Commodities Rising? | Technically Speaking: Trading the Trend

[Music] [Music] hello and welcome to trading the trend weeks to months my name is james boyd we welcome you here today we also have my good friend michael fairborne he's actually in the chat we'd like to welcome rk fez amy vijay jarvis george texas he says howdy and uh todd ak and many others carlos hello and welcome to everyone and just real quick this is on really talking about trading the trend weeks to months so we're not just gonna look at daily charts we're gonna look at weekly charts this i think is really an emphasis that a lot of investors even if someone said i'm short term they want to really have an idea of where the trends really are up into this point and could those trends continue now as we talk about really trading the trend weeks to months we also kind of want to keep in mind of how to read the trend how to see support resistance how to maybe use stocks or options so and also track the momentum so there's a lot to cover actually in this class don't think that this is kind of like past just passive investing there's a lot the investor could really learn by taking this class now remember you could also follow me on twitter do post educational content there daily check it out and as you know elon musk went 43 billion big on twitter today now just real quick as we're getting started remember that the content is intended for educational informational purposes only not investment advice recommendation of any security strategy or account type options are not suitable for all investors special risk inherited trading options and also understand that when we talk about demonstrating the function of the platform we're going to use actual symbols and also remember when we actually discuss options remember we will be using the paper money software based version and when we talk about options or if we do remember the option greeks they are a sensitivity to something like direction time and volatility now today what we're going to really talk about is i want to kind of take a moment and talk about we'll take a look at the two equity indexes but i also want to kind of take a look at some other price indexes and i want to kind of talk about how that's actually going to relate to our first three bullish trades i'm going to show you some charts we don't normally look at but i think they're actually worth taking a look at that's going to go into the first three trades and then what we're going to do is we're going to talk about two protection examples and then we're going to talk about one to two bearish examples i know a couple of year are seeing maybe some stocks that are going down so let's kind of talk about that so just real quick as we're actually getting started let me actually pull up first off rates okay and if you actually take a look at rates uh how many of you have been watching this chart you know this has been a big chart as the fed has talked about uh reducing their balance sheet selling maybe uh some fixed income you're seeing that the long the the ten year okay we'll just talk about this one the t and x i don't know how much they had of the 10 year maturity but it looks like it was substantial okay you're gonna see in about the last month or so the rates were about 1.7 they went up one percent or what people would also call 100 basis points 100 basis points one percent and if you actually take a look at this we're up to 2.8 30-year interest rates on houses uh mortgage loans uh hit five percent today okay so remember when this is actually up what equity index would probably be under pressure if you kind of choose between the russell the s p the nasdaq or the dow which one do you think might get pressured the most well if we're talking about kind of rising rates that tends to slow down gross stocks of those four indexes which ones tend to be more pro growth you might pick out the nasdaq okay and if you actually take a look let's say the nasdaq you're actually going to see that that is continue to kind of struggle here a little bit now i also want to kind of make mention of a different type of graph we normally will bring up like a 10 day exponential moving average to track momentum 30 period moving average track trend but i want to kind of show this from a maybe a little different viewpoint okay and if you actually take a look at this what you're going to notice is you haven't really seen any turning at all it's just kind of been red shading right we're looking at a whole moving average same setting 10 30 but it's just kind of still been down okay so we haven't talked a whole lot about the nasdaq this year really uh as far as like being focused on tech stocks but it's still an area that's still under pressure now let's kind of talk about maybe something in this case if you let's say brought up the spx if you take a look at the spx maybe trying to get a little left here but don't really even see the shorter term moving average turning yet how do you know which one is which well the short term moving average is going to track the price more closely that's the 10 and that's the 30. anytime you see the

