Thursday, January 19, 2006


Marketz and Intraday : Pullback appears to be over

The recent pullback is almost over. SMH bounced nicely from its 50 DMA.

What next ?

A] Either the uptrend will resume in right earnest or

B] We will drift around in a trading range between 42 and 43.

I think Bull-Call spreads are the way to play this. If the market shoots up quickly, you take your profits and run. If it stagnates,you benefit from the absolute difference between the higher time premium between your out-of-the-money/at-the-money calls and smaller time premium on your well-in-the-money (but not too deep) calls.

The nasdaq volatility index (VXN) is sinking. I view that as confirmation for the rally and continue to watch it very closely.

What can upset the applecart ? GE's earnings, which are going to be out tomorrow. GE, simply because of its heft has to power to affect sentiment. So, ideally, time to get long is when GE's earnings are outta the way. But by then, it may be too late to join the party. Thats where balancing risk vs. reward omes in.

DISCLOSURE : Long QQQQ 40/43 bull call spreads

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