Options Trading News

January 1, 2014  Wed 8:52 AM CT


I had a good trade in Twitter on Monday, and a premium subscriber asked me how to trade such stocks. We are reprinting my email because it provides some ideas on how to make money from momentum stocks. While we normally focus on options, this can be another successful strategy.

Dear ____,


So here is my view on stocks like TWTR. I saw it ripping over $70 last week... So I looked and saw $60 as a good support level based on the Dec 16 peak.

I then programmed a price alert around $60. When it fell down there this morning, I bought it, plain and simple. I didn't over think it or hesitate. I just bought it. (Filled at $59.01.)

I have anticipated similar entries in names like HIMX, GST and LNG. Every time I plan ahead of time and execute when the computer tells me, it works. Whenever I chase a bounce impetuously, I lose money.

I suggest finding several stocks in very bullish uptrends and programming alerts at nice entry levels. (Former peaks work well.) Then forget about them. Some will pull back and give you opportunities and others won't. But your probability of success will be much higher by having a bunch planned.
Be greedy and cheap. When a stock is in a monster uptrend, it usually works to buy a sharp pullback and ride the bounce. But let them come to you.
This is swing trading, and not based on unusual option activity.

Right now, fyi, I am watching names like FRX and ILMN, waiting for potential entries.
It's also a good idea to spend some time making your list before earnings season because some may gap lower and give opportunities.
Good luck and happy New Year.

David Russell
Senior analyst, optionMONSTER.com

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