Monday, February 28, 2011

AMGN Watch

Every trader's nightmare. You get a great signal, open a bull position, and the next day the price heads south. That's Amgen Inc. (AMGN) in a nutshell, which rose like crazy on Friday after some happy research results for one of AMGN's products.

Check out my posting of last Wednesday for a discussion of levels, fundamentals and other reasons to get in.

I want to focus, instead, on the virtues of heading with vertical spreads.

I structured my trade as a bear call spread out of March options, short the $52.50 and long the $55, for a net credit of $53 per contract.

The price today has pulled back from the high point of the rise, although it still stands at about the breakout level. Although my position is unprofitable now, time decay is working in my favor.

If the price remains below $53.02, then I'll be profitable at expiration after the close on March 18.

So I intend to hold the position unless the price rises to that level, which is well below the $53.51 stop/loss point.

Table Abbreviations:
  • pfe - Location of the polarized fractal efficiency line.
  • pps - Person's Proprietary Signal mode.
  • trend - Trend of the polarized fractal efficiency line.

Key to the PPS/PFE tables
phase bull phase
bear phase
pfe +100 and above
+50 to below 100
0 to below +50
below 0 to above -50
-50 to above -100
below -100
pps bull confirmation
bear confirmation
trend uptrend
no trend

More on the PFE/PPS analysis

Read a detailed explanation of the analytical tools and how they’re used, including trading rules.

Tim Bovee, Private Trader tracks the analysis and 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.

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