Featured

Caterpillar - Catching A Reversal On A Monday

Mondays are not the best of days to look for reversals however Caterpillar jumped upwards a modest amount which impacted the value of this series of Puts. The Puts are off about 50% on the day at this point in time. This is a 1:36 p.m.readout. Here is it's five day chart. Now its one day chart. It's Puts. Why consider them? It would seem like kind of a random thing to do. Why fight a strong stock? One reason is that the markets are only mildly up and could give back some of it's gains before the end of the day. Caterpillar could be gaining strenght based on all of last weeks business articles talking about how Caterpillar could potentially benefit from all this new AI movement. Caterpillar afterall builds heavy equipment which can be used in the construction of nuclear reactors. Notice that the five day chart is in an uptrend and notice the small open interest numbers in the Puts. That's understandable. No one wants to hold Puts on Caterpillar when it is in this...

Buying Caterpillar - A "Catching a Falling Knife Trade".

In with two "Calls" at $1.59 each which expire the next day. The stock is down ten dollars in three days on no real news. This kind of judgement calls is sometimes difficult to make. The stock seems to dropping on light volume which is better than on heavy volume. It's a "no news scenario".
Let's see what happens next. A 10:30 a.m. update, one hour after I got in. I am down something like 37%. At this point in time it has turned into a "sit-and-wait" hold. What I like better is an"in-and-out" in thirty minute trade.
Now another look at it at 11:30 a.m. with the D.J.I. now up over 225 points. Remember I got in at $1.59 a contract. I don't enjoy these having to wait until Friday morning situations.
There was a bounce on Friday morning and I got out. It's difficult to read but it says two contracts sold at $3.60 each at 9:49.a.m. Here is it's morning chart.
Would I make this kind of trade again? I am attracted to these "falling knife" chart formations. This one turned out OK for me. My point is, the next time you see one of these chart formations happening remember this blog and my comments about jumping in to quickly. Hopefully my comments will help in saving you some money.

Comments

Popular posts from this blog

Living on Kraft Dinner?

The Little Engine That Could

Another Blog On "Vinfast"