Searching for Stronger Trends | Technically Speaking: Trading the Trend
[Music] hello and welcome to technically speaking trading the trend weeks to months my name is james boyd we welcome you here today got my good friend michael fairborne in the chat you can follow him or any instructor on twitter we do post educational content there daily we'd like to welcome bill amy pretty in tennessee okay my wife was actually you know about live about 20 miles from the border so to die tennessee's good place fess hello to you bill good morning uh good morning to you ray rk dom vijay len grace and many others good morning and good afternoon to you but just real quick this class is on really talking about trading the trends weeks to months so we might spot out maybe kind of some short-term entry setups or maybe where some short-term exit signals might be but uh we're going to be talking about dominant trends where's the longer term trends whether they're bullish whether they're neutral whether they're bears got a number of examples we'll actually take a look at here today so let's go ahead and hop right in now remember what we talked about here today it is for educational purposes only not investment advice recommendation of any security strategy or account type options are not suitable for all investors also remember that short options can be assigned at any time regardless of the in the money amount also uh with that an in the money option has a higher risk of being assigned early okay that means the investors can be the buyer of the shares at the strike price and also remember that in order to demonstrate the function of the platform we will need to use actual symbols td ameritrade does not make any recommendations determine suitability of any security strategy for individual traders any investment decision you make in your self-directed account solely your responsibility and also remember when we talk about paper trading we will be using a paper money platform and also remember the options greeks as well now remember we're going to focus on really three things here today i'm not going to take a lot of time and actually talk about market posture because i don't think it's really changed that much i'm only going to really bring up maybe two indexes to focus on maybe to kind of get a sense of what's happening and then we're going to spend really probably 80 of the time talking about stock and option examples on stocks that are trending and then what we're going to do is we're going to look at about you know the last maybe 10 minutes or so on some past examples on maybe some trade adjustment and or management so let's go ahead and hop right in i also want to kind of just invite you that if you have questions okay mike is in the chat i'm going to be looking at the chat as well i already see a question i'm going to intertwine that in my in my first kind of comment here on the dow so feel free to ask questions now there was a question from vijay regarding the fed is that she there was i believe the anticipation was the fed maybe could raise the rates by 50 basis points a half percent or three quarters of a percent but now they're only talking about 25 based upon what's happening in russian ukraine vj's question was is the market actually taking that as bad well i i think anytime you actually have it where you could the inves corporations could actually borrow money potentially for less i don't think that's a bad thing and i do think the market is actually finding that a little helpful and that's kind of when russia and ukraine kind of had that still ongoing situation uh would the fed still be as hawkish to really raise the rates more aggressively okay now i'm not going to get in whether that's right or wrong but if that's really true that they're not going to be as aggressive to raise the rates maybe the market takes that favorably maybe that's actually maybe why the dow is trying to come up a little bit now when we say come up a little bit the last about week or so the index has really kind of been more neutral it's come awful low but you go back to where it was let's say i'm 222. it's pretty much flat so you can understand in the current market why some investors are doing neutral strategies some investors might be looking for some bearish opportunity which there are some but then other investors are saying look i'm going to try to buy the dip in some of these stocks and try to look and see if they can't maybe play long positions now when we also take a look at volatility my last comment here before we look at our first example when you look at the volatility and i said this yesterday the vix is really being sticky what i mean by that is you know it's usually when we see the vix go up it kind of pops to the upside and then fades this is kind of making maybe some investors think that maybe the investors aren't just buying puts and then that's it maybe those investors are buying more of those puts over time and maybe they're rolling those puts the demand is actually high hence the vix is actually staying high so this is actually something to kind of continue to watch if the vix is higher it's harder to trend trade it's harder to swing trade okay because you've got more abnormal type moves these are not like half percent moves in the index they're probably at one percent fluctuation one and a half percent fluctuation on the indexes volatility there okay now what i want to do is i want to bring up a number of stocks okay but before i do are there any questions that you have on the indexes hello amanda walter el diego greetings to hobie scott uh jake seattle michelle there any questions on the indexes now if you have questions on the indexes or sectors let me know we'll come back and actually take a look at those i asked the question takes a little moment to get a response but let me know let's take a look at our first kind of example here today so first off i want to kind of just mention we kind of talked about the last two days really about crude oil and how it's gone up quite a bit and i want to kind of maybe first take a look at let's say this i want to kind of look at two stocks which would be unp and csx now first off if someone asked me james what is the easiest way