One For The Bears
12/13/2009 8:54:05 PM
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If you think the market is going lower, this week's recommendations are for you.
SOS Timing Indicator
With the market testing highs, in December, the normalpositioning would be bullish. We still remain in a seasonal weak period into the 18th. The TRIN is far from a buy signal, but fear (as this shows it) is high, which is bullish. The vix is at lows (bearish) and the advance decline line is movng lower, and not at lows, so leaning bearish. Accordingly, we'll position for some downside for the week ahead.
Stock Options Speculator uses the above indicator in the establishing of various options trades and strategies. The indicator has two frames. The top frame shows the Nasdaq Composite and the Nasdaq Advances and Declines. The lower frame shows volatility (candles), the equity put call ratio (red line) and the Trading Index (blue line). The height of the indicators determines if call or put buying strategies are recommended.
Options Trading Ideas
Based on the SOS Timing Indicator or other special market conditions, the above 10 trades are recommended for consideration in your trading plan.
The following risk graphs show stock price plotted against potential profitability. They're listed alphabetically.
We're leaning towards a bearish market for the week ahead, and accordingly will position in PUTS.
However, in the spirit of the season, I don't want to be all bah-humbug... So here is our Top 10 CALL List - you'll note that there are some similar picks here - it's an inportant thing to understand - what makes it a pick on our list is that the option play is a cheap one - no indication of direction - so its implied volatility is low. That's why we put so much weight on the market timing indicator. Feel free to apply a little technical analysis to the charts, that would be the third step.