A Dual Advocacy Approach - The Art of Trading Part II

Multiple weeks have passed and we continue to discuss the lack of appetite for derivative traders to risk trade forward for a move up in the overall markets.

Nothing has changed and we don’t see this trend reversing in the near term. So, instead of discussing the same lack of enthusiasm for traders to take risk and how we continue to see a lack of upside in the overall markets we will go back and discuss the art of trading.

It is apropos, during this tumultuous trading times, to trade as opposed to investing. Investing now will cause many traders to try to time the markets and dollar cost average but at what price? Picking equities and or indexes based on valuation alone is not a sufficient strategy these days because who really knows what the valuation metrics will be in six months, let alone one year from now? No one… so why risk several entry points just to try to get your investment back in three to five years from now? Doesn’t seem like a profitable plan moving forward.

Trading for gains in the short term is a far better strategy right now. Of course you want to combine a technical/black-box model with a valuation strategy to best take advantage of trading. That strategy is what we refer to as a Dual Advocacy Approach; we will call it DAA from now on.

DAA is the strategy whereby you can combine a technical/black-box strategy with fundamental analysis to filter out the trades that best offer short term profits. The strategy also allows for a consistent ability to hedge and lock in profits for longer term gains. A short term strategy that leads to long term gains – BRILLIANT! We are not ones to pat ourselves on the back, but, MarketDNA.com is the exact product that allows for this strategy with DAA.

So, trading via DAA with MarketDNA.com would allow trading for short term profits, long term stability and gains while allowing for hedging techniques locking in profits – Can you think of a better way to mitigate uncertainty in the markets than this? None out there! You could develop your own DAA and we would be more than welcome to discuss it with you or you can join with us and take advantage of volatility in your favor.

Several equities and indexes as we spoke about in prior week’s continue to garner interest – Gold, commodity ETF’s are also another favorite position as well as technology equities.

To take advantage of the opportunities in the near term look at the following:

Some of the specific equities we like from our research to the upside are as follows:

BKC – Burger King Corp. with a potential move to $20.00+

BIIB – Biogen with the potential move to $55.00

FTO – Frontier Oil with the potential to move to $15.50

Some of the specific equities we like from our research to the downside are as follows:

SXCI – SXC Health Solutions with potential to move down to $65.00

TRW – TRW Automotive Holdings with the potential to move down to $25.00

ITRI – ITRON with the potential to move down to $60.00

The above equities have all shown interest by derivative traders to take risk out over the next month with the ability for the underlying equity to return double digit gains in the short term.

We base our research on the proven fact that variances in option volume is known to be a predicator of impending moves in an underlying equity and that is what we follow but we take it to a level that filters out the trading that is not based on “smart money” and get to what is really driving a specific equity.

As always, Good Luck investing.

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