Active Trading Strategies | Pat Mullaly, CMT | 9-10-19
Hey. Don't, call it a pullback well. We'll see after trading up right now. Welcome. Everyone I'm Pat Mullaly and this is, the. 10th of September Tuesday. And. Today. If we're gonna take. A look at the portfolio. We're, going to look at Possible's and some possible new trades. But. Before we get into that of course we're going to need to. Look. At the important information, and that is that, options are not suitable for all investors as. Special risks are inherent. To options trading training futures and Forex not. Suitable for everyone spread straddles, other multi leg options strategies can until a extra. Transaction, fees which can. Impair. Trades. With minimal. Potential, benefit we're, going to use actual symbols, today that does not mean that TD Ameritrade is making any kind of recommendation. And any, investment, decision that you make in your self-directed, account solely your responsibility past, performance, of any security. Or strategy. Does not guarantee future results, probabilities. Are theoretical, not guaranteed, all investing, involves risk and remember. No soliciting recording, photography, or of. The presentation, without prior written consent of TD Ameritrade, and as. Always, Delta, Gamma Vega theta option, sensitivity, to changes in price time, and volatility. But there is more there because you can also help that use those to help choose strategy, and to define your risk directional. Risk in your portfolio, so, get, to know those alright, let's get to the platform. And. See, what's going on out there. I'm. Gonna start off with a. Look. At the S&P 500 and, we're gonna look at my conviction, indicator, which I'm going to do. On Friday again. Going, to show some guidelines, and, how to read, that whether, it's for bottoming primarily. Or if it's looking at weakness, or strength in the markets so let me pop, in here, and drop. Down in to figure out where I put it. Conviction. Grid and there we go we'll, pull, that up. And. Pop that open hello. Everyone, it's good to see everyone here we've got Edouard. Edouard in here we've got. C. W B is C yeah, I'm, just gonna say C, W B, good. Morning, all and. To, everybody else that's coming, into the room right now so let. Me collapse. This side for just a second we're going to be using, a. Some. Momentum. Stocks take a look at what's going on out there, and I want to maybe, change the colors of this real. Quick here. Appearance. And. You. Should be able to see the up days better so. What, I'm looking at here the conviction, indicator we're looking at strength, or weakness in, the. Move not necessarily, price. But. What that tells us so we've, had we, had a pretty. Strong volume. Down. Day yesterday that zoom in here that's yesterday's volume. Right, there so what you hear from you know a lot of people out, there is all it's a down day on huge volume, well what kind of volume was that we're gonna talk about that again on Friday but, just to take a you know kind of a check checkup, from the neck up on the markets, if we zoom in here we see, that yesterday you. Know we opened higher we closed a little bit lower and so, with. The conviction indicator, what that typically. Should tell us is that we. Should, be seen. We should have seen perhaps. A little bit, a. Little, bit you, know more of this. Is where the conviction, indicator closed yesterday, with. Price, being. Very. Pretty. Much very close to, where. It was trading. The. Previous, day in other words price yesterday, closed. Just, below where the, on the SPX, just, below where head had had opened, with. That kind of action we, probably should have been, somewhere. Closer. To the, 50%. Area, or, maybe, even a little bit lower so even, though we had big volume, the. Conviction. Of the. Selling. Side. Of that I can't get my mouse back here. That. Can Vic. Ssin on the selling side of this. Really. Didn't. Show up as strong. As it possibly. What. It what it may have had, it's in other words if we are if, we're. About, where price. Open. And close open and close the previous day and, you know or even for that day even if it had gapped up and, enclosed. Similar, to where it it opened we should see you. Know about a 50% range. In the conviction indicator no matter what. That volume, was and we had big volume, so but. So that just tells us it, seems, to be no nothing's, 100% but. It seems to be that, the. SNP, even. Today. Holding. Up holding, up fairly well as fault as far as buyers, coming in and. People willing our. Sellers. Unwilling, to sell, ok, don't, want to get too deep in the weeds there, we've got some we've, got some things to think about and, things to consider, and.
