GG was spotted a bearish reversal candlestick formation on 17 Mar 08
after market closed which maybe due for a minor market correction as
there was a negative divergence present in the stock chart. The stock
rating was 8 and the analyst recommendation was moderate buy
making this reversal play contrary.
GG was trading at $44.22 and the low was at $43.00 and the trading
plan for GG entry was set up using a conditional order.
If stock price < $42.90, buy Jul 08 $45.00 Puts
However the order was triggered the next day on 18 Mar 08 @ $6.00
when the stock falls below the condition set. Having paid $3.90 for the
time value leaving behind $2.10 in intrinsic value for a 120 days
option, I guess it all right as the maximum holding period is only 2
weeks. The time decay effect is not so damaging to this position.
A stop loss was then set if stock price is > $46.40, which is the high of
the reversal candlestick.
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