This page last updated: January 28, 1997 at 11:00PM
The Saga Continues................With Yet Another ATTABOY!
Welcome back traders to what will be another pleasant chat session. When we last discussed the OEX, you will remember that I had commented that short positions on the OEX were to have been exited when the OEX hit 749 on MONDAY. 749 was the correct price point and MONDAY was the correct time frame. The OEX openned with a vengence on Tuesday to about an eleven point blast- a classic short squeeze on news that I basically considered bearish. If you hadn't covered your short position, things looked ugly and most traders would have paniced and took a beating that either gave back all profits since the FULL SELL signal was issued or even worse, ended up with a loss. The PRUDENT TRADER having exited his short position on Monday felt no such pain.
Infact, the PRUDENT TRADER was expecting a rise, as commented on yesterday, only I did not expect it to occurr so fast and so intensely. Nontheless, having purchased the OEX bj's yesterday at just above the recommended price point of 749, I was well positioned for the ride up. HOWEVER, just as everyone was trying to get in, the PRUDENT TRADER was looking to close out his call position. At roughly 9:50AM, the sale was announced while visiting the AVID TRADER CHAT. The bj's were dumped for a price of $20 each. Why? Because my desired price point, a price point that I mentioned here just last night, was rapidly approached. Notice I said that word, "approached" again. Where was it mentioned you ask? When I said "You will see that on Friday we broke below a supportive trendline........(which) in concert with the 1st std deviation band will be the resistance point............". Stated in plain english that was the 760 price point!
So you see, had you read my commentary closely, you knew the price point to exit. Sure we could have gone higher, but again the TRAILING INDICATOR has declared a FULL SELL condition and until further notice any long position is countertrend and is not something a trader wants to "spend the night with, let alone marry"!
As it turned out the rest is history. The OEX sold off to finish down a tad. NO NEW POSITION was taken at the 760 resistance point because had the market remained at that level, or just under, the TRAILING INDICATOR may have signalled a change in market condition..
SO Deaner, what's a trader to do? First it should be noted that the markets condition REMAINED AT A FULL SELL by today's closing data. This market is nervous but help is on the way in the form of the 740 price point and a trendline (not shown) that extends from the December and January lows. The Prudent Trader does not have an opinion on what will happen tomorrow BUT if the 740 price point is "approached" I will be going long with Feb 740 calls. Reitterating my comments yesterday, NOW IS NOT THE TIME TO BE TAKING ON FRESH SHORT POSITIONS. Should thinks break the 740 price point (which I doubt), the 50 day MA at around 733 will act as a safety net. If I go long, and happen to go to the local 7 Eleven and return to find us at 733 I would double my long position. That sounds risky but the Prudent trader sees at least a couple components of the TRAILING INDICATOR that historically trigger "change" waiving their red flag.
At the present time, the Prudent Trader IS NOT recommending call purchases unless either the above scenario unfolds or if the market condition changes to FULL BUY. That is not scheduled to happen any time soon.
Finally, there is a new button that chronicles the deaner's trading results. Check it out.
It's been a pleasure chatting. with you.
