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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: B. Anderson who wrote (1282)3/18/1997 1:39:00 AM
From: Robert Graham   of 14162
 
I have not used this technique before to determine upside potential. However, it has been my experience that anything which relies on one or two days worth of price activity usually only holds for a very short period of time, perhaps for the next few days. So if the upside potential in not confirmed in the lets say two or three days that follow this price event by a move up that breaks the previous high, then for each day afterwards there is less of a chance for the potential upside indicated by this price action to happen. So in the example that you gave, if this confirmation is not forthcoming in a timely manner, then I think the most that can be said is that the price has hit a resistance level which should be noted. In this case, it hit a trend line which the stock is currently bumping up against.

Also, there is another strong trend line a little over a point above it. This is where I think the stock will finish its uptrend. So if the trendline is projected into the future, and allowing for the trading range to go 1/2 to 3/4 of a point beyond what will end up as its close at the second trendline, then I expect at most about 30 from this stock. This is where I get my estimate of 30 from.

Bob Graham
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