What Goes Up, Must Come Down! | FAST PROFIT TRADES

What Goes Up….Must Come Down!

A little over a week ago, I told you about Beacon Roofing Supply (BECN), detailing how I bought call options with the hurricane about two days away. I made a quick 16.6% profit on that trade, and then waited for the political hysteria of the Northeast to die down before entering another trade. BECN went up about 25% on its move from $15 to $19 before the signs of a top began to emerge.

And then with Hurricane Irene poofing out over the Atlantic, it was time to reverse roles, and buy several PUT contracts on BECN.

Late Tuesday afternoon, I bought the October 22 puts, at 1.90, and again sold them late afternoon yesterday at 2.40, for a 26.3% profit in less than two days!

And of course, since I frequently sell too soon (those reading this blog may choose to hold my positions longer, I just like taking the profits sooner, thus the name of my site), BECN dropped some more today, with the Put going higher this morning than where I sold.

But who cares?

So we’ll let the Put ride out some more, as the general market blow down on bad jobs news continues, because off in the distance looms Katia, with the potential for some sweet call option profits after Labor Day….

A quick look at the BECN chart:

What goes up, must come down!

Chart courtesy of stockcharts.com

The first thing I noticed was the “Death Cross” that formed yesterday. For those who are not familiar with the term, it means the crossing of the 50 day moving average below the 200 day moving average, and is a bearish indicator.

The second thing of note was the stochastic crossing below 80, again a bearish short term indicator.

And while the MACD is still in bullish mode, the RSI (14) has now bounced back from just over the 50 level.

So this trade was the complete opposite of my bullish call buy last week, when BECN was both oversold and

sitting on a possible hurricane. This time my bearish put buy was based on overbought indicators and the petering out of the storm, i.e. the classic, “buy on the rumor and sell on the news”.

So to quote that old Blood, Sweat, and Tears song from a few decades ago, “What goes up, must come down….Spinning Wheel got to go round”

When I think the time is right, I will once again give the bullish signal on BECN. This one can be played up and down from now until the hurricane season passes.

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