Expand Your Trading Horizons

Licia Leslie

Hi Shoppers,

Check out this ugly chart in Bank of America (Ticker: BAC):

I am seeing a head-and-shoulders formation, which could be signaling a top in BAC.

The confirmation is the piercing of the neckline — the horizontal line — which I think happened on Friday.

Also, Friday’s candle is a bearish engulfing candle — red and engulfing Thursday’s candle.

The next stop in BAC I think will be the $34 area.

As for timing on my trade idea, BAC traded down $3 this week. With that big red candle on Friday, I think it could move at least two bucks next week.

Of course, I don’t like paying extra, so I will buy the July 23 expiration puts.

The July 23 38-strike puts are $.08 in the money. (Strike price of $38 minus stock price o $37.92 = $.08).

If BAC opens and trades lower on Monday I will pay up to $.59 for these puts.

My favorite! A super-duper quick cheap shot.

Trade Review

- - Sadly, Ford (Ticker: F) did not cooperate, the stock did not go higher. I paid $.23 for the July 16 14.50-strike calls and let them expire worthless. A lot of times when the options trade down to $.12 and $.15 it becomes easy to say, “Well I can just let them ride, maybe I will get lucky.” But that does end up costing money. Be careful of that trap I just fell in.
  - AT&T (Ticker: T) was looking strong on Thursday, so I bailed out on my July 23 28-strike puts for a 48% loss.
  - On the sunny side of the street, Comcast (Ticker: CMCSA) is going my way and the chart is still looking bearish. My July 23 58-strike puts are up 19% and are going higher this week.