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Option Millionaires was started in February 2008 to provide traders with information about option trading. Led by three career option traders, whose pseudonyms are JimmyBob, UraniumPintoBeans, and Vantillian, they started one of the most popular option trading communities on the web. Now, Option... More
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  • EOG Resources - Energy Outperformer Ready To Rally 35% In Long-Term (Video)

    ​By Chris Diodato

    "A stock is never too high to go higher, nor too low to go lower." That's a quote from one of my favorite books, ​Reminiscences of a Stock Operator, ​ as the main character was explaining his reasoning for buying stocks as they reach new highs. This will be one of those "buy high, sell higher" type of trades.

    EOG resources has been a market leader in the energy sector as of late. Below is a ratio chart of the energy sector ETF, (XLE), divided by price of (EOG). These "ratio charts" are used for comparing two stocks, and give an easy to read visual representation of which stock is outperforming.

    (click to enlarge)

    As you can see, the line is clearly declining, which means that EOG is outperforming. This trend actually started in October of 2011, when EOG mustered enough strength to become a market leader.

    So what's the trade Chris? Take a look at this video to find out! Included are more technical signals, the risk management plan, and the target!

    Happy trading!

    ~Chris Diodato

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in EOG over the next 72 hours.

    Nov 10 8:41 PM | Link | Comment!
  • On Balance Volume Signing Major Market Warning For Months Ahead

    By Christopher Diodato

    Normally, my analysis is focused on short-term, exact predictions, but not in this post. Ever since the August 2011 mini-panic, pundits have been calling for a new bear market. Obviously, they were early, but we cannot dismiss the importance of this decline, even over a year later. During that decline, the market printed some of the highest negative weekly volumes since fall of 2008. During that nervous August, the influx in selling volume indicated an enormous rise in selling pressure in the market. Those same measures of selling pressures, not recovered from the August collapse, are still telling investors to be cautious.

    The chart below shows weekly data of the S & P 500 ETF with the On-Balance Volume (OBV) study on the lower graph. The OBV is calculated by adding the index's total weekly volume if the index's price finishes higher and subtracting if it falls.

    (click to enlarge)

    Generally, the market OBV will top before the actual index does. This is typical. In idealized Wyckoff market top, a high volume downward correction is very common before the market makes its final high. That high volume correction drives the OBV down so much that the measure cannot make new highs. That is our warning. This signal also provided warnings before the 2000 & 2007 market tops.

    In addition to the OBV divergence, note the actual volume statistics. Since 2009, the market has been trending upward. However, volume has been consistently falling, especially on rallies. In fact, as the market rallied in August, some of the lowest trading volumes in years were recorded. Then, a glance at shorter term charts shows that volume has been increasing on declines and decreasing on rallies. In short, the demand that has been propping up the market is stalling out.

    Frequent readers know my opinion. One more rally, then head for the emergency exit.

    Happy trading!

    ~Chris Diodato

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Nov 01 10:35 AM | Link | Comment!
  • Short-Term Trade – Western Union (WU) Flag Breakout (Video)

    By Chris Diodato

    It's Friday, and the end of another exciting week of trading is upon us. Looking through my stock screeners, I found that Western Union (WU), looked ready to break out to the up side.

    (click to enlarge)

    Now this is a short-term trade, as I expect the broad market to top very soon, and with that, most stocks. We are looking for a quick 7.5% gain to walk away with. Take a look at this video for the analysis and the strategy.

    Happy trading!

    ~Chris Diodato

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Oct 19 10:14 AM | Link | Comment!
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