Wednesday’s Levels
Technical Analysis and Trading Strategy
By Mark Melin, technical analyst
Wednesday, July 28
Tuesday Recap: We had a good day
yesterday with a profit of $345.
Charts from
www.stockcharts.com
In our prediction posted before the cash open
Tuesday, we said the market would attempt to firm and we said “if the cash Dow
breaks 10,000 we could see a move to 10050 – and above.” That occurred on
Tuesday, as the cash Dow started the day by breaking the 10,000 resistance level
we had identified all week. The Dow moved higher, then came down to re-test
this level before taking off for 10050. Initially 10050 was tested, then
sellers took the Dow to consolidate before pounding through 10050 to end the day
at 10085, up a big 123 points on decent 1.6 million share volume.
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For its part, the Nasdaq climbed over first level support at 1865 to close just
below 1870. Let’s see if we can break the 1870 level.Â
If there is one spoiler to this party it could be oil. Yesterday oil was
knocking on the door of $42 per barrel. If oil spikes higher from here we could
see a sell off in stocks.     Â
Prediction for Wednesday:Â Over the short-term the markets
could potentially test their respective moving average resistance. The next few
days are going to be important to see if we get follow-thru to Tuesday’s
advance.
On the cash Dow we’ll keep an eye on the 20-day exponential moving average at
10150, then again the 50-day at 10215 and the 200-day at 10220. In terms of
support, we’ll keep an eye on the 10050 level. If this breaks and holds, we
could head to test the lows.Â
On the cash S+P let’s watch yesterday’s intraday highs. If we break and hold
the highs we could test the 200-day moving average and 20-day EMA near 1106.
Portfolio Strategy:Â Yesterday morning we sent members an
e-mail buy signal that bought 3 mini-Dow call options, which brings us to delta
positive. We’re likely to look to establish a debit spread shortly depending on
the market behavior today.Â
Previous Day’s Results and Current
Portfolio Status:Â Â
Daily Profit: $345
10100 Sept. Mini Dow Call Options
Long 3
Tuesday, 7/26 we bought 3 Sept. 101 call options at 182. They closed at 205.
Profit yesterday on this position was.
These options expire September 17.
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.