to find trend i would just tell someone to look at the year-to-date percentage return when you look at the year to date percentage return that's going to give you a gauge of trend the other way you could actually find trends is look for stocks making let's say 20 or 55 day highs if the stock is trending up it should probably be hitting one of those thresholds a 20-day higher 55-day high if someone just did that year-to-date percentage appreciation 20-55-day high they could probably find the trends every example i'm going to show you here today came off those those really two main criteria three if you actually kind of used a you know the 20 and the 55 is really a breakout criteria right the year today is just looking at performance every example i'm going to show you here today came off those f if you want say three criteria that's it now let's take a look at ump now we know it actually has crude oil has actually gone up okay shipping stuff might become more expensive through diesel trucks but i'm going to show you diesel trucks actually getting a little lift as well okay if we actually take a look at this chart let's start with a three year weekly okay when we talk about trading the trend weeks to months and we look at the three year weekly chart this has been a chart that has actually been quite strong if we actually looked at the 10 week moving average the blue line it hasn't even crossed down below the red line yet okay this is one of the few stocks you'd actually say in terms of relative strength it stayed up there now the one thing as i was kind of thinking about here today is when someone trades the trend weeks to months is it just about technicals or could there some be something here fundamentally that's causing the stock to stay elevated or make higher support levels over time now the stock rallied to the upside and then what you're going to notice is it kind of just stayed up it created a higher base of support and what i want you to notice is in this case is 237 really became like a new level of support and then just today okay remember i said that we found these by just looking at let's say what are some stocks they're really making a 20 55 day high this would come up on that criteria and there it is now we know that when a stock breaks out it doesn't mean that oh yeah 253 that's the line okay it's gonna stay above that would like to to stay above that we don't know if that's really support level the support level yet now when you look at ump the idea is if we're kind of talking about a short term and i know some of you like to do short term i'm gonna speak to it but if we were to look at this from two to two different measurements kind of measure the width of this channel that's about 15 adding 15 on top of 253 is going to give a shorter term target maybe about 268. if someone said james i'm not really trading the shorter term type of trend i was actually kind of thinking about maybe is this maybe a bull flag now is anyone else thinking that maybe this could have been the start of the poll where rallied entered the flag which is the consolidation anyone else thinking that now here's the deal what i want to kind of look at is if we kind of use fibonacci okay now if we look at this if i were to go back and say geez this move where we kind of had resistance down to really where that low that double bottom area is what you're going to kind of notice is if the investor's thinking hey this is breaking out they might use fibonacci to really get the price target now in october i'm going to take my wife to italy and on the last day before we fly home the day before we fly home you better believe i'm going to pisa and i'm going to have my wife she's never been over there i'm gonna have my wife stand in front of lee art leonardo fibonacci's statue she'll probably cry as much as i as i did first time when i actually saw that statue and i thought about the fibonacci retracements okay that's the only thing i'm joking okay it's really there now if we take a look at this what i want you to see is if we were going to talk about extension target and try to trade the trend weeks to months someone might have a a short-term target 268 but someone who's trying to trade this maybe for a longer term time frame if it were to go up might be 289 okay now what i want to kind of also mention okay so the paperMoney account you someone might look at this and say oh james it's fainted off it's high it's bearish well it's not necessarily right the first thing has to break out right it made a higher high when it fades back like that the investor might say wow it's actually a little closer to support so what we're going to do here is we're going to actually right click in this example in the paperMoney account go buy custom it's going to go with oco bracket now when the paperMoney account does this i want to kind of focus on setting now as a trend trader it is okay to also have a target but what you're going to notice is as far as a percentage upside move it's probably going to be higher okay so it's not going to set the target let's say that 260 whatever number it's going to set it at the higher number 289 23. now if we actually were to take a look at the downside okay if we were to look at this and let me kind of take this off just whoops let me actually go delete i'm going to take any of these lines off so we can just see only the price and if i zoomed in on this and said okay where are those lines as far as potential support i think setting this the stop underneath 253 i think that's maybe wishful thinking wishful in the fact that you think that the stock is going to stay above there maybe some people aren't that wishful in terms of their thinking then maybe they say james i'm going to set that stop underneath maybe where the moving average is now what that really does is it is it sets the stop lower it makes the risk per share higher okay now what i want to do is i want to kind of just just briefly and i had some questions on this so i want to kind of address this so i'm going to kind of write this down on a sheet of paper so we're crystal clear we're talking about the entry price uh and i'm going to bring this up but i'm going to need to look at the chart here 258 81.
