Trade The Journey

Trade The Journey

Trade Strategy Review: ORCL Bull Call Debi Spread ($87 Buy: $89 Sell)

Charts: 5-minute, 1-hour, daily

5-minute Chart

Short-time Frame: A semi-weak trend began on Monday.

1-hour Chart

Medium-term Time Frame: The trend began last Thursday after a new low was reached the week prior. The low was tested again before the trend turned on Thursday. The ADX began its trend up before the low was tested again.

Daily Chart

Long-term time frame: The trend is less evident if we look at the ADX. Even though we can see the rebound that occurred in the shorter time frames, it looks like ORCL is a prolonged sideways trend that started in January.

 Expiration Date: 3/24/2023

Entry Date: 3/21/2023

Exit Date: 3/22/2023

Premium Paid: $0.93

Premium Received at close: $1.35

Profit/Loss: +0.43

Hypothesis: Oracle may continue to run up with a pause in rates. Options data is bullish according to the ratio of calls to puts. The put/call ratio was around 0.81, a little over the threshold of 0.70 which signals a somewhat bearish sentiment but not much. The open interest tilted heavily toward calls for the week, assisted by the rise in the Nasdaq. The Nasdaq RSI is above 50 which means that the average amount of up days are above the down days. It seems like market participants are finding stable tech companies to invest in. The Nasdaq also had at least 50% of its stock components above the short-term, medium-term, and long-term moving averages.

Some helpful facts about the recent Nasdaq’s performance:

  • Up eight of the past 10 trading days
  • Up three of the past four weeks
  • 50 SMA crossed the 200 SMA

The purpose of a hypothesis is to formulate an interpretation of probable events likely to occur in the future based on the evidence available. Since we’ll never have every piece of information needed to guarantee a profitable trade, forming a hypothesis helps guide your attention toward finding trades in areas of the market that may begin trending or remain stagnant.

Potential Trade Charts: One of my trade rules is to come up with three trade ideas and select the trade with the highest probability of profitability. Below is an updated view of the spreadsheet I use to analyze potential trades. As I learn more about what works and what doesn’t, I’ll be refining the spreadsheet.

The data: Below is an updated view of the spreadsheet I use to manage trades at the end of each day. There are several things I watch when in a trade which are: the chart pattern formations, the trend, the greeks, the put/call ratio, and the open interest.

Trade Review: This was a very tricky trade that started off losing money on the first day. The spread price I originally entered was unable to be filled at $0.82 so I up the price paid to $0.93. I was initially not wanting to do the trade since I would have to pay eleven dollars more but I wanted to enter the trade. On the first day, I ended the trade up $3 but the candle was unconvincing at the top with a small doji.

Most of the action I reasoned would be occurring on the next day with the Fed announcement. I was kind of nervous because ORCL started the day back and forth, finally reaching a nice profit while the Fed chairman spoke. I set my profit target at $50 but when it came close, I closed the trade.

Lesson: Work on the psychology of closing profitable trades by setting a profit target. I developed a hypothesis, stayed in the trade when it was unsure, and gave it a chance to succeed. In other words, I had a plan. Need to work on setting a definite stop and profit target based on charts,

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