Technical Bullish Momentum Trade and Trigger in Iridium Communications Inc
Iridium Communications Inc (NASDAQ:IRDM) : Technical Bullish Momentum Trade and Trigger
Date Published: 2019-05-31
Disclaimer
The results here are provided for general informational purposes from the CMLviz Trade Machine Stock Option Backtester as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation.Preface
In a market driven by politics rather than fundamentals, we can adjust our options strategies to require multi-layered technical requirements and use longer dated options to lessen the impact of time decay when a stop and limit are introduced.Traders don't have to be overly active, but can wait for signals, even if it takes months for a trigger.
After rigorous testing over the ten year period from 2009-2019 and the period from 2007-2009, which included the Great Recession, and over 100,000 back-tests, today we demonstrate the technical conditions that have provided a strong short-term bullish momentum trigger for Iridium Communications Inc , as well as, broadly speaking, the Nasdaq 100 index constituents.
Today we make another adjustment for the volatile market and look at longer term options than our standard view.
TESTING SWING TRADING SIGNALS - OPTION BACKTESTER LOGIC WITH TECHNICAL ANALYSIS
The goal is to create a portfolio of option trading backtests with alerts attached to them, so we don't have to stare at the screen all day, but rather use Trade Machine as the pattern recognition work horse to notify when the ideas become actionable.The Bullish Option Trade with Technical Analysis and Moving Averages in Iridium Communications Inc (NASDAQ:IRDM)
We examine the result of a long out-of-the-money (strike price is set to the 40 delta) call option, in call options that are the closest to 30-days from expiration (using calendar days). But we follow three rules to test the swing trade:* Never Trade Earnings
That means the backtester never opens a trade between the "black out period" of two before through two-days after an earnings announcement. Here it is, first, we enter the long call.
* Use a technical analysis trigger to start the trade, if and only if these specific items are met. This is the trading system:
* Trigger on the precise day that the stock crosses the 10-day exponential moving average (EMA) -- that's a trigger of a momentum breakout right at that moment -- an uptrend.
* The stock is already above the 200-day simple moving average (SMA), which means that the stock is not in technical failure -- we're not after reversals, we are looking for "not a down trend." There is also some sentiment surrounding this particular moving average.
* Stock prices are below the 50-day SMA means that it has room to run to the upside.
* The Relative Strength Index (RSI), using 20-days, is below 70, so the stock isn't overbought -- there is little risk of being oversold with the prior signals in place.
Here it is in an image from Trade Machine -- only focus on the moving average and RSI settings where the filter is turned to "on.":
You can set an alert in Trade Machine®, which will track all of these moving parts for you, and message you when it triggers. In fact, you can do this with a portfolio of stocks for a portfolio of bullish and bearish triggers. Let Trade Machine do the work for you -- there's no need to stare at the screen.
* Finally, we set a very specific type of stop loss and limit:
* Use a 40% limit gain and a 60% stop loss.
At the end of each day, the back-tester checks to see if the long call option is up 40% or down 60%. If it is, it closes the position.
3-year Stock Option Backtester With Technical Analysis Results inIridium Communications Inc
Here are the results over the last three-years:
| IRDM: Long 40 Delta Call | |||
| % Wins: | 69.2% | ||
| Wins: 9 | Losses: 4 | ||
| % Return: | 320% | ||
Tap Here to See the Back-test
➡ The average percent return over the last year per trade was 28.8% for each 30-day period.
Stock Option Backtester With Technical Analysis Results
Here are the results over the last year in Iridium Communications Inc:The mechanics of the TradeMachine® are that it uses end of day prices for every back-test entry and exit (every trigger).
This is not a magic bullet, rather it's a bullish technical analysis momentum strategy predicated on using pattern recognition in charts through moving averages and RSI, rather than manually drawling lines stock by stock.
Setting Expectations
While this strategy had an overall return of 164%, the trade details keep us in bounds with expectations:➡ The average percent return per trade was 26.2% for each 30-day period.
Checking the Moving Averages
You can check to see the values of all the moving averages discussed above with real-time daily prices, including live after hours prices, for IRDM by viewing the Pivot Points tab on www.CMLviz.com.Next Steps
Tap here to use technical analysis with pattern recognition. You can do this.Risk Disclosure
You should read the Characteristics and Risks of Standardized Options.
Past performance is not an indication of future results.
Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment.
Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.
Please note that the executions and other statistics in this article are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity and slippage.