How Sharp Paper and a W Pattern Made 30% Overnight on Cisco
Here’s a real-life example of how trailing “Sharp Paper,” combined with a “W” formation, can lead to an overnight trading winner.
This happened just over the last two days…
Yesterday afternoon, I noticed that someone had bought more than $860,000 worth of Cisco Systems (Nasdaq: CSCO) July $50 calls – using the D19 expiration. They paid $5.40 for 1,600 calls. Clearly, somebody was bullish on Cisco and was making a move.
Pulling up the Cisco options string, I noticed that more than 21,000 calls were also sitting in open interest on the July $55 call line.
What is open interest?
Open interest tells you how many contracts – options or futures – have been purchased and remain outstanding. So the figure gives you a good idea of the options trading activity on a stock and whether it’s rising or falling, as well as a look at what market players are thinking about the future price movements of any underlying security.
In the case of Cisco, there was a large amount of open interest on the call side of the July $50 and July $55 lines. This realization was triggered by the fact that more than 12,000 contracts were traded on the July $50 line just yesterday.
In other words, this wasn’t just some ordinary trader buying one or two contracts. This is what I call “Sharp Paper.” Someone with deep pockets was making a dramatic move into Cisco, and they were putting substantial amounts of money on the line to support their directional bias.
Did somebody know something about Cisco? It sure seemed like it.
Noting this Sharp Paper action, I did a quick chart study on Cisco, and I noticed that it was forming what I call a “W” pattern.
As soon as I saw the indicator that the W pattern would take off, I issued a trade in The War Room. How did it turn out?
Action Plan: War Room traders paid $1.04 to enter the Cisco July $55 calls. And earlier this morning, they sold these calls for a quick and easy 30% overnight winner. I walked you through this to give you a real-life example of how trailing Sharp Paper, combined with some real-time technical analysis, can lead to quick winners every single trading day. It’s all happening right now in The War Room. Join us!