If you compare the daily chart of ADBE and PBR you will see the same pattern where the stock breached its uptrend and put in a rounded bottom. There is then consolidation at the level that was breached which I have seen on several charts lead to a nice move to the upside. I would change how I play this one though. I mentioned below that I was interested in the Mar '10 35 calls instead because of my lack luster results of trading front month options for directional movement I would look at Apr '10 35 calls instead. They are currently trading at 1.45. See new analysis below:
I would also tighten up the stop from 34.50 to 35.
I was messing around with the stock screener at finviz.com and was looking for stocks that had recently crossed above their 50 day moving average. I found ADBE, they also happen to report on 3/23. So I am looking to buy some March '10 $35 calls with the stock currently trading at 34.79.
My thesis is that the stock will continue to trade above its 50 day moving average into earnings. I do not want to hold the position through earnings as that adds a whole other level of risk. The $35 calls are currently trading for about $0.67 a piece. I am interested in buying 5:
Entry: 34.75-35
Target: 37.80
Stop 34.50
Risk: $100 (0.61% of total portoflio)
Position Cost: $325
Reward: $900-$1000
Holding Period: Less than 3 weeks
Currently as I write this the market is turning negative and ADBE has reversed course and is no longer trading above its 50 day moving average. I would like to initiate this position if we can get candlestick close on the hourly chart above the 50 day.
So at this time I am not putting in an order but am ready if the opportunity presents itself.
Ok so I am in with a tight stop at 35. Risking about $50 on this one.
ReplyDelete$50 are you crazy? That could buy 150 tacos on Tuesday Taco Night at Del Taco.
ReplyDeleteI have to give myself a pat on the back today for sticking with the plan. A lot of times I get chased out of a stock before my stop is hit just to see it reverse course and continue higher or what ever direction I am trading. Today I was determined to stick with the stop when the stock was trading within pennies of my stop. It traded down to my stop level but did not break. I held and the stock when to pop up $0.50 and is up .33 on the day. It showed the respect I was looking for at the 35 level and has increased my confidence in the trade. The next hurdle that ADBE must overcome before it can continue higher is resistance at 35.62.
ReplyDeleteRemember they report on 3-23-10. So my goal is going to be to try to exit before they do. So by the close on the 23rd I would like to be flat.
Not liking the price action in ADBE. It has given back everything it gained yesterday. Yesterday it showed relative strength to the overall market and today it shows relative weakness. It feels like I may get stopped out of this name today. We will see.
ReplyDeleteI placed a conditional order to sell the options at market if the underlying trades <= 34.94.
ReplyDeleteI was stopped out. I am not flat and 100% cash.
ReplyDeleteI got stopped out by one penny yesterday and today the stock is up over $1. What a mother fucker. Oh well I stuck to my plan and that is all I can ask for.
ReplyDeleteThat is a bitch, it will happen again at some point so just find a soft wall to punch when it does. However, the few times this happens is better than the alternative of not setting stops, which is how I lived my former life. Watching a $10 ITM option expire worthless because I wanted/needed to believe it would come back my direction felt pretty ridiculous. A simple stop with a simple reason behind it would have sufficed and saved me a lot. Trade and learn. Hey, that's my new tag line!! I don't know who coined "Live and learn" so I don't feel bad about not paying any royalties to that person.
ReplyDelete