October 3, 2018

A Classic Breakout Pattern In Blackstone Group

Following Federal Reserve Chairman Jerome Powell’s description yesterday of the U.S. economic outlook as “remarkably positive,” market watchers are on the lookout for more Fedspeak. Speeches from seven Fed officials are on the radar today, just one week after the central bank hiked rates and signaled upcoming gradual increases. Powell will again take the podium, participating in discussion before The Atlantic Festival in Washington D.C. at 4:00 p.m. ET.

*Source:  Seeking Alpha

Let’s consider Blackstone Group LP (Ticker: BX):

This is a classic set up of one of my favorite technical triggers, the Inside Bar (IB).  The concept is quite simple.  This is a three bar set up.  I use this as a swing trade methodology so I am using a daily chart.  An “IB” is set up when yesterday’s high and low price is “inside” two days ago high and low price.  If that sets up you have an IB.  An IB buy is triggered when today’s price is 1% higher than yesterday’s high price.  That is your signal to get long.  Conversely, an IB sell is triggered when today’s price is 1% lower than yesterday’s low.

In the example above with Blackstone Group, the buy trigger price is 39.31.

Strategy Discussion

I am going to play this bullish trigger with options.  You can consider the BX October 19th 39.5/40.5 call spread; buying it for $0.30.  The most you can lose is the premium paid and the most you can gain is the width of the wider spread less any premium paid.  Max risk = $0.30 and max reward = $0.70

This means that you are getting odds of 2.33:1.

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about the author:

Mike Shorr

Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProsperTradingAcademy.

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