Thursday, September 22, 2011

Identifying Opportunities in the Stock Market

I have been following S&P 500 very closely past several months keeping track of support and resistance levels.  I have also been trading, mostly Option trading, using the support and resistance levels.  It’s been a roller coaster for past two months, which is great for Option trading.  I will discuss in more details later in this post but first I would like to share S&P 500 three month chart below.














As you can see from the chart below, I have drawn a support level at around 1120 and a resistance level at around 1220.  Nearly for two months, S&P 500 index has been trading between support and resistance levels.  So, what kind of opportunities can you create using this simple technical analysis?  For me, I have been using Option trading to make some profit.  For example, recently, I purchased some AAPL put Options early this week when S&P 500 was near 1210.  I do have to admit that I entered this put Option little too early but I knew it would eventually go down if I held on to them.  As the S&P 500 index is approaching its support today, I have sold my put Options, taking great profits.  I have no idea if S&P 500 will break its support this time around.  But you know I will be ready to enter either call Options if S&P 500 starts rebounding or put Options if S&P 500 breaks its support.  You can also use this simple technical analysis to create opportunities trading stocks Long, Short or Options.

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