Useless Observations from SmartTrend
Every morning and evening I get a free e-mail from SmartTrend, a market information service, with a few snippets of information meant to be a teaser for their paid subscription service.
This morning [Dec. 23] I got this one as part of my AM edition…
They noted yesterday’s huge volume spike on a 0.4% move up while noting that this often signifies a potential turning point. SmartTrend promised to continue monitoring XLNX to see if the bullish momentum would continue.
Here is a short-term chart of XLNX’s action (source: MorningStar):
What’s noteworthy is that Wednesday’s highest volume came in the opening minutes as the shares got pummeled (down 6.3%) to $26.60. The rest of the day was spent in recovery bringing the closing quote to an almost 1% daily gain.
A similar 1-day trading pattern was seen in XLNX’s major competitor Altera…
ALTR showed the same high-volume sell-off followed by a much lower volume recovery to finish in positive territory for the day.
Knowing what really happened intra-day might make you wonder about the conclusions drawn by SmartTrend. What’s certain is that if you waited to hear from them you absolutely missed your chance to buy shares or sell puts when the prices were really good – right at the open.
I had previously written up both XLNX and ALTR here on Options Profits as good plays so I was more than willing to sell some more puts at great prices. Here are the trades I actually put on yesterday morning when XLNX was $26.90…
|
|
Premium /sh. |
‘If Put’ Price |
Margin of Safety* |
|
STO Jan. 2013 $25 puts |
$4.30 |
$20.70 |
23.0% / 27.7% |
|
STO Jan. 2013 $30 puts |
$7.00 |
$23.00 |
14.5% / 19.6% |
|
* Margin of safety from $26.90 (near opening) / $28.63 (4PM close) |
|||
If you know what you like and the price gets good you need to be able to pounce on the opportunity. Waiting for after the fact reporting and possibly inaccurate conclusions, will only reduce your chances of placing winning trades.
Disclosure: Long XLNX shares and short XLNX options
Dr. Paul Price www.BeatingBuffett.com www.OptionsProfits.com
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