Monday's Finalists: FTNT, NSC, WWW

Seven symbols, all bull signals, made it past the early analysis up through Friday's trading. (See "Monday's Prospects"), as did a symbol that had broken out to the downside on Thursday immediately after earnings were announced. In addition, a bull signal from my list of innovative companies was also on my look-at list for the first hour of trading today.

Promising, yes? But the promise was unkept. All failed upon examination of their charts and options grids this morning.

Of the bull signals from Friday, EGN failed confirmation and MLM, DVN, ETE and COG had insufficiently bullish charts to support the trade. The survivor from the innovators, TCS, also gave a bull signal on a charr that isn't enthusiastically bullish.

That left three standing for a more detailed look: The California network security company Fortinet (FTNT), the Virginia rail company Norfolk Southern (NSC), and the Florida internet service provider Web.com Group (WWWW).

One requirement for my trades these days is the presence of options with characteristics that will support a trade. I want the leverage and hedging ability that options provide.

The hedging is especially important, because I'm not bullish on the markets. The patterns I'm seeing suggest that more a topping process is underway rather than a renewed uptrend. Hedging provides some protection against sudden downdrafts.

For options, my first two stopping places are open interest at the strike prices I would need to build a position. I want three figures and better. FTNT, NSC and WWWW failed on those grounds, wiping out the list.

I never had to examine the second characteristic, but it is the bid/ask spread. I generally look for the front/month at-the-money calls (for a bullish trade) or puts (for a bearish trade) to have a spread of under 10%.

So that ends chances for any trading today, under my shorter-term rules, of symbols that signaled on Friday or Thursday.

It is still earnings season, so I'll spend my time looking for trades under my volatility rules. The regular November options expire 10 calendar days from now, and that gives me an opportunity to look at a wider field of symbols, including those that lack Weeklys among their option expirations.

-- Tim Bovee, Portland, Oregon, Nov. 10, 2014

References

My shorter-term trading rules can be read here. My longer-term trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here. My very short term volatility trading rules can be read here

Disclaimer

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 decisions for his or her own account, and take responsibility for the consequences.

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Based on a work at www.timbovee.com.