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Crowder Investment Research (Crowder's Corner)

Snowy Friday Sell Off Closes Wednesday’s Gap

The upside gap that occurred in the S&P on 11/29 closed today as economic woes continue to linger within the market. The gap closed around 2:30 EST and bounced higher immediately following the close. I talk about the gap phenomenon quite often in the newsletter and recently in the blog.

I actually placed a trade buying SPY 141 puts for $1.75 per contract on 11/30 and sold today shortly after the gap closed for $2.50 per contract. Once gaps of this magnitude close they typically reverse direction and start to move back in the direction of the gap. This is why I sold shortly after the gap closed. Knowing that this typically occurs why would I jeopardize a 43% gain. Had I waited until the trading session was over I would have actually broken even at best. The bid/ask spread was $1.70 to $1.80 so I would have been lucky to get $1.75 and even then I would have had a losing trade due to the cost of commisssions. I am never greedy… okay, almost never. I talk about how I trade gaps in great detail in my White Paper. Check it out, I think you will find that it is a valuable resource.

RSI Wilder (5) for December 1, 2006

  • SPY - 55.0 (neutral)
  • DIA - 46.5 (neutral)
  • IWM - 47.8 (neutral)
  • QQQQ - 36.0 (neutral)

Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com

Published Friday, December 01, 2006 10:35 PM by acrowder
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Crowder Investment Research ...
At Crowder Investment Research, LLC (www.crowderinvestments.com) we offer our thoughts on several stock and options-based strategies that might complement your long-term investment objectives. We provide you with the trading tools necessary to produce returns that attempt to outperform the major indices on an annual basis regardless of the economic environment. Our extensive research of numerous options-based strategies has shown that uncomplicated strategies, when applied effectively, consistently provide greater gains. Read the thoughts and ideas of our Chief Options Strategist, Andrew Crowder. He will provide you with educational tools, useful technical and seasonal indicators, and a wealth of investment research (updated daily) to increase your stock and options trading knowledge.

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