Sunday, October 23, 2011


I recently shared a bullish diagonal trade on MA claiming strong seasonality, so I wanted to show you what I am seeing:

MA with Seasonal Projection
The purple line is the projection of seasonal performance averaged over the last 5 yearly seasons for MA as produced by my SeaPro5 study. The green shaded area represents an area of high probability for a trade and is bounded on the upper side by .3 x standard deviation of the seasonal data (you math wiz's should prove to yourself that 62% of the seasonal data lies above this bound.) The close proximity of this upper bound to the seasonal track indicates that MA has decent seasonal behaviour. So I see an excellent chance that MA will be challenging at least the 52 week high by earnings and a very good chance of a really nice move into the 380-390 area before post-earnings profit taking knocks it down.

I play this with a diagonal because, at this point, I want to be a seller of expensive earnings premium. I plan to roll weekly and possibly diagonally upwards depending on circumstances. If MA pops decently into earnings I plan to put on a bearish diagonal to leg into a double diagonal position in order to capture the backwash from profit taking.

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