Strarting from Scratch: A Complete Entry to Exit Trend-Following System Using Chaikin Analytics for Desktop and iPad.
By request, here is my 10 step system for beating the market.
In early November, I entered a 2 contract long call option trend trade on an Oversold Buy Signal (the green arrow). Today I rolled my deep in-the-money Comcast long call option down from the April 47 to the April 44 strike. The options have appreciated nicely and my rule calls for a roll down any time the option delta gets above .85 to a strike near the .70 delta. If you don't speak option gibberish: this means that I took partial profits on the trade.
The S&P 500 rallied to resistance on incredible volume. I'm cautiously optimistic the Santa Claus Rally is here. If you believe we can break out and move higher, then check out these VERY Bullish Power Gauge rated stocks: #ADM
Is the Market Trend Changing? How I Use Chaikin Analytics to Forecast Market Direction and Pick My Strategies
5. My Secret Weapon: The Power Gauge Bull - Bear Ratio Trend Confirms Recent Downward Price Action
The Chaikin Analytics Power Gauge Bull:Bear ratio has fallen below 1 for the first time this Fall.
6. Sector Strength: Healthcare, Tech, Financials and Industrials
I apply The Power Gauge Bull Bear Ratio to each major sector ETF, then rank them on a relative basis. This helps me focus only on the sectors likely to outperform the market over the never 3- 6 months.
The healh-care sector has rotated back into favor recently. Looking for a market bounce and an oversold buy signal before getting into this one.
The underlying strength of the market is weakening. While the intermediate and long term bullish trend remain in tact, we're in the midst of a short term bearish correction. The Bull:Bear Power Gauge ratio is near it's low of the past month and the number of sectors expected to outperform the S&P is narrowing. Cyclical stocks in tech and industrials, along with financials (thanks to rising interest rates) are poised for outperformance. Healthcare remains strongs, while discretionary is pulling back. If the market bounces, that's where we should find strength for a Santa Claus rally.
The ratio dropped to its lowest level since 11/8. 126 stocks bullish rated stocks cmpared to 93 bearish stocks. The bull:bear ratio of 1.35 keeps us in bullish, though approaching neutral, territory.
Sectors w/Best Potential to Outperform: Tech, Healthcare & Industrials and Financials. Breadth of Sector Strength Thins.
Long Term Weekly Time Frame: Bullish
Daily Time Frame: Bullish
Hourly Time Frame: Bearish
The Chaikin S&P 500 Power Gauge ratio as of December 4th is 129 Bullish to 84 Bearish stocks for a ratio of 1.55. The ratio high was 2.58 on 11/17 and the low was 1.34 on 11/8. We are near the low end of the rage over the past 30 days, but well above the zero line, indicating a bullish market.
Well, our single contract long-dated in-the-money Apple option has paid off in the past week big time!
The original trade on 11/15: BOT +1 AAPL 100 APR 14 480 CALL @60.40 NASDAQ
If I were to sell it today: SELL -1 AAPL 100 APR 14 480 CALL @91.50 LMT
That's a profit of more than $3,000 and better than 50% in slightly over 2 weeks. Apple is now overbought according the Chaikin oscillator. Price could continue to move up, but at these levels, the probabilities favor a sideways move, pullback or some other price consolidation So today, I opted to leg iinto an OTM short call option. I sold the $575 December Week 2 call for $4.55. Expiration is in 9 days, and Apple wll have to move up another $10 before I risk getting exercised. My hope is that this option will expire worthless, and I'll write another OTM call option for December Week 3 and beyond.
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