Wednesday’s Levels
Technical Analysis and Trading Strategy
By Mark Melin, technical analyst
Wednesday,
June 22
Tuesday Recap: We had a great
day Tuesday with a profit of $340, or close to a 4% return on the required
maintenance margin.Â
Tuesday’s prediction posted before the open of
cash trading said the Dow would find support and bounce higher. Below I’ve
posted the exact chart that we posted yesterday with the only addition being the
recent price action. As you can see, the Dow started lower and eventually found
buyers near the top of our support region at 10300. From here buyers pushed the
Dow steadily higher to close near the highs at 10395.Â
Charts from
www.stockcharts.com
It should come as no surprise that the best
performing index of the day was the NASDAQ. You’ll recall that in yesterday’s
report, we noted the NAS was sitting on support. But more important, even
though the NAS was down hard yesterday the Sox index was down a scant 2 points –
and we noted this was a positive for bulls.  Today the Sox was up over 15
points, close to 3 ½% gain. This powered the NAS higher to close at 1994.15, up
1% on the day while the Dow and S+P were only up approximately ¼%.Â
Prediction for Wednesday:Â The
markets are likely to move higher and test significant resistance Wednesday. Â
On the cash Dow we’ll watch the 10400 and 10430 level. A break and hold of
10430 would then indicate a move to 10500 and ultimately a test of 10550. If
the cash Dow hits 10550 today, that might be a good time to sell the market.Â
On the S+P, watch the 1137 level, and then again
the 1142 level. A move and hold above this level would then indicate a move to
1150. If the market does rally, watch for the NAS to lead once again. A quick
break of 2000 on the NAS could lead all markets to break their respective
resistance.Â
Portfolio Strategy: Right now we
are delta positive, and we might get additionally positive depending on the
market set-up today.
Previous Day’s Results and Current
Portfolio Status:Â Â
Daily Profit: $340
9900 July Mini Dow Put Options:Â On 6/18/04 we purchased 4 July put options
for 32. Yesterday it closed at 27, down 3. Loss yesterday with this position
was $60.
10300 July Mini Dow Put Options:Â On 6/21/04 we sold 1 put option for 88.Â
Yesterday it closed at 90, down 20. Profit yesterday with this position was
$500. We are now short 5 put options.
10600 July Mini Dow Call Options:Â On 6/10/04 we sold 2 call options for 64.Â
Yesterday it closed at 40, up 10. Loss yesterday with this position was $100.Â
Mini Dow Futures: We came into the day flat the mini Dow future. We remain
flat the mini Dow.
Estimated margin requirement (may vary broker to broker): $9047
Delta: +139.1
Gamma: -63.70
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.