New Trade - FAST

Here's a new trade that was put on 10/15/09:

I've been watching this stock for a little while now and you'll notice the lines drawn on it. You can see that resistance has been fairly the same while support is getting higher. Technically, this is called an "Ascending Triangle" and is bullish. I'm anticipating a breakout to the upside.

I decided to enter a bullish trade at this point for the following reasons:

1. The MACD black line just crossed from below the red line to above it while the histogram is going higher - this is bullish.

2. The Stochastic black line looks like it's ready to cross the red line from below it - if so, then this will be bullish as well.

3. The price has been staying up closer to the resistance as compared to down below at the support.

4. We just had an earnings announcement and the price did break ABOVE the resistance temporarily. There are sellers up there, but that was a nice move a bit above resistance. This tells me that there are buyers and they are stepping up their game, even though sellers are up there, the buyers seem like they are getting stronger.

5. Related to #4 above, we just had earnings. So, hopefully we won't have any news on this stock for awhile. Nothing can ruin a trade as news can.

So, with those reasons I decided to make a bullish play. I kept in line with the revised style of trading that I'm now doing and entered a Bull Put Credit Spread.

I sold the November 40 Put Option and bought the November 35 Put Option for a net credit of $1.47.

*Important note: I sold an ITM (in the money) put option. Normally I won't do this, as they can be more risky, but as long as you have a solid game plan and closely monitor this position, then it can be worth the risk for the reward.

I like this particular ITM put I sold because:

1. The credit for the 40 that I sold is much greater than what I could have sold the 35 Put strike for.

2. I believe that this stock will get a good quick move to the upside to pop above that resistance. So, it won't be ITM for long.

3. The Theta on this is higher than the 35 strike - so time is even more on my side in decaying the value of that 40 Put Option that I sold.

So now, it's time to keep a good eye on this trade. Keep checking back for updates.