As you can see, the prices were in a downtrend, then reversed and now are in an uptrend. Yesterday, the stock broke it's resistance. One of my rules is a 2 day's close above resistance to get into a bullish trade - I got that today and therefore took my entry.
I bought a January 14 Call for $2.15 and am looking for price to get up to it's target - the next level of resistance overhead around $17.50 or so.
I always put my mental stops (NEVER physical stops) 2 support levels below the current price. My definition of "support levels" basically means - where the bulls came in the last 2 times to drive up price. Sometimes it's tough to decipher, however in this example it's fairly obvious.
So, from this point, I've got my target and I've got my stop. There are a few other things that would get me out such as:
1. A significant pop up in the stock within a very short time period, thus resulting in decent ROI obtained quickly.
2. Prolonged stagnation (sideways movement) over a period of weeks. If this were to happen and I got within a month of expiration, then I'd close the trade at some point before hitting the target or stop.
3. If I have profit and the markets start to either physically start into a downtrend, OR there's a major stoch or MACD divergence on all 4 major markets.
Of course, I don't know what's going to happen, but I've got the edge on my side for a profit - so that's where my money is.
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