OPX Time Cycle

Fujisan here.

I posted this chart a couple of months ago and posted again this week in one of my comments, and I was getting a very good feedback, so I decided to post this chart once again.

SPY OPX Time Cycle

When I was doing SPY’s time and price analysis, I found out that SPY was going through a very distinctive bull/bear time cycle in relation to OPX (options Expiration Date) as follows:

Consolidation Phase:

1. Monday after OPX, SPY makes an intermediate low, and
2. it turns around on the following day and start going higher (bull cycle).
3. Monday 2 weeks before the following OPX, SPY makes an intermediate high, and
4. it turns around on the following day and start going lower (bear cycle).
5. Repeat 1~4

Trending Phase:

During the trending phase, SPY accelerates toward the direction of the trend through OPX.

I also found out is that these key dates often fall into the astro cycle dates.  For instance, this month’s turning dates overlap with Lunar Eclipse on July 7, and Solar Eclipse on July 22, which would make them  even more powerful.

Please be aware though that VIX closed below the previous low on Friday, so this may well be the beginning of another trending phase and the market may accelerate toward OPX without making a significant turn.  We should be able to find out very soon.

Bullish Three

When I was reviewing my favorite stocks, I realized that GOOG, AAPL and AMZN, as well as QQQQ, all closed above the previous swing high on Friday.  From a swing trade standpoint, this is a very bullish set up (they all seem to have three white soldiers – Keirsten, please verify).  This may well be a fake breakout, but with the stocks closing above the previous swing highs, the chances are, they are at least going to retest the recent swing highs, which are 447. 146, 88, respectively (37.23 for QQQQ – as many of you know, 35% of NASDAQ is composed of these three stocks plus RIMM).  Remember, we have one more week left in this bullish time cycle (see above SPY time analysis) coupled with low volume trading days ahead of 4th of July holiday weekend — and earnings are coming up after that.

GOOG

I have been doing very well with GOOG and definitely my favorite stock.  My current target is 460.

Here is a look of GOOG Open Interests.  As you can see, the market is sharing my view.

Here is my 420/450/480 butterfly.  I will probably close this position before earnings.

I am planning to put on a speculative butterfly one week before earnings, and I am going make an update on this as we approach the earnings season.

For a more intermediate trader – here is a 400/450 July call vertical spread.

For a beginner or for those who could only trade nakes options, here is 400 July call option.  One nice thing about earnings is that, as earnings is approaching, you won’t lose much of the time premium as IV (Implied Volatility) kicks in (for more IV discussion, please see my last week’s posting at https://evilspeculator.com/?cat=206).

References and Educational Material

As I am getting the same questions every week, I decided to answer those questions upfront.

1. How did I learn my options?

I picked up my options by watching educational webinars at CBOE.  You can go to CBOE website and explore educational materials.  I wached all archived webinars, and implemented every single one of them.  Particularly I love Dan Sheridan’s presentation.

There are many other free seminars and events available throughout the year.  TOS (ThinkOrSwim) has scheduled basic and advanced option seminars in most of the major cities in every 3 months, and OEX (Options Express) has one day seminar event in major cities.  Please check their website for more details.

2. What do I suggest to newbies?  Any recommendations on readings?

Learning options is like learning how to ride on a bike.  You can read many, many books as to how to ride on a bike, but you would never be able to learn it until you actually ride on it.

Please paper trade it first, if you don’t know how to use a platform, and moreover, start putting a real trade.  You don’t need to trade big.  You can trade very small – a couple of contracts at a time, and then increase the number of the contracts once you feel comfortable with the strategy.

FOREX Trade

I am getting more questions for my forex trades than option trades these days, so I decided to introduce a couple of my FOREX trading strategies.

I discussed this strategy in one of my comments this week, and I thought that I might as well put it in my weekly update.

My favorite currency pair is GBP/JPY by far, and I found out the following trading phases:

1. GBP/JPY tends to make a move to the direction of the trend in Asian trading hours (trending).
2, This trend changes around midnight (PST) when Euro trading hours start (retracement).
3. It goes through consolidation phase during the US trading hours (consolidation).
4. It stops moving in the last hour of US trading session until Asian market opens.

Here is one of my day trade strategy based on the above trading phases.

1. Place an order entry between US and Asian trading hours (i.e., 2 pm and 4 pm PST).  Sunday afternoon before Asian market open would be a very good set up as well.
2. Look for a doji candle and place an order one pip (+- spread) above and stop one pip (+- spread) below it by using an hourly chart.
3. It would be ideal if stochastics and RSI are in sync with the direction of your trade and BB is contracting.
4. It’s even more ideal if the entry/support level is right above/below pivot points (I use Person’s Pivot).
5. As the trade takes off, move the stop one pip below the previous candle
6. Set up a target using daily pivots, previous day’s high/low, or 100% extension of abc.

In the below example, I was only risking 30 pips to make a potential of 200 pips – risk/reward was 700% (in reality, I made 60 pips in this trade – not bad for a couple of hours of trades).  I have seen more than 2~300 pips move in both directions in a matter of hours recently and the currency trade has become such an excitement and much more profitable compared with US equities.

It would be ideal if you place an order in 3 multiples (like 3, 30, 300 lots instead of 1, 10, 100 lots) and place a stop loss in 3 different ways – one for an hourly candle, one for trailing stop, and the other at a breakeven point.

You may not have a trade every day.  Please look for a good set up before entering into the trade.  Also, because of the high leverage nature of the trade, I woulnd’t recommend that you risk more than 1% of your account balance at a time.

If you like to learn how to trade using pivot points, you can check out John Person’s books.

Happy Trading, everyone.

Fujisan