That Is. What. Possible. Trades might there be out there now yesterday there was a rotation. Into. The. Financials. And I'm going to pull up and. Actually let me go to another. Grid. Here because one we're going to be using today is going, to be the, market. Forecast. And the relative strengths market. Forecast relative strength, and. I. See, we've got. Hello. Edy. Duryea. Hopefully, I'm pronouncing that wrong if not. Hit. Me on the head that next time you see me J. Orlando, Ali's. In the room Ricardo, is in the room good. To see you all. For. Sure I'd, like to makes. Me feel like. I have some friends. So. Let's take a look at what we've got going here so let's. Look at, IX. M these were what. We were seeing strong, over, the last little, while so the question becomes is the, rotation, into, financials. Is there rotation, into oil and. We'll. Look at the energy. Sector. As well so we can see here energy sector, still rolling down we've, got the. Relative. Strength in the, energy sector. Popping, just, kind of sagging. A little bit if you will to, the downside but trying to break to the upside here. So basically the agenda today a little bit late on the agenda my apologies, here is to. Look, at some, a possible, rotation and. Then. Maybe. Try to find, some stocks that are in that that. Are moving in that area and then, look, at our momentum, look. At our momentum watch list find, some stocks that might be giving us some. Strength. Showing. Us some underlying, strength things we might not really. Think about with the market pulling back here so, let's. Get rolling so we've got banks and we've, got we've. Got banks that are strong and we have the. Energy, that is we're strong, yesterday, energy. Was strong yesterday pretty, much in in, a, lot, of the underlying industries, in that, in that group so. Let's. Let's. Come right over here to PS, X so, we click, on PSX. And we're not linked anymore hmm. PSX. Right, there and. We can see here PSX. From. A. From. Just a price level price first and then indicators, second we'll, talk about the possible, you. Know, ideas. That you might have should, you buy or should, you wait we, look at where. We've, seen some past, resistance, and I'm going to draw a line right across those, highs there. And. Here's. An interesting, an. Interesting, concept. That maybe a lot of people haven't heard about and that, is the. The. What's. Called. And. You're gonna hear this term used it in different in, some, form different forms and fashions I even do it but, this is called an ABC. Pattern. I, call. It a flying W in other words we have a W. Here. And, the. The right, side of the W. Is higher than the left side of a dub because it's called a flying W some people call it an ABC.
Pattern, I look. At things, like like. What we've just seen, PSX, go through as far. As an ABC, pattern, where we have. An. A. Move and then a rally back up a B and then, a C and then look for price to, move. Through, and above. The. The. B, portion, of that, pattern, the B portion of that pattern being that, apex, right there so. The. The. Idea of the, so, called ABC, pattern, is the same thing we see a rally up we, see a pullback with a higher low, and then, a rally to, the upside and look for some area. Of past. Resistance. Usually, it's going to be the last swing high in the, in, the group which would put. It at. Put. That right here. And. So. We. See that PSX. Had, come in with some pretty strong, a. Pretty, strong change, in the complexion, of the. Price action and then we will look at. Price. Moving to. The. Moving to the upside checking, back checking back into, a 200-day. Moving average. And then, rallying off of that and you can see continuing, today so some strength in in. Just. The price action of PS, X so again price first and. Volume. Which we don't have on here and don't want to squish. Up the charts but if you use volume indications. Make sure that you don't you, know. Use. Those, partially. Always. Use you, know always use those things and. Then we have relative, strengths here, and. Relative, strengths. Showing. Us what's. Showing. Us. PSX. Stronger. Than the rest of the market which is fairly. Unusual. When. We think about some of its protegees, out there the. With. The big players at COP, just. Now coming off of its lows XOM, and we look at relative strength and I say coming off its lows in price coming off its lows and relative. Strength you look at. PLO. VLO, not. Not. Showing any you're, not showing that much strength. It's it's leveled, off somewhat. It's leveled off just, now trying to get above its 200-day moving average. These. Something. That these, are something that maybe you want to watch and put, on your watchlist to see what how they act and, once, they get above that 200-day, moving average, it's it's. Oftentimes, failure at the 200-day moving average, that we watch for but also when, we when, we think about it on a. Get. That to stick there we go. We, look at it kind. Of from this perspective. Where. Has, price. Been from, the upside and the downside and. What. We're going to look for is signs of strength as. It gets closer, to the to, the upside here but guess what we've already seen that in PS. X and that, sign of strength if we put. This this. Channel, if we draw these channel, lines in here. And really. It's more of a wedge. Pattern or a triangle, as we have, this higher low here but, when I say sign, of strength what we're looking at is, a rally. Back into the old resistance. And then, this kind of action right a sell-off, that, holds, a sell-off, that holds, support, and then, starts to move back to the upside. The. The. Idea behind sign of strength looking. At relative strength, as well, looking. And then using, in this case we have the market forecast. Indication. Down in here where we're looking at strong. Intermediate, trend, which is what we have with the green bar and then, a hook back to the upside for. A possible. Buying opportunity, now we can see here we. Have not seen. PSX. Breakout, totally, to the upside breakouts, are tough they're still tough there, was some lamenting, going on out there and in the Twittersphere. From. Some of the. Traders. That have been doing this a long time, that, are very good, lamenting. That they're, still struggling with the breakouts that. Often. Happens in August. And September it, often happens, especially. When we see the, markets, themselves as, we've. Seen. For. Quite a while now. Be. Put in a really. Just a consolidation. Period where we're really. Have, gone nowhere. As.
