Wednesday’s Levels
Technical Analysis and Trading Strategy
By Mark Melin, technical analyst
Tuesday, July 20
Tuesday Recap: We had another
great day Tuesday, with a profit of $220.Â
Â
Charts from www.stockcharts.com
In our morning prediction, we said the market was
going to move higher. Although the market didn’t necessarily start off
positive, eventually it got its head above water, steadily climbing to bring the
cash Dow to close at 10149, up some 55 points on the day.Â
Importantly, the S+P climbed above its 200-day
moving average today and is trying to fire off buy signals. Also of note, the
NASDAQ has been bouncing off chart support we identified in our previous report
and was in fact the best performer of the day, closing up some 33 points on the
day.Â
Prediction for Wednesday: We
need to see if this move higher gets some confirmation, but my inclination is to
think we’re going to continue to move higher. This isn’t to say we come back
down and test support, but we could have put in a near-term bottom in the
market. On the downside, we’ll watch important NASDAQ support near 1865-70. If
this support breaks all markets could head lower. On the cash Dow, I’ll keep an
eye on the 10050-60 level on the downside, and on the upside I’ll watch the
50-day and 200-day moving averages, as they converge just above 10200.  Â
Portfolio Strategy: Same as yesterday. Right now we are delta
positive.  I’m going to stay positive and look for a short-term bounce. Recap:
On July 14 we established a small position in the August options, selling two
102 near the money puts. We offset this position by selling one Sept. mini-Dow
future to create a delta neutral position. We will likely hold this options
position until close to the point they expire, which is August 20. Further, we
are likely to add to our options position once we see a clear trend or
potentially near the start of August.
Previous Day’s Results and Current
Portfolio Status:Â Â
Daily Profit: $220
10200 August Mini Dow Put Options
Short 2
Yesterday it closed at 152, down 70.
Profit yesterday with this position was $700
These options expire August 20.
Mini Dow Futures
Short 1 Mini Dow future
Yesterday it closed at 10168, up 96.Â
Loss yesterday with this position was $480.
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.