Trading the Charts – Examining the CAL Trade

15Apr07

Here’s an example of a recent position based on fundamentals and charts (i.e. technical analysis).

I took the trade for May 40 calls on CAL (Continental Airlines, Inc.) on Feb 30th @ $1.35.  Based on my analysis I figured there was a short term top on oil at 66 and with airlines hammered there was a great probability for a bounce.  Transports tested their recent breakout and were also poised for a bounce off support.  All signals were aligned to the upside.

My analysis was that I could enter CAL calls right off the 200ema for a bounce to 40+. 

A few days after the purchase, on April 2rd CAL released March traffic figures pointing to a better first quarter than it previously suggested.  This trade was money!  The shares surged 9.2% to $39.35.  I knew this had room to run so I held a few days longer until it tested resistance levels.  At that point I secured profits on the calls @ 2.85 for 111%.

This is just a brief example of a typical trade I look for.  Trading directional options strategies require a quick and timely thought process.  I always say timing is everything, but you also need to be ready to make the right decision at the right time!

Account is slightly up.. but not worth posting yet.  However, I loaded calls on last weeks dip and I expect new highs into expiry.

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