Saturday, January 12, 2008


There is a very strong correlation to the Airline Index based upon the 2 charts below.

This first chart is the Model and the second chart is the current index.

Currently the present market is about 2/3 the way through this pattern and has just finished the one large up day that broke through the Moving Averages.

This will give you some kind of idea as to where we currently are in the pattern and what to possibly expect in the future. If the pattern continues to hold true as well as it has been doing, then we can expect the airline index to rally another 10%-12% before running into any real trouble.

The best way to play this pattern is through options and not on the index either as they tend to be very thinly traded. Your best course of action is to look at all of the stocks that make up the index and then buy calls on the strongest of the bunch. You want to make sure that there is liquidity in the options and check their true value with the free option value calculator at
I would also keep my stop loss very close to your execution price as the trade should prove or disprove if it is going to be legitimate in short order. The index should continue to rally sharply starting Monday. If it does not follow this path then we know something is wrong and exit our positions accordingly.

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