Active Trading Strategies | Pat Mullaly, CMT | 11-26-19
It's. Thanksgiving, week and we have a cornucopia, of trades to get to today let's, get started. Good. Afternoon, good evening good morning wherever. You happen to be in the globe my, name is Pat Mullaly this is active, trading strategies, for Tuesday, the 26th, of November, happy. Thanksgiving, everyone as I, said we've got a lot of trades today but what we're gonna do today is we're going to look at four different things. We're. Gonna use to make those decisions and make. Those decisions, on different, styles of trades so let's. Get rolling here before we do anything of course we, need to recognize, that options, are not suitable for all investors as, special risks are inherent, to options trading, trading, futures and Forex does, not is. Not for everyone because there, is speculation, so. Remember, that spread straddles other Multi, leg options strategies can entail treant extra transaction, fees and those transaction. Fees can impact, significantly. Sometimes, trades, that involve minimal potential, benefit we're. Going to use real symbols today those symbols are not any. Recommendation. Or guarantee, about, the underlying stock or the or. The strategy, that we might be using past performance, or is not indicative of future performance. Transaction. Costs those should always be considered now we do have zero Commission, that applies to, online. Us. Exchange listed, stocks ETFs an option trade sixty-five cents per contract on those, options, and. Remember. That Delta, Gamma Vega theta that's, what we're gonna look at when we look at options so those are the options sensitivity, to changes in price time and volatility the three very. Important things with options. So let's, get out there and get. Rolling here so first, of all we'll take a quick our usual cursory, look at the markets the markets to continuing, to grind higher we, talked about that as it started to break out a few, weeks back that it looked like it might be a grinder, and that. Apparently seems to be the. Case now, let's, talk about the. Learning the. Learning outcome, today so we're going to use. Three. Different. Three. Or four different things we're, gonna look which, hopefully, one, thing is not like the other so if you look into corner B of trades we're gonna have lots of different trades we're also going to have different styles, of types of trades we might do some, of involve, options, and. A major, portion, of them maybe involve options, some, may involve stock but, we're going to use price, we're going to use volume. And. That's, what I've been doing in the last few weeks using, making, sure people start to understand, volume, and what we're seeing with volume we're gonna look at the RSI, again as, a, matter of fact let. Me come. Over here, and. Hit. Return. I am, putting in, the. Chat. A. If. You don't have the RSI. The. RSI. Make. Sure that's the same, script. That's the script that I use that shows these different lines that we have on RSI so on the RSI, I've got three different things we're going to look at overbought. Oversold we're. Gonna look at the 50% line and we're gonna look at areas, where. Bearishness. May come in or bullishness may come in so, primarily. Today the markets in an uptrend so we're gonna look for bullish, style trades that doesn't mean we're going to buy things we may sell some things and. That. Will help, us with those. You. Know we'll look at some of those decisions, so, and, then we're gonna look at the relative strengths so if you're gonna go long something, you want to make sure you're outperforming. You know that's a big thing with me out performance, so we'll, start from that so Jay and everyone. From Chicago, all right Chicago, love, Chicago one, of the probably. The best city in the United States Ricardo, Carlos, and all the other cities in the United States are the best as well they're just trying to cover my bases there all right we're going to start off with Arrowhead, Pharmaceuticals, and.
Some We're going to be looking, at. Some. Of that health care industry, today. As well so I'm going to come over here to market watch and I am going to drop down into, the. Sectors. And. Those sectors and, I'm looking for. Is. Where. Do they go here. IX. 2, these. Are the IX sectors these are just. Indices. That. You. Can't, trade them they're just there like the. The. The. Dow, cash you, can't trade the dow cash. But. In, like, the SPX you can't buy the SPX, but you can trade options on that these, are not products. That you can buy or sell but. The reason I bring these up is we're going to look at these sectors. And we're gonna answer some of the sectors. That we're looking at we may buy some of the industry groups I talked about this yesterday in the ETF, class but, ixv, that's the healthcare industry and. We. Can look at the last, eight week return the last five day return that's what I just clicked on so, health care was kind of the laggard, coming, out of the, its doldrums. Moving, higher today. So we'll we'll focus on some of those some of those will actually that we're going to look at they're going to be retail so, let's go back to the. Charts and this is Arrowhead Arrowhead, pharmaceuticals. Pharmaceuticals, obviously, in the healthcare sector this, particular, stock. Rocketed. Higher on earnings. This. Is one of those that you. Know probably a. Little. Bit ahead of itself up 17%. Today. If I put my cursor here, the 25th, last night after. After. Hours. They announced. And apparently, they liked what they saw we. See a. Earnings. Well, it's not showing earnings, were 14 and a half cents they were expecting, fourteen. Fourteen and a half cents so they liked what they heard in any, event and. This is one we've looked at before you can I know that because we talked about this and the patterns, on the, advanced. Charting. On Friday. The, cup and handles here and how far we expect them to run places. Where somebody, could have bought them so, what we're gonna do now is we're going to zoom in here a little bit and we'll.
