Gitanshu Buch's Commentary
September 24, 1999
Here is the chart that describes the current position.
- Booked partial profit on open Oct 685 puts entered 9/21 on downside break of ID/NR4 for the Dow.
- Holding long Oct 670 puts in addition to core position of 700-675 put spread and 700-725 call spread.
- No adjustments on core position yet.
- Straddle cost completely paid for through short term trades.
- Range expansion breakout of multi-month trading range below 50 and 89 ema
- Range expansion breakout to trade below -3.5% band and close at it.
- ADX picking up steam with -DI running away from +DI.
- Looking for follow-through downside at the open tomorrow after which downside action should be climactic (large range bar with a potential for reversal as seen on previous lows in 1997 and 1998) or extremely painful to the bulls (1987 and 1991 type follow-through).
- Gap up open of 3-4 SnP handles is bad news, to me would imply a trap for longs.
- Consolidation type action (seen yesterday and early part of today) is also bad news since I would tend to interpret that as pause before another run down.
Travis has the ball, follow his advice. Gotta admire the trader in him. Flipped from extremely bullish to extremely bearish in a heartbeat - and followed through on it.
He will be sorely missed.
Action plan for next couple of days:
- Buy 670-680 zone calls, sell 700 calls to roll down upside participation threshold from 700.
- Buy back short 725 calls to prevent road bumps in event of upside explosion.
- Look for a spot to trade out of remaining 685 and 670 puts.
If things get ugly expect short 675 puts to be assigned. If that happens, you can either exercise the 700 puts or be long them depending on your short term outlook and account capitalization.
We have a bulk of our expected 50 point round trip captured. Time to wear our helmets and move on to greener pastures while the world goes ballistic.
I will be bidding cheap for ATM calls, since we still have a long time to expiration.