Divergences

Quote from romik:

As these divergence based trades are in daily TFs it would take longer to get either a positive or negative result, the only one that has been almost there so far are Silver futures, where PT1 and PT2 have been achieved ~12.75% return based on very basic calculation based on price increase, not initial ROI, as that would depend on margins used etc, if one was to buy SLVs though, the ROI would have been around mentioned above, but it hasn't played out to the end yet, as PT3 is still out there somewhere, so is exit @ entry.

All other stocks are neither here or there at the moment, most of them are BLD and from S&P index, so if it tanks, these BLDs might sink along with the ship, but hey, I believe there is still room to the upside in the index for the time being, so I remain positive :)

How are things with you? Nothing exciting today, tomorrow should be good though for intraday traders.
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Nothing exciting with ES today but CAL has gone up about $1.75 since I put my option play on it. Might make some cash on this one soon.
 
Romik,
Well the BRD that we were seeing this weekend kicked into high gear this morning when Merril Lynch downgraded all airlines overnight. On Friday I was telling my brother that I was seeing a BRD developing and he kept saying he doesn't really look at any indicators just at the chart and S/R. So that is when and why I asked you about it.

I am market neutral with a straddle on this so it doesn't really matter to me if it goes up or down. I just want movement.

Thanks,
Gary
 
Quote from 4re:

Romik,
Well the BRD that we were seeing this weekend kicked into high gear this morning when Merril Lynch downgraded all airlines overnight. On Friday I was telling my brother that I was seeing a BRD developing and he kept saying he doesn't really look at any indicators just at the chart and S/R. So that is when and why I asked you about it.

I am market neutral with a straddle on this so it doesn't really matter to me if it goes up or down. I just want movement.

Thanks,
Gary
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so you can't lose in either case? How does that work?
 
Quote from romik:

so you can't lose in either case? How does that work?
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Well you can lose on time decay. But if you find a stock that moves a lot. For example CAL or the Q's. On CAL I bought the 25.00 puts and the 35.00 calls. I bought September contracts while the price was right about 30.00. If either side get to the strike price before September I'll make about 100%. There is a little more to it but that is the cliff note version. On my Q's play that I did recently I made about 10% on the call side before the price started falling (Then sold my calls) and made another 30% on the puts. Could have made more if I would've stayed in but the puts but I wanted to bank my money and set up the CAL play. So I made a total of 40% on my initial investment in about a week.
 
Quote from 4re:

Well you can lose on time decay. But if you find a stock that moves a lot. For example CAL or the Q's. On CAL I bought the 25.00 puts and the 35.00 calls. I bought September contracts while the price was right about 30.00. If either side get to the strike price before September I'll make about 100%. There is a little more to it but that is the cliff note version. On my Q's play that I did recently I made about 10% on the call side before the price started falling (Then sold my calls) and made another 30% on the puts. Could have made more if I would've stayed in but the puts but I wanted to bank my money and set up the CAL play. So I made a total of 40% on my initial investment in about a week.
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nice one, thanks for the information.
 
Romik,

As you suggested in 4re's thread, I decided to come over here and poke around.

I've looked at all the stock traded that you've posted in here and I'm pretty sure that without exception you're long plays are on stocks that are below their 50 and/or 200 smas and the shorts are on stocks above those averages.

Have you looked at this in conjunction with your divergences? Can be like stepping in front of a freight train or catching the proverbial falling knife.

Very intriguing work, though.

Thanks for the thread.
 
Quote from boro45:

Romik,

As you suggested in 4re's thread, I decided to come over here and poke around.

I've looked at all the stock traded that you've posted in here and I'm pretty sure that without exception you're long plays are on stocks that are below their 50 and/or 200 smas and the shorts are on stocks above those averages.

Have you looked at this in conjunction with your divergences? Can be like stepping in front of a freight train or catching the proverbial falling knife.

Very intriguing work, though.

Thanks for the thread.
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Divergences are reversal patterns and yes one can make comparisons to catching a falling knife. You either learn to follow a trend and/or learn to trade reversal patterns. There are tons of information you have to learn about either of them and actually test via simulation and live trading is of most importance, so to summarise, please go to the first page and click on the link. There you would find some essential info on what is a divergence. Secondly, there are only 6 pages in this journal and I have explained already how I set my PT1. PT1 is the most important level, as PT2/3 if not reached I would exit at entry and by doing so would lock in profits on 50% overall position.

Average price PT1: that is a very simple, though effective methodology. Let's assume you have a divergence in BLD in RSI, where RSI has made higher lows, when price has made lower lows. I basically look at the average price (H+L)/2 at the time when RSI has made its 1st low in the divergence formation and set PT1 slightly lower than that average. Next PT2/3 are based on either support or resistance, depending on whether it is a BRD or BLD.

Let me know if you need some more info. Thanks.
 
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