Let's start with a couple of winners

I joined a trading group in my area on Monday. It was nice to hang out and discuss the market with other traders. My wife appreciates me talking to someone else about the subject too because she could care less about this stuff.

The question most often asked while identifying support and resistance areas on different stocks was, "How would you trade this?". So, here is what I saw and what I did on 2 recent trades.

July 16, 2009 - CRM looked unable to break the light yellow downtrend line or the resistance level in the mid 41's so I bought a July 41 Put for $2.50 with a market stop at $42.22 and target of $35.42. I closed it out on July 7th for $5.50 because I got scared of a bounce before it hit the target like the one on June 23. In the end, my emotional exit (shame on me) only cost me a couple of dollars this time. My target would have been hit and closed on a market order today. The yellow box highlights the trade.

The second trade was entered on the same day but took less time to reach my target.

CHK 22.5 july Put 2 @ $1.50 July 16,2009

Resistance = 24.38 Support= 19.52

entry = 22.38 stop = 24.87 target = 19.60

Everything went as planned and I was taken out by market stop

I entered 4 trades that day. 3 winners for $863 and one loser for $78. Best of all, I took my small loss and did not try and wait for it to turn around (which it did 8 days later - hitting my target on the nose 4 days after that). If I had placed this trade as a spread, I would still be in it and on the positive side - but vertical spreads are a subject for another day.

I put together a fairly long list of stocks with penny increment options sitting at support on Monday (I will post the list on the right soon). As with any support level, any break below it usually signals further downside to come.