Far As the highs go over the last couple of years so, but. We can see we do have an uptrend we're, just looking for price to break to the upside, SP. Down two, tenths of a percent still so, PSX, let's. Take a look at what, what somebody might do here lots of different ways to do this you could wait for, this to pull, back. To. Wait for it to pull back you might define an area. That. You're looking for it to pull into or you could just do cold. Close. Above, the, low of the high day, which. Means that we have to wait at that point we, have to wait for. Something. Of this. Nature, hopefully. Be able to see these. Something. Of this nature a little bit of a pullback and, then. See. Price. Move. Out. And above that, load. A so if i zoom in on these colors here this. If. You. Can visualize, what you're looking for and that's the whole point of practice. Practice practice. Visualizing. What you're looking, for watching. It pan out and then, over time build, that intuition, and. Then what you can do is you can say well I've seen that before it's good I, might. I may take the trade I've seen that before it's bad I will. Exit, out of this or will not, take the trade but we can see here PSX is pushing, above that resistance. Area in here that zone it's still a zone you could choose to take a bite. A small, bite perhaps. And. Look. To. Enter. Or, build. Onto that position on any, pullback. After. At rallies, whoops. After. It rallies. So. What we'll do here is. Put. It put. A trade on to. Enter, into this trade enter. Into PSX is trading at 103 there's. A theory out there that goes back. Gees. Over. A hundred years now that, if a stock gets above a hundred, holds. The problem, the, probabilities, of it making into 110 or better. Than 50% in, theory. Again. Probabilities. Are not. Guaranteed. But. Looking, for an, upside price of about 110 that's $7, away so when you think about that it's about a 7%. Game. And. It may be in a very short amount of time but you don't want to just bet. The farm on that because it, could pull back here we're really not. We're really sitting at a resistance area trying to break above. These, highs, in here so we, look at not these highs necessary but these closes, we, look at this close on the 31st, that close is at 102. 56. Previous. Day's close is at, 103 61. We're, trading above both of those by 10 cents that's, what, people may look at they may look at the ultimate high up in here and, so, but trading above 10. Cents it could be 20 cents to look at somebody, might go in there and buy, X amount of shares so if you had a thousand, shares that, you're willing to trade but, you were a little bit squeamish if it breaks back down which often will happen, in.
This. Market, you may put in a tight stop so if we look at, today's. Lows, today's, lows are sitting at 102 25, and for. All intents and purposes that's, about a dollar. 50 so if you took. And. I'm going to use a calculator if, you took a thousand, dollars risk, and you you plugged in divided. That by a dollar fifty. Worth of trade risk so portfolio, risk you're willing to give up. You're. Willing to give up a thousand. Dollars of your portfolio. And. But. Only risk on the trade a dollar and. A quarter that, means you you would buy, six. Hundred and sixty-six shares, and six, or six hundred and sixty six point six shares will just not make that the devil number, by. Adding that point six you, know that's gonna that's going to be an enormous amount of your. Capital. For, your portfolio so, you'd have to reduce that back right and so really with a thousand, dollars worth of risk if you said I only want to risk 10 percent of a hundred thousand dollar, portfolio well. That would be ten thousand, dollars and if you bought it at 103 73. Divided. That by 103. Point seven three and, for, some people this is the, best way to do it that, would mean your, total position would be 96, shares so, at that if that's the case ninety-six, shares and only, willing to put ten thousand dollars of a hundred thousand, dollar portfolio. At risk, in other words you've got a hundred thousand dollars that you, have in your trading account you're, investing account and you. Only want to at any one time have, $10,000. On one. Stock, you're going to take $10,000. /. 103 75. And what do you get you get, 1996. Shares so what we'll do is we'll cut that in half we'll, make that about. 47. Shares we'll trade about 47. Shares on this with, a stop loss very. Tight now. In this market is a little bit iffy perhaps. So. We, don't want to take on too much risk and it's always probably best to partial, into these trades to scale, into these trades and. So we're gonna look at a low of 102, 25, so we know we're gonna have about a dollar 25. Worth of trade, risk. Coming. Here click, on trade we've got PSX, in here and our, you. Could you could buy the shares so we're gonna right click on, the ask if. You notice on the number on the ask and then we're going to go to buy custom, with, stop that's going to be our first.
