Stocks Nearing Resistance? | Technically Speaking: Trading the Trend
[Music] [Music] hello and welcome to technic speaking trading the trend weeks to months my name is james boyd welcome we'd like to welcome julius chadwell sean scott vijay wrong barat welcome back dom gi chris vj and many others all right and also george from florida now again this topic is really on trading the trend weeks to months a lot to actually talk about here today there's been some volatility in the market fedron pal talked about 50 basis points is in order okay or at least maybe that's the plan there's also been nine rate hikes actually planned and yeah nine so the market is trying to absorb a lot right now as far as cost equity rising we'll talk about that now also with this in the chat we also have my good friend michael fairborne with us in the chat so if you have some questions if you actually see m fairborn in the chat just know he's a fellow instructor and you can find him or myself on twitter we do post educational content there daily but just real quick as we're getting started remember that the content is intended for educational informational purposes only on investment advice recommendations of any security strategy or account type also remember that options are not suitable for all investors special risk and heritage trading options and also understand that when we actually talk about using options there's a pamphlet called the characteristics of risk of standardized options read that have that and also when we talk about investing remember that we're going to demonstrate the function of the platform and also remember that we need to use actual symbols we will remember that td ameritrade they don't make any recommendations determine suitability of any security strategy for individual traders and also remember uh when we actually bring up the paper money uh we will be using that for educational purposes and if we talk about options which we will a little bit remember the option greeks as well know that those are a sensitivity to something be aware of that now also want to give us a quick reminder that coming up next week john mcnichol will actually be doing the options strategy class starting next week so if you need a little help with the options just know that john will actually be kicking that off next week now just real quick as we're actually getting started here let me actually share with you just a super quick picture kind of an interesting day if i told you everything that happened i i didn't even believe in myself okay wife had to go back to the hospital son called me up and actually said hey dad where are you at i was like i'm at the hospital and he goes i'm at the hospital too i was like what are you at the hospital for he goes his wife uh went into labor and they were at the hospital too and he says where's mom she's a little tied up right now and uh so needless to say a couple hours later about 10 hours later we were able to go over and see our first grandkid that was all fun her name is bria so that was a little fun yesterday there was lows and highs all in the same couple hours but good times okay so just want to give you a quick heads up on that now as far as the market okay and by the way i kept thinking you know holding brie in my arms last night i kept thinking about the 529 college plan kept thinking about that and also kept thinking about compounding interests what would happen if you started when you were young of course i did right all right now we're going to talk about the index of quickview just want to take a quick look why not actually kind of talk about some maybe some short-term pullbacks okay and i want to con when i talk about that that's going to be about current positions in the portfolio uh current positions i want to talk about is like john deere uh chevron uh free port mcmoran i want to actually talk about maybe target walmart uh rtx maybe even american airlines today not sure if we get to all of them but that's going to be maybe the ones we pick from if you have one where you say james i'd like you to talk about that one hit me up and let's talk about it now the third thing we're going to talk about is bearish setups i would like to look at two bearish examples one of them is going to be crm today and the other one is going to be nvidia okay now when i bring up these two examples don't take it personally okay sometimes if i talk about a stock that someone likes they think i i hate the stock no i'm just going to talk about it from a maybe a bearish trend perspective and i think all of us here should at least kind of get practice on bearish trends because it's not just bullish trends okay we can't see bearish trends as well and then last we'll talk about is bullish trades so let's actually hop right in let's just fast fire through a couple of these indexes and i'm going to start with just the dow the dow was actually up i think it was like up about 300 points it's kind of faded back as jerome powell's comments actually came out down about 166 did did anything to change about the trend today no okay did it fade off the high as lisa would say yes it did okay so seeing the price fade down like that it was also kind of fading back down near the prior high so as a bullish technician i think most of us are probably bullish in nature we'd like to see the price get above that it didn't