ABC Patterns in Options

December 6, 2010 · Posted in ABC Bullish, Head and Shoulder, Options · Comments Off on ABC Patterns in Options 

ABC Patterns with Options

ABC Patterns are integral part of many other patterns like Double Tops, Double Bottoms and Head and Shoulders. When I see Inv. Head and Shoulder patterns and its breakouts I plot ABC Patterns and trade using Options. Here is an example of CVS (Caremark Corp.) Daily Chart. This chart shows a clear Inverse Head and Shoulder pattern. Plotting ABC Bullish Setup, it covers from Sept. 2010 to Dec. 2010, trading above EL Level. On Friday Dec. 3rd, it traded above the Neckline to signal a breakout. The distance from the Neckline to the Head is about $6, so the projection from the Breakout level is also $6, targeting around $38. I plotted CVS Feb. $35 Calls in the subgraph. This chart also shows a potential double bottom pattern confirming the validity of Inv. Head and Shoulders in the underlying stock chart. The Feb. 2011 CVS 35 call is trading at $0.50c. Expected target is around $1.10-$1.40.