First. Thing we're looking to buy this at a limit, and we're going to put our stop at 102. 102. Point. Let's. Make it 2-0. 102. Point 2 0, we're. Going to, leave. The, limit. Here, we'll put in looking. To get in that today so, we're going to leave that alone let me pop close this side my apologies, limit. Today and then we'll change this day, order, for, whatever reason, we don't get filled we'll, pop that in there and then, we'll make these good to cancel, which means that they will sit in the. Queue. Until they get filled in other words once we get filled on the, on. The shares we're gonna buy. Then. We. Will. Automatically. Have our stop-loss, sitting in there if it goes against. Us if I click confirm and send that's, going to be our last check and the, first thing we do is we say well we're gonna buy a hundred shares at PS X well wait a minute we didn't want to buy a hundred shares so we know if we, read out loud we, write down what we're what we're thinking we, read out loud less. Chance of us making a. Mistake 100 100 shares not what we want to do we're, gonna edit this I'm going to come back down in here and we're, going to do. 45. Shares. 40. Yeah we'll just do 45 shares, to. Buy and we'll change our sell stop to 40 or are selling, order. To 45, shares and then, we hit confirm and send again and, and. Double check that now that's the stock okay. Now nothing says you have to buy the stock if. You said well you know it's I don't really want to take that chance on the. On the stock on, and, on. A large, outlay, because, energy. Has been so strong. This. Could be with the relative strength the way we see the role of strength it could be the leader or it could not right so some people may come in and say I'd, rather go, out in time a good. Ways out in time say 66, days or even 100 to 29 days out, into January and, look. At buying a, call. Option in stocks. Trading at 103 89, if we bought a call option at. 110. Well, we would have to for. This to, archieve, me 105. For. 3 dollars and 90 cents. What's. Going to occur there is. Price. Has to move by. Expiration, at least three dollars and ninety cents or $390. Because this has a, multiplier. Of a hundred. And. How do we figure that out well we, look right up here. And it says. 100. Right there so we've got a multiplier. Of a hundred so three dollars. And ninety cents times 100, basically. Four hundred dollars. Including. Taxes, or including, fees. Transaction. Fees so.
It's Going to have to be if we, buy the 105, by expiration, in 66, days it needs to be for. Break-even needs to be at. 102. B yeah, 109, so at 109, that. Would get. You to break even on the on the actual trade but. There would be some transaction, fees that would eat into that as well so that's. Something. You need to figure out is it going to move far enough, for. This to double. For this 392, turn into or let's, just round it up to four dollars that four dollars to turn into eight dollars. It's. Gonna have to move very far very fast and it's, going to have to be above 110. Okay. So, you're gonna have to pick up some intrinsic value keep, some time value or by expiration, it needs to be at, 114. So, we go back to the chart. So. In 66, days we see that this, movement, here, the, last move. Went. From. Rallied. About $7, right well right. Now at 103 is. 72, we need to see it move $10 in 66, days okay. So can it move $10, and 66, days well we'll look at the downside, which, is usually a little bit more rapid. And we, can see that well obviously that's. Move $15. This. Big move off of the lows here, was, a huge move that's $22. After, some consolidation and, this becomes the next question, that we. Ask ourselves do, we believe. This. And I know this is maybe, a stretch for some this is more of an intermediate class by. The way to, advanced. If you want to know more about technical, analysis, join. Cameron. May on Monday mornings at 11:00 for getting. Started with technical, analysis, 11:00 Eastern Time I should, say but the question becomes is this some more accumulation, if it's, more accumulation, than. Perhaps this, leg here, that, we saw that. Really came off the lows you know back in. May. All, the way to the middle. Of. July. Certainly. Was a pretty long a. Short. Amount of time with, a fairly, large magnitude. Move so it can do it and so, what we will do here is we're going to go ahead and, just. For educational, purposes only not, for recommendations. Versus. Buying the stock we're. Gonna buy this call and with, this call. At 380, you, can use, and, if. You're buying you. Can use a stoploss I say if you're buying if you're selling, a spread. It's. Probably, not, the world's greatest idea, to use any kind of stop on on selling, spreads because you could in theory you can your, I'm.