it wasn't able to do that it wasn't able to hold there okay so the dow is we would kind of say is more neutral would have been nice to see the price closed above here but hasn't done so yet now the s p if you take a look at this since it's more tech weighted and also discretionary weighted you see that that moving average crossover still kind of struggling a little bit to cross up not as bullish as the dow is and if you actually take a look let's say the nasdaq right here this has just been the absolute yeah okay really really struggling okay now i want to kind of point this out okay one thing is if you pull up something that i posted before we talked about this in this class many months ago probably about four months ago guys and gals if you understand this formula earnings per share over cost equity minus growth and if you say what does this have to do with technical analysis the answer is everything okay i showed you about four months ago what happens if the cost of equity the cost of borrowing actually goes up for growth companies and we said that if you actually get the cost of equity to rise it could actually put a severe dent in the price of the justified price of the stock in our situation we've seen t and x go up substantially okay and when that 10-year rate actually goes up stocks that borrow companies that borrow or these growth companies if this actually goes up let's say one two percent and it's actually done that it makes a severe impact on the price of the stock let's not kid ourselves okay and we've seen that those tech stocks continue to struggle second point i would say is if you get growth to slow too some of these growth companies could be in serious trouble okay you get cost equity goes up and growth goes down and the third domino would be wonder if earnings per share flattens out wonderful earnings per share actually drops and all of a sudden these some of these stocks that are more growth oriented could be severely under pressure you should look at this tweet and you should put in some numbers here and it will surprise you how just one percent can make a massive difference in the price of the stock oh my gosh james is so bearish i'm not so bears i'm just saying this makes sense now why these nasdaq stocks have struggled so much okay so on the indexes that's what we see dow is actually still the strongest s p struggling a little bit nasdaq not even close okay now when we actually kind of talk about let's go to the second agenda item i want to kind of bring up like a stock like cvx okay now let's kind of talk about this so have you ever owned a stock where you said i'm in the stock and maybe just a couple days after getting in the stock starts going down now we talked about this wonder if the administration is able to bring crude prices down wonder if they were okay and wonder if some investors might be bullish airlines okay well chevron what is the position of chevron where was it entered okay so if we actually take a look at chevron i want to pull it up in that account and let's look at it it was a it's a hundred shares of stock okay now remember all the positions we actually do they're in the webcast okay so it's a it's a hundred shares of stock and that stock was purchased at 173 and the stock now is at 165. now what are some things you would be thinking why might the investor be thinking maybe about potentially a little protection up until today you hadn't seen the price go down below that 10 period moving average have you seen that before now does this mean look at where the stop is right the stop is down here the question is what's going to happen from when it breaks the 10 period moving average down to the stop now option number one is the investor says look i'm not going to do anything and i'm just going to let the position play itself out option number two the investor says you know what i see it getting down below the 10 period moving average the risk could be that it could actually fall down and it has an increasing probability of the stock going down the investor might think about maybe some type of protection now option if if you said okay option number one is don't do anything option number two use protection what would you consider now i've actually seen a lot of times when things go down and a lot of investors they kind of become fearful but the investor is probably thinking if they have experience say hey that's not good when the price gets down below the short-term moving average it's losing momentum and it might try to fall down to that next area support like 162 like 157 now here's the thing is sometimes investors know that and they don't want to risk more money if they already know that they might say i want to slow down the give back and i'm going to kind of start with this initially the investor might say you know what james the investor owns a stock at 1.73 there's no profit on this right now and anytime that actually an investor uses a cover call or a protective put or a caller it doesn't mean they have to have a game example given chevron so the investor might go out let's say 20 to 50 days to expiration now i want you to notice this how many of you have ever said james i got in and uh you know geez i i got to be careful where the investor sells the call okay so notice if the stock was purchased at 173.87 the strike that is out of the money is 175.
