In sorting through symbols, I consider the final step of the contest to be the chart and the options grid. The other elements -- confirmation, current momentum and pending earnings -- all live somewhere in a middle ground between the early rounds and the finals.
In that middle ground, the most liquid symbol of the group, GDX, joined PVH and KRE in showing faltering momentum. That means that although the price remained beyond the 20-day price channel, it was within the extremes showed on the day of the trading signal. Generally, faltering momentum shows as an inside day.
Two symbols, EXR and DE, have earnings scheduled for February. The symbols are not yet within the 30-day hard limit, but I judge that the opportunity for profit will be greater if I wait until the last trading chance before the earnings announcement to make a play.
That left the finalists. VNQ was promising, an exchange-traded fund specializing in a narrow sector, real-estate investment trusts. However, implied volatility is too low for me to build the sort of short-term trade I'm interested in these days. A position of four or six months ties up funds that I can otherwise use for my most profitable sort of trade, a very-short-term options spread in the front month sold for a credit and living for only a few weeks.
Having passed on VNQ, I turned to the last symbol standing, BNS, only to find that it has open interest too low to meet my standards.
Bottom line: No trades based on symbols from Tuesday's market session.
I did an analysis of APOL earlier in the day and took the trade, a very-short-term volatility play keyed to the earnings announcement. A second symbol, GBX, had been on the schedule for analysis. However, my brokerage's calendar had the date wrong the trading opportunity was lost.
See "APOL: Volatility play" for the analysis.
-- Tim Bovee, Portland, Oregon, Jan. 7, 2015
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 volatility trading rules can be read here.
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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.License
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Based on a work at www.timbovee.com.