red shades sellers are controlled the green shade at that point buyers are in control now let's kind of talk about speaking of uh buyers might be in control if we actually take a look at let's say gold okay so as we have equity indexes under pressure if we actually take a look at gold how many of you have been watching gold a little bit now this is the daily chart of this and as kind of equities kind of fell back down at least some of them you're seeing that gold is getting a little lift okay kind of what's going more neutral seeing a little positive green shade there trying to get a little push here now if you take a look at this also on the weekly chart pull it up through your weekly zoom in we did actually see a break out in the price action to a higher high to a pullback in the price and what you're going to notice is it's trying to really make like a higher low right now okay so if some of you like gold or so you might be thinking james could this be a higher low post a breakout okay so this being the breakout out here this being really the higher high and this being really the area where it's really trying to still make a higher low now what you'll notice is if you zoom in notice the shorter term moving average is red showing price softness or weakening but that 30 period moving average what you'll notice is it's still green so that trend is still there so far now if we actually take a look at now this is where i'm going to kind of show you some different ones okay when we actually look at let's say crude oil okay let's pull this up to the daily chart many of us have been watching crude it's kind of hard not to if you go to local pump we see it up a little bit about two dollars and 30 cents at 106. macd kind of rotating back up if we actually look at probably the one that's actually been one of the stronger ones we talked about this yesterday we'll take a quick look at it natural gas okay i don't want to say it's been on fire but yeah it's kind of been piping hot okay natural gas actually hitting brand new seven seven dollars and 33 cents here 732 for the may and if we also take a look at let's say let's see if i got this let's kind of take a look at this now these we see when we take a look at corn okay brand new high here today on core we also for example well i can take a look at let's say this chart and if you look at let's say something like soybeans brand new high as well okay now if we actually look at let's say so we got corn actually hit a high soybeans actually hit a high other products such as milk hit a brand new high and the last one we'll actually bring up if we actually bring this up we did see also lean hogs hit a brand new high so let me kind of recapture what we talked about you see gold's still holding up we see oil still holding its ground we see heating oil actually at the highs we actually see uh you can actually also throw up uh gasoline as well but if you look at soybeans at a high corn is at a high uh milks at a high and you also see hogs at a high what type of asset class are we really talking about well you'd say commodities right commodities so now i want you to kind of think about when we take a look at these charts and i'm going to go back to this first trade example let's say if i look at a chart like this corn is there any companies that might benefit from that rising price tell me what those trade potential ideas could be if you look at a chart that shows corn you look at a chart that actually shows soybeans you look at a chart that sews let's say wheat which is forged zw who might be able to take advantage of this now we're talking about stocks here okay i want to know which companies might benefit from the rise in the commodity prices now i'm not gonna go anymore until you tell me give me some names now just real quick and i'm gonna i'm seriously i'm just gonna kind of wait from what we're seeing on commodities which companies i'm talking about companies now might benefit from the rise yeah there is uh joe it's uh four slash qg okay which is the natural gas okay okay now stuart actually brings up let's pull this up caterpillar okay so let's kind of talk let's kind of talk about this and what we're going to do is we're going to look at this chart okay so kind of tell me now stuart actually brought this up okay so if we look at this you're going to kind of see that caterpillar has been really kind of more sideways and if i zoom in in just a moment maybe you'll kind of see maybe like an area of resistance at least one of them kind of maybe being in the spot of about maybe let's say 227 and maybe another lower spot maybe kind of somewhere here okay so those are probably two markers if we now if i zoom in to let's say the last three to four months we kind of went down and then we went up so this is kind of like a classic v pattern right v okay sometimes you see it more like a u okay this is more like a v and what you're gonna notice is on the right hand side it actually kind of pulled back did not pull back as far as it did before and what you'll notice is it's already pushed right back up to the top now when you kind of think about a cup and handle you think of more like a u okay you don't typically think like a d i don't think it matters whether it's really like a u pattern uh or a v pattern i don't think it matters i think if you take a look at let's say the pullback on the right-hand side we might say could this be something where it's make making a potential cop okay and are we just kind of lately starting to form the handle of this so let me draw this down up and then recently kind of there's the handle and then what you're going to see is right there now sometimes as technicians a trend trader you might be looking for these type of patterns that might be like cup and handle type patterns basing pattern reversals inverted head and shoulders things like that so if you were to look at this and say look the bottom of this is about 180 okay 180 now by the way someone asked me hey when you draw the chart are you using the toss well when i'm just kind of manually drawing drawing like this it's an app that we downloaded it is not on the toss and if we actually take a look at this kind