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Strategies & Market Trends : The Thread Formerly Known as No Rest For The Wicked
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To: margin_man who wrote (3533)12/22/1998 1:28:00 PM
From: Glenn  Read Replies (1) of 90042
 
'kensey' has recommended EGRP (Short)

'kensey' said:

E*Trade is very extended above the 13-day EMA. Pulling out some
of the hot money from the auction houses et al and putting some
of it to work here. Shares are trading at 35. Objective is 30.

Notable are the 'tails' that have occured on the chart in the
month of November. A 'tail' forms when the stock closes at the
absolute low
end of the day after having been up sharply earlier in the day.
There are two - one in early November and one in late November.

The tails suggest that corrections typically occur after extreme extension.

After each of the two prior breakouts of the stock, the 13-day EMA
was visited rather quickly. In both cases, the tail served as a
reversal day.

Well, the order was just rejected by Waterhouse Securities so I
guess there are no shares available to short. So instead I'll
realize the short in the form of buying Jan 30 put options.
10 contracts at 1 3/8. If the objective of 30 is realized, these
should appreciate to 4 5/8 (which is where the Jan 35 puts are
currently trading). Also picking up 20 Jan 25 puts at 9/16. These
should navigate to over a dollar if this trade pans in the anticipated
direction.

Since this is an options trade, there isn't a reason to put in a stop. I'll just eat the loss if the stock continues to climb. Put options
allow a bet to placed on the downside while putting a number on maximal loss (which is approximately $2500). If the stock goes to
30, I should be able to cash them out for approximately $6000. If
the stock goes to 25, the cash out should be approximately $14,000.

kensey
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