Friday's Rally Means Positive Weekly Gains

A strong Q3 GDP sent the broad market on a rally. Volume on the Nasdaq was heavy. The NYSE had lighter volume. The trading bias is more neutral now than ever. How do you trade when the broad market is neutral? Lower your profit targets, trade faster and look for charts that stand on their own. Click here to get today's free options advice; have A.J. explain option trading to you in everyday language.

Hey trading team,

This is A.J. on Sunday, October 30th with your Trading Trainer web log. We are your home of market insights for the serious options trader. This web log will cover the events in the market from this past Friday and last week as well as prepare you for watching the market tomorrow and this upcoming week..

A very positive 3rd quarter gross domestic product number set the pace and direction on Friday. For the large caps, as they are measured by the Dow and the S&P 500 that meant recouping all the gains we had seen on Monday, even after giving them all back throughout the week. For the small caps it meant coming back into positive territory for the week. Interestingly enough, it was on the NASDAQ exchange that we saw an uptick in volume. On the NYSE, we actually saw volume subside.

For the week we actually can start to picture, if we try hard enough, that we hit a bottom three weeks ago and that we are on our way back up. But, really at this point, that is a little bit of a stretch. The next week can either further qualify that or discredit it.

All in all, the index charts are still telling us to take a neutral approach to the market. We’re going to leave our trading bias at neutral / bullish based on the bottom we saw a couple of weeks ago. But, I’m urging everybody to trade more neutral than bullish.

Trading neutral means lowering your profit targets and expectations, being faster on your entries and exits and picking underlying stock charts that can really stand on their own – meaning the entry and exit signals are so prominent and strong that whether the broad market was against them or with them, the stock would still perform as expected.

My Techne January 55 Call closed down with a bid price of $2.60 per option. I’m drawn down by 57% into my initial investment after 24 days. My Apple January 55 Calls closed down with a bid price of $4.10 per option. I’m drawn down by 16% into my initial investment after 8 days. My Google January 350 Calls closed up with a bid price of $29.50 per option. My return on invested capital is 11% after 2 days.

Here is my recommendations team. First, earnings season is over so we will see the volatility subside. Watch for profit taking on Monday especially if the economic news is negative. Wait till the afternoon to take a reading of the market.

At this point team we want to trade only sure things. The charts need to be very confident. How will you know? They will be the charts you personally feel very comfortable with. Trust the hairs on the back of your neck. If you have any doubts, save your money for another trading day and paper trade instead. That’s the best thing about trading… we don’t have to.

It’s when we have to that trading controls us instead of us controlling the trading. When the trading controls us, we loose. When we control the trading we profit. No different than any other scenario in life, right team?

Okay, team. I'm done.

Till tomorrow, happy market watching, trading and money making. Trading Trainer is here helping you create your dream lifestyle.

Best regards always,
A.J.

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