of resistance we're probably talking about let's just say 227. so if the price were to break resistance we're talking about a potential price target of maybe check me if i'm wrong about 47 from kind of the bottom to the top now i don't know about you sometimes people like to kind of set higher targets maybe the investment says james i'm not going to kind of set it that big maybe they only want to take it from the 190 to the 227 and say not 47 but maybe 37. remember when you start setting higher price targets one that might not get there then two right it might take longer to get there okay now if we actually take a look at this now the comment from the last me is uh cat this breakout i expected on jan 20 january 2022 how do i fix such emotional option trading so i think it kind of goes back to sometimes you can get a stock that actually breaks out and on the first breakout it doesn't necessarily hold that might might kind of bring up the point which is when you see a breakout maybe the investor tries to go half position because a lot of times the first breadcut doesn't hold maybe the investment says look i'm going to buy half if it breaks out and then if it pulls back and bounces maybe like a target example they add to the position so i think this is where the sometimes as investors they just go so committed on the first time it breaks out of resistance okay so now let's kind of take a look at this if it broke out of resistance where might the stock try to go to so if the stock really broke resistance and we said the next potential resistance if well we actually might kind of say the next level of potential resistance i mean kind of maybe a little bit more potential believable maybe not as high as price target we talked about before maybe it's just 244 okay now now roy is actually saying on cat i'd buy a put and this is what creates a market okay now if you take a look at this so two yeah 227 and 244 we zoom in and there is an upcoming dividend at dollar 11 and there is also an upcoming earnings right there in 428 now let's imagine the investments of james this is a bigger dollar stock and if we zoom in i want to kind of show you what we're seeing here on the chart okay when you start to see a turn up in the price the shorter term moving average goes from red to green and so it's kind of like showing you hey price is changing now what you're going to notice is the lagging moving average the 30 it notice it doesn't turn as quickly okay so sometimes people like to kind of be made aware of hey we could be turning show me and they start looking for it right and then what you're going to notice is you get across and if that probably goes up too much more you're probably going to get that lagging 30 period moving average to turn up as well if it were to close here so let's say the investor decides that they're going to go into the trade tab and they say look i want to practice like a long call vertical long call vertical is just buying a long call okay and then selling a call above that it's kind of cover call like but it just doesn't own the shares now this is kind of more of a profitability type trade it doesn't really have let's say the unlimited gain like a stock might but let's kind of use this to start with we're going to look at the may 220 and it's gonna sell the 230 okay so let's kind of take a look at kind of what the spread we actually saw you got about 25 cents between the bin mass open interest is about 1919 if the investor sells the 230 4300 contracts and now what you're going to see is a 10 wide spread 578 is what the investor can risk that's the debit 10 widespread less the debit we're really talking about 422 okay so how on earth do we come to caterpillar well when we actually did the routine of actually kind of going through let's say equity indexes not it's not just equity indexes look at interest rates look at let's say some commodity pricing we actually looked at crude oil the the spot price of it we actually looked at gold right we looked at let's say what we we mentioned gasoline we also mentioned soybeans corn right uh mel we mentioned lean hog these might give an equity investor maybe some potential trade ideas of which company could be potentially benefiting from that rising prices now that's the idea now if you take a look at this at max profit 422 max loss so let's say the investor said james i can really risk no more than 750 dollars in this case it would only be doing let's say one contract okay now if we kind of go back to the look at this roy actually says my best guess is a double top and a collapse of resistance about ready to find out roy right so now what you're gonna notice is on this you see a dollar thirty okay so now what you're gonna see is if the investment says okay they're okay with that i'm gonna send the order gonna go back and let's kind of pull this up for one now when you see a candle that is the size of my forearm op it is that a sign of potential weakness do you think that maybe influences maybe that it might break well i mean normally you might kind of see some fading right here you know what so far we don't see any fading very strong paying off a resistance matter of fact if we were to close here this is the highest close we've actually had in the last 20 to 30 days okay now remember notice we're seeing the buying happening right before the dividend and right before the earnings now remember caterpillar when you actually take a look at this if you are a commodity based company let's say you do like gold and you do copper and platinum palladium whatever silver you want that machinery asap so you can actually dig that stuff out of the ground if for