we got a support that support level is about 249 37. if we're talking about the stop we're talking about that 239 okay and if the investor were to say stop three percent below there let me slide this over so you can see that's the entry price we're talking about this is the support the line we already have drawn the stop is just taking that 249 less three percent remember when the investor actually does that the risk per share is a little higher okay so that risk per share is a little higher and if we actually do this i'm now going to actually go ahead and bring this up if i can you know why that's actually doing that but i'm going to actually go ahead and actually put that look at what the risk per share is and that risk per share is really 16 okay now let me kind of just address this because a lot of you have asked asked about risk management okay in a volatile market if you're seeing more swinging it is okay okay to actually say i'm not going to risk as much that's okay banks financial institutions they do that too if they used to actually give people a higher credit limit in times where they think the economy might struggle they start cutting the credit lines they don't cut them completely but they might tailor them back based upon economic conditions now if the investor said james historically the risk for each position let's say it was twenty five hundred dollars okay but let's say the investor said you know james i i'm not sure if i want to risk that much okay so the investor says i don't want to do actually 2 500 let's just kind of say risk for volatility and let's say the investor said james i'm willing to do half of that number okay so what the investor is saying is james these trends don't tend to be really as stable and the investor is really saying i want to take less risk in other words buy less shares so if we looked at this and said okay this is half of what the normal risk would be 1250 what is the risk now per share well we just got to take one number divided by the other all we're going to do is take 1250 which is the acceptable risk and divide that really by the risk per share and what is that going to do it's going to give us the number of shares okay now as investors some people can actually hurt themselves when they don't know about position sizing when they don't know that it's okay to kind of cut the position size based upon volatility conditions it's okay so i just kind of want to go back over that because i know we started out the year really hammering that hard but this is kind of just that kind of repeated step of entry price support stop risk per share these are stocks technical analysis one-on-one it's not even in the second class it's in the first class so if we take a look at this we're going to go back to the chart we're going to right click on that buy custom the nice thing about that it kind of gives us a framework of due diligence and if we look at this that target was i believe was 289 double check me on that and then the other number we talked about the stop was 241.89 okay now is this correct well it's not because that was a hundred shares now what you're gonna see in this case is we're gonna go ahead and change that to plus 100 to 73 shares okay now that's properly position size and this would let's say example given we did this really in the ira account the margin account doesn't have that much money left so it's going to go to confirm and send it's going to change this not to the margin but to the ira account now if the account says okay that's what it wants to do it's going to send it okay the target price at sell at that price or higher the stop is saying sell at that price or lower okay and there's no commission but there is capital to buy the shares now if the investor said okay now what you're going to notice is it's trying to buy those shares right here now what i want to do just real quick okay is see if there's any questions now vj talks about you know mention is i really like the idea of cutting down the position size based upon the current volatility guys guess uh if you see that there's maybe an inconsistent trend there's more choppiness in the price let me show the next example now i'm not going to talk about it from this stock but i'm going to talk about it from this area okay now there's a stock which you've never heard of before called united healthcare okay now what you're going to notice is it goes up and it goes down it goes up and it goes down and when you look at this you're thinking well dad gummy what's the trend well in the shorter term there are trends and that's the point in shorter term if you're trying to trade the trend longer term the investors may be long let's say unh they might have a very wide fluctuation this is fluctuating 50 dollars okay down up down up if they can't really see a dominant trend where it's kind of more of an up trending line they might say i'm gonna chop the position because if that investor kind of goes through this up and down that could cause the capital to fluctuate quite a lot for the individual position but also the portfolio now i'm going to bring this up and i'm going to kind of talk about trade example number uh the stock i was actually going to look at is amtm now i want to kind of bring this up because when we take a look at and thumb here's the trend now this stock what sector is it in and i want to go to where we can bring it up if i go to analyze we're going to go to where it says fundamentals i click on the fundamentals it's now going to say it's in the healthcare now guys and gals i don't think this is a bad thing to do in our current market investors have been really trying to weigh what has value momentum stocks have been taken out behind the barn well and many of them haven't come back okay investors are really trying to say which companies really have continuance of cash flows revenue earnings per share etc they're dominating the industry group okay now if we go i just want to bring up one thing that i think is important because investors obviously if they buy the stock they have a forward outlook of what they think the stock could do they don't know if it's going to do it but they at least have an idea of maybe what that what's built into the train now if we go to where it says the street we're actually going to go to where it says download now these are four analyst firms these are not td ameritrade these are their firms and they actually give for example really what they think the company could do why am i doing this whenever you bring up a stock it's not a bad idea to kind of scroll down a little bit and