Kind Of you, know quickly look through the. Four things we want to look at so price is obviously up, price has been in an uptrend and. This, is where people. You know kind of throwing the towel and waiting and say oh my gosh I better buy right. So. Where was the better place to buy the, better place to buy probably was when it came out of this downtrend I have a 20 period exponential. Moving average. Here. As well as a 200. Period. Moving, average and so. Coming up out of that downtrend. Might have been a better place to buy I'm gonna widen out the volume, so you can so we can kind of pick this volume, apart big. Volume, over. On the left-hand side big. Volume over here on the right-hand side there's. Going to be a difference, and that's, that's the importance of how, one. Of the things we might use to make, our decision, in, these. In, these trades today so if we go back in time and we, take a look at where. These volume, spikes came into play coming, into play after long. Naps. Let's say after they've had their Thanksgiving meal and you know they're just kind of relaxing, sitting back and then, they finally broke out on. Bigger. Volume that's a hint that probably, going to be some kind of a bit, of trending, now this. Didn't trend so well this is a little. Side note when. We see stocks, that. We. Get a drawing to when we see stocks that. Have. A 10 have, a look. As to, they, move up they, drift sideways they, move up they drift sideways they. Move up they, drift sideways we see that a lot sometimes. There's, very efficient, moves, and we're going to talk about that in a second but this what, we're looking at right in here is. This. What I just drew that. Might mean that there's a lot of. People. Willing to let some of their shares out on the market so that there's an absorption, of supply. When, we look, at these sideways, areas, as it continues, to move higher and perhaps, that's, what we were seeing as this, was rolling, along so drifting. Kind of sideways, volume. You. Know a little bit of heavier, volume, on these on these downward, moves we knew with, those two down moves that. There is probably maybe a little bit more. Of downward. Push, that we might see just because. There was some extra volume coming in there well. Above the 50-day moving average, on this volume is my average. Volume. Volume average you can see over here on the left hand side and you can find that up here in the beaker under. Vol. Ume, so if you click on these studies at, it studies beaker that's top of the chart just a little bit to the right type, in volume, look for volume AVG. And. Highlight. That click, Add selected that'll put that over on the right. Side here, and, put. It on your chart so we like to see just.
You Know where, is that you. Know how far below that average, volume are we drifting and are, we seeing supply, come on the market those types of things so what. We saw was a big push to the upside markets. The the market for arrowhead, held. Up pretty well and. Then it started to trend it, started to trend and therein lies the difference between the drawing I just made and. Oftentimes. What, we see so this is very efficient, a lot, of bulls. Basically. A lot of bullishness in here, in. In other words there wasn't a lot of supply. Let, out onto the market until. Maybe now you're, saying whoa wait, a minute what do you mean now well, we've got this big volume push to the upside if, we look at what's happening, today. We're. Up 17%, today. Yesterday. Up, you. Know something. That was similar to that so, that's a pretty big move in the last two days if we, look at the RSI. The relative, strength index. Certainly. Looking. To. Beginning. Up into what, is what is it sitting at today it's, at, 87. Today you know typically. RSI. Doesn't go to a hundred it's getting pretty darn close so, we might see maybe. A little bit of a breathing out period and this. Is, the. Relative strength, index certainly. Up so you've got two choices here if you'd, like to buy arrow. Head but don't want to buy it at this level a couple. Of things you could do. Depending. On what, you think is going to happen so let's pop over here to the trade tab and. We'll. Look at this. Isn't Arrowhead. I let's, see what they've got here. Arrowhead. Does not have any weekly, options but they do have, your, standard. Third. Friday of every month option, so we're going to we've, got all of the strikes, on there and the lay out I have probability. Of out of the money in Delta will use that. Possibly. For making. Some decisions and. Look. To possibly, maybe, sell. Some. Options, so if you wanted to own, if. You wanted to own. Arrowhead. Would you rather own it right. Here or being. Looking. At the fact that it's up in a fairly. Large amount over the last two. Weeks would you rather own it on some kind of a pullback right, if it pulls back there's no guarantees, that will pull back if, you look at a call, spread you. May have to go out even further to get, a call spread that seems, to be worth your while it's trying to sell a call spread, may. Not at. Five dollars wide may not exactly, work but the reason somebody might sell a call spread is they, would go back to will go back to the charts and say well that, RSI. Is so over, bought, from. A momentum, standpoint, they're in there's. A possible, leave it pulling back price has moved so far so fast that, there's a possibility, of some relaxation, that doesn't mean it won't gap up tomorrow. But. If you if you feel like hey. We're in this we're, in this industry. Group, that's. Starting to really break out. We. Look at the industry group ixv, here's ixv starting to break out certainly, has been a laggard of. Late, maybe. We. Want. To someone. You might say hey you know I want to be an owner so what we're gonna do on this one come, back to the trade tab and, just, over the next twenty-four days before Christmas we'll, sell, a put, ok. Being. Somewhat. Bullish being. Willing, to own, the stock because if we sell a push put, we are obliged. You buy that stock there's no guarantee, that you will but, you also need to have the cash in your account so it needs to be secured, there. For. You. Cash secured put for you to be. Able to play this to, play this style, of. Strategy. And so. If we look at the $60, strike. Well that $60, strike comes in pretty close, to where today's low is and that's about the halfway point in between. Where it broke out gapped, up yesterday, and where we are today if, you're willing to own that feeling that maybe this. Bull market is going to continue after, maybe, some pull backs right maybe some pull backs Evan, flow is the market as the waves come in and the waves go out so, we'll come over here and we'll, sell this.