example you are the farmer who is sitting on low just acres and acres of corn guess who's probably going to have some money this year to potentially upgrade their tractors maybe the farmers right if you're the farmer you're actually seeing the corn price go there you're actually looking at the soybean prices actually up near all-time highs those farmers probably have the money to upgrade on the equipment so we did the first trade of caterpillar and i like where that kind of went i think it kind of is an example of maybe a basing pattern it might kind of be something where we practice and let's kind of note this so trade number one was one contract up near the area of resistance the second is if that stock were to break out and we're going to put an alert right above that area of resistance right above right click we're going to go down to where it says create an alert and what's the alert going to be about well if it gets at or above resistance add second position question mark okay so some of you kind of want to have practice maybe on how does maybe someone get in an entry and then maybe add to the position okay so we're going to kind of put that right there that if it gets at or above resistance and it's trying to break out maybe the investor wants to add to the position now if we look at this on a weekly chart let's see what this looks like let's zoom in and this is what it looks like on the weekly chart there's your v there's your pullback and if you kind of look at this this right here is the pull this right here is the pull back which is making a higher low and it's right back up at resistance when you look at the macd on that three year weekly chart okay the weekly macd it's still positive and it's higher than where it was last week now here's the deal no one knows exactly what it's going to do right going to have to see over time what it's going to do now if we were looking at let's say caterpillar okay what other type of stock might you think might be in that space we mentioned corn you mentioned wheat we mentioned soybeans we mentioned farmers what type of equipment do they use what do we got what type of it made if you're on a farm what you look around you're thinking okay case tractors maybe ingersoll kubotas right john deere well let's take a quick quick look at john deere now i'm going to ask you a question here okay and if we look at this what would you say the trend is on the weekly chart so if i pull this chart up and i said the long term trend is what what do you see in terms of the trend now the paid money account already owns 20 shares of stock sometimes people think that if you only buy 20 shares of stock you can't make any money or lose any money but that's not true and if you actually take a look at this it kind of got above the area of resistance okay and i'm going to mark that that line right there that horizontal line about 397. and if we actually go down now to the daily chart i kind of want to talk about the breakout okay so here we are right here so the the old resistance was right at 397 40. now i want to kind of take this

frame by frame by frame okay the first day it really broke out above resistance the whole can above the resistance was 318. 321. now what i want to kind of do is show this frame by frame by frame and what you're going to notice is it's just gone kind of going up now what do you see on the right hand side here now we know when it breaks out and maybe it tries to go too high it's not an usual thing breakout higher high and maybe a little pullback and maybe a potential re-test so it's not a usual thing that it might try to pull back in the vicinity of where it broke out from so we kind of see a little red line we get a little warning that maybe might some of that momentum be dying a little bit let's take it one frame at a time we see it cross down down down now what you're going to notice is that shorter term moving average which is a 10. that kind of was a nice warning signal before the stock fell a little bit further right now remember the the lagging moving average line that's going to take longer to get the confirmation so think as far as kind of an early warning signal and the confirmation notice it didn't show both red lines until the stock had really gone down to about four about four four fourteen now it's still above resistance it's now pulled back okay when that stock is down like that might you be thinking that it might try to bounce i want to look at the bounce i want to kind of talk about where is the bounce so if we actually take a look at this what type of candle is that right there that's not perfect okay but if you look at that you might say james that's kind of more like hammer-like if you go back to this candle that's an inverted hammer you go back to this candle that's like an inverted ham three out of these four days inverted inverted hammer type candle ten inverted candles and also hammers kind of be something where it's trying to build a higher low and or a higher base okay so if we zoom in on this what you're going to notice it didn't do anything what we're looking for is when do we start to get that turn that where it goes from red to green not yet let's kind of watch and see what we got not yet ah right there now notice it kind of drifted a little bit lower it fell down near that old 397-ish area and all of a sudden right there on four seven we get that shorter-term moving average to turn green now some investors they might say i'm getting in right there and that might be more of an aggressive entry but they might be trying to get in near the support area okay now let's kind of watch and see what we see by frame so for an