MCP Follow Up, P/L, the Next Trade

MCP was actually entered around 3:15 yesterday so that nearly +40% gain was for about an hour and a half of market exposure with a quality (November) call.

If you're curious as to why the trade was entered (as we have been pretty cautious the last week and a half, here are yesterday's charts.

With a cost basis of $.96 and a fill of $1.33, the P/L came to + 38.55%. 

You may have noticed I only closed 40 contracts of the 50, that's curiosity to see what MCP will do and since they are November expiration, that should minimize Theta burn. Besides, the nearly $1900 gain pays for those remaining contracts and still guarantees at least a $1000 profit even if they expire worthless.

 I showed you in the linked post above how MCP respected support and resistance and the "Tweezer-like" bullish reversal yesterday and Monday right at support.

I said I wasn't sure if this run would make it to the breakout of the ascending triangle base, which is NOT a consolidation/continuation pattern, it's too big. However, irregardless of whether it was going to make a breakout or not, I said I thought it was worth the trade, even if you just traded the stock itself with no leverage, you could have made +14% thus far over the last 2.5 hours.

This is a clean set up for 3C and a typical one. Starting with "A" , A relative Positive Divegrence in to "B", a relatively flat price range, "C" a Head-Fake move below the Hammer's support /Stop-run with "D" a Leading Positive Divergence confirming the head fake move.

This is a typical, solid long / 3C set up, all of our concepts are there in the correct order. That's a nice way to start the day with a 40% gain with less than 2 hours of market risk.

 

 Here's a 10 min chart of the same region, 3C continues to make higher highs and lows as we get our best timing signal, the head fake move that is confirmed by accumulation.

This is why I cut out, the trade is VERY parabolic, this is exactly where I like to take profits with options before momentum fades as do profits. My next play would be to enter MCP as an equity long (maybe a call position with it for the initial move).

Using our Custom X-Over Screen, Usually after a long signal cross-over the first pullback is to the 10-bar yellow average, as long as our other two indicators stay long and 3C confirms accumulation in to the pullback, that's where I want to buy MCP equity for the longer move to the upside. I drew in where I think the 10-bar average would be by the time of a pullback, it's a best guess, but the $7.20 region, although that parabolic move has the potential of a deeper correction if we don't breakout of the ascending triangle.

Then MCP becomes a longer term trending trade.