Going Off the rails here in theory you could. Lose. More, than that, spread is the, width of that spread so use, them on things, that you buy not necessarily, on things, that you sell so what we're gonna do is do the same function. Here, we're gonna right click or, come up here to buy we're, gonna come over here at a single, you. Don't you could whoops. No, that's not what I wanted to do same, function we're going to right click come. Up here to buy, come. Down to buy custom, with, stop, and. Now we have this in at 380 we. We. Want to get out if it's worth about $2, and excuse. Me $1 and. 380. Divided, by 2 is. What's. That, one. Let's, see. 190. I wanted, to say 180 I think. As I was staring at a lot of 80s. 1.9. So. We're gonna get we're gonna have a stoploss good, to cancel. At. 190, we're, gonna leave it at a limit order on the, buy now. We need to figure out how much we're willing to how, many of these were willing to buy, again, here something, you can partial, into so, if we say, well 400. If I were to risk. If. This gap down just because we're using a stop does not mean that stops guaranteed you this gap down we. Would lose the, total, amount, of this premium. So, in other words you, could actually lose. For. Nine, hundred and sixty or. Eight. Hundred seven, hundred sixty dollars in. This trade and. What. We want to make. Sure that we don't do is over. Over. Trade this right, because. We. Can only lose a thousand, dollars so in theory, we could do 3 what we're going to do is we're going to do two, of these and, leave. It at that we're, going to be out 66. Days we've. Got our stop in good till cancel we're, looking to buy on a limit, and a day order and we'll, hit confirm and send. And. There we go we are filled, on PSX. Now. Again that's along, the lines of. How. Did we do this why did we make that decision. We. Made that decision based. On. The. Fact that we, were seeing possible. Rotation into, energy we saw a possible rotation into banks there's. Other things that are still holding up well that. We may look at but. That's how we made our decision but, our decision is made with a. The. Fact. That we have strong relative, strength stronger, than what. We've seen in most of the other oil stocks. Out there we're, looking at as.
Far As a trigger, to, buy, price trigger it strong, its seemingly, trying to break out and, we. Have a, tick. Up in the market. Forecast the blue line here is. Ticking. Up the green line is above the 50% area, showing. Intermediate-term. Strength, we. Just look for this to break out we've given itself room. For this to move around we're not risking our full thousand, dollars okay, let's. Pop back over here and. Take. A look at some, of the other things that might be going on interesting. A couple of interesting things let's. Take a look at home builders. Or. Some home builders let's, look at Lennar and, as. We look at Lennar we're gonna look at a few of these so let me collapse this and, it's not necessarily be home builders we're, going to look at we're gonna look at some things some, ancillary. Companies. Some. Of the the. Hammers. And nails if you will of. The. Home Building in. Construction. Area so, we see here relative strength fairly strong we've, got a, possible. Hook to the up side strong. Intermediate. Term trend. On the market, forecast. So. Some. All, the things we like to some, people may like to see and. So that's lennar let's look at. Kb. H. K. Bh trending, higher let's look at ph, m. Trending. Higher i think. You get the idea well, let's look at Home Depot take, a look at what Home Depot's, doing Home, Depot from, a relative, strength aspect, pretty, strong, rallied. Pretty strong it's, not necessarily Home Depot we may. Want to look at because, what I'm looking at today and see, if they're still holding up is. BM, CH and. It. Looks like it's not holding up there was another one in the group that. Was moving higher and. GM. S so, if I click on GM s, it's. Obviously. A low price stock given. To some pretty, pretty good volatility. If I click on the analyze. Tab all, I would. Think it's probably good idea to know what, you're trading in so it says industrials. And if. We look down here and look, at what they do will all board suspended, ceilings, and. So. On and so forth so they're, in that construction area, right, Home, Depot a little, bit more in the. Home. Deep a little bit more in. Homes. For, construction. Homes for all their home. Products. For. Redesigning. Your home so on and so forth let's look at B MCH, this. Is another one. Providing. A provider. Of. If. I can get this to click here. Building. Products, and services, residential. Construction market, so maybe that's one we want to consider let's pop over here look, at B MCH. This. Is, perhaps. A close, above, the high, of the load a. But. It has been nice, earnings. Pop to the upside it's, not a it's not a high dollar stock, but we've got some support coming in here so. We've got this. Drawing a line very tight, we, look at let's, back this off a little bit get a better picture of the relative strength relative, strength, in this. Stronger. Than a. Good. Portion of the, sp500, why, because this line is rising. When that relative strength line Rises then, that shows us some some, strength now this might be something you don't necessarily want to get into today that's up to, the. Eye of the beholder we. Look at some some, possible triggers so let's break this down price. Drifting, sideways nobody. Wants to sell it they're not really buying it up if, we look at. The. Relative strength it's strong stronger, than the S&P 500, and we, have some. Some, buying action, coming in on an. Intermediate, term. Is. Is intermediate. Term strength in the market forecast, what's very interesting is, this big push to the upside and, then, the straight sideways move and we're really not seeing much, of a relaxation much, of loss of momentum in that intermediate, term line on the. Market. Forecast so, this might be an idea. Here with this hook to the upside to, take on perhaps. A few shares of this, under $25. Stock let's see how how, the, options look on this. And. We'll. Go out don't, get a lot of choices if you're gonna buy options. It's probably best to, buy. A lot of time if. You're gonna sell options sell a short amount of time if, you're going to go long as an, option, buying it. Go. A long time, right if you're gonna sell an option shorting. It then do a short, amount of time here. We can see a bit, a spread, at two dollars or two dollars and 30 cents not. Too terribly bad it is only a $25, stock though so that's a fairly. Large, bit a spread, that's in the money 25, by 18, cents $25. Strike. Have. To go 129. Days out, if. We look at if, we think that, it.
