Click on the chart to enlarge it.
Continuing with the 56-minute chart, the next day (the 21st) prices open basically flat and then begin to advance (in sync with our previous analysis) throughout the day. Remember that we set a subjective target of a 100% return for this trade, so we need to see the option trade above about $6.00 to plan or execute an exit.
The following day (the 22nd) the option price declines substantially, putting pressure on our position. But as long as our Ocean analysis remains supportive it usually pays to stick to the plan.
The Ocean analysis (on both the 56- and 78-minute time frames) shows us that prices are still being supported by the NMA and that new NMC (78-min.) and NMC2 (56-min) ZeroHits are developing late in the day (July 22nd). These are good signs and offer us some comfort through the lessening of open profits.
Note also that the NMM ROC has come close to forming yet another ”slingshot” formation on both the 56- and 78-minute charts (pt. C in the bottom sub-graph on both).
We need to be patient here and let the Ocean formations yield their potential. On the following morning (the 23rd), we get the kind of results we were waiting for. Prices gap $2.00 higher and by the close of the first 56-minute bar we've gotten our goal of 6.00 (a 100% return) that we had initially set for the trade!
As mentioned earlier, a goal of 100% is ambitious yet reasonable given the setup. However, having come so early in the day and on such a violent opening thrust, it usually pays to hold the trade throughout the day.
Therefore, barring any signs of Ocean-based weakness, we'll try to wring out as much profit as we can before the close. The advance which kicked off with the large gap opening remained healthy throughout the day, but no matter how well the charts appear in a swing option trade near the close of the 100% day it's a good idea to exit no later than the close of that day.
It feels painful to leave money on the table after hard work and good analysis, and to see more profit show up in the trade once we've already closed it out, but greed eventually catches up with us. More elaborate exit strategies are certainly possible, but this one works well.
So we close the trade out near the end of the day (the 23rd, marked Exit) at $7.40 (assuming the worst exit price of the last 56- & 78-minute bars). That's a closed profit of roughly $4.45, or better than a 125% net return for a little more than 3 days worth of work.
Do these trades appear every day? Perhaps not, but the profit potentials and risk/reward parameters shown here are not at all unusual. By careful and patient application of the Ocean tools, you too can discover these gems.
|
