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| Gator's Chart of the Day: WYNN (Click chart for better view) |
The daily chart shows me that the stock has found a bottom after a 6 month decline beginning in July. Since mid-December we have printed higher highs and higher lows and now the 20 day sma has turned up. It made a strong move through 50 day and had consecutive closes above the upper Bollinger Band on good volume. On Thursday the close was lower than the open on lower volume and Friday was a small decline on very low volume.
I am looking for a bounce to get back in. It could come as the price comes down to test the 50 day or it may happen nearer the 20 day. (Those are now 113.20 and 110.93, respectively.) If it does not bounce before it reaches 105 then I won't take the trade at all.
With market volatility (as represented by the VIX) relatively low options are cheap. I will be using calls and probably looking for a March strike as I want to keep the position for a couple of weeks or longer. For an options position I try not let the value of the call drop more than 25% and will set my stop accordingly. If I were buying the stock my stop would be fairly tight. Probably no more than $3 below the entry or 104.50, whichever is higher.