How to Generate Income from Your Stocks

June 4, 2010 // 52 minutes

The Market Guys will show you how you may be able to create income from your stocks with options.

Investing Education Day

July 29, 2010 // Chicago, IL

PIN PRESSURE INDICATOR™

Using Pin Pressure as a leading indicator for setting price targets

AJ Monte, Chief Market Strategist for the Market Guys, has written a paper for the Market Technicians Association on the Topic of Pin Pressure.

This document was grounded in research conducted by the University of Illinois showing how Option Trading Volume affected the price of the underlying stock in which the option contracts where traded.

From this paper, AJ has developed the Pin Pressure Indicator™ which is a calculation that computes the combined open interest traded at various strike prices and uses this data to determine price targets for individual stocks as we approach options expiration Friday.

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0 Answers to Questions from Last Thursday’s Webinar

Q:  The markets of the last couple of weeks have been so volatile that isn’t a day chart too late?  – Tim

A:  A chart, no matter what the time frame, is never too late because it is simply telling us the history of the price action. So the thought provoking question is: Can history ever be too late? From history we learn many lessons and in the world of trading and investing it’s price history that we rely on. For instance, if you were to look at a weekly chart of DIA, QQQQ, SPY and OIH you will see that in all four charts we will see a bullish engulfing pattern. What does history tell us about bullish engulfing patterns? Well, if you study your history you will find that in the majority of the cases, bullish engulfing patterns were followed by price rallies. So there is a very good chance we will see higher prices in these four stocks/ETFs.

Now, what does a chart tell us about risk management? This is the most important message because if we are wrong about the bullish engulfing pattern in the weeks that follow, we need to protect ourselves should the pattern not hold. This means we should be setting our stop prices somewhere below the lows of last weeks price range. Should the stocks go down instead of up, we will limit our loss and be around for another day. History…If you do not remember the past, you are doomed to repeat it.

Q:  In this current market, we continue to retrace lows and violate resistance; what are the signs to look for to mark a bottom of a bear market?  – Greg

A:  First of all we need to make sure we have support and resistance at that right ends of the chart. Support lines connect the low points and resistance lines connect the high points. We are currently on intermediate to longer term support levels in the DOW and RUT. One of the major things we look for is a drop in volume after the volume spikes on these support levels along with prices moving up from the most recent support levels. We are bullish at this point but like I said in the answer to Tim’s question….protect your downside.