Boeing

Up to this point we have only looked at longer term trades. Today we have a short term setup in Boeing (BA). The current market condition is an upward counter cycle against the longer term down trend. The counter cycle has turned the weekly MACD up. For the previous 2 days (Monday and Tuesday) the market has fallen. Remember, the trend is in place until it proves it self other wise this includes counter cycle trends. This means we could get a short term rally in the market in the next week or so.

Boeing is the perfect candidate for a short term trade. The daily chart, figure 1, shows an inverted head and shoulders pattern with a MACD failure swing at the current price (right shoulder). The weekly chart, figure 2, MACD has started to flatten indicating the downward momentum has slowed. Figure 3 is an hourly chart. Notice it has turned up. This is our “entry signal” to “buy calls to open”. We can expect the trade to remain open for up to one month, the time from shoulder to shoulder. I believe it will be less then that however.

The highlighted line of figure 4 shows the price for Boeing (BA) September 65 call (symbol BAIM) ask price to be $1.50 per share. An options contract represents 100 shares so the contract price is $150 plus commission which is about $10. We will assume we opened this position today for a total of $160. This contract gives us the right but not the obligation or the “option” to purchase 100 shares of Boeing at $65 per share. This contract expires the third Saturday of September, 31 days from today.

Follow this link for charts, your will find them under the files section of this yahoo group, the file name is “Charts for article 10”. http://finance.groups.yahoo.com/group/HawaiianTradeWins/

Bob