Friday’s Stock Option Trading Strategy!

December 28, 2007

Yesterday, the market drifted lower all day on higher than expected initial jobless claims, disappointing durable goods orders and it is of the former Pakistani Prime Minister’s assassination. Early downside momentum was established and in light holiday trading, buyers but their wallets back in their pocket.

After an initial “pop” higher, the market immediately reversed direction and tried the downside. For the next two days the market is likely to establish a narrow range early in the day. That range should stay intact. If by chance there is a breakout or a breakdown from that range, momentum will be established and the market will continue in that direction the rest of the day.

There aren’t any scheduled news releases for the next two days and you should expect choppy, light volume trading. Towards the end of next week, earnings and economic news will revive trading activity. After back-to-back weak initial jobless claims numbers, I am expecting a dismal Unemployment Report. If that materializes, it will create significant selling pressure since the Fed is reluctant to lower interest rates and an inflationary environment.

Use today’s short-term chart as a guideline and watch the key price levels. Keep your size small and spend the majority of your time conducting research. If I had to pick a side today, I would be bearish after the early reversal. However, that bias is very weak since the A/D has been able to hang on to a 3:2 advantage for the gainers.
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December 27, 2007

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December 31, 2007
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