While the US indices have been moving in a downward pattern most of the week, could this be changing? The charts below for the emini S&P 500, emini Dow Jones and emini Nasdaq show that all three markets are oversold on the 45-minute and the emini Dow Jones is oversold on the 180-minute chart, as well (marked on the charts using yellow circles). However, the key will be if the ATR (marked with a white arrow). Will this area serve as resistance? If it does not then the next area of resistance will likely be the ATR on the 180-minute charts for the emini S&P 500 and emini Dow Jones or the white congestion dot on the emini Nasdaq (marked using white arrows).
The potential scenarios that could play out:
- The ATR on the 45-minute charts offer resistance and price continues down
- The ATR fails to offer resistance and price moves up
If the first scenario plays out, where would price more than likely go? The yellow horizontal line marks the last low on each of the charts and highlights where price is likely to go if resistance holds at the 45-minute ATR.
If the second scenario plays out, resistance does not hold, then the next likely area for price to go is the ATR or congestion dot on the 180-minute charts.
Using the emini Dow Jones chart (since it is oversold on both timeframes) how could a trader utilize the binary options to enter a trade?
The chart below shows the daily binaries that are available for the Wall St 30 (which utilizes the emini Dow Jones as the underlying). If you have a bias to the upside, you could enter an At-the-Money option at 21750 (blue box) or any of the Out-of-the-Money binaries highlight by the red box. The advantage with binaries is that you pay the risk upfront and, if the indicative price (highlighted with the black box) expires in your favor then your profit would be the maximum payout, $100, minus the risk you paid on entry. For example, if you choose to buy the 21810 strike, then you would pay $26 in risk with a profit potential of $74 if the indicative index expires in your favor, excluding exchange fees.
If you choose to sell, then you could opt to sell the ATM highlight with the green box and your risk would be $50.25 and your profit potential would be $49.75, if the indicative expires in your favor (excluding exchange fees). Of course you also have the option to sell any of the OTM binaries highlighted with the brown box, as well.