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Maybe they are thinking this set up signals at least a consolidation below the
highs, and at the most, a fall in prices. By selling calls, you have time
working for you, instead of against you. Also, selling calls on an market
index is less risky than on a stock, since the market index can not be bought
out. Just speculation on my part-
Bill Bancroft
Ira wrote:
> If it is going to fall, why sell calls with limited profit and unlimited
> risk and not buy puts with limited risk and unlimited profit? The geniuses
> always seem to put we poor traders in harms way. Good trading, Ira.
>
> Bill Bancroft wrote:
>
> > RTs,
> >
> > For those of you familar with Hayward and Connors' patterns, this week
> > set up an "Undeniable" sell signal (their name, not mine). This set up
> > is when a market makes a six week high and then closes the week (week
> > one) below where it opened. For the set-up to be complete, the market
> > must then trade below the low of week one. Undeniables were set up on
> > the S&P 500 March Contract, SPY (Spyders), and on the Nasdaq Comp. They
> > recommend taking advantage of this pattern by selling calls with a
> > strike price above the six week high.
> >
> > As everyone knows by now, the markets failed at the previous high. This
> > may or may not have serious implications, but a correction starts with
> > lower highs. On the flip side, no support level has been broken.
> >
> > The ADX on the S&P continues to fall, indicating a trading range (no
> > duh), but more importantly, low ADX levels often signify that the next
> > move may be a large one.
> >
> > Finally, the Nasdaq Comp. has had "3 pushes" up on the daily chart. I
> > believe this pattern was called "Three Little Indians" by Raschke and
> > Connors. This market has since pulled back to the 20 pd ema, which
> > should act as at least short-term support.
> >
> > FYI-
> >
> > Bill Bancroft
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