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"Best Trade" Newsletter (January 23, 2008)

This newsletter is intended for educational purposes only " it does not constitute trading advice, nor does it make or imply any market trend predictions. This newsletter illustrates examples based principally on MarketVolume® index volume indicators and advance/decline (AD) indicators. We do not mean to imply that you should follow our exact trades, but rather wish to suggest that you may make use of our analytics to develop your own trading style.

Below you will find a Table of Trade Motivations and a chart showing the trades, including detailed trade calculations.

 
Chart 1: NASDAQ 100 60-day Chart
 

In Table 1 - a 'Table of Trade Motivators' - we show the motivating factors that led us to take the above trades.

Table 1: Table of Trade Motivators

Date Trading
Decision
Motivation
January 2-11,
2008
 

High-magnitude Buying volume surges were noted in all market sectors. On some days the volume on the NASDAQ 100 exceeded the average daily volume over the last 10 sessions by more then 50%.

On January 3, 2008 the NASDAQ 100 Advance/decline volume and issues ratios hit critically low levels. We saw following readings:  0.06 A/D issues ratio and 0.02 A/D volume ratio.

On January 4, 2008 the S&P 500 Advance/decline volume and issues ratios hit critically low levels. We saw following readings:  0.06 A/D issues ratio and 0.04 A/D volume ratio for the S&P 500 and 0.06 A/D issues ratio and 0.01 A/D volume ratio for the DJI.

January 16,
2008
Buy Calls

Although the indexes declined less then yesterday (specifically -1.15% today versus -2.82% yesterday on the NASDAQ 100), today's decline was coupled with large volume surges. Today's volume output exceeded the average volume generated over the past nine sessions by 51% on the NASDAQ 100, by 22% on the S&P 500, and by 49% on the DJI. From a historical perspective the volume output on the NASDAQ 100 and DJI were the largest in their respective history. The only higher output then today's S&P 500 volume was noted in the S&P 500 on August 16, 2007.

SBV oscillator started to advance based on the 60-day SBV(20) chart. This reveals that there is a chance of a short-term move up.

January 23,
2008
Buy Calls The advancing SBV oscillator would favor the possibility of the recovery.

Today's strong buying volume surge centered at 13:00 EST may signal the start of a mid-term up-trend.

By 15:00 EST we saw that during the today's recovery there were large selling volume surges on the intraday charts, however they were ignored and the indexes continued to rally higher. One of the characteristics of an up-trend is that the market moves up while ignoring big selling volume.

We have the large amount of buying volume accumulation since January 4, 2008 and we expect further recovery.

Shortly after 15:00 EST we decided to buy calls.

Below we list in detail the actual trades made, along with the netted returns achieved.

Table 2:
Details of the trades

Date Trade Strike Expiration Contracts Contract
Price

1/16/2008

Buy QQQCU Calls $47 March, 2008 60 $1.87

1/23/2008

Buy QQQCS Calls $45 March, 2008 100 $1.30

In this example, we have based our QQQQ options trade on the NASDAQ 100 volume indicators. Using the principles outlined above, you may wish to trade options on the QQQQ, ^SPX, DIAMONDS (DIA). It is also conceivable that an analysis similar to the one shown below could be used to trade options based on the NASDAQ 100, Russell 2000, and other indexes.

©HGH Associated Traders

Important: The analysis results presented in the “Best Trade" may differ from the outlook presented in the daily Market Commentaries. Results may also differ from the trading signals generated for Exchange Traded Funds (ETFs), or from any other research and analysis efforts shared with our members. These are products developed by independent research teams, delivered to MarketVolume® members. While sharing some research results, these autonomous research teams may use different systems and may have dissimilar market outlooks.

Disclaimer: This newsletter is intended for educational purposes only - it does not constitute trading advice, nor does it make or imply any market trend predictions. This newsletter illustrates examples based principally on MarketVolume® index volume indicators and advance/decline (AD) indicators. We do not mean to imply that you should follow our exact trades, but rather wish to suggest that you may make use of our analytics to develop your own trading style.

 

2008
Date Indicator
September 16, 2008 QQQQ Options
September 11, 2008 QQQQ Options
September 9, 2008 QQQQ Options
July 31, 2008 QQQQ Options
July 29, 2008 QQQQ Options
July 8, 2008 QQQQ Options
March 19, 2008 SPY Options
March 17, 2008 SPY Options
February 26, 2008 QQQQ Options
February 22, 2008 QQQQ Options
January 25, 2008 QQQQ Options
January 23, 2008 QQQQ Options
January 16, 2008 QQQQ Options

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