Monday, July 14, 2008

Monday open gap fade

A picture perfect gap fade this morning at 9:38 as the Qs made a lower low off the previous little 2 bar squat. The action in the NYAD was the clear confirmation we were coming down.
The PP provided a clear first downside target, and the Qs got there in a record time of 20 minutes.
Since I've got several things to do today away from homebase, I closed the position at 10:04 as the Qs reversed back up through the PP. We'll probably go up 100 points today, but I'm flat and done for the day.
Net time in trade: 9:38 -10:04 = 26 minutes
Net gain 44.93 - 44.56 = .37
I would have preferred to play the options in lieu of cash, but I knew I couldn't stick around to finesse the trade exit and with only 4 days till expiration, premium decay intraday on long options can offset any directional gains, and then some.
Why not play the August options? Should have, could have, but in my humble experience the best use of options for daytrading is in the 2 mid cycle weeks of the current contract when premium decay volatility tends to be more muted.


Kaizen said...

What is a "squat bar" formation? Love your blog, thanks for posting!

bzbtrader said...

I think of a squat bar as a horizontal doji. I use "squat bar" to refer to a multiple bar pattern (typically 2 or 5 minute bars)where the high and low of the bars are contained by a clearly defined support and resistance level. Breakout from a squat bar reflects the resolution of buying/selling pressure and often leads to dramatic directional runs. I'll find some examples to post when I get a chance. Hairy tops and bottoms are like squat bars, except for the hair.