Daily Chart View – CME

Apr 26, 2007: 9:09 PM CST

I highlighted Chicago Mercantile Exchange (CME) here as a study on trendlines and support. It is a ‘very expensive’ stock, and one I recommend playing options (particularly credit spreads) if you desire to trade this stock that is priced higher than monster Google (GOOG).

cme-apr-26.jpg

Of quick note:

  • CME recently broke its triangle consolidation to the downside
  • All oscillators are oversold (in chart)
  • Support zone is likely at the 200 period moving average
  • Should the MA break, then support may be found at the price low highlighted with a horizontal line
  • Should price break significantly here, all bets are off (thus, stops should be placed here)
  • A credit spread (bull put credit spread) could be entered close to the market to take advantage of the support zone
  • A debit spread (bull call spread) could be entered also to play for the bounce
  • Of course, you could buy long calls here… but the edge typically comes from selling premium, especially with volatile stocks

These are just a few observations, and I hope to challenge your thinking to step outside ‘pure stock’ trading and explore other possibilities.

Either way, it’s still an odds game and there are various ways to ‘play the odds’ with options in addition to stock transactions.

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