Sunday, January 20, 2008


The last leg of this decline is equal in length to the first leg of the decline which should be a good place to engineer a change in trend.

This last leg has also been almost text book on a structure basis with all the earmarks of the final push lower.

Our long term model on GGP officially gave the green light this week-end when I did my work so look to enter the stock sometime on Tuesday. Use 29 5/8 as your protective stop loss.

For those so inclined to use leverage to trade GGP, as I always am, you can look to call options or if you wish to play the stock on a longer term basis you can look towards the LEAPS.

The April 35 calls are valued at 2.70 and currently trade 2.60/2.80 so you should not have a problem getting them at fair value. Stop loss of 29 5/8 on the stock puts your risk on the April 35 calls at 1.38 or 48%

Those of you who feel more comfortable with being in the money, the April 30 calls are valued at 5.61 and currently trade 5.50/5.75 so you have the same opportunity there. Having a stop loss on the stock at 29 5/8 puts your risk on the April 30 calls at 3.55 or 36%

To me, these are both unacceptable stop loss levels on these options, so while the outright stock purchaser can set their stop at 29 5/8, the option or leap trader should tighten that stop loss level upwards considerably. I will not lose over 25% on any option trade as I have found that anything past that level tends to forecast trouble.

No comments:

Trend Analysis LLC Headline Animator