aggressive entry they might say james i'm buying that bounce near support okay someone that says i want more confirmation they might say james i want to kind of see that but i want to see us close above the high the low day well on the date of four eight it did close above the high of the low day the previous day being the low day now if someone said i want more confirmation well the investor might say james i want to see a cross and or i want to see the stock and actually did i want to see both of the moving averages green now what's the con about waiting for the moving average crossover what's the con about waiting for both moving average lines to turn green and i want to kind of highlight this the investor if they're talking about early entry where that line goes from red to green they might say james i'm going to get in right here now looking back you might say they're lucky they're lucky okay but some investors they try to buy closer support if we kind of look up the next step james i want to get in when that line turns green but it's also showing a close about the high the low day that'd be the next day if we talk about lagging james i want to see the moving average cross or both of those lines really turning green and that's kind of really what we've seen in the last let's say two days now even though we talked about this there's still some people that will say i don't believe it i think deer is going to go down you know i think this i think that i think this i think that whatever or we have a prior high and they call the prior high resistance and that's kind of one of my pet peeves okay uh the prior high is a potential resistance okay so if you've ever seen like a bull flag where the stock runs up in price okay so it runs up in price and then it pulls back is this prior high resistance it's potential resistance it's never gone back up and re-tested when you talk about seeing resistance you want to see that the prior high and maybe that re-test is probably about two weeks apart to really start to see is it really resistance so a prior high is exactly what it it is it's a prior high we don't know if it's resistance yet if this stock actually goes up and goes doink going to a brainy high that was just a prior high so many investors wait for the stock to go above the prior high and what they've just done is they've just bought elevated off support and they're wondering why they can't get ahead now you know okay be very careful who you listen to you hear a lot of misinformation you'll see a lot of times that they'll label this as high on the graph there's not a label on the chart that says resistance it's a high okay it's a potential resistance now if we actually go back and look at john deere this stock is even a higher price 438 we're gonna look at the exact same strategy on this but if we go back to say hey james what's the position on the shares the shares were 20 shares of stock at 3.97 it's at 438. what it's up to 800 unrealized game we go back and look at this when was it entered it was entered on may 14th and may since may march 14th and march 17th okay average price 397. now if you actually take a look at this let's kind of go back let's evaluate if we're going to go to the may expiration now by the way does someone have to go the may expiration no maybe they want to go a little bit farther out maybe they think these prices might be elevated for corn and soybeans and wheat for a little bit of time maybe they want to take a longer term viewpoint on the position okay so let's say the investor goes to the june and they say look i want to buy a long call which is just the right to buy the shares at the strike price and they want to sell the higher strike okay and when someone does this we're talking about a long call vertical and what you're going to notice is the good and the bad is well the good is whatever the investor pays for 548 that is what the maximum losses okay so that's nice the bad part about this is if if deer actually goes up to let's say 500 550 600 whatever there's only a cat gain on this trade okay and this is why some people like stock and the paid money account already owned some shares in the stock but if they said hey i want to add to the position the investor says they might say i'm going to maybe do like a long call vertical okay now notice when someone does a long call vertical we have a break even which is just 4 30 the right to buy the shares on the strike price add whatever the debit is break even 435.48 so pretty simple

where do you have the right to buy 430 and how much are you paying for that right that's where you get the break even now that's not break even today that's break even at expiration the commission is 1.30 because it's buying the call and selling the call how much money is being set aside whatever the max loss is okay 548 dollars if this is what the investor wants to do gonna send the order and so here's the biggest thing so many times in the world of investing you'll find people that will say oh yeah i know crude oil is going up yeah i saw nat go snap gas going up oh yeah i saw for example gasoline going up and you're like well great so i'm sure you're making money from that trend aren't you and the person says no i just kind of was watching the news so i think the goal of the trend investor is not to become a news reporter and tell your friends about it the goal is to actually see the trend for the investor self and say what type of trades might try to benefit potentially from those trends now how many of you know somebody like that now you know i had a good friend dwight and dwight i swear he knew everything and i asked him one time i said so