In the next few weeks to month, I will be looking to buy into long-term option contracts of selective stocks that look like they’ve reached a bottom. In the last 6 months buying shorter-term CALL option contracts has lead to some losses in my portfolio to be honest.
Look at the chart below of the $DJX, the decline started from mid October 2007 to just January 22, 2008 then a bounce and now we are heading back down.
To be on the safe side, I will now only look at LEAPS which are long-term option contracts with at least 1 year before expiration. Looking at the $DJX Dow Jones 100 chart we can see to the far right of the chart, recently the Dow Jones market has try to form “W” shape but failed, and it looks like it is dipping back down. Read the “Trading the 123 Strategy” for double bottom info.
My guess here is the $DJX may go back down to the 122 (DJIA would be 12200) before turning up or go sideways more with a series of small bounces.
Looking at the QQQQ Nasdaq ETF chart below, you can see that it has not even formed anything that looks like a double bottom “W”. Read the “Trading the 123 Strategy” for double bottom info. The Nasdaq QQQQ chart still looks like it wants to go lower to about 43.
If you look further into charts by looking at the weekly chart of all indexes, you will also see that it is going to be a while before the overall market trend is going to be up again.
I’ve learned the hard way in the last 6 months about trading against the trend. Losses accumulate if you are not fast enough, getting in and out either taking quick profits or quickly minimizing your losses.
Please read the disclaimer.
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