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Handling Volatile News

Will the real Mubarak please stand up? Or resign, or at least come to a decision? And we all know handing power down to your Vice President isn't the decision the Egyptian people want either. (Although CNBC is reporting that Mubarak just stepped down as this is published; ~ 11:35 a.m. EST.) As a trader, handling news can be difficult. Situations like those we're seeing in Egypt can escalate at a moment's notice, often overnight, and can leave options traders facing a difficult gap against them in the morning. Obviously fully understanding your risk and managing it appropriately in every situation is key. But like our recovery trade in ASML Holding (ASML) yesterday (noted in the comments section), using a box play is a strategy I've found useful and was able to get us out yesterday at our initial stops and what ended up being the highs on the day.

So how do I handle this morning's trading? I always like to keep floor pivots for the S&P 500 futures on my main chart. Today will be no exception and I'll be looking at 1315.92 as our key pivot in the markets, finding first support at 1311.33 and first resistance at 1323.33. Then I'll also be watching the tick, the number of stocks ticking up versus those ticking down on the NYSE closely as this is a good barometer for where stocks may head later in the day.

Today I want to take a look at a setup that closely matches the one we took yesterday with JinkoSolar (JKS), a confluence of Squeezes. We see in today's chart that Wynn Resorts (WYNN) has been in a daily Squeeze and and just fired off a 60-minute Squeeze. We've bounced hard off our 13-period moving average, and I'm looking for a pullback down into the $123.50 area for a new entry. I like a stop here a little below our 61.8% retracement of $121.60. If this holds, we should be well positioned for our daily Squeeze to fire off long and take us up to the $127.00 area.

Wynn Resorts (WYNN) Daily and Tick

Source: TradeStation

View Chart

Trades: Buy to open WYNN March 117 calls for $9.50, with a stop at $121.00 and a target of $127.00.

Wynn Resorts (WYNN) Options Chain
Source: Think or Swim




At the time of publication, John Carter was long WYNN calls.

John is a Commodity Trading Advisor with Razor Trading. McGraw Hill commissioned him to write a book entitled Mastering the Trade, which was released in January 2006. Carter has also been featured on ABC Money. He and Hubert Senters founded and run the Trade the Markets web site.

On February 24, TheStreet's OptionsProfits is hosting a webinar featuring Dr. Paul Price of Beating Buffett. Dr. Price will discuss selling, rather than buying options as a keynote strategy. His basic premise is the strategic use of option sales combined with solid fundamental analysis leads to wide statistical bands of high profitability while incurring below average risk.

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Stock quotes in this article: WYNN, ASML, JKS 

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