Small Cap Slingshot

Well I made some nice profits last week and I would like to keep the momentum going. Last week I closed out the majority of my option puts and I am now looking for the perfect opportunity to buy some more. I studied the chart of the PowerShares QQQ Trust (NASDAQ: QQQQ) this weekend, and I think I found what I wanted.

Although the recent breakdown in the QQQQ was a pretty strong indication that the bears are currently in charge, the bulls are at a perfect place to stop them. The QQQQ have fallen almost exactly 10% from the recent high to the $45.50ish support level in addition to being extremely oversold. If there is an oversold rally that comes in the next several days, anything less than a full strength bull attack will allow the bears to assume control, and will probably result in taking out the March lows.

With the stock market in a precarious position, I am not looking to play any individual small cap stock names. Instead, I will wait and see what happens over the next week or so before I look to play individual names (long or short).

I did sell my calls in the Oil Services HOLDRs (AMEX: OIH) at the close on Friday for a small loss, and picked up a small amount of August 180 option puts. I might be a little early on this trade, so I left room to add to it.

Good luck trading and see you Wednesday.