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Holding a position in a stock through earnings can definitely be a crapshoot. Sometimes it works great, and sometimes you get crucified. Unless you are looking at some very low-risk options strategies, it's probably not a great idea, especially if you're new to investing. You might as well be putting money on one of the craps tables in Las Vegas.
Personally, I was tempted to enter a position in Sina (SINA) right before the report. The China tech name is a big component of Guggenheim China Technology ETF (CQQQ), at 8.5% of holdings, and comprises some 4% of First Trust ISE Chindia Index Fund (FNI). But, even though I had a really nice trade setup in mind for Sina, I figured I would get another shot at an entry if the price cluster zone held. This particular setup was a two-step zig-zag pattern.
The formation saw the stock correcting a rally that started Dec. 14, with a Fibonacci price cluster zone defined between $56.20 and $61.29. This cluster included 1.272 and 1.618 Fibonacci extensions of a prior swing, a 0.618 retracement back to the December lows and a 100% price projection of the first swing down from the Feb. 2 high. A buy trigger did fire off on the 15-minute chart just before the announcement, but I chose not to roll the dice to wait until after the announcement
Well, in Tuesday's session, we saw a beautiful rally in Sina off the two-step pattern parameters. So, what do you do if you've missed an entry that was close to the original price cluster zone? Since the minimum upside target for a move off this area is the $82.55 area, there is still room for this stock to rally -- so we will look at a pullback for a possible buy entry with this initial upside target in mind. Let's take it down to an intraday chart and see what areas we should watch for a possible entry.
On a 30-minute chart, there are two areas that I'm interested for buying some outright options or a vertical call spread. The first zone comes in between $67.89 and $69.16, and the second one is $64.92 to $66.25. If Sina tests and holds either of those areas, I will look at an entry, with my maximum risk defined below the recent lows. Since I know my initial upside target is the $82 handle, I can choose my strike prices with that in mind. Of course, if the recent lows are instead taken out, then this trade setup will be negated.