are you in any of those trades and he goes no i just know about him i thought that was awkward okay let's kind of take a quick timeout maddie's question is wouldn't you say that de was in a flag until two days ago so to answer that question let's kind of start with that weekly chart and i'm gonna really zoom in here okay now sometimes i think when people talk about seeing flags it's hard for them to see it but there's if you go to where it says style and if you go to where it says chart type this is looking at candle we're going to go back to where it says hakanashi and what this does is it smooths out the price action and so if we were to zoom in on this what it does is it really shows the poles nicely which i'll draw in just a moment but boy it also shows the flags how could it be so simple sometimes if we actually go back and take a look at this the green let me draw this right here if we were to look at the pole how can you see where the bolt well the pull is the green candles where's the flat the red candles are the flat where's the pole the green candles are the pole where's the flat the flag is the red candles so if we set ask the question well don't you think that maybe uh deer broke out of that flag two days ago we we would probably say it even broke out a little earlier than that we saw the red movement we saw the shorter term moving average was red went green probably right on the date of about four nine or so and since then we've actually been going up up up we talked about the four eight four nine day being kind of early some investors like to buy closer to support second if someone says i like to see more confirmation give me a moving average crossover give me where those moving averages both turn green now even if though if they saw that does that guarantee that the stock's gonna go up no it doesn't it's just showing that the trend is building strength okay now so uh i would say many on that i think it was a little earlier okay probably on the date of about four nine now uh question from stewart is can you use the whole moving average on the five minute charts sure okay sure now i want to kind of just briefly mention this so trade example number one we actually did was caterpillar trade example number two we actually did it was john deere okay now by the way could someone maybe take a poll measurement and try to get something where it might extend it maybe get a target yeah sure now let me kind of answer another quick question so you're going to kind of see at the very top i have kind of where it says twitch 2022. when we look at charts we kind of tend to look at different charts sometimes okay so if we look at let's say uh this is d on a kind of a classic chart right exponential moving average 30 days simple go to the next chart and what you're going to see on this chart is it has let me kind of move this out of the way is it has a little green dots on the chart what are the green dots for uh those are close above the high of the low day setups go the next chart and what you're going to notice is you're going to see the same green dots but it's going to be showing you a line up top or two which is going to be showing you a 20 or 55 day high and so when we actually take a look at graphs i think it actually makes sense to sometimes see graphs in different views i don't use just one i think sometimes different looks at it maybe confirms what you're seeing okay or you just want to look at it from a different viewpoint okay there's what we talked about yesterday which is called a trend kind of a way to evaluate trend was purple kind of went up green about four days ago and if we go forward this is actually taking a look at uh kind of maybe potential stops currently this is stops over time potentially and the last one which we've been on here today was just kind of looking at a whole moving average same setting at 10 30 as what we saw before the whole moving average though is going to act like an exponential moving average matter of fact going to be a little bit more okay a peter says is there a scan to identify these maybe so what you're going to notice is if you go to the very top of my twitter page if someone said hey you know is there a way to kind of see maybe like a whole moving average cross yeah okay yeah so what you're gonna notice is right on that twitter page it says h m a x okay well what in the world does that mean well if someone said i'd like to kind of find some of these whole moving average crossovers okay well that's what that is and where could you actually see that what you're going to notice is any of the scripts that we actually look at so we know that there's different types of moving averages some more sensitive than others moving average crossover okay max moving average crossover on the weekly if you said james i'd really like to actually kind of see that whole moving average crossover on the market watchtop or the whole moving average that's on the blasted chart yeah how about it okay right there so here's here's the one thing is sometimes this has been here like some of these things we've been like maybe thinking about and it's right here so the person can kind of say i like the whole moving average and that in blue is the code for that okay good now i want to kind of talk about this second agenda item okay now if we actually said where's um i'm going to talk about the second agenda item here and what i want to do is i want to bring up a stock that has been going quite parabolic and i want to kind of talk about this and i want to kind of look at a chart like dollar tree for just a sec now as a trend trader have you ever had stocks like go parabolic and you said