Trying a New Strategy

I use a handful of indicators to determine whether stocks are overbought or oversold. While there is nothing wrong with this strategy, sometimes the moves in stocks on their way to being overbought or oversold can make money as well. This is called momentum trading and I'm not very good at it.

I'm a cynical guy, so I take moves in the market with a grain of salt. That's why I can perform well with a contrarian strategy.

Lately I've been looking at other indicators and their correlations with ones I currently use. One such pattern is with the MACD and the Commodity Channel Index (CCI).

Crosses on the MACD usually signal a continuation in the direction the stock is moving, but not always. I seem to have found a correlation that can signal when there is a "true cross" on the MACD. When the CCI crosses the zero line, it almost always coincides with a MACD cross. When the two match, the stock usually continues in the direction.

While indicators aren't magic bullets, telling you automatically when to buy and when to sell, they are good reference points. They guarantee nothing, which is why I am only dipping my toes.

So, XLE has gotten beat up but looks like it could rebound. It may also have a reversal... I don't know

Unfortunately, the IV just isn't high enough to sell premium, so I have to buy calls.

Here's the trade: +2 XLE March15 79/81c @ 1.00

Target is the gap just under 85, and I will attempt to leg out of this one just like MA.