Update - SPY trade

The stochastics indicator paid off with that divergence play. The SPY pulled back like it did during the past few pullbacks. So that long put option was a good one to play.

Here's the chart:

The entry was the first blue box you see and it was based on the sideways movement and the divergence of the stochastics indicator.

The second blue box was where I took profits on 10/28/09. I took profits on that day for a couple of reasons:

1. It was about the same percentage pullback as the last few pullbacks, and

2. It was basically sitting near that 50 day moving average, which institutional money usually pays attention to (good place for them to get long bullish).

I bought the SPY option on 10/20 for $7.92 and sold it on 10/28 for $10.80, which was a profit of $2.88.

That profit of $2.88 really helped to offset losses in my portfolio since everything else I have on was bullish.

Lessons:

1. Keep an eye on how the general market trades - watch how those pullbacks set up and watch those divergences.

2. Make sure if the market starts going sideways to buy some "insurance" for your portfolio to balance it out. I was completely bullish and had to get a bearish play in SPY to counterbalance that in case we pulled back. Thank goodness I did.