May Take some time before it moves off of the. Tarmac. Meaning. This, one. Month of. Sideways. Action, then. You might not want to necessarily do an. Option, but 129. Days should give you plenty of time it. Won't be a lot of time decay in there, as well so let's. Do that let's go out here to 129. Days. We. Will buy the. Option. That. Has, at. The $25, strike, again. Two dollars and 30 cents now here's it often. Times a quandary should, you put in a stop that is, half of that should you put a 50%, stop in on that no, that's going to be. Put. You at a dollar 15. Below. Or a. Option. Price a call option price premium. Of $1, 15, you, start getting down to these lower prices maybe, it's not the it's. Not necessarily. A great, idea to. Have such, a small. Amount of money as a stop so. We. Won't do that on this one we're just going to leave this one alone we're, gonna use that two dollars and 30 cents as our maximum, risk just, like what we did even with the the last one we bought two, dollars and thirty cents BM, CH looking, for it to move up, off of the, tarmac. Here it. Is really. Right now above. If. We. Look at the load a here. What's the lows in here, 2457. Yesterday's. 2464. 24. 63. So. Really 57, is the lowest point in this. And in, this area here so we can see right, here let. Me zoom in on. This. Day we. Are above the low day in this. Line. Then it's drawn. So. We'll. Use that as a reason. To, make this trade so, we're gonna risk 230, dollars you have a thousand dollars you can risk. Again. Probably. Better to add into the position, you, do that with options or, you could buy five, of these and risk, about $30 we'll start off with, three. And look to add in as we, move along the, reason, somebody, might say well why are you doing that if, this goes against us immediately, which. Often times is when you lose your money right if it goes against you immediately, then. You're. Gonna lose less right, then. If you put on your full position now the, other side of that if it goes strong. Immediately. Well you're not going to make as much money but that may. Be an indication, of further. Strength to come then. You can add into the position, and if, it trends, then, you'll you'll be a lot better off, you'll lose less when.
If It goes against you immediately over. Time you, may make more if it goes your. Way may because. Our. Heads get into it and. We. We. May do things that, we don't want to do so check make. Sure you know yourself, make sure you understand, that we, have a, propensity. To. Cut. Our winners short letter losers, run, options. Will well automatically. Doing. It this way. Define. Our risk to the downside in theory you can only lose what, you've put into this trade so, don't over, trade. But. In theory you might, not let your, profits. Run and you might cut those two short right so if we're looking for a trend sometimes. We've got to just, sit on our hands and bite, the bite the nail. And let this thing let. This thing do what it's going to do over. Time you're. Going to get past this. Dissonance. That you have and you're going to say I've seen this before I've just, got to, get. Over my my. Fear, of giving, back what I made and just sit back I've got a plan I've got a rule and that rule. Says, I exit when this happens and stick to those rules Ally. Says the PS x RS relative, strength doing, well likely breakout that's. What. We're looking for we'll, see that breakout may come in. Fits, in starts, certainly. We'll see there. So. Jay. Mentioned. Something, here that we may talk about in the future but something to think about very interesting. Idea put, a vertical in, on on. The trade to subsidize, the, trade in other words buy something, sell something, that helps it. Can't. Really help that trade so I got to be careful how you people, see, this there are two different, trades okay, you're not really subsidizing. The other trade because whatever you buy is that is a trade by itself okay but. You're gonna put another position, on that. May work in your favor so you. Subsidizes. Away a lot of people think about it so but. Yeah you could do you, could build all kinds of you know do. All kinds of things and, have one big. Trade. Made. Up of different might. Well one big position made up of different trades okay, but they are going to be separate rates, possibly. A great idea so let's. Go ahead and put these on here, do we have our three in there hit confirm and send make, sure we're doing what we want to do all the way out in January, that gives us a lot of time and it. Is filled. Okay. Let's. See here we've got time. So, that's interestingly. Enough. Housing. And, I want to take a quick look or are and, the. The in this case stuff. That helps you make the houses right so. Let's take a look at dollar sign. DJ. Us. Home. Improvement, H I now. This is the. That. Is not the. Right I don't know how to type apparently, dollar, sign us. D, J H. I. Well, I thought, for sure that was in. No. We. May not have this one but in any event I, was, just trying to show you the sub industry. There so let's take a look at. Another. One that's, moving today. And. We've got some healthcare moving, this is an interesting UHS. We'll. Take a look at that one UPS is moving. Transportation. Stocks we're starting to move yesterday let's take a look at UPS when, you see UPS, picking. Up some strength relative, to the rest of the market we've, got this really. This nice coil moving. Up in the market. Forecast. Here's. Another one, mtz, that's another industrial it's, a bit, ahead of itself this, might be one when I say ahead of itself is charging. Higher might. Give it this one a little bit of room let's look at UHS, and UHS. Strong. Certainly. Strong today on. A pop, to the upside and. Let's. Pan out on this just as hairs you can see what's going on with relative strength right. Now.
