Timing a buy with p&f
Hi Jack,
Tom Dorsey's book on p&f has taught me to cheat a little on breakouts to max your profit potential.
If you already know what you like (big if), then buying on a trend line makes sense. By doing so, you are expecting a breakout to the upside, but you don't know the exact timing. In return for the early buy, you gain perhaps several points.
As an example, about a month ago, I bought AFCI Jun 30 calls when the stock was 'resting near support' at about 28-29, on the belief that the multi-top breakout at 32 would be confirmed. If I had waited for confirmation, I probably could not have gotten in below about 35-36. Big reward, and worth the risk!
FNM and FRE should both move higher as interest rates move still lower. Looks like a good play here, but would be careful to wait out this next correction, which appears imminent.
Regards,
Dennis |
