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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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  • Holiday Effect Giving Stocks Upward Bias Today - Buy Weekly Calls?

    ​By Chris D

    I'm the type of person that usually wins poker by manipulating the players. Same with playing the stock market; I take advantage of crowd psychology. Today, however, has always been one of the trading days that I come to the market to play pure probabilities.

    What's so special about today? There has been a strange "effect" noted by several analysts regarding trading days and holidays. They found that the trading day before a market holiday was usually more positively biased than most trading days. Also, it was discovered that the day ​after​ the holiday was usually negatively biased. Therefore, today, the day before thanksgiving, the market has a positive bias.

    Here are the summary statistics I gathered for the last 60 years in the S & P 500. The data goes to 2010. To download my spreadsheet from my DropBox, click here

    Average Gain0.41%
    % Losers21.67%
    % Winners78.33%
    Standard Deviation0.84%

    The trading strategy buys the S & P 500 index at the close of two days before Thanksgiving and sells out of the position at the end of trading the day before Thanksgiving.

    Notice that the frequency of winning trades with this strategy is quite high, especially when the average for other days gives us only a probability of slightly above 50% that the market will gain on the day.

    While the average gain is not too impressive, this "holiday effect" can still offer traders who use leverage a trading "edge" today. Good luck!

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

    Nov 21 8:14 AM | Link | Comment!
  • Crude Oil Momentum Warns Of Coming Upward Reversal (Video)

    By Chris Diodato -

    Today's price action in oil was not surprising. It was a 61.8% retracement of the past ten day's up move. That's great, but does it continue lower, or start a new up trend? As I watch the internals, momentum is beginning to show that a bullish reversal may be in the works. Will there actually be peace in the Middle East come a month from today? Take a look at this YouTube video (clickable) to see the analysis on my computer screen.

    Happy trading!

    ~Chris Diodato

    Disclosure: I am long XLE.

    Nov 20 4:41 PM | Link | Comment!
  • Monday Morning Outlook – Bullish Candles, New Support Levels, Potential Bottom Targets (Video)

    By Christopher Diodato

    • August 8, 2011
    • May 17, 2012
    • November 15, 2012

    What's in common with these dates? These are all of the dates during the past two years that the market has reached the formal definition of "oversold" as explained by J. Welles Wilder. That is, the market has crossed below the "30″ level on the Relative Strength Index. In the past four years, shortly after the market reaches this point, the market had made a lower, panic low, then reversed back up. Especially with the bullish hammer formation we saw on Friday, I believe that a market bottom may be in the near future. The hammer occurred on very high volume especially in inflationary issues, such as energy stocks. Therefore, I would not be surprised if energy stocks emerged as a market leader in the next rally.

    (click to enlarge)

    Check out the video here for the RSI and candlestick analysis. Also included (in the above picture too) are the new support levels for the Dow Jones Industrial Average.

    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 18 9:05 PM | Link | Comment!
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