it's not a bad idea to kind of get a sense of what is their revenue growth and their margins but the biggest thing i'm trying to see out of this is what are some of the other companies in the space because if you see one stock going up it's probably not just that one stock and if you come across a stock that's high priced but you like the trend you might say well could i go look at maybe another stock like 17 to actually see if it's actually upward trending maybe it's the same type of trend but just at a lower price point the other thing i want to bring up here just real quick is if you're a fan of seeing the revenue growth and the earnings yield i know someone who might look at that okay so just make sure you're taking a look at that the street is also going to have excuse me the cfra is going to have actually a forward look as far as what they think they can do with revenue and earnings for share guys and gals that plays into the trend it's not all about candlesticks it's not all about uh volume and price patterns okay let's not kid ourselves here now if we go back to the chart i'm going to bring this up now this is going to really be for the ira account the bigger dollar account but i don't care if it's a 470 stock or 70 stock the position sizing is the position sizing so if i looked at this kind of setup this kind of also still has like a flag-like type setup to it got kind of a triple top one two three and you're gonna kind of see the on the bottom like a triple bottom and then you already know where i'm gonna draw i'm really drawing like something like this now why on earth would someone be looking at something like this well they might be thinking well couldn't that be like a flag couldn't that be where the stock rallied to the upside and the flat is that sideways consolidation now if that stock broke out of resistance okay well what might potentially happen what might try to happen well what you're going to notice is the width of the channel is about 37 the idea is cook if that stock actually broke out could that stock for example try to travel up the width of that channel now i said this the other day okay with covid numbers declining as of right now okay they have been declining you know a lot of these companies let's say like anthem or united healthcare etc they haven't been able to really kind of take patients that to do elective surgeries my wife she was diagnosed with cancer she had a major surgery and then couldn't do the other one because of coving it's almost a year now and still hasn't ended the surgery but now with those coping numbers actually going down that number two surgery number three they're at least being able to start to schedule that stuff those elective surgeries are huge for these companies because those actually might be those higher ticket type surges not that maybe you'd want to get it but at least right the patients could actually get the care fine now if we take a look at this the paper money account is going to set that target at the 506. okay now what you're going to notice is the investor might say well james i'm going to measure this a little different way maybe the investor says you know what i'm going to take this poll and i'm going to add it to the bottom of that flag so let's get two measurements here okay the paper money account we talked about the first measurement which is the channel width and the second part of that if we actually go to where it says activate what i'm going to do is it's going to drag it over now if i were to do this what you're going to notice is that pole i just want to verify that can't be the same because there's a little angle here i want to measure that again that's about 73.
so it's about 73 dollars of that pull if this went from let's say support add 73 god that's i just want to make sure it's going to get to the same target okay so we're talking about 506 so here we go paperMoney account is going to right click now someone might look at this and say james but isn't the investor buying at resistance and i think that's a fair comment you could absolutely say someone's buying it resistance but it's what the idea is that could the stock break out good now the one thing is when someone buys at the top of resistance is someone going to let the stock come all the way back down and then get stomped out well maybe not maybe the investor says james i'm going to set my stop a little closer so that way if it gets stomped out uh they're getting out earlier than just selling out at the bottom of the channel so let's kind of talk about some customizing here so let's say the investor let's bring up our little sheet of paper here okay that we made on the spot let's say the stock's at 470 71. let's say the investor said james i'm kind of seeing that support let's say they said they want to set that stop at let's say 457 which is where the 10 period moving average is 57. let's just go flat now here's the deal if the investor sets a stop like three percent down et cetera that's going to be closer to the support so the investor is like selling potentially at support is that a great place to sell at support oh maybe not so maybe the investor says i'm not gonna do like three percent below 457. maybe the investment says james i'm going to run a little tighter stop and just take it maybe less one percent okay so what the idea is if the trade isn't going to work they want that investor saying look i want to admit sooner that they're wrong okay and that way that stock the stock could try to sell at 452 and not ride it all the way back down to the bottom of the channel are you with me on that how many of you have actually said i said a stop blow support i reviewed where the exit was and the exit was right at support that's why sometimes investors will tighten those stops especially on these type of breakout trades now when we look at the risk per share 470 stop is it truly a risk per share of actually 18 theoretically why do you say theoretically because we don't know where the position is going to exit the stop is a market order now we've got to ask ourselves the question is the paper money account willing to risk a higher amount or do you actually want to risk a lower amount okay now let's say the investor said james i was kind of thinking like the 1250 maybe taking half the risk okay so if it did that it would be doing in this case 68 shares okay so we don't need a dollar sign there because it's not a dollar sign it's just going to be 68 shares okay there it is so if the paperMoney account does this it's going to actually set this up it's going to take this add the 68.