60. Strike put, 4, it says the dollar 60 here now. If. You looked at the chart and you said well I want to stop below, this, low over here two. Days ago that low is. $48. Let's say if you wanted to stop if, your this was a longer-term style, trade you were looking to get in this for a few months you might put a stop 3%, below that you might use a stop below. The moving. Average and what does that stop have to do with the. Secured. Put it, only has, to do with how many, puts. That you are willing to sell meaning. How many shares, you are willing to buy it's. Oftentimes, better, for you to scale into these trades meaning if you could own 300, shares. Maybe. It's better just to sell one put right now let's. See what happens, and. Then. Kind, of build into, that scale, into that, trade. The pyramid. In, however. You however you do it but try, to get some shares in so we'll just leave it at one right now for a dollar fifty, five and. We'll hit confirm and send and send, that one off we are filled and, I'll. Put it in the active trader. Tab. Are, in. Under Mont on the monitor tab here, a little bit later let's. Go back to charts now move on to the neck chart and, the. Next chart a dsk. Now. This is a different trade, and. What. We see here so if we go back today, is, today's, action, very important, today's, tomorrow's. Information. Equally. As important, because there is a. Earnings. Announcement, tomorrow so with that earnings announcement, tomorrow. You. Know maybe. We. Toss. Out a possible earnings, trade to take advantage, of implied. Volatility. Is implied, volatility. Hi let's, go over to the trade tab and take a look well the market maker move is showing about three dollars and ninety cents if you don't know what the market maker move is it's this up in here this, is just taking the, straddle. In the strangle, and. We already have a oops. Sorry. That's, on arrow there is a that's. Interesting, we've got a strong market maker move so it was good that we sold that put didn't, even notice that before my, bad. There. A. Dsk. Forgot, what I was looking at a dsk, let's, take a look at a dsk we, know that there are earnings, coming out tomorrow twelve dollars and a. Thirty six cents, so, seven. Percent or so, of a. Market, maker move up or down that's. What that market maker move implies. There's. A plus minus. Sign, in there, really. All is a all, I, shouldn't, I'm, not trying to minimize this they, look in, from. A high level back. Of the napkin type of thing they look at the straddle, the at the money straddle add, those two together and they get a number if you put these two together here, the. 170. Put, in the 170, call add those two together you're going to be right around that twelve dollars, and. So that's kind of what the markets pricing in that has to do with implied volatility. Is implied. Volatility. Hi, well. Let's go take a look at today's, option, statistics, down here on the, low and. Current. It says current IV percentile, fifty, four percent so, that. Seems to be in the middle of where. Implied, volatility. Is now I'm going to question that a little bit and the way I'll question that is I'll, come over to studies I'm going to left-click on studies, and drop, down to quick studies down, to volatility. Because I want to take a picture look at a picture of that volatility, and then, I'm going to come over here go. Down to volatile e studies to. The next window that pops up plop move, up to implied. Volatility, and I just erased all of my information, that's okay don't need all of that for this so, much yeah, but if we look at these highs, if. We disregard, this, outlier, high which it's, happened a couple times in the last 52 weeks we. Are. Maybe. A little bit higher than Center so. Volatility. Is. Could. It could have been higher look at this on the last earnings a lot higher about. Where it was the earnings before a little, bit lower than where it was on the earnings before so. Begs. The question are people, not expecting, or they've already priced everything, in here right if they, priced everything in, here perhaps, it, stays somewhere, in the middle now if they come in and miss, you. Could it may give back a pretty, big portion of this if they hit if. They hit you know the we. Try to. Consider. What might occur here well, maybe it moves, to the upside a little, bit and then pulls back right. Maybe, it. Moves. To, the upside but, it ends the day down. On the lower end nobody. Knows for sure it could drop through the floor we don't know but what we're gonna do is. Look. For. We'd. Like to look for a volatility, trade, I'm, a little bit surprised we don't have that much volatility, in there, but.
