El Paso Corp.: Back Ratio Call spread follow up

This is a follow up to the El Paso BRC Spread I traded a couple of days ago. I feel managing profits is just as important as analyzing entry situations. So this post is my analysis on that subject.

As you can see, I had hypothesized the stock to break out above the 9.91 area (yellow circle on the daily chart) and had traded a BRC spread on that hypothesis. The stock did shoot up the next day and is up again today in the vicinity of 2%. This has allowed me a near 75% return on investment but I believe the stock is going higher.

I have set up a stop loss for half my position at 10.15 since the stock could face resistance in the teal circle seeing as how that area falls between two key fibonacci levels. Also, the stock is fairly close to the trendlines I have drawn. If the stock breaches these lines we could be in for a complex correction and the stock could move sideways for a couple of weeks. Thus, raking in profits for half the position if the stock falls to 10.15 is a good idea.

My original hypothesis that the stock will probably move to 10.70 area still holds. The momentum on the weekly chart is very bullish and the daily, although overbought, is still bullish. On the weekly chart, a high-high cycle is predicted in a couple of weeks and that would tie in well with a high of around 10.70.

In summary, I will exit half my position at 10.15 and stop loss for the rest at break even. But if we keep climbing, I will keep moving the stop loss along the trendline on the daily chart.