okay so the first thing is watching are the stocks starting to get down below the 10 period moving average are those stocks up near resistance if they are the investor might go [Music] thinking about having some type of protection to try to actually minimize the profit give back that's unrealized and then second they're trying to maybe hold their potential gains we'll hit that in just a moment we're going to go down to where it says the column last option theoreticals and greeks and what we're going to do here is we would like to actually go to where it says delta and if we click on delta notice since the stock has already dropped and our class was not to two eastern the delta is a little lower than what we would normally look at okay so in this example first thing i need to do is i need to cancel that stop but let's remember where that is 157.57 why do you need to cancel the stop well because it's not going to allow to sell a call okay we're going to reattach that i'm going to sell the 175 which is the strike above the entry price gonna click on the 240 sell one contract i'm gonna try to move the price to 244. that's the mid price okay so does everyone understand why it's trying to sell the 175 because the trade price was 173. it's trying to have some stock appreciation some and it's trying to agree to sell those shares at a higher price than what it bought it for that's why i'm gonna go to confirm and send notice there's a credit there's actually less a 65 commission gonna send the order and now that trade actually gets filled now what can the investor do they could actually come back hold the shift key down on your computer hold the shift key down click and then click both lines okay now when you do that you can just right click on the chart and say create closing order and say sell cover call so as a trend investor when stocks drop the investor doesn't just have to get you know hit they could actually say hey short-term price pullback the investor might use things like cover call as a basic strategy to offset some of the potential drawdown this is the most elementary way to try to learn some form of protection the protection though is the premium if the stock goes down by more than the premium the investor still owns the shares but it's something start there okay so now what you're gonna notice is it'll say limit to market data gtc and we're gonna go back and just kind of reattach that stop but now what you're gonna see is we'll just put it back on symbol method less or equal to 157 57. so now if that stock goes down to that same stop that was there before buy the callback and sell the shares okay so there you go so now what you're going to see is save the order confirm and send it there's the exit now remember is it saying it's going to get out right at 157 57 no it's a conditional order okay so if it goes to that price or less exit the cover call that means it's buying the callback and selling the shares send the order hit there it goes so the one thing that actually happens is notice when the stock is above the blue line that 10 period moving average there's just like a strong trend oh man it feels so nice but then when that stock drops down below that 10 period moving average all of a sudden those gains start to shrink and the investor needs to be thinking what's their plan if it were to do that well our plan that we actually just talked about is we're going to do a covered call a basic way to try to protect some of the stock capital second it still has the stop so you have to kind of decide when your stocks actually pull back do you sit there and do nothing or what's the plan are you gonna use like a cover call is it a caller what is it okay now i'm gonna go to another one now a couple of you actually mentioned james i would like to for example take a look at uh rtx okay so let's talk about this okay that's kind of funny you mentioned this who said this ah crazy foxy said this definitely interesting rtx well let me kind of show you is there a position rtx yes there is 400 shares of rtx okay now if you were to look at rtx and kind of go back to the chart and say why does the paperMoney account have rtx well it's been in an upward trend it's trying to ride that long trend now what i want to do here is i want to kind of draw maybe diagonal support which would be like higher lows increasing over time and then what i want to do is see if there's maybe like a diagonal resistance so what i'm doing is i'm just going back i could go left to right right to left and i'm just going to try to nick some of these lows and what you'll notice is here would you say that's a pretty good level of diagonal support would you say that's a pretty good level right there if i go from let's say right to left maybe at the highs touching as many of these highs as i possibly can would you say that rtx is in a channel huh i mean it looks pretty accurate okay so here's the deal option number one the investor says consider applying protection when the stock goes down to the bottom end of the channel goes down to the bottom end of the channel well the idea behind protection is the investor is trying to identify resistance and they're trying to put on that protection or sell the call or something up near resistance where the stock hasn't given back so much of those gains yet but how many of you besides me i i want to put myself in there too how many of you have seen resistance after the pullback and said my gosh that was the dumbest thing ever how come i didn't see that until after the pullback this is why having those lines on the chart it's important okay it doesn't take that long okay draw the lines if that stock goes up to the top end of the channel the investor might be thinking might this be a time to maybe consider a covered call now he didn't we didn't talk about that okay so now the stock is at the mid point of the channel now that stock all also has upcoming earnings on 4 26 which is on tuesday so when investors think about maybe protection they might be thinking about hey why protection number one it's at the top of the channel and pull back number two has earnings upcoming we're within let's say four trading days to the earnings well now the investor could actually say look gonna go the trade tab and the one thing is the stock so let's kind of think about this okay the stock's at 102 there's the mark there's the trade price could this stock drop down 10 on earnings and completely give all of that 4 600 back the answer is absolutely would you want that to be the outcome would you be thinking i'm not really sure if i want to part ways with the 4600 would you be thinking about is there maybe any way to kind of try to lock in some of the that potential unrealized game well that's the point right now thinking about it doing something totally different okay so let's kind of go look and say okay could the investor maybe go look to sell a call that's out of the money so if we look at the current price what you're going to notice is it's at 102.67 the strike is at 105. that st rike kind
