Three Call Options Positions that look ripe for trading but.....

Ok so here is the process for digesting this post. Although these are for trading today’s session potentially the lesson is timeless!

And before we start..you know the rules..these are for educational purposes only not direct recommendations for you to take action. We cannot tell whether these fit your plan nor whether trading is right for you or not. Do your own due diligence may seem obvious but make sure you do anyway..The educational lesson from putting this up we would consider hugely important! So read on…

a. Now, Read the top part…I know this is the exciting potential trade bit but you MUST

b. Read the bottom part

Potential number 1 -ADBE

One of the things which means i know I am doing my job as a teacher is when those I work with start to identify great potential trade set-ups. Credit for this MUST go to Kay and Terry

adbe12

 

ADBE have just changed to a Hawkeye Green Trend on the daily , with a Green Heatmap and buying volume. This combined with a break of the previous pivot high on the daily and weekly both in continued uptrend is indicative of a good “long” set up. no impact from earnings or dividend imminent. A further move up would provide a potential bought call opportunity.

Potential 2 – MU

mu1002

 

After a period of Congestion on the daily chart MU have broken to the upside on the daily are showing a green heatmap and the daily volume on Friday will turn green on market open. This key break is illustrated also one the weekly with a more obvious $28 resistance now broken. The monthly chart remains in an uptrend. Again we would want confirmation of a further move up in the last hour with the price closing above Friday’s high and in the top 405 of the bar to consider entry.

Potential 3 – EA

EA1002

EA bucked the general market trend in the recent pullback and continued in an uptrend although formed two pivot highs at $27. The weekly chart has just turned into a green uptrend but the previous highs from August/Sept may prove to be resistance to significant upside form the current price. We do have buying volume across all three time-frames and an entry could be considered on a break over that resistance seen more clearly on the weekly. This one is “cooking” still but worth adding to the radar.

So there you go..3 of interest from Hawkeye, all very optionable or tradable as stocks….

….Now for that BUT

  • The S&P500 IS in a downtrend on the daily so to enter any of these you are going against the shorter time-frame trend despite the excitement of a potential support on the SPY (albeit fragile).
  • However, the fact the weekly IS in a showing a green uptrend may make consideration of these viable.
  • But would we enter as normal if all met entry criteria?

Here is the thinking…

There is additional risk due to underlying market conditions (Either long or short) and to go against the shorter term trend is adding to that risk.

Therefore what can we do to mitigate that risk whilst still offering an opportunity?

a. We can position size smaller.  Position sizing is a fundamental part of successful trading. To adjust this according to market conditions seems common-sense (although this may, in reality, not be that common). So if you are happy to tolerate normally a maximum 3% of capital on any one trade. Such circumstances may mean that you halve this, and so the number of contracts you enter (knowing of course you CAN accumulate if a trade goes in your desired direction).

b. We can reduce the number of positions we enter. If you are risking 3% on every trade and open all three positions then that is a 9%+ potential draw-down (“gapping” aside). Solution: limit the number of positions you enter in market conditions such as these. Maybe just one is enough!!

TWO practical, no BS ways of allowing you to take advantage of opportunities whilst managing the increased risk of the current situation.

The last couple of weeks have been difficult for directional traders. so much so we have only entered 1 position on the Hawkeye trade alert/portfolio and that is why the portfolio remains at 120% in four months and not given much back to the market as has been the case with many i would guess. To have access to this for $1 for 21 days then you can by clicking here

Hawkeye Options is all about creating educated, yet risk-wise traders..i trust this has given you some food for thought about your trading process whatever you are trading.

 

Trade safe and learn with passion

 

Mike Smith

 

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