Tuesday’s Levels

  • July 13, 2004
  • Mark Melin

Monday Recap: We had yet another
great day Monday with a profit of $460.

In our prediction for Monday we said the markets
would touch both sides of the flat line with an upside bias.  Further, we called
for a test and likely break of the 50-day moving average on the cash Dow. 
Although that’s pretty much what occurred Monday, it didn’t start that way.  In
fact, the markets were looking quite weak from the start, testing and breaking
the 200-day moving average in the morning, but then consolidating for much of
the morning and early afternoon before rocketing higher, just breaking the
50-day moving average to end at 10238, up 25 points. 

                             
Charts from www.stockcharts.com

While the cash Dow ended higher, the
semiconductor index got socked, ending the day close to 10 points – but closing
well off its lows and holding at chart support.  I still maintain my belief that
the semis could be putting in a bottom and that yesterday’s brokerage downgrade
was calling a downgrade near a bottom.  In any case, we’ll keep a close eye on
the semis – and I expect to see a big move in the next few days. 


^next^

Prediction for Tuesday:  I
expect the markets to move higher and test resistance Tuesday.  On the cash Dow
I’m going to watch for a test of 10260-70.  If this breaks,  we’ll watch for a
test of the 20-day EMA. 

Importantly, on the S+P well watch for a test of
the 50-day moving average near 1118.  If we break this level, watch for a test
of the 1122 level.  Now, if these Dow and S+P resistance points don’t break,
watch for an intraday re-trace back to support levels or near the flat line. 


Portfolio Strategy:  We are delta positive.  If we break and
hold 10270 we may get additionally positive and may even rotate our options to
the forward month – if we get high enough. 

Previous Day’s Results and Current Portfolio Status:  

Daily Profit: $460

9900 July Mini Dow Put Options

Long 4

Yesterday it closed at 5, down 5.  

Loss yesterday with this position was $100.

10300 July Mini Dow Put Options

Short 5. 

Yesterday it closed at 100, down 27. 

Profit yesterday with this position was $675.

10600 July Mini Dow Call Options

Short 1

Yesterday it closed at 1, unchanged. 

Profit yesterday with this position was $0.

Mini Dow Futures

Short 1 Mini Dow future

Yesterday it closed at 10225, up 23. 

Loss yesterday with this position was $115.

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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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