Morning Update - How to Play Options - Examples: CRS, GIGM, GSS, ISRG LYO, PSYS, SJR,STLD - Daily Charts
Good Morning, I want to discuss some our portfolio stocks. I am not annotating these charts because I just updated them last week. I still think that there is good short term upside potential in the stocks listed below.
I know that a lot of subscribers trade options. Therefore, I want to give you some tips on how to pick the best stocks to trade options that will be profitable for you. Although, I do not trade options myself, I do want to give you some guidelines to follow.
What waves or patterns are the best to use when picking out options? Any equity or index that is trending up or trending down is good to use when trading an option. The equity or index must be being in an impulse wave up or impulse wave down. Therefore you want to pick stocks that are in an impulse wave 1, 3, or 5, be it up or down. Never pick an equity or an index as an option play that is in a counter trend pullback / lettered wave corrective wave. Never pick options on stocks that are in a consolidating in a lettered move that form a geometric shape. Never trade options on an equity/index that is in any of the following patterns: such as rectangle, ascending triangle(A,B,C,D,E), symmetrical triangle(A,B,C,D,E), falling wedge,sideways correction (ABC). Geometric shapes also measure distance. Once the stock breaks out of the consolidation / lettered move and continues on up in an impulse wave up, you can then trade an option on that stock. The reason for not trading options on a stock/ equity that is in a lettered corrective move is because there is too much indecision as to what direction the stock is moving. There is no well defined trend, therefore you take the risk of your options not moving and expiring worthless. Lets look at some of our portfolio stocks and how you would play them if you were to trade options on them.
Carpenter Tech Corp.- (CRS) - Daily Chart - Bullish Continuation Wedge Pattern / Symmetrical Triangle - Basic Metals - Optionable CRS has broken out of a bullish Continuation Wedge Pattern / Symmetrical Triangle. Therefore it has resumed an impulse up wave move. The odds of your option working on this stock is higher. You could buy a call option on this stock. This is not a recommendation to trade an option on this stock. It is just a lesson.
Gigamedia Ltd- (GIGM) Daily Chart - Cup and Handle Swing Trade
I am bringing up this stock because I believe that it is currently forming the handle part of the pattern. Handles typically take 5 to 7 days to form. Sometimes a handle can form with a big stick down, like today. Then you will typically get a lateral sideways move after that. However, sometimes you don't have to wait a the full 5 or 7 days because a catalyst will come along an propel the stock higher. I issued a buy alert on GIGM on the big stick down move today. If you want to buy low and sell higher, now is your opportunity to do so. Again, This is not a recommendation to trade an option on this stock. It is just a lesson.
Golden Star Resources Ltd. -(GSS) - Daily Chart - Symmetrical Triangle breakout - Gold Sector- Daily Chart
GSS is a medium risk Gold play. This stock was just in the high $2.00 range in January. I was begging people to buy back then. Yes, it is up quite nicely now. I still think that GGS is an awesome buy in this range, buy the dips. ( I am begging here) However, I will not be recommending it once it takes out $4.00, because it won't be as great a play as it is now. The higher GSS goes up in price the less I will be recommending it. GSS looks like it is bull flagging right now. Now is a good time to buy the dip.
Intuitive Surgical Inc. (ISRG) -Daily Chart - Bullish Descending Triangle Breakout - Swing Trade - Optionable I updated ISRG on the weekend update, I stated that I hoped it would gap sown on Monday and that we would buy that back test. It dip gap down and I issued a buy alert. Yesterday ISRG closed down .30 cents. ISRG has a history of not filling the Gaps. That is very bullish. The momentum is to the upside right now. It has broken out of an
ascending triangle. It is in an impulse wave up move now. It is now trending Therefore if you wanted to play the option on this stock you could. Again, this is not a recommendation to trade an option on this stock. It is just a lesson.
Lyondell Chemical Company - (LYO)- Daily Chart Ascending Triangle Breakout with a Bull Flag - Optionable
I issued a buy alert on LYO this week, not because we were playing the bull flag or the pullback off the highs. I just want to point out that we got a good entry by playing the daily chart. We used the daily chart to pick our entry even though we are trading the monthly chart. This is why I like to buy the pullback off the highs.
Psychiatric Solutions, Inc. - (PSYS) - Daily Chart
I know that PSYS is going to report soon. It can be very news driven and it is a very volatile stock. It just want to let you know that it is volatile, and if it dips I would reiterate a buy on it. It is a good long term trade. It is one of my highest rated stocks.
Shaw Communications Inc. - (SJR) - Daily Chart - Wave 3 to Wave 4 pullback Channel Swing Trade - Not Optionable
SJR has not really moved since I suggested it. It is currently in a pull back off the highs. I am reiterating a buy here.
Steel Dynamics Inc. - (STLD) Daily Chart - Cup and Handle Breakout pattern Swing Trade - Optionable
Over the weekend I showed you the longer term picture and why we are playing it. I like it long term.
Edited by :Andrea Victoria Friend aka Daisy
Editorial Assistant for Trending123.com daisy@trending123.com
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