OPTIONSMART MORNING UPDATE: Little changed

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OPTIONSMART MORNING UPDATE: Little changed

OPTIONSMART MORNING UPDATE: Little changed

1. OUTLOOK: Trading was being influenced by quadruple options expiration. BlackBerry maker Research in Motion is poised to slide this morning. After the close, the company reported higher quarterly earnings that topped estimates and higher quarterly revenue that missed estimates. Its sales forecast disappointed investors and the shares slumped 5% in after-hours trading. QQQQ's implied volatility remains low. Investors want to lock in some gains. European and Asian markets are on the rise. U.S.Futures point to a higher open.

2. REAL PREDICTION POWER OF MACD

In fact, many widely used technical indicators are not that reliable as many traders think. We have analyzed all 33,691 bullish signals generated by the most popular MACD (Moving Average Convergence / Divergence) indicator for all US optionable stocks in 1999 and found that it predicts upswings with a 68% probability (within the next five days period after an occurrence). For bearish patterns, this probability equals only 62%. This indicator has often been criticized for failing to respond in volatile market conditions. It is not recommended as the primary method of analysis and should be used as a monitoring tool only.

We also found that predicted upswings are very short-lived (three or five days). The chart (frequency histogram) below is right-skewed. It also shows that the initial bias fades very quickly as dispersion increases.

That’s why we prefer short-term option trades. We offer QQQQ front-month option spreads designed to “jump out” within 1-2 weeks.

3. TRADING OPPORTUNITY: Buy QQQQ bullish spreads.

4. OUR FREE MONTHLY TRADING RECOMMENDATION AUTO-TRADEABLE WITH OUR PARTNER BROKERAGES:

Day Limit Order

Open QQQQ Debit Call Spread

Buy to Open QAVIH Sep 34 Call

Sell to Open QQQIJ Sep 36 Call

Debit 1.40

Target Credit 1.60

It is absolutely free. Open your brokerage account, select OptionSmart as an newsletter publisher and Free Picks as a service. You will have our free monthly pick auto-traded. That's it!

5. WISDOM NUGGETS: "Diversification is a protection against ignorance. It makes little sense for those who know what they're doing." Warren Buffett.

6. SPECIAL OFFER: n/a.

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June 19th, 2009 at 6:46 am

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