okay there well not 58 68 let's put it back okay got a different keyboard today it's throwing me off 68 let's go ahead there we go snap that there we go 68 the target price okay we talked about that what was the number there let's kind of scroll that and that was really at 506. now what you're going to see is now a lot of you said lower amount okay that's what the paper money count did as well that's the target price day to gtc now as far as the stop let's kind of go back to that little sheet of paper here and what you're going to notice is that stop was at 4 52 43 okay so 452 33 double check 452 43 okay not a big difference okay there it is now the stop and the target good till canceled 68 shares it's going to be in the ira account now what you're going to notice is if we take a look at this if we go confirm and send entry target stop remember the stop doesn't guarantee that price the stock opens up below that could fill at a lower price but the commission is zero that capital there now this is the other thing that people have asked about which is kind of reviewing kind of the risk management the position sizing so when we look at this and we said okay how much is it to buy the shares well it's 31 000 okay thirty one thousand dollars eight seventy nine on a portfolio that's about nine hundred eighty three thousand dollars it's three point two percent of the capital so this position think of it like a pie is only three percent of the capital of the portfolio now if this position lost the 12.50 if it lost it on this portfolio of 983 it would be down a tenth of one percent so not really that big now this kind of says why is the position size only three percent why is that well it's because the paper money account we kind of talked about maybe lowering the risk per trade okay and that's why normally it would be probably each position would be about maybe example given six percent now what i want to kind of do is i want to kind of pause and i just want to see if there's any questions so let's just kind of have a come to james and mike meeting right now everyone gather around hold on hold on now if we take a look at thomas thomas was actually saying i was thinking in terms of aviv and johnson johnson being more drugs versus anthem and unh well funny you should mention that okay if we were to actually go back and actually take a look at let's say stocks like abby v abby v has also been the one of those that has been going back back back gone okay it's had a nice trend now this is what's dangerous about just kind of painting everything with the same brush and saying there's there's there's nothing going up okay there's a little saying in the market that says there's always a bull market somewhere right even when stocks go down the money is typically flowing somewhere abby v if we kind of take a look at go to analyze go back to fundamentals if we actually said hey what does abbyv do it's it's healthcare okay but you're going to notice it's a research-based biopharmaceutical company okay and so yeah is that different than you and ancient anthem you better believe it okay now we're talking about a biopharma company okay now yeah campfire here we come now the comment so so thomas i agree with you okay the other thing is i'm gonna also throw in another stock that the paperMoney account did the other day which was lily and if you look at lily the idea with lily is that was a stock that kind of fell down now you've heard me say the word channel a couple of times here man these channels are kind of interesting because in the previous examples we saw the stock go up and then it channeled sideways okay i'll flip that upside down this is actually where the stock went down shield after the drop and it's trying to reverse the upside so when you look at let's say a stock for example like lily it's in the uh drug manufacturing company and again when you bring up something let's say like unh how is it shown well what you're going to notice is it says diversified healthcare company four segments united healthcare optum health optum site you're going to actually see we don't see anything that says biopharma so thomas i agree with you they're not the same okay now the other thing i want to kind of just say just real quick is hf question which is regarding okay where did the paperMoney account come up with that 2500 dollar well the 2500 was with the idea that the paperMoney account was willing to risk a quarter of one percent on each trade so what does that mean well if this portfolio started out the year at one million dollars well what you're going to notice is in this case and let me kind of put those little commas in there there it is 1 million well what you're going to notice is 2500. of 1 million well is really a quarter of 1 that's where it's getting that number now let's kind of go to the other question so i got thomas question and an hf question uh vj's question is can you give the example of pyramiding for trend trades sure now the one of the things let's kind of go back to this and maybe let's kind of let's kind of use lily as an example okay now if we were to look at lily the first entry okay the first entry we're gonna go to trade and what you're gonna notice is what type of trade is lily well the lilly trade was in an option trade a long call and a short put we know that as a long synthetic now what some investors really do is they'll actually say hey james and i'm going to kind of use the sheet of paper to answer this question so let's say entry number one okay this was really a bo breakout trade or we could actually say bounce when some investors talk about adding two positions assuming they