PurelyTechnical

The following is a review of a recent bullish Options Pick on XTO Energy (XTO).

Setup:

XTO was showing a positive divergence on RSI in early August, when this trading pick was opened. Given that the stock had seen nary a retracement during a 45% drop that spanned 6 weeks, a dead cat bounce, if not outright reversal was seen as a strong likelihood and, as such, there was going to be no beating around the bush - an at-the-money front-month Long Calls strategy was featured.

Result:

The stock sauntered sideways for a week and a half, before blasting off - moving over 15% in two and a half sessions - to hit our target of 52.50.

Profits of over 130% were booked, exactly two weeks after the trading pick was opened.

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Trade Details:

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In this article, we'll expand a little bit upon the topics touched upon in last Monday's webinar.

A couple of topics that will be touched upon briefly include time decay on straddles and a potential repair strategy.

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Here's a look at the 5-min charts and the hourly charts of SPY. Although to be complete blunt, you're asking for trouble if you're reading too much into this action. There is NO discernable trend at the moment.

Like we've been saying for the past couple of weeks in our nightly and weekly commentary segments, WAIT for the markets to give you a clear signal. Don't jump in head first and then regret it later.

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The following is an update on the two options picks used as illustrations in the volatility options trading strategies webinar

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Nice little bounce today. SPY has recovered half of the losses since the Aug 11 intraday highs. As mentioned in last night's commentary, the minor trend is still bullish and will continue to be so until/unless prices move below the 20dMA.

A look a the 15-min and hourly charts...

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The following is an update on the two options picks used as illustrations in the volatility options trading strategies webinar, after Wednesday's session.

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The Upper Bollinger Bands on several of the major indices are potential showing signs of trouble. We'd first brought this to the attention of members in the Nightly Commentary piece, last night, when we noticed that the upper bands were curving inwards.

That was quite an untoward development, as far as the bulls were to be concerned. Yet, one had to wait until the next morning to see if the development was just a blip or if there was definitely a change taking place.

Here's what you'd have wanted to be looking for this morning...

Were the bands still falling this morning? In fact, were they even just flat?

If the answer to one of those questions was "yes", then it was to have been seen as a sign that a potential minor top may have been put in place. At the very least, such a development would have to be seen as a big stumbling block for the bulls. It would have taken an immediate rising in the bands to have called for an ignoring of the development that was seen on the chart, last night.

So what has actually taken place after the open today?

Take a look at the charts of SPX, INDU and OEX, below...

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Here's a look at the intraday charts...

Also check out the blog entry titled "Trouble at the Upper (daily chart) Bollinger Bands" published this morning.

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An update to the two options picks used as illustrations in the volatility options trading strategies webinar that was conducted on Monday.

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Intraday support from yesterday/today at 129.90 might be worth watching. A target of 129.00 looms if that level is broken. Otherwise, the minor uptrend is to be expected to take prices higher eventually.

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