Trading Trend Line Resistance

As traders, our job is NOT to predict the future, but to spot low-risk opportunities (particularly at visual inflection points) and manage open positions in real-time as new information appears each day on the price chart. A common low-risk trading strategy is taking advantage of trend line resistance level breakouts. When prices break above an established declining trend line resistance level, this level usually becomes new support on a pullback. Buying on this new support level in anticipation of a rebound provides an ideal risk/reward entry with a stop-loss just below the support area in case support fails and prices break down.

ADAPTED OPTION STRATEGY: BULL PUT SPREAD

As the upside potential is unlimited, selling premium can be an excellent strategy to create income during volatile market periods. As long as price of the futures contract remains above 1180, this strategy will keep the initial credit received. Pairing a short put with a long put at a lower strike price helps reduce the margin required for an outright naked put position and defines the total risk of the strategy on the downside. The whole spread positon is entered for a net credit.

Bull Put Spread: Leg 1

Trading Symbol GC Q6
Option Type PUT
Option Strategy SELL
Strike 1180
Expiration Aug 2016

Bull Put Spread: Leg 2

Trading Symbol GC Q6
Option Type PUT
Option Strategy BUY
Strike 1130
Expiration Aug 2016

ADAPTIVE FUTURES STRATEGY

Trading Symbol6B GC Q6
Strategy BUY
Entry Point1.2975 1223
Target 1345
Stop Loss 1180
Contract Expiry Aug 2016

TRADING TREND LINE RESISTANCE: GC Q6 FEBRUARY 2016

ACTUAL OUTCOME

POTENTIAL GAIN PER CONTRACT

A target of 1345 is determined by identifying the previous high/resistance.

POTENTIAL DOWNSIDE PER CONTRACT

If the price fails to accelerate and falls below 1180, the position is closed.

Trend Line Resistance happening now

GC #F

SI #F


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