don't have a full position they also might look at what's called the atr and in this case what i'm going to do is let's add that the atr is really showing the volatility of the stock expressed in a dollar amount so all we're going to do is going to go right to the test tube we're actually going to actually go back and say okay where's the atr double click on that and this is the average true range of the stock and it looks at really the low to the high and says how much is the stock really fluctuating now let's say in the first example of lily let's see the first example of an entry was right about the price of 253 55. that was their first entry now what some investors actually do is they'll say okay i wanted i want to know what the atr is okay so the first entry entry number one was 253 33 and they'll say look i want to go up if that stock goes up by another atr above the first entry price let me kind of write that so the entry price was 253 33. add the atr and this is actually going to be the potential second entry entry number two so this is where someone is pyramiding or scaling into the position well let's kind of go fill this out the atr on the bottom if we put our cursor right where it is now that stock fluctuates on average about six dollars and 26 cents now if the investor said you know what james i'm going to kind of go back and look at this let's say that atr was six dollars and 26 cents what could be the next potential entry if we used one atr well if the first entry was 253 33 add one atr the second entry if we're just kind of using this as our first example here it would really be about 259 59. that james doesn't have to be one
atr no some investors like to get in a little early okay they might say i'm going to take half of the atr so 253 33 was hypothetically the first entry we said what is the atr of the stock 626 we have those two numbers together we said the next entry is going to be 259.59 but james the stock is not yet at 259.59 well if we look at the high it went to two it went to 259.58 so the paper money account what it could do is they could say you know what it's going to right click go buy custom and now just go with stop but in this case we're gonna go with bracket and now when the investment says i want the stock to go to this price or higher what is that called well it's called a buy stop buy the stock if it goes to this price or higher okay so this is not going to be a limit it's a stop it's a day to a gtc now could the investor still use maybe this kind of level down here as far as the stock yeah sure uh 248 47. understand that
it has gotten above that stayed above that haven't really had a pullback yet but that might kind of be the closest maybe the investor might consider in setting a stop now if we were to set a stop okay and looking at that risk per share let me actually go back i got to type that in 248 47. it's going to give a stop at about 240 well i got to change that because we did that last example saying a little tighter if we looked at that it would be 241 okay so where is it getting that it's just taking that 248.47 area less three percent and now what you're going to notice is the investor could say okay how many positions do they want to add well the first position let's say hypothetically was 50 shares the second position is not typically going to be as many shares because the stock went up it might only be 48 shares and why is it lower well because the stock price is higher and if the stock price is higher the position size should typically be lower the only thing that could probably offset that is if someone may be artificially set a stop really tight now the other thing is if we went back and said okay what is a potential target well we talked about kind of maybe could we don't know could that stop trying to back up to 248 now remember as a trend trader the trend trader does not have to be blind to where maybe they might ask the question say if you look at this chart where would you anticipate sellers to try to sell now if you've ever sold you didn't blame yourself on the stock market when the stock did went down right but when the stock of the market goes down and that investor didn't sell they're mad at the world they're saying those bad people that sold right that's how it feels right but when when the other investor says it's fine that i saw but other people should have let me know okay doesn't happen like that so if the investor we're gonna say james i'm gonna set that target about 278 48 there you go okay now let's kind of just let's kind of re-huddle a little bit but the questions i was getting those three questions which we hit all of them which is kind of going back to these health care stocks okay vj's question was i wonder if you're already in a stock and maybe the investor maybe wants to add to the position wait why doesn't someone just get in the whole position well if someone is saying james the market is a little bit more volatile and i want to confirm that that stock is really breaking out and staying okay at least just showing more signs of staying above support they might not want to have all of their capital in based on one day and time okay it makes sense i mean if you were an investor and you were going to kind of use your capital for whatever you're probably not going to take 100 of your cash holdings or your cash and plow it all in based upon what happens in a day that's why investors like to kind of sprinkle capital over time let the trends kind of evolve and show themselves that the stock is going up that it's holding above support etc now let's kind of go back just real quick to questions just real quick and see