yourself i don't want to give it back now i don't want to spend a ton of time on this but i i mentioned this yesterday okay but i want to kind of talk about this from a different viewpoint okay dollar tree has been one of the positions that if you look in the portfolio it has been well quite strong to say the least let me close these down this has been a stock position now we know that when as inflation has been going up consumers i don't care if you have money you don't have money you have a little bit of money people typically want to try to save some money now inflation might cause people to kind of be more price sensitive they might try to go to stores like dollar tree dollar general they might try to go to supermarkets maybe like a win coat whatever uh where maybe you can get maybe more of a potential bargain that was the whole idea behind dollar tree and actually what you're going to see is that stock was purchased on 218 and the stock was if you kind of look at this the price was at 140. now if you see the price at 140 this is actually something that was probably an old short put that where the investor was assigned to buy okay in this case being the paint money count so what you're going to notice is it was on the expiration of february the old strike price was the purchase price of the stock that price does not include what the premium was and this is why we talked about catching bloods why would someone sell cash secure puts if they don't want to really buy the stock it got put the shares and what you're going to notice is the stock actually went up okay got the premium and got the stock appreciation now what i want to say on this i want to take a look at this from a different viewpoint okay so when we get these stocks and this has gone quite vertical sometimes we actually see like that on this chart there was like an old resistance level on the chart and if i were to actually look at this i'm going to back off for just a moment but if i were to actually look at this and if we were going to kind of draw like a resistance for we're getting more touches you're going to kind of notice as i zoom in now i didn't draw from here because that was only touch once or twice i drew the resistance and i started drawing the fibs from 142. now how on earth does this come down to trading the trend well we know that sometimes when you get a trend that breaks out the fibonacci extension lines might be a potential target and what you'll see is it went up to 161 and it kind of consolidated for a little bit got above it and kind of bounced on it two three times ran up again pulled back guess what it did it bounced right on that line okay well now what you're going to notice is it now has gone up to the 261 extension so kind of now if the investor said james i want to try to profit could this be maybe an area where the investor might say james i i actually want to profit take here or i might want to try to protect i also want to kind of have your eyes focus on the last six or so days when you get a full flag here up two three four five six seven days in a row doing straight up when you look at a typical bull flag pole would you say that maybe a sweet spot it's not always this case but would you say that it's kind of normal that or maybe on average not always then it might be five to seven days up and maybe a couple days back if the investor is trying to put on protection maybe they're trying to put on the protection as the stock is kind of maybe in that top of that five to seven day run and they're trying to put on the protection at a resistance area before the stock actually pulls back in a flag does that make sense so the reason why we're actually bringing up dollar trees we're going to actually go kind of consider putting on a little protection for dollar tree now when we actually talk about protection we're talking about the paid money account has 100 shares and option number one is maybe the investor says you know james i just want to sell the call selling the call by itself is not it's some protection but it's limited in the form of just the premium if the investor said you know what i want to really sell the 175 and i want to really buy the 165 they're coloring it and they're trying to hold on to more of those games okay now if the investor said i want to sell the 175 which is higher than where the stock is now and use that premium to come over and buy the puts what you're going to notice is it's just adding a caller now i'm going to make mention of one more example after this this will be fast but the investor is putting on protection when that stock is up near an area of resistance resistance can also be a price pattern measurement it could be a fibonacci like we're talking about right now as well sure and what you're going to notice is this still has a net credit here so this makes up to potentially 175 on top add 182 so now what you're going to notice is as stock investors we say well i'm going to set a a stop i'm going to do a trail stop so i can get out locking my profit look you can't really say that because a stop if someone were to set it stop doesn't lock in anything because you don't know where you're going to sell it okay but if the investor actually buys the put it actually gives them the right to sell the shares at 165 which tells us there can be profit they know where they can sell how do you know that because they bought the right to do so people don't understand that they don't understand it and that's why they a lot of times they're well they give back profits as fast as they actually made them okay now if you like that have at it but if you actually say that you say i don't like