This is the contradiction that I'm experiencing. Every time you make a trade, you are "speculating" on where the market is going (unless your name is Michael and you are arbing off some island with a T3 connection). So, if I look at a chart and see weakness, then I make a trade based on that speculation. Obviously charts are a historical view of stock prices, but then, if you are going to swing trade stuff, what really do you have to use instead of charts? Here is what I am seeing with IBM right now (and this could apply to many other stocks as well) ...
I am not trying to make things hard for myself. I am not purposely trying to lose money. I am learning. Debit spreads pay for some of that time decay by cutting your profit potential. The debit spread I have with MSFT will be profitable so long as MSFT doesn't end up above $53 at expiration.
Why do you choose to "discount Friday" on that chart? I suspect it's because it spoils what you want to see.
Aphie - try swingtrading using the 30-minute bar. It gives you a better picture of trends. It's my favorite for anything other than daytrading. It paints a more accurate picture than the daily. Looking at yesterday's 30-minute bars I think you would see that it wasn't the day to go short. If anything it was the day to cover a previous short. Problem is, depending on the details of your 30-minute plan you may have to get in and out in the same day so your PDF rules may cause a problem. Just a suggestion.
Aphie, Looking at that IBM chart, if you draw the resistance line directly from the two previous highs, you would already be above it. You've bent the trendline to suit your opinion. And what's worse you are assuming the current price is a high, when it hasn't proven to be yet. It may only have completed 30% of its potential move. It can't be a high until it has pulled back into the channel. Im not saying it won't pullback, but your entry is close to coin flip. Runningbear
So in effect, what you are saying is that I am taking a hunch and just drawing lines on the chart to prove myself correct for psychological satisfaction? Well, that might not be so far fetched, really. One of two things is going to happen early next week, and I need to make a decision. Either the market will continue to prove me wrong and, at some point, I will need to close my two positions (short and long). Otherwise, I could close my long positions for a loss and keep my short positions open to keep at or slightly above break-even and risking two naked puts on IBM for a few weeks. However, I'm in a precarious situation. Honestly, what I should have done was recognized the volatility of the situation and opened up a corresponding bullish debit spread and had a profit so long as IBM made some strong move away from it's current point by expiration's time. I just like options because there is practically endless creativity involved. I don't see the market as reversing. There is still huge looming problems ahead and this market seems to be taking a bump up from a strong trend down. If I'm wrong next week then I'll sell for a loss. Isn't that what you are supposed to do? You make a trade for a specific reason and if you are proved wrong, you get out and cut your losses, correct?
Yes, looking at the 30 minute candles certainly confirms that I was wrong. I need to stop being so stubborn with the market.
That mid-day consolidation period yesterday on IBM was just that; a consolidation. Markets never run straight up or down. They need time to balance out. That does not mean it was a shorting opportunity, since lower lows and lower highs were not being made. Pateince, man, will do you wonders in this outfit.