if i missed anything okay now the question is when candles are big seems like the atr's high well that that might be true so if you go back to let's say the date like something like on that the atr uh by the way let me actually go back to the chart so you can see that on that big day right there the big candle plus the gap yeah the atr went up a lot okay that might be a circumstance where you say look given that gap in the chart and based upon the size of the candle maybe the investor says i'm going to cut the atr in half because that was an abnormal move this was not only a large candle but it also had a pretty big gap in there as well okay the other comment is is there a divergence in as well it's not unusual that if you're starting to see one touch to touch three times if you start seeing double triple quad bottoms okay there's a really good chance you're starting to see a matty divergence now if i were to bring up a chart with a macd on it where is the stinking divergence well let's take a look at this okay if we look at this what you're going to notice is on the bottom and then some people struggle to kind of see this so i want to kind of zero in on this if we were to look at this and kind of say let's see what we got the matthew at the slowest point was here and then it was actually that again it was the macd was there through here the price is lower that's that's a classic divergence price is going down but the macd is not going down as much now where it does get more interesting where you can start to see it more is when the price makes a lower low again but then when you look down the bottom you're like wait how come the macd isn't going down as far it's because the sellers are they're they are able to get the price down but they're really the thrust of the selling pressure they're not really able to kind of keep it down and if they are if that price does drop the bearish momentum is declining and it tends to do that at sport level now when that stock actually runs up and then pulls back let's circle this it's kind of double bottoming and guess what the macd was doing it barely went down stock actually goes up again pulls back triple bottom one two three count them up and guess what the macd was doing damn gunman the macd wasn't even red now if you take a look at this the macd predominantly was staying above the zero line no who cares well someone who actually knows how to look at the macd they might say hey there might be an increasing chance of a little breakup resistance and they might be looking for that breakout so when you start to see these basing patterns with double bottoms triple bottoms accompanying with that might be like a classic macky divergence this one took a while but i think from about let's say about the month here it had about a month where it started to set up kind of a a base the base was kind of confirmed by the osler or the macd and then really the last two days the really stock broke out now if you kind of go back to really kind of the the comment which is how could the investor add to the position well what we talked about is what was entry number one the investor might use atr as a filter to say look i'm not going to get in until it goes up one atr above and beyond where the first entry was and i'm not saying that you have to do one atr you might say james based upon my practice that i've done i like half of an atr it's the same mechanics just different parameter that's it okay but that's how some investors do it the reason why they use atr is every stock is different in terms of the volatility walmart doesn't move us let's say as much as amazon okay tesla loses moods a lot more than let's say citigroup so the atr's nice because it's stock specific okay now i'm out of my time here today and so i i gotta wrap it up there but today what we want to kind of talk about is market posture we actually said that for example when you take it with a dow dow actually trying to get a little reversal here we talked about for example stocks like ump we actually really kind of heavily really talked about uh healthcare area we talked about anthem united healthcare brought up lily brought up abbyv so if we kind of said sector focus it might have really been more kind of healthcare as our trend trading examples as we talked about these type of trends we actually brought up kind of using channel with measuring techniques using fibonaccis to kind of get a gauge of maybe where those targets could be we also re-emphasize for example kind of going back and really kind of talking about position sizing and when the investor might kind of do adjustments okay sometimes as an investor and as a person the person could be their own worst enemy and understanding when the investor might kind of scale back based upon vulnerability volatility conditions it's an option considering now remember with what we discussed here today it was done for example illustrative purposes only these were paperMoney trades in a paper money account we'll follow them through and see actually how they do also remember that when we talk about examples uh some of the examples we talked most of them were stocks that might not always be the case understand if you trade options they're not suitable for all investors i want to say thank you for all your comments and your participation thank you mike fairborne for answering those questions in chat and with that said i will be on twitter throughout let's say today and tomorrow i'll be in all next week and so uh it's always great to actually meet on thursday and talk about trend trading trading that trend weeks to months with that said thank you
2022-03-06 20:33
