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July 22, 2012 / redman59

Looking to Break Through

Today’s action led to further encouragement for me to add or put more money to the long side rather than the short side. I’m by no means looking to get aggressive with allocation but would like to get more involved to the long side. I would still like to see a push and stay above this 1333-1337 level as stated in previous post back on June 7th:

“Also I am looking at that 1333-1337 as a tough level to crack. If I were initiate longs under this level they will be small. The last move we had to the downside in mid-May saw nice up days followed by consolidation which then led to last weeks selling. In reading several blog posts it seems that further consolidation would be the healthiest and I agree. I would like to consolidate below those resistance levels noted, let accumulation happen, and then rip to the upside…”

We did break above that level 2 weeks ago but it didn’t last long as the huge reversal we saw last Wednesday brought us back under these levels. I do find it constructive that we recovered Mondays drop and like to think that there is quiet accumulation going on. With that, I am still looking at those resistance levels but like to think that traders will start to short there, only to see us rip past 1340 causing those that went or are short to cover. These two days of price action have changed my outlook as I now am more willing to add to the long side.

Today I did follow my plan on the AAPL trade as shown in this post. I got rid of the single call option that acted as a hedge in case we saw a gap down or selling in AAPL. I was encouraged by the ending price action and in watching the 15min chart I like the price action. I wanted to see the 574 level hold and now it looks like a cup with handle pattern is forming within a larger timeframe that is showing tight consolidation. Below is the 15min chart (don’t have access to my regular charting software, so best I could do):

With that I am still bullish here on AAPL but also added some short exposure through the SPX. I placed a Bear Call Spread on the SPX with the weekly options, so I am looking for stalling into the weekend with continued upside price action.

Current Account:
Cash @ 90.4%
Long bias @ 4.9%
-AAPL Call Calendar @ 4.9%
Short bias @ 4.7%
-SPX Bear Call Spread @ 4.7%

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