observations i trade with

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OTCkrak

wanted to start a thread to share some simple observations i have noticed, but not tested. would appreciate if others could comment.

>if an instrument breaks significant resistance/support, that level will most likely be re-tested

>if a chart pattern develops intraday that looks obviously bullish/bearish, take the other side

FX

a)if the NY session has seen strong movement in one direction. a pullback will generally occur early Asia (6 - 9pm)

b)the opening of NY session often reverses direction of London movement

c)traders often use x.xx50 and x.xx00 for limit orders

Options

a)IV > 300% is great short signal

b)expiration day offers significant pullbacks to the "sweetspot"
 
I would agree with the first 4 points. I don't know anything about the option market.

I hope this thread gets some play.
 
Quote from OTCkrak:


>if a chart pattern develops intraday that looks obviously bullish/bearish, take the other side
More...
Does this usually result in a sustained move or just a short term spike when the stops of people taking the pattern you're fading are hit?
 
Quote from OTCkrak:


Options

a)IV > 300% is great short signal

b)expiration day offers significant pullbacks to the "sweetspot"
More...

I know a little something about options, so I'll make some comments here:

a) Often an IV> 300 means a stock has already got pounded - often it is a sign of a possible bankruptcy, but I have seen where stocks avoid going under and remain in business and not sure shorting would be a great idea - also if you were to short, the IV of over 300 would mean expensive put buying and/or call buying (for protection of any short position).

b) This is possible. This is also known as "pinning" to a strike price. I'm not convinced it works all the time and also stock price can get pinned to a higher strike. i.e. if a stock is around 108 early in the day, it may not pullback to near 105, but instead may move just short of 110. How to know which one is more likely requires a lot of research IMO.

Just my thoughts.

JJacksET4
 
Quote from OTCkrak:



Options

a)IV > 300% is great short signal
More...


Short the underlying or short options? Careful with biotech, Dendreon (DNDN), IV was probably around 300% day before their drug passed last April, went from like $6 to $18. Short anything but puts woulda been killed.
 
Quote from wutang:

Does this usually result in a sustained move or just a short term spike when the stops of people taking the pattern you're fading are hit?
More...

i call this trade the blatant trap, i see it all the time in 15sec - 5min intraday moves. below is just an example that im sure caught alot of people off guard:eek:

2q8mseh.jpg
 

Attachments

Quote from wutang:

Does this usually result in a sustained move or just a short term spike when the stops of people taking the pattern you're fading are hit?
More...

my point is that if it looks like a textbook chart pattern, "about to breakout" ( too good to be true) take the other side. usually good for a tradeable move.

the idea is that "if" TA is useless in the very short term, you can use that to your advantage by fading the "pattern"

of course, use discretion - common sense
 
Quote from JJacksET4:


a) Often an IV> 300 means a stock has already got pounded - often it is a sign of a possible bankruptcy, but I have seen where stocks avoid going under and remain in business and not sure shorting would be a great idea - also if you were to short, the IV of over 300 would mean expensive put buying and/or call buying (for protection of any short position).

More...

short as in sell put or calls IV >300

the idea here is that the market has over-reacted and the option will expire worthless, right?
 
This is an interesting thread but I would have to see some type of data suggesting that going the opposite of an expected move would work over the long haul. My gut feeling is that it work out to be right/wrong around 50% of the time. It must feel good though doing the opposite of what it looks like you are suppose to do and have it result in a winning trading :)
 
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