Relative. Strength. Moving. To the upside here's, what's interesting about, this. With relative, strength is. To. Try that again there we go we've. Got relative, strength at a. 52-week. High if we go back out this well actually it's a two-year chart so a, two-year. High on relative. Strength okay. But, price. If. It closed right now that would be a closing, high intraday. High, it's. Not at that intraday high so what two, things going on here relative. Strength very strong people. Breakout. Traders, like to see that, as. Well, it's 154. Dollar stock this. Is up against some resistance, this might be one where you. Look. You. Know depending on you know how much risk you want to take so let's kind of go there with. J. And look at possibly, a vertical, on something like that, vitale. Can you please share how to get the lower pain indicator, momentum, term, intermediate-term. This actually, is. Script. So, J. I'm going to put in a vertical, on this one I'm gonna pop, a script, up there, for Vitaly. And. I. Want. You to write this down. And, then. I'm gonna get to Ali's question in there because it's very important, because I am going to put a vertical on so right, now what I'm going to do real quick here, Vitaly. I am. Going to come in here and. This. Is a. Script. So, you're going to have to. Let. Me share this. Open. This link here and I'm, going to quickly. Copy. This. And, I'm gonna right-click and, then I am going to no. I'm not I'm. Going to come over here put this in the. Text. Box here click. OK. And. Ally. Just copy this down. Its, and copy it it's, case sensitive so, make sure you copy it with the Capital. G capital D, lower Q, capital. E lower, Z capital. M copy, that down and then towards. The end if I have time if, you don't know how to. Okay. I'm not sure if that's still going but I'm going to. I'm. Going to continue, on here. Hopefully. It's still going I'm not sure if it's still recording. But. If you, could in the chats tell me if you can. If. You, can hear me. Okay. All. Right so something, went haywire over here with me okay so if you've got this if. You've got this. Script. You can put in the video, or, in the. You. Can put in the market forecast here. Okay. That's, really bizarre because everything's gone. Thanks. For hanging in there all right so let's get to this UHS, what we're gonna do here is we're going to look at a vertical, and I want to address. The. Idea that. One of the questions in here that. Ally, are, not Alec yeah it was Ali said. Do. You. Is, it a liquidity and concern no when, we when you put on a vertical, and what we're going to do is we're not going to go over for. A long distance on this because we're going to sell this we're, gonna sell a put spread on this and. First. Thing we're gonna do is make sure we got a good delta and make. Sure we can get a good premium, but what I want you to recognize is when we sell a vertical or anything you anything that you sell. It. Has a. Finite. Gain right all right so you, your defined, gain your defined loss on, a vertical so, we'll look we'll start off with a 140. And. We're gonna sell, the 140. Put. And we're gonna buy the. 135. Put. So this is a put spread brings, in a 95 cent credit on a $5 wide spread, here's. The thing and the. Reason to not use stops in a, very fast, market, if for some reason, they. There was some accounting, mishaps, then. And they were getting, investigated. By the SEC a, Starbucks. Getting investigated, by the SEC today. Price. Can drop very far very fast, and many things can make that happen very far, very fast but when that happens, these, spreads this three dollars and 20 cents the three dollars and fifty cents that. Could actually it's a five dollar wide spread so. 140. To 135. With. A spread, that's only about 30 cents, if it, drops really far really, and say that you're taking in 95, cents, on this spread and you say well I want to put a stop in that says when or, a dollar on this I want to put a stop in when this gets to 50 cents okay.
