’t break resistance, I’d
ultimately expect a challenge of point C near the 20-day exponential moving
average.
Portfolio Strategy: We are
pretty close to neutral right now. If we get to the 10550 level we might get a
little negative.
Yesterday’s Results and Current Portfolio
Status:
Daily Profit: $125
9900 May Mini Dow Put Options: We are long 2 put options. Yesterday this option
settled at 20, unchanged. Loss yesterday on this position was $0.
10100 May Mini Dow Put Options: We are short 2 put options. On 4/19/04 we sold
2 Mini Dow Put Options, one at 70 and the other at 66. Yesterday this option
settled at 40, unchanged. Profit yesterday with this position was $0.
10100 June Mini Dow Put Option: We are short 2 put options. On 4/22/04 we sold
1 Mini Dow Put Option at 103. On 4/23/04 we sold one Mini Dow Put Option at
104. Yesterday it closed at 92, down 10. Profit yesterday with this position
was $100.
10600 May Mini Dow Call Options: We are short 2 put options. On 4/19/04 we sold
2 Mini Dow Call Options at 66. Yesterday this option settled at 65, unchanged.
Loss yesterday with this position was $0.
10600 June Mini Dow Call Option: On 4/21/04 we sold 1 Mini Dow Call Option at
97. Yesterday it closed at 130, down 5. Profit yesterday with this position
was $25
Mini Dow Futures: We came into the day flat the mini Dow future. We are now
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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