the stock falls below the condition set. Having paid $6.80 for the time
value leaving behind $1.60 in intrinsic value for a 60 days option, is a
very expansive premium to pay as the IV was very high.
I took this trade because the negative divergence was very strong
bearing in mind that it is going to be a real short trade. Since only one
day the stock is down to closed at $68.12, the option premium has
increased to $10.30 giving me a profit of $1.90, a 23% returns.
The William %R indicator is at the bottom again sending me a
signal to take my profit get out. Money in my pocket is always better
than in the market.
Case Study #5 McKesson Corporation
MCK was the third bearish reversal trade I did together with ACOR
and ABT. It is the most profitable one indeed; I managed to pocket a
profit of 117% in 10 trading days. Spotted a “Dark Cloud Cover”
bearish reversal candlestick formation on my screener on 15 Jan 08
which have gapped up in the stock price three months ago and were
making higher highs since then.
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