Remember. You got the bid-ask spread, the deal with number-one on two, different, options so they can impede. Trades. That have a small benefit, but. You got to remember that. As. Well the. If. If the market Falls really far really fast then. This 30 cent bid-ask spread could, actually end, up being. $5. And you would have that on both sides so. You could literally, lose, more, in, then. The. Theoretical. Risk. Of. $5. Okay. So if you put a stop in there you could get taken out and in. And. You, would think well I've got $1 to. Credit, I've got, a $5, wide spread so in theory I have four. Dollars and ninety are for three dollars and 98 cents worth of risk well you could end up having, a loss that's, more than five dollars, that's. Why we don't use because that bid-ask, spread widening, and that's, why we don't use stops why because. That, will subside, okay. Now if it if it moves far and fast like a flash crash rallies. Back up then, things go right back to normal you didn't get taken out for a bigger loss you, still have a trade that has that, has potential. Possible, potential, in your pl so don't use those, don't. Use those so right now we've, got about four dollars worth of risk we're, gonna leave that at that and, the reason we might do this this kind of goes along with some, of the comments. You know that we had, earlier. About. Should. We you, know should we, subsidize. Well here we can put on this trade looking. Possibly. Looking to say hey you know what I want to buy into this but right now I think it's got a little bit too hot and, it's. Up against a resistance, area we could have done the same thing with PS x up, against the resistance I'm going to sell something that gives, it, that I can use to buy, it at a later time meaning, the short put even. Though we've got a vertical, and it keeps, our eye on the ball so should this continue to run higher, well, this, trade, this. Vertical. Spread again if you don't understand. Options, Friday, mornings, at, 11 o'clock Eastern, Time barb, Armstrong, getting started with options learn all about verticals. They're archived, you can check them out it, can be a great way to do things but, this could, put us in to, the to the ballgame so to speak in other words keep our eyes on you. HS. With. The possibility, of making money if it keeps going up in, theory these will go out worthless, and your. P&L should change by ninety two cents. Or ninety two dollars per share. Okay. Or excuse, me ninety two dollars 90. To 92. Dollars so, we'll put that in and. See, what occurs, there so there. You go so it's down, here that's where the we, sold those below, the market and come back in here to the trade. Come. Up to the monitor tab here. Look. At our working, orders, there's, our vertical we, sold the 140. Strike. If we come back over to the charts, we've. Sold these below the market in here, we'll. See if those go out worthless. If. Not no. Harm no foul we can choose to if things, are still strong. Relative we, can choose to buy, into that as, far as the, relative strength goes very strong but, the market forecast near-term, lines hooking down so, we're probably going to lose a little it looks like we may be losing a little bit of momentum on, the, upside there. Alright. Let's, see here, let's. Hit over to the monitor tab here, close, this up close, this side over in here and take, a look at our. Platform. So Fiserv, we've. Got some things going against us I close some things out earlier today. PayPal. Got way way, out of way, out of control it, closed down we've got Starbucks. That has having an issue it's, stop loss was, hit today you can see we have zero quantity, of Starbucks, so we bought into that if, we look at we bought into Starbuck. See, if I can see. Let's. Go to the charts. Take. A look how this set up better. To take small, well in this case we took a small gain. Bought. Starbucks, on a. Close. Above the low days high I think it was this day writing yeah the 13th and we. Had made a little bit and then it sold off and took us out today so. Starbucks. Out. We, are. Twitter. Is. Trading. At $43. Almost. Well 85. Cents below our short strike so, we got some work there to do but. All, in all what. Occurred this, morning was PayPal got, taken out of PayPal out of Starbucks, got stopped out of Starbucks. Fiv. In, stopped. Out of that that was a $500. Loser. There, Fi. Here's, the case for buying. Not, your full position in not, losing the full thousand, dollars only lost. 528. Let. Paypal, get out of, whack because we didn't have a stop that's. What will happen and. Fiserv. We, have a stop sitting in here at 101. 59. And you can, see that's getting precariously. Close. To. That so pretty, hard down day to day taking out away most of the gains in, Fiserv. And. Again. That's been kind of the tale of the tape with a lot of the NASDAQ, stocks back. Down into. Into. Support that yellow line there is it, was our buy price came. Within a fraction, of our, stop loss today, so, sometimes.
You'll Get stopped out and then it will bounce back up sometimes, it'll just barely. Almost. Touch your stop-loss and run back, sometimes. It just blast right through it but we'll, have the stop and remember stop-loss, is no guarantee, that you'll, get out at that price, okay. In. Summary. Look. For, and watch for those changes, in. In, regime and, which. Sectors. Which, industries. Price. May, bar price, may be rolling into in other words if money's coming, out of some, of the tech stocks some of these recent, high-flyer is moving into oil moving, into banks you may you may want, to consider, those they, have to meet your criteria, other. Than that there's plenty of other things that may be moving just, because a certain. Group isn't. Outperforming. Doesn't mean there isn't something in there that may be outperforming. We'd rather have the strongest, of the strong that's. Why we use relative, strength find, out what is the strongest trade. On what's the strongest. When. It, makes sense price-wise, that's why we use the, market forecast in here, so, with that market forecast giving, us the giving, us a. Possible. Trigger again, it's just something that some people use. You. Don't have to use it use all these. Different things find something that works for you use, it and stick. To it okay. With that. We. Are going to close. Out for the day remember that everything. We've done here is for educational. Purposes only we. Looked at symbols they're not recommendations. And any, investment, decision that you make in your self-directed, account, solely, your responsibility, take. Care everyone I'll talk to you soon.
2019-09-12 21:26
