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Any Given Friday

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I'm nowhere near the trader that I'm striving to become one day. However, I've accumulated enough years of experience on the battlefield to warrant documenting them in a book. I'm not doing it out of ego or anything; rather, it's because of all the nasty blows I've taken in past years to get to were I am now. At this stage of my journey, I already know what type of trader I've developed into, i.e., what trading style best suits my persona, etc. Some folks are the "easy does it", "buy and hold" type, while others prefer the minute-to-minute scalping. And those in between would rather plant their seeds and patiently wait several weeks or months before reaping the fruit of their success. 

I'm titling my book "Any Given Friday". It's premised on my preferred strategy, which calls for doing the homework Monday through Thursday, before finally pulling the trigger on Friday. This homework is based in large part on the myriad of technical analysis principles I've come to learn over the years. My preferred methodology is options premium selling, and it works like this: Monday through Thursday, I simply collect the technical evidence required to execute a winning trade. And on Friday, I put my money where my mouth is. For the remainder of the session, I baby-sit my trade to ensure it won't backfire. Trading, you see, is almost like arguing a court case; the more evidence you have on hand, the better the odds the final verdict will be in your favor.

For instance, here's how I prepared for Friday's BIDU trade, which by the way yielded a handsome profit of $5,500. Referring to chart 1 below, TradeWinds subscribers booked their long trade at the top of wave 3 on Wednesday morning before moving to the sidelines. And then later on in the afternoon, someone cited the new intraday high. In response, I pointed out the triangle formation and its implications in the live room, labeling it wave 4. 


Chart 1. The homework

On Thursday, I felt compelled to sell some OTM (out of the money) call premium, maybe above $197.50 or $200, only to realize it would be too soon. After all, "trigger time" is strictly "on any given Friday".

Enter Friday. The price action confirmed my suspicions by falling past the triangle's bottom to fulfill the Head-and-Shoulders' objective. In reaction, I waited for price to back-test the neckline, just shy of $195/share, before pulling the "weekly call premium-selling" trigger. 

ACTION: Short 100 x weekly 195/197.50 call spread.


Chart 2. Rationale and execution. The weekly auction strongly suggests stiff resistance exists near $195/share (High-Volume Area). The POC (point of control) is further below at 193.60. If they were shrewd enough to buy the dip down to the Head-and-Shoulders' measured move, they must also be shrewd enough to exit upon the back-test of the neckline.   

Chart 3 below zooms in on the action. Note the large red candle that gained steam upon the violation of the POC at 193.60. 


Chart 3. The Aftermath.

When it comes to price behavior, there's certainly no shortage of theories and schools of thought out there, such as "Random Walk""Elliott Wave", and "auction Marketplace", to name a few. And while they all do look great on paper, I've come to find out over the years that in reality the market's structure is "a little bit of everything". In the end, your perseverance, open-mindedness, and objectivity will serve you best insofar sharpening your instincts and fine-tuning your rhythm. 

Trade Smart,

Peter Ghostine (@peterghostine)


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The focus is on mentoring and education for the remainder of 2016, and throughout 2017! Without a solid foundation in Technical Analysis and Options Theory, you'd be trading like a deer in the headlights.  61point8.com's mission remains unchanged: to foster a network of intelligent, goal-oriented traders who, like me, wish to take matters into their own hands. 

If you found my analysis thorough and useful, consider subscribing to the TradeWinds service on 61point8.com for an ongoing analysis of the U.S. market indices and a steady flow of trade setups. As always, you will continue to enjoy my free contributions on Twitter and StockTwits by following @PeterGhostine. 


 

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