of might be up near the top of the channel anyway okay so now what we're going to notice is if the investor says i'm going to sell a call that's at the top of the channel i'm going to use this premium to go and buy the put now i want you to notice this it's going to sell the 105 right click sell going to go down to where it says caller synthetic now james why is it gonna do the caller well the caller actually buys a put below which gives the investor who buys the put a contractual right to sell that's interesting so if the investor actually bought the stock at 91 they would have a contractual right to sell at 99. now as a trend investor would you like to at least try to lock in some profit or we just say no i just like to give it all back well they could do that but if the investor said i don't really want to go down that path they contractually can lock in profits because they have a right to sell the shares at 99 from now to expiration so the purpose of the caller here is to try to protect if there was gap down risk if that stock gaps down to 80 doesn't matter the investor can still sell the shares at 99. now james why'd you pick the 99 well the idea behind the 99 was that it was trying to sell a call for a credit and using that credit to come over here and pay for the pet and that put was about what the call value was and it also has a delta 30 to 40. okay so last protection last example here the 105 call selling that creating credit using that to come around and pay for the put now remember this is only on one contract how many contracts should it really do boys and girls ladies and gentlemen how many well could the investor do one two three four if they wanted to protect all they could actually really come down and say look i'm going to do four of them okay now cindy actually says how do you determine the put strike for the combo well the investor is typically doing about a delta 30 to 40 on both sides typically the call delta has a delta between 30 to 40 the put delta actually has a delta between 30 to 40. okay the investor might even say james i mean even gonna maybe go up one higher strike okay but they're both between a delta 30 to 40. typically when you're doing a caller it's trying to do it for where there's no cost okay now here's the deal a lot of times investors will say these words okay now i was walking in the mall the other day and someone had a stock market shirt on and on on the front it said i made a lot of money and then when i turned i walked past the person and on the back of the shirt it said and then i gave it all back okay now probably know somebody like that right well how does the investors try to stop that okay by buying a put that the investor is using the call to help pay for it's locking in some gains instead of giving it all back it's trying to lock something in now here's the deal if it gives back maybe 1600 of that 4 600 would that be be sad look i think it would nobody wants to get back anything right but the thing is at least to try to lock in something and get through something like earnings and understand that the investor could still make up to the 105 add 20 cents because there's a 20 credit okay so if the investor says they're gonna do this i'm gonna put it right in that little stock section right here and i'm gonna go ahead and protect it now could you give me feedback and say james your timing absolutely stunk you should have been considering this right upper resistance i'm guilty okay absolutely guilty i think the timing could have been better i think it could have been maybe considering the strategy even yesterday the day before the day before that fair if the investor is actually putting on protection halfway down the bottom of the channel or at the bottom of the channel what does that probably mean they probably weren't looking at their positions and i think that's probably fair okay all right now let's kind of talk about that uh third agenda item now i want to kind of time out what questions okay do you have okay now i'm just gonna ranjeet says hey take a look at apple tesla sure but also for example i want to kind of just fast fire in a couple stocks let's take a look at apple a couple of comments i just just one brief thing and i was on uh schwab live daily actually today and we actually talked about disney and had a very spirited discussion and i found out there's a lot of people that like netflix okay and so with netflix diving i don't even know if you say diving i think word tanking might be kind of more appropriate with that 35 cataclysmic drop don't ask me how to spell that ask bill but i want to really see on apple with netflix going down with disney going down like it actually has is apple grabbing that market share we don't know yet because we haven't heard from apple if they are picking up subscribers on their apple tv if they even have some growth you're actually think of it as far as like a pie is apple grabbing some of those subscribers from disney plus netflix etcetera now remember i don't hate any of them okay my wife loves netflix my kids love disney plus okay i'm just wondering i want to know is it people just dropping out completely or is it actually people shifting where they're consuming it okay now when you take a look at apple in general it kind of has that classic flag don't really quite seeing it break out yet okay when we go back and look at this on let's say a three year weekly chart it's kind of still more at the diagonal level support it's at a spot where it could probably bounce but we're not really seeing any strong follow-through the key word is yet when you actually look at the breakout the breakout was right there it's checking back to where it broke out but it's just kind of very well kind of more flat okay now you have to understand that people might have a position already apple kind of might be at risk of what disney is doing being at risk of what netflix is doing they're thinking hey wonder if apple's numbers aren't grady either so this is where the investor might use something like a cover call et cetera to try to at least try to hedge different snares of price but if you look at that it's still