Some technical setups on the stock charts, can fairly accurately indicate which direction the stock will go. Precision is always needed in trading, but with the flexibility of options and the tools of technical analysis,.....   read more

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Some technical setups on the stock charts, can fairly accurately indicate which direction the stock will go. Precision is always needed in trading, but with the flexibility of options and the tools of technical analysis, the odds could be a lot better than you think. Precision is often good enough in identifying both direction and price target.

 Trading within a channel:

Notice the trading that takes place within the channel, the breakout out of the first channel and how price forms a new parallel channel. This is the USD, and trades can be taken on crude oil, commodities and foreign currencies, ideally whatever has more room for movement!
Notice in the above chart how the USD reaches the bottom boundary of the second channel, what does that tell you? Obviously you would want to profit from the subsequent drop in crude oil, by either buying an ITM Put, or selling a deep ITM Call that’s about to become OTM by this move!
(How deep ITM is needed, depends on the expected move, in this case crude oil fell sharply as dollar rebounded, sometimes even a $5 dollar intrinsic value ITM crude oil option can become OTM by such sharp dollar moves)

Bullish divergence, and breach of trend line:

Notice the bullish divergence on the CCI indicator, and the subsequent, confirming breach of the downward trend line. This is the stock of Citigroup, so what would you do?

Buy an ITM Call option, or Sell a deeper ITM Put option? I think, being a seller of deep ITM Puts here, is better, as the stock rallies back up to test previous highs, its volatility metrics will also decline, you are better off being a Put Writer than a Call buyer!

The 3-gap pattern:

The 3 gap pattern, appears every now and then on some stocks and stock indices, when it does show up, it works as follows: The first gap is considered the Break Away gap, and price is expected to continue in that direction, then there’s the Continuation gap, at which point one can expect the trend to continue even more. More specifically, one can accurately measure the trend from the beginning to the continuation point, and then project the same magnitude from the continuation point to the future. Then comes the Exhaustion gap, which signals that the end of the move is near, but for accurate target price we use the first half of the move, as a projection. The mid point is always considered to be the Continuation gap.
This trading signal is pure technical analysis at its bests! You can profit enormously by selling Deep ITM options. In the case of the above Nasdaq chart you could have sold Deep, ITM Puts, on the index, or even on other correlated stocks with a higher Beta.
Being Deep-ITM means a high premium, it’s an option contract with intrinsic value today, but one that is doomed to become OTM soon.
Accurate price targets means confidence in the trade, and assessment of the risk.
Imagine a Deep-ITM Put option, on a Nasdaq stock, going for 6 ($600), it would have been out of the money soon, plus volatility would start to increase just before the Continuation gap and then it would gradually fall. That Put could be sold at $600 before this Continuation gap, and it could be bought back days later on, when it fell below $100, that’s an almost give away $500 option trade!

Breakout patterns:

Breakout patterns such as hedges and triangles are best traded using ATM options and volatility spread trades, however you can still profit even from small price movements in the stock. That is by using strategies such as a Bear Call Spread that aim at profiting from minor sudden movements. And of course, you can also write (sell) ITM options that will become OTM soon. In the above chart of the Morgan Stanley stock, the first breakout pattern is rather unclear of direction, I would feel confident implementing a directionless strategy such as a Straddle, but the second one, does indicate a downward bias! That’s where I would simply write some ITM Call options. Ideally one just-ITM and one deeper- ITM Call. The stock did decline, but only by a couple of dollars, both written Calls however would have made money, though the deep ITM wouldn’t have become OTM.
Generally, when a breakout is expected, look at previous lows and highs, as well as the stock’s own historical volatility. Then, you can decide to use a Straddle or a similar strategy, but that will require significant price movement, see if the stock could make this required move. For smaller price moves, it is wiser and safer to implement a Bull or Bear spread, but this requires predicting the direction of the breakout! And finally, we have the option of selling options contracts, either just-ITM or deep-ITM options, depending on how big we expect the move to be. 
Using the trade simulation tools at Analyzetrade.com you can know in advance, and with certainty, your exact profit potential for every $1 of favourable movement in the underlying asset. If you use technical analysis, and the trade simulator correctly when planning a trade, then really, nothing will be left to chance.
Also remember, that even if the underlying stock’s price does not give many clues as to where the most likely target is, then Analyzetrade.com tools can be used for back testing! And you can statistically assess the probability of the stock making this move, over the given number of days. It is better to always attempt to profit from smaller price moves than the market can provide!