that this is why investors consider using maybe options whether they buy the puts or they call the position which isn't but too and they're doing that to try to lock in contractually the right to sell now the last one is if you go to confirm and send the paid one account is going to put that right in the stock section and send that order now the one other one i want to bring up just briefly i'm going to go to questions is rs now rs i want to bring this up because the stock now would you say that maybe rs is back up near an area of resistance yes or no would you say that rs is up back up near an area of resistance and now kind of starting to get in the window of earnings what would you say now we know that steel's been quite strong because if you look at the industry group list that i posted from tuesday you know that steel's actually been one of the stronger areas if the investment says james the stock has swung back to the upside and now it's kind of right back in that area of resistance is maybe this a time to consider a little protection now i'm going to kind of show you this because sometimes people don't understand buying the puts even though they buy protection on their house and a whole bunch of other things they already do it already but they've never done on stocks but let's say the investor said james i'll do the cover call what's the position it's a hundred shares of the stock okay bullish and it has about fifteen hundred dollars of gains unrealized games so far but let's say the investor says look james i just wanna sell the call okay and let's say the investor says i want to sell the call and i maybe want to actually sell the call with a delta of 30 to 40. the one

in that range is really the 200 strike so this means that the investor could still go from 194 up to 200 but then they got to add what the premium now some investors they don't like to buy the put that can be a whole discussion by itself okay single cell minus one because that has a hundred shares obligated to sell the shares at 200 from now to expiration but that premium if you got in between the bid and the ask the mid price is let's say 30. confirm and said this is a covered call okay so the investor really gets up to the 200 add the premium so it's like making up to a potential 205 30 okay so that is still ten dollars higher than where it is right now do you know what we've actually seen over time is when stocks go up and maybe the stock is up near an area of resistance investors have a tendency to get greedy they they get greedy they think everything on their portfolio is just going to go straight through resistance like a hot butter okay a knife through hot butter and they just kind of maybe sometimes are too optimistic so sometimes when you're actually looking at let's say a trade you say wow you know rs has an implied volatility of 35 500 worth of premium for 36 days and still have 10 dollars upside right now that premium of five can also be a reduction in average price if the stock we're going to decline if that stock were to go sideways there's still potential premium of five dollars so sometimes it makes sense to kind of evaluate can the investor look for trades like this that maybe they already own stock on already why does the paid money count why did they do an example on steel that's been one of the stronger industry groups and now when that stock is swinging back up to an area of resistance we did call it resistance because it's touched this area multiple times and it's also getting inside that window of about 10 days or so until earnings and that might be kind of two reasons why the investor might consider trying to apply an income type of strategy or a protection type strategy okay now on this one i'm just going to show an example of a cover call okay uh so on that one you know it's just a classic cover call long the shares of the stock with a short call at the 200. now i'm out of my time here today i think as a takeaway i'd like you to kind of think about a routine for yourself so today when we started out i kind of showed some of the equity indexes talked about interest rates talked about let's say looking at crude gold talked about looking at even some of these uh type of crops these could be potential equity ideas just like an investor was looking at sectors now you could actually look at energy itself you'd look at base materials itself and probably see something very similar to what we actually saw on those indexes as well now i'm out of my time here today but i want to thank you so much for your comments and your participation also i want to give us a quick reminder that with what we discussed it was done for example illustrated purposes only the paper trays that were done here today were caterpillar john deere and also the other ones that were actually done were as well we did the protection example on dollar tree and also we talked about using fibs and last but not least maybe taking a moment with a reliant seal maybe trying to do a cover call right up near an area of resistance into the earnings and try not to use the premium to maybe kind of build some other ways in which that position could benefit okay so i'm out of my time here today tomorrow the market is closed and i just want to give you a heads up on that thank you so much for your comments and your participation thank you mike fairborne as well also remember if you like today's session reach out smash that thumbs up button you can also subscribe to the trader talk channel that way you can see all of our videos and have that content right on your mobile device so with that said thank you so much take care bye

2022-04-16 04:16

Other news