Loading Up on PUT Contracts, Stocks Overbought — May 20 Trade Log
Markets started off positive today and in fact managed to keep up. Futures before the session were trading high and already in the premarket stock were winning. The only thing we had in our portfolio was a IWM PUT contract which of course we would not sell, even though we were going to deal with some losses we had set a target and unless seeing a clear change in direction we were not going to sell.
It was more of a shopping day for us today, without really anything to sell it was time to fire some bullets, majority of stocks that we usually look at seemed to be overbought and without fuel to keep on running, we checked trade qualities and probabilities using stockconsultant.com on different underlyings and most were inclined for short trades.
We loaded our Portfolio on PUT contracts expected to run on no more than a week and on the stocks we bought we saw pretty similar behaviours and based our trades pretty much on the same criteria: an overbought RSI, a MACD slowing down and losing momentum and testing resistances on price channels or Fibonacci levels.
2 AMAT June 19 2020 $50 PUT
We bought the contract near to or on the day’s high, it was a well placed trade and a winner from sure since the beginning, the contract cost us $0.74 and on today’s close we were up 19% already.
We have traded AMAT a few times now and we have been playing with the Price Channel highlighted above by the 2 trend lines, when we saw once again the price testing the resistance with an overbought RSI and a MACD as high as this we were sure to bet on the PUT. Our bet was certain.
3 FORD July 17 2020 $5 PUT
Ford had been following a pretty consistent symmetrical triangle pattern ever since the March lows, monday the stock broke out and it has since sustained the level. Since Ford contracts are usually cheap and we have been playing with them for a while we were confident and didn’t hesitate much to place this trade, the indicators filled our criteria for buying a put, overbought RSI and super high MACD losing strength and momentum.
The contracts cost $0.31 each, since we bought 3 the whole position is worth $93 and barely winning, with the stocks close.
INTC June 19 2020 $60 PUT
Intel stock is once more testing the 23.6% Fibonacci level at $63.21, it has previously tried to do this a few times and hasn’t yet been successful. The Fibonacci line is traced from the highest price of the stock to the lowest in a certain time frame to see the resistances or supports it has on its way up or down, since the March lows Intel has already beat most but is once more coming up to test the highest one before reaching pre pandemic prices. We are betting it will correct once more before breaching this resistance.
Anyhow no other indicator in the graph above is giving a strong signal yet, of course that is because the time parameter is set to much longer periods, for the swing trades we have been placing we usually use 4 hour candles instead of daily.
As seen in the chart above with 4 hour candles, the RSI is breaking through the resistance and it is on clearly overbought terrain, the MACD is also really high, it is most likely that it will correct a little before trying to breach the last Fibonacci resistance.
The total cost for our contract was $1.31 and as of the end of the day we were barely losing to it, the price ended really close to par.
