Declining Trendline

The declining trend line is certainly one of the simplest tools used by technical analysts. It is important to be able to identify new trends developing in order to take advantage of market moves. A declining trend line is a straight line drawn downward along successive tops. Once you identify 2 periods of lower tops, a declining trend line can be drawn and the purpose is to play the third impact. It is well suited to a directional trading strategy, as a trailing stop can be set just above the trend line to protect accumulated gains.

ADAPTED OPTION STRATEGY: SHORT SYNTHETIC FUTURES

When you are bearish on the market, the short synthetic futures strategy is ideal as it will not be affected by changes in volatility. Profit increases as the market drops. Profit is based strictly on the difference between the exit price and the synthetic entry price. Selling a call effectively removes the risk of time decay for the long put position.

SHORT SYNTHETIC FUTURES: Leg 1

Trading Symbol LO F7
Option Type PUT
Option Strategy LONG
Strike 52.00
Expiration DEC 2016

SHORT SYNTHETIC FUTURES: Leg 2

Trading Symbol LO F7
Option Type CALL
Option Strategy SHORT
Strike 53.00
Expiration DEC 2016

ADAPTIVE FUTURES STRATEGY

Trading Symbol CL F7
Strategy SHORT
Entry Point 52.11
Target 50.95
Stop Loss 52.75
Contract Expiry DEC 2016

DECLINING TRENDLINE: CL F7 DEC 16

ACTUAL OUTCOME

POTENTIAL GAIN PER CONTRACT

The target is set at 50.95 (the previous support level at 9 December). As a trend following strategy, the profit should be taken when the declining trend line was broken.

POTENTIAL DOWNSIDE PER CONTRACT

If the price broke above the stop loss at 52.75, the position should be closed with limited loss.

Declining trendline happening now

Natural Gas: NG

2-Year Treasury Note: ZT


Copyright TRADING CENTRAL
The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Any opinion offered herein reflects TRADING CENTRAL current judgment and may change without notice. Users acknowledge and agree to the fact that, by its very nature, any investment in shares, stock options and similar and assimilated products is characterised by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable.

Services in the U.S. are offered through TRADING CENTRAL Americas, Inc.

TRADING CENTRAL is not registered in France as an Investment Services Provider but complies with the following rules and directives, including:
- General Regulation Handbook of the AMF, Book III, Title III, Chapter VII "Investment Analysts Not Associated with an Investment Services Provider"
- EU Commission Directive 2006/73 dated 10 August 2006, Articles 24 and 25
- EU Commission Directive 2004/39 dated 21 April 2004
- EU Commission Directive 2003/125 dated 22 December 2003

This message is intended for recipient only and not for further distribution without the consent of TRADING CENTRAL. Although TRADING CENTRAL attempts to sweep e-mail and attachments for viruses, it does not guarantee that either are virus-free and accepts no liability for any damage sustained as a result of viruses.

About Trading Central

Trading Central is a leading provider of independent investment research to financial market professionals, specialising in the field of technical analysis. Founded in 1999, Trading Central now has offices across North America, Europe and Asia, providing research to over 200 leading investment banks, FCMs, hedge funds, brokers and exchanges in over 45 countries.