Maybe. This that might catch some people off-guard but, let's take a look three, days out where. We look at the implied. Volatility. That's at 92, right. Up here, we. Look at the this. Right. Here whoops that's not very good drawing let's do it let's do an arrow instead. 92. Implied. Volatility, through, the, next three days to expiration, the, market. Maker moves through, the earnings announcement, tomorrow you, can see here the market. Maker move through. Expiration. Is still almost $13. $12.93. So, let's take a look at the options, in here. And. We're gonna pop this window, down, come. Down and see if see if the bids and and, asks, or tight bid. And ask needs to be tight because. We're gonna put on a multi leg option. The style strategy, if it can pay well enough and what we'll do is we'll first look at an iron Condor, now. If your thought is that hey, there's a lot already, priced in and. You're feeling, good about it, that maybe we get a little bit of pop to the upside and it comes down right maybe, it comes down and people. Buy into it because they wish they had bought into it down. Down. Below and this. Is where we want to really kind of clue, in on. On. The. Volume so I'm going to do is I'm going to come. Over here to fleet core just so I don't have to rebuild, everything. And. Take. A look at some thing so we have seen, volume. Build we've. Seen volume, building into this that means there's some takers of some of whatever. Shares are available, out there pushing price, higher and higher relative. Strength sitting, up here at. The 80. Level, we've got our, actually RSI, sitting up here at the 80 level. Let me explain RSI, here we've got oversold. That's this purple line overbought. That's the top purple line there, is a 40 percent green, dash line which anything below that is considered, a little bit bearish or. Even, maybe getting more bearish anything. Above the green dash line at the top the 60 percent line is considered, going, stronger. Bullish so. When we put all these things together strong, volume, strong, RSI, strong. Relative strength price. Breaking, out that, may mean you know in some, instances, that you may look, to do something bullish on the stock in this case this has been running so long that. You might look at an, opportunity on. The. Downside, to sell. A. Say a $2.00. Two and a half dollar wide spread. And see what you can get for that so we'll come down in here we're going to start with the twelve Delta. On the puts and we'll, come over here and look at the twelve Delta on the calls and we'll see what we can get if we sell a a put, spread which. Is a defined risk trade we're going to sell one closer to the money for. A credit we're going to buy one further away for the money for a debit and we, should have a net credit on that we'll do the same thing with the call if. You want to learn more about options, get. With our getting started with options on Friday with, barb, you can also join, with. Wednesday's. With, Mike. Follette in first, thing in the morning on, weekly, options or, in the afternoon probabilistic. Options, and. You, can also join 10 rows so look in the look in the education, tab so, what we're doing here is going to come over here and we're going to sell an iron Condor. That's. What we're doing it's a fancy name for selling, a call spread and a put spread there, going to be two and a half dollars wide now. We know the call, that we're selling, is not going to be the 155, call we're. Gonna sell the 190, call that's the one with the 12 Delta. Y. Because, we have we want to have a higher probability, of that. Being out of the money, unfortunately. What happens is that. 195. Call is, a. $5. Wide spread and, the. Puts are two and a half dollar wide spreads it Garner's, about a fifty six, seven. Cents. Credit. Which means if you look at the risk that's, involved that's always the, the, widest.
Side In these options, that's five dollars spread, five dollars worth of risk - your credit, so. You might, take this put, and go. To take it down to or. Take it up let's see what we can get here I. Don't. Want to do that I'd want to be further away on that one so that's the other thing to think about, okay. Let, me back up here let's, go back to the chart if we think that this is gone, you, know pretty far and there's more of a chance of it rolling. Back over a little bit up here against tree distance where price is, if. I get a price. Level. Appear. Near resistance. Then. Perhaps. We sell the calls a little bit closer in and sell, the puts a little bit further away so. We know we have a 12 strike on the puts we, don't have to necessarily do, that on the calls we could sell the 20 strike on the calls at, 185, and 187. And a half and. Have a two and a half dollar wide spread a little, bit closer in on the calls, a little bit further away on the puts again, this, is not a recommendation. Whatsoever. Just, somebody might look at this and say it's run a long way. Whatever. Exciting. News they may have may be priced, in and maybe, it's going to pull back a little bit so we'll, come down here to the trade tab and we'll, look at the the. 19 Delta here so the 185. Sell. The 185, calls, and buy, the. Higher. Strike call for protection at the ones 87, and a half and now we have a 55 cent credit on a two and a half dollar white spread our risk, compared, to our. Possible. Credit is, better. And we, have still, stay, within that, high probability. Trade so we're going to do. This one if our risk is two and a half dollars less. The 57, cents our risk is about a dollar 93, if, you could lose a. Thousand. Dollars which means lose a thousand. Dollars you, could look at doing this. About. Five, times we're, gonna keep it down at four. Always. Err on the side of risk. Trade. Small and. Boom. We'll send that out all. Right. And one, Happy Holidays, and safe, to you as well. The. Northwest Happy Thanksgiving, yes--that's comes from Terrence hello Terrence Carlos. Ricardo, of course I don't know if I said this already Mike is. In the room lol oh and. Hopefully. Everybody's going to have a wonderful, wonderful holiday, so we've got that put in we have a position now, on that for a tsks. Let's go back to the chart and. Take. A look at the next go-around, here. And here's. Here's. Bed. Bath & Beyond. So, let's take a look at what has occurred. On Bed, Bath & Beyond along. Sideways. Consolidation now. I want to talk about this a little bit we're gonna talk more about disease, this type of price action, that. We're seeing here if. We look back on the, year basically, Bed Bath & Beyond sideways, with some. Protracted. Hard, sell offs lots of strong, hard down days in here and now, it's, a. Where. We're, seeing our first really, big upside, move and that's, important, and what, we're going to do is we're going to look at the structure, that, we see right, in here, this whole sideways. Action and. This. This. Area. Right. Up here where. It broke out and rolled. Right back on over so that breakout came. On, fairly. Small volume, right, and so when I started talking if we wanted to be bullish on something you'd want to see something breaking, out perhaps are bouncing. From a from, a a. Area. Where it looks like there, was strength coming, in where, might that area, be well might be back over in here, and. Or. Literally, could be down in these, areas, we're going to be making, some of these hopefully, making some of these types of. Discoveries. Over the next, several. Many, months. If. We stay bullish in the market, maybe.
