On Aug. 11 I wrote: "I like XRX as a directional bear play, either by shorting the stock or buying puts. The swings have had a velocity measured in weeks rather than months..."
The stock was true to its signals, opening today 4% below its open on Aug. 11, when Person's Proprietary Signal (pps) moved to bear phase. (Pps, parabolic sar, macd are the slower signals for tortoising in.)
So, all in all, a very nice play. And play it I did, with a bear put spread, producing a 7% gain on the options.
The Fibonacci retracement helped make the decision. On Monday the price moves below the 50% retracement level (of the rise from from July 20 to Aug. 2), but rose intraday, and today opened above the 50% retracement level. That's a good confirmation that a real reversal is at hand.
Also, the macd, although still in bear territory, reversed direction and began to rise toward the zero line.
Always dumb to play might've been with a trade, but if I had entered when the fast stochastic moved below the 80-line (rther than waiting for the slower signals), I would have seen a 6.8% price decline, boosting my profit significantly.
Oh well, you pay your money, you take your choice.
Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
- psar - Parabolic Stop and Reverse
- adx - Average Directional Index
- pps - Person's Proprietary Signal
- ma20 - 20-day moving average
- macd - Moving Average Convergence-Divergence
- sto - Fast Stochastic
About the glance: The colors indicate the state of each signal.
- trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
- adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
- psar, pps, macd: green for bull mode, red for bear
- sto: green for overbought, red for oversold, yellow for the neutral zone.
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