Perhaps one of the best teachers of option strategies is Alan Ellman. He has specialized in teaching people to sell covered calls, a conservative relatively low risk option strategy. Alan just published a new book on selling cash secured puts. This technique can be used to generate income or to buy a stock at a price lower than it is currently selling at. This technique is very similar in risk profile to selling covered call options. I have used this technique in my IRA. This is the best book I have read on the subject. I have added it to the list to the right of this post. If you purchase it through this link, my webmaster son might earn something to repay him for all of the support he freely gives me on this site.
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3rd day of $QQQ short term down-trend; $NPSP shines; GMI signals Sell
In spite of the decline on Tuesday, it was surprising to see that there were 171 new highs. So I looked at where they were. I was amazed to find that one half of the new highs were REITs! Could it be because REITs tend to pay more yield or is it that people are afraid of stocks and moving toward real estate? Any ideas?
Biotechs continue to outperform and many have been rising in this declining market. I noticed that NPSP had a high volume green line break-out to an all time high on Tuesday. Check out its weekly chart. There is chatter about a takeover. Any stock that can come through this market at an all time high has something going for it.
With the GMI below 3 (at 2) for a second day, it now signals Sell. I am hedged and not looking for long positions now. The GMI has done a great job getting me out of declining markets.
2nd day of new $QQQ short term down-trend; $T2108 suggests more room to decline
I looked back at the length of QQQ short term down-trends since 2006. About 40% have lasted 5 or fewer days and another 16% lasted 6-10 days. So there is about a 50/50 chance this short term down-trend could end within 2 weeks. However, one more weak or flat day and the GMI will flash a new Sell signal. GMI sell signals are more significant and can indicate a longer term down-trend. Note the GMI-2 is now 0 and the T2108 has fallen to 39%. I start looking for a bottom when T2108 is below 20%. This weekly chart puts T2108 in context. It still has a long way to fall.
