Friday, January 9, 2015

010915 MS Weekly - Options Trading Opportunities

Options Trading Opportunities
Options Follow The Stock Chart
Options Trading has suddenly become far more popular with professionals, and smaller funds learning to trade options. This means that options retail traders will find more trading volume and opportunities than have been around in nearly 10 years. It is the Renaissance of Options trading, and what the professionals want now more than anything is Stock Chart Analysis Training for Options.
Professionals realize that the secret to successful options trading has more to do with selecting the right stock to trade than choosing what option strategy to use. Professionals are learning Technical Analysis to study the stocks they are considering using in their options trading, therefore it would be wise for option retail traders to do this also.
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Interpreting the new technical candlestick patterns that have emerged over the past few years is very important. These patterns are due to the massive Financial Market Structural changes that every market has undergone, including the Options Market.
Now technical candlestick patterns include new types of sideways action. Stocks move sideways more often nowadays than they did even a decade ago. It is critical to identify early on what type of sideways pattern it is because that reveals which Market Participant Group is in control, the direction the stock is likely to take out of that sideways pattern, and most importantly the volatility AND velocity once the breakout occurs. Volatility and velocity are not the same thing. Volatility is a sideways pattern, and velocity is a sudden huge move out of the sideways pattern.
Determining when the breakout is going to occur and the direction, optimizes many options trading strategies and increases profitability trading options as well as stocks. Finding the right sideways patterns with strong energy building that will have big moves out of the sideways pattern is important.
The chart example below shows a huge gap after a lengthy sideways pattern. This sideways pattern also contains an island gap.

If you study the chart you can see that the sideways pattern became very consistent in its pattern, just moving within the range of the prior sideways pattern before the island gap. Often the price barely moved. See the very precise tight consolidation of the seven days prior to the huge gap up. These price patterns reveal a steady controlled bracketed order that is totally controlling price for those days. This is one of several footprints of the Buy Side Institutions using Dark or Twilight Pools. Being able to see this pattern, along with confirmation from giant lot indicators, reveals that this is an ideal set up for a velocity or momentum move to the upside.
Quiet accumulation by giant lot investors is obvious in the chart, and the candlestick patterns show that these are very savvy investors using orders that bracket and control price. Dark Pools use these kinds of orders. When you can trade with the giant lot investors from the Dark Pools and you can enter with them prior to High Frequency Traders HFTs gapping price, profits are easier and more consistent.
Trade Wisely,
Martha Stokes CMT

TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock

Instructor & Developer of TechniTrader Stock and Option Courses
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Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.

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