Why I went long on Calls
* Company has been beat up for the last month which is important for me to see before playing reversals
* Supports has been breached; the most notable ones include the BB basis line and 50EMA - these supports cracked with little fight involved
* Price is now currently sitting on top of the ascending trend line which shares confluence with the 200DMA - the most powerful support MA
* Price has tapped outside of the lower BB twice in the past week (requirement before I play reversals as the best probabilities come under extreme conditions)
This trade offers the elements that I need before taking a trade
* Risk is defined; a D2 close below the 200DMA will invalidate the setup for me and spell future trouble for the stock ... this is about 69.35
* Since I am going long on calls, I require three things: 1) price must be tapping outside of the lower bands, 2) RSI must be in oversold conditions and 3) a daily doji to form with higher lows from the previous day and next day
* All of those requirements are met except I'd prefer to see a daily RSI even lower but low 30's will suffice. The daily doji that I am referring to is from 8/8 - note the higher lows formed by the wicks on the day before and the day after. This provides additional conviction that supply is exhausted hence why I am going long on calls.
I chose to trade the Oct 21 70C's - I entered this on Friday Aug 10 when the underlying share price was about 70.72
* Company has been beat up for the last month which is important for me to see before playing reversals
* Supports has been breached; the most notable ones include the BB basis line and 50EMA - these supports cracked with little fight involved
* Price is now currently sitting on top of the ascending trend line which shares confluence with the 200DMA - the most powerful support MA
* Price has tapped outside of the lower BB twice in the past week (requirement before I play reversals as the best probabilities come under extreme conditions)
This trade offers the elements that I need before taking a trade
* Risk is defined; a D2 close below the 200DMA will invalidate the setup for me and spell future trouble for the stock ... this is about 69.35
* Since I am going long on calls, I require three things: 1) price must be tapping outside of the lower bands, 2) RSI must be in oversold conditions and 3) a daily doji to form with higher lows from the previous day and next day
* All of those requirements are met except I'd prefer to see a daily RSI even lower but low 30's will suffice. The daily doji that I am referring to is from 8/8 - note the higher lows formed by the wicks on the day before and the day after. This provides additional conviction that supply is exhausted hence why I am going long on calls.
I chose to trade the Oct 21 70C's - I entered this on Friday Aug 10 when the underlying share price was about 70.72