We'll Go bearish, but. Let's look at what's occurring today big wall today and we still got a lot of time left in the day so, we expect volume to get higher, Bed, Bath and Beyond, again, this structure, that we see here, this, price volume structure, let's pop volume, up here and let's check out what happened, in here, this. Area here is. Broke. Above this this, range over, in here you know which was the first sell. Down that. Bed. Bath & Beyond it's seen for a while strong, selling bars, coming down and then, rallies back up. Breaks. Out on low volume low, volume breakout sold, right into a big long, down. Day here, big, volume, big. Volume pushed to. The downside here had. A little. Bit of this. Is interesting you're gonna hear me talk about this as well and want you to heed. And. At least look in not necessarily heat it but look, into what you might think if this is a big volume bar and it runs back up into a place where somebody's sold would. Somebody. Think that's a great place to sell some more of what they had perhaps and, it, looks like that occurred over the next couple of days now. That meant, that these down days people, were throwing shares out there they were they were selling, meaning, they were taking lower and/or prices, throwing shares out there if, somebody, thought that Bed Bath and Beyond, had it together would, they want to buy down. Here, or would they want to buy up here, right well, perhaps the somebody. Who had, to hide what they were doing, maybe, they were buying into, the selling so sometimes, a lot of selling, hides. Some, of the buying and if, we look over and hear this gap down on earnings, big volume, big volume but, you've, heard me talk about this many, many times. And. Let me zoom in a little bit better here so we gapped down and. We. Let. Me get a drawing tool here get. A line and. I'm. Gonna go from this low over, in here this last sell, off low. Okay. We we pushed below, that. Low on this, day, right here pushed below that low on. Huge. You. Would think that on this kind of volume which outpaced, this volume, over. Here that, perhaps we. Would have a bar that. Was, looked, a little bit more like this bar right, well. It looks like somebody thought that that's a pretty good place to buy maybe. And. If you if you are of, the belief that if price goes up there's, more buyers than sellers at, least in the near term that. Might have been what was occurring and then we saw some selling coming in over, here in the middle of, this of, this structure, here so. Let's. Back this up a little bit here and see what occurred. After that some, more selling but notice this selling we, had was. Really. Nobody, was willing to throw is throw any more shares. Out there so the, reasons, to sell were, maybe. The last few, weak positions, in in. Bed Bath and Beyond at that point and so. Buyers. Came in the next day not. With a lot of you, know there wasn't a big huge but run. In in the upside volume. But, once volume gets going sometimes once, price gets going volume. Just finds its own its own place so we look back at this, volume. Right, back in here. Here. And here, that's, a little bit distribute Ettore right and then, it seems like that was absorbed. Get. One get where I'm coming from here, maybe. Some buyers coming in there and then, it brings us to where, it brings us to price. Pulling back some. Higher volume, on the pullback, going. Into the earnings volumes started to pick up that's not a guarantee whatsoever. That earnings is gonna be good and now, it's breaking out and if, we look at the other things.
Involved. In our decision making price is breaking out volume, is good, chart. Won't react. Correctly, here, we go. Relative. Strength on the breakout relative, strength index on, the breakout going. Above 70, that. Is often times people get worried because they think that's overbought, well, if it's overbought, on a breakout it could, trend the. Thing is it's up 10% or, 12% almost. Probably. 12% at the high do. You want to buy into a 12%, pop and this, is where we. Need to make decisions you certainly can there's nothing wrong with that you could put a limit order in for. A pullback down, into the 78, level or we could do what we started out with and that. Is. Sell. A. Sell. A put and I've got to go to I'm. Going to remember, fleet core as well. We have time so, we might sell a put so we'll come out here we don't want to look at three days but. You certainly sell the $82, put three. Days from from now and maybe, you put the stock but that's right. Up there where it is right now if you don't if you you if. You are okay with that owning the stock quickly. And taking in some. Premium, by. Selling that put nothing, at all wrong with that if, we go out say to the December. Expiration. See. What kind of credit we can get a little bit further away letting. It pull back a little bit and so from a Chartist, standpoint, you. Know maybe halfway down, this bar right around $80, some people would look for 77. Dollars to. Buy the stock so we, look at 80 a dollar 30 you look at 77. 69. Now. Be careful don't just go out there and sell something because it's more money it. Has to be reasonable, has to fall within your guidelines, right. And, if that falls within your guidelines, well, at an $80 stock can you for afford number one afford 100 shares of an $80 stock if you can't then, selling a cash, secured put is not he, is not going to be your method you're gonna have to wait. Put. A limit order in buying, the pullback by, a little bit right now by a little bit more in the pullback if it pulls back there's no guarantee of that and that, might be another reason to, sell. A put so we'll just going to sell one of these at. A. Selling. Short. 180. $80. Put that expires, on the 20th of December, and. We'll. Send, that off now, remember if you sell a put your a block aged to. Buy, the. Stock honor before. Honor. Before expiration. It doesn't you it doesn't, have it isn't there is no rule. Or law that says that it has to be at expiration, so it could happen at any time and just, remember that. And. Then have an exit plan because, if it drops through the floor you, may not want to buy that I own that anymore so know. What you're getting into okay. I'm gonna go back to. To. Here and we had freak corn here. Fleet. Core no, let's move back over here because we don't have all the stuff here fleet core is breaking out now. This one has been through earnings, and. Will. Hover over earnings, estimate. Three dollars and eight cents it came in at three dollars and ten cents it really. Received, no love out of that but. It's been really, for the since July. Drifting. Sideways now. Trying to break to the upside. So. This might be something that, you, might. Concern, yourself, with what. Does fleet core do let's. Go take a look come. Back over here to the analyze tab put, in FLT. And. Fleet. Core technologies, global business payments, company alright, so who are they involved, with well they're involved, with the visas of the world the. GP, ends, of the world or. Excuse, me GP, in global, payments which is doing pretty good this. Could be a proxy. MasterCard. Is. Doing, well so if we look at the overall industry, or, in the sub industry, in this case, in. The FinTech industry, these, seem to be doing well let's. Look at square and. Square, coming, out of its doldrums, and any, of those might, fit your might, fit your rules let's go back to fleet core. And. Take a look at what's happening here so fleet core really and. Start with the relative strengths here because everything else we've looked at relative. Strength has been. Trending. Higher, here. We, have relative, strength trending. Lower we. Have a small breakout, it looks like relatives. Strength, is trying to turn if we, look at this from kind of the geometric. Wedge, here, we've got going in relative, strength you, know something. To consider let's look at what, RSI. Is we're going to come in this we're going to come in this the back way. We, know price is breaking out where all of the strength above 60 what does that mean, if roll. Up strength gets above 60, and it's, been holding, above, 40, ultimately. Struggling. To get below. 40, struggling, to get even below fifth stay below 50 maybe. There's some inherent, strength in this sideways, action, that. We're looking at here ultimately. Back. Here when we look first look at free core way back last, February, we. Saw this breakout here and that, was a nice a nice, run so if you're expecting this.
Long, Drawn out sideways. Action to, continue higher Global. Payments, FinTech, to continue, to be strong that. Might be a fundamental. Reason if we look at the. Volume. Now that's, kind, of dissect dissect. This, movement. Up, in here big volume, movement more of a, blow-off. Volume. Perhaps, after. And I say and. You might say how can you say that's coming out of this downward. Pattern, let's, pan out of this and take. A look at where this volume came in as, volume, came in after, a protracted. Run to the upside pulled back and. A, really, strong selling, volume and then, the buying volume, came in and just. Drifted higher high, volume, finally, drifted, lower so there's not that. Was more of climactic. Volume. What we really care about in, this whole, situation there's. A couple of places I'm going to draw another line in here this. Might seem unusual to, a lot of people and that's, gonna be from this high right. Here. That. High right there and. Why because that's where the weakness. Started to come in the first time and then the, move, to the upside from, that struggled. To, continue, higher and that's where this blow-off. Climactic. More climb acting volume came in so, if I draw a line across that let's. See what happens it, breaks out above. This. Line and fails, breaks, out above that second line I drew, and failed, breaks, out above that second the line I drew and failed over, and, over. And over finally. Last. Week, it. Held above it held that line and now, it's breaking above that line, ok so price is looking. You. Know a little, bit sassy let's say and perhaps. It wants to move higher what, do we see we see some people. Pushing, their shares out onto the market right here at the bottom and they seem to be absorbed, along here, and. We. Continue, to see. Shares. Being thrown out onto. The market now. We're seeing the 50-day, moving average, of volumes start to recede. Recently. Shares. Tossed out there again the question is how, does this volume add up on the break do we really need big volume on that breakout nice, to see so. Here, a, 307. Dollar stock if. You don't want to put. An outlay of an enormous amount of. Dollars. You might come out say 87, days and buy, a call, option that's. Still going to be $1400, to. Buy an at the money call option or, one that's a little bit out of the money. 2020. $100. $21. Per share, times. A multiplier, times, pointing. Out with my finger you can see that times, a multiplier, of a. Hundred. Right. Here, gives. Us two. Thousand one hundred dollars right and remember, options, can go worthless, if something, happened in this fell right through the floor that. $2,100. Could could, expire. This, could expire worthless so, you've, got a choice here you're. Looking at a lot of very positive things, that are occurring right now in. The very recent past looking, at things that, happened in the past that were fairly. Supportive. Now. We're looking at should, I buy if, I. Don't. Have, a money to pay for 300, shares of. Or. A hundred, shares at a $300 stock and, maybe I don't want to buy, 20. Spend. 20 $100, on a call, option. In. Total, so. Maybe you buy 25, shares 30 shares whatever that number is that. Works out for your money management and, so. That becomes very important so how would your money management work well.
Simply. Put. That. Money management, might be. Let's. Say that you. Looked. At this and said well let's. Now. That it's trying to roll to the upside here's the most recent, low that, most recent, low is. To. 90 to 95, so it's just say 293, if, I'd go 3% below that to. 93. Times. 0.97. That's, going to equal out to 284. So that could be a stop. At. 284. So. If we put our stop at, 284. And we. In if by, luck you buy shares, at 307. 41. So we, take this 284, 21, -. 307. 41. I'll. Learn how to use a calculator. In one of these days. Through. A 741. That's going to equal out to a. What. I say 284, 307, that's not that's, not the way that works. There. You go Wow she's. $23. In. In, risk, right and so if you could risk $1000, if. You're new to trying. To figure out how many shares you should buy and there's no law that says you have to buy a hundred shares so, you're 23 dollars we, would take if you could lose a thousand. Dollars say you had $100,000. Account and. You. Were. Willing to lose, 1% of that that's going to be a thousand, and you're gonna take that $1,000. And divide it by your stop-loss of 23, so, when we get that how many times does 23, go into a thousand. Well. It goes into a thousand. Forty. Three times so that's going to be forty three shares that you could buy if it, was a if it were you. Only had fifty thousand dollars I would be it. Would be twenty one shares, you could buy and so. So. That equals, forty. Three that, would be your goal to buy forty three shares to. Put it on in in tranches you might buy twenty. Twenty, one or, twenty three, and then add another twenty, or in. Some, form or fashion once, you saw that, it it. Started rolling so we're gonna come over here to the trade tab and we'll. Do that one and. Base, it on a hundred thousand, dollars so, we're gonna come over here and we, are gonna come in here and start, off as it's, just starting to break out the, end of the day it could be lower we'll. Just start off with a little bit because if we're going to be wrong we're. Typically, going to be wrong right, away so we're gonna look to buy twenty three shares at three. Hundred and seven dollars but wait we want to stop loss where do you want that stop-loss to 84 so, we're gonna come up here again to, the ask price, right. Click on the ask price set, or by with, custom, or with stop by custom, with stop and change. All of this so by, twenty. Three shares sell. Twenty. Three shares should we get taken out and get taken out we're at eighty, four at, 284, so I'm gonna put in two, hundred and eighty four dollars, down. Here, this. Needs to the stop loss needs to be good till cancel, otherwise. It goes away at the end of the day and you'll have no, stop now stop does not guarantee that, you're going to get out to eighty four you could get you get taken, out a lot lower because. Stops just trigger a market, order when that touches 284 that market order goes out for you to sell the stock if it's, moving fast that may not happen just know that can be the case well. Hit confirm and send. Double-check. Everything, 23:23. Good till cancel and send, it okay. We're filled on 23, shares of fleet, core, okay. Let's, go out here to the next chart. Very. Stuff we looked at that one already already did. Our job there best. By Dix. Boys you, know you see if you see a theme here Best, Buy's retail, Dix is retail, if you're gonna buy retail buy you, use a couple, things you can look at you can look at the Macy's of the world and, try. To try. To ferret, out is there, bottom fishing going on in here or you could buy the the. Ones that the retail, that's breaking higher now Dix has, been in a one year sideways. One. Year sideways, trend let's look at two years that's been in a two year sideways, trend and so. There's. A theory. A technical. Theory that the longer the sideways, longer. Sideways, you go the, further the. Price can move once it breaks one way or the other there's. No guarantee, of that but. This. Could possibly be a pretty, strong upside, the thing is it's up it was up over 20% at one point during the day so. Again, here's something that. We might look, to. Look. For some kind of a pullback now. Do we want to go the full. Do. You want to first, of all we got to check if we're going to use options, do.
We Want to go the full. 24. Days or do we want to maybe have a chance to get filled fairly. Quickly take, advantage of some of the higher implied. Volatilities, that may have been out there so. You might, come in here and you're not going to get a lot for those three-day options, we, come out to 10 days. And. At. Forty, six and a half forty five and a half so you know, at forty five and a half go. Back to the chart where's forty five and a half well. It's pretty far up here right so that's up to you. Otherwise. You could put you could just wait and watch and, see what happens wait for a pullback. Because. Reason, I say you don't have to you can jump in right now cuz you might say gosh. Darn it you, know I, waited. And the thing went from 46, and it went to. 255, dollars whatever typically. There's going to be some kind of relaxation. Historically. There's always been some kind of relaxation. If, not, there's an opportunity to sell calls, so. What we'll do here is we. Will look to, trade. Discs on that. Selling, that call. At or that put at the 55, strike. This is a $45. Stock we looked at $80, stocks and sold to put or one put we'll sell two on this, one look. To get. Put the get. Put the stock and we're, going to do this however. The. 6th of December we're only doing this 10 days out okay. So. Looking. To get put the stock fairly, quickly on any, kind of a pullback so what happens on pull backs how, do pull backs often, happen. Oftentimes. What we see is. We. See them drift down and. Rally. Up, drift. Down and rally up that's one that's. One way sometimes. They, just drift. Straight sideways right, and, that's okay too we can make decisions. Less. Hastily, by, putting an order underneath, the market taking, in some credit then letting to see how things unfold and then we can make other decisions right and that's, the idea is to give us some room right. You need to if you. Are. Being, rushed. To judgment you. Know maybe you need to step back give yourself a little bit of breathing room and selling. Puts might be the, way to do, that so we've bought stock we've sold puts all bullish. Trades why volumes. Volume. In Dix, this last run so let's that's now that we've done now, that we've done the trade let's. Analyze it so. To. Analyze this. We. Know it's been drifting sideways so. In. This last run I'm gonna put a line right across that high right there. Pulls back rallies, uh fails. Doesn't. Make it. Down. In here volume dries up you, know really, low volume just. Dried right up down in here right, in this. Area down. Days it's been running down this. Sell-off right here on that.
Down Day there was some volume, associated with it. With those big. Volume. Sell down right here and you, notice that it, got down into these zones and it, struggled to go any lower so when we pierce these, Piercy's. Lows let's draw a price, let's. Draw a price, level. Right. Here, and. When. We pierce these lows and on bigger, volume and. It can't go any lower that's telling us something right and so, maybe there were some hints with Dix that things are getting strong stronger, and then when we look at this last this, last, October. Through, where we are now we. Hadn't seen that kind of action let's, go back two years when, I say that kind of action let me draw a. Square. Around. A rectangle. Around, this area so we can see it. And. Let's go back out two years so. We know it's been drifting sideways about, two years in the last two years, when. Has Dix, hung. Around the, highs struggling. To go lower. It. Hasn't right and so, maybe, a little bit of a hint that. Nobody. Was willing to let go of Dix not and not, any kind of an indication, or an indictment. That it. Was going to pop to the upside on earnings, but, certainly that's what happened right and we, had this we had these low volumes sell offs we had price, drifting, sideways right, up against resistance that's just strength a lot of people might look at that as strength strong, relative strength, recently. Really. Just kind of drifting sideways in, its in the retail. Group. So really, weak group but strong, strong. You. Know maybe the neighborhood's not so good but the the. House is nice apparently, as we saw with bed or. The best, buy okay. Let's. See here so that's, another. Trade dared DR. Horton, I mean Danaher I do, that every time Danaher, come, back over here to the analyze tab here, D H R Danaher. Is in health care we looked at that at the very outset, we made some healthcare trades why, because. That industry, group is the, good neighborhood, right now right a court, when we say neighborhood, it's not really a neighborhood, but, what it is, on. An. 8-week return, and as. If i can get this to do that on. An, 8 week we turn seven six five four three two one it's. The. Top it's, in the top groove right it's, in that upper groove so. Somebody. Might use an, analogy that it's, a nice industry. Group is what we're trying to say and, they are. In a nice sector, and then we look at these sub industry groups what's Danaher do go, back in here designs, and manufacturers and medical industrial products and services, so health, services, and material. Are and devices. Earnings. Popping. Pop. Our earnings are over and. It. Underperformed. On earnings interestingly. This, whole sideways, action again failure, up in here to. To. Move higher. Than. These hot than these the the the high over in here and. Continue. To run to the downside now seeing. Some pretty, good volume building, as it's trying to break out now this one's a little bit, a. Little. Bit interesting, nice gap to the upside on some kind of news and. Drifting. To, the upside so this would be it's a hundred and forty five dollar stock this, might be something that you. Might not be willing if you're not willing to make. A. Large. Purchase. Of. Shares. And. You could risk a thousand, dollars this might be one where, you go here out, of the money. You know $5.00, are at the money and by, a, call. The issue with the calls here the issue with the options here is a big, bid-ask spread, when. We look at this the, bid here and the ask here, you, know there's a few dollars in between there and the reason for that is. They. Don't get traded a lot there seems to be a lot of open interest in here but they're not getting traded a lot that's pretty interesting. I'm, gonna go out I'm gonna go back here to the, 52 s, the. 52 52, days to expiration sorry, not, the 52, s a little, bit tighter bid-ask spread but not a lot of time when you're buying and buying an option you probably want to utilize. The fact that options. Decay and knowing, that fact buy, time to. Hedge. Off, through. Time the. Decay, the, the. Quickness. If you will how, fast, the, the velocity of that decay. So. That. May be out of the question, and, so, what, you might do with this one is by, just, a small, amount of shares now we paid we bought 23, shares of a $300, stock, you. Know you could buy you, know or, with. A total, goal, of 43, shares. On. That last, stock. Purchase, this one here you, know you might, just start off with something very small just let's, make sure we're paying attention we're, looking at some looks what appears, to be some buying volume, the question, with this buying volume, that, may stop anybody is why.
Are We not really seeing a. Stronger. Move on this bigger volume and so. There's a lot of action a lot of volume for, not a lot of um not. A lot of upside right and that, may be because. The. The. Buying was, happening, all back in here and. There's not any. Big, players willing to buy now, we're just waiting for the trend traders to come in and push, it higher, momentum. Traders or, it could just be that hey you know inside. Of this small rain people are just we're. Seeing these shorter, ranges, in here we, may see a little bit of a pullback okay. Oddly. Enough that can, possibly happen so what, we're gonna do on this is we look at this and say. These. The, the the. Thrust is, starting, to narrow in this the, thrust is narrowing, but that's. Where. Is the thrust narrowing, the, thrust is narrowing where it has, had issues, before. So, might. Want to watch this one a little bit for, a little bit longer. And leave, it and, leave it where it is here's. Another one that. We're. Gonna skip this one but this is also in the pharma, or excuse. Me in the healthcare. Industry and. Medical. Industry, s. Ie and take a look at this one on your own that's gonna be your homework to look at C in, C. Intra and. Silicon. They have implants, and those types of things go. Back to the charts so, your, homework is to look at Siena and how did that one get in there again and. Burlington, make, some decisions, do what I just did right now and make, some decisions on. Should. You buy if you are how, are you gonna do that you're gonna do with options you're gonna sell options you're gonna sell. A small. Amount of shares that's, totally, up to you alright. So in summary. What. Did we do we looked at four different things, those. Four different things were price. Volume. Momentum. Indicator, RSI. Looking. For that to be bullish whereas bullish polishes above 60 and above 70, is it, too bullish where, is that at 80% if prices, move 20%, or more, maybe. We look to sell. A put underneath maybe we look to sell a call spread earnings. Trades have. As price moved a long way going, into earnings is there now, a possibility. That everything's. Priced in and it could pull back what, kind of trade do you want to do they're totally, up to you the market is still up fractionally. For the day that. Is good coming, up next Connie Hill stick around technically, speaking with Connie Hill and remember. This I, won't see until next week have a wonderful. Wonderful. Holiday. Be, safe and. You. Know give, thanks to you having. All the things that you have you're, all wonderful people you have each other I'm lucky, to have you and I give thanks in. Gratitude for. That as well so with that everyone, have a fantastic. Holiday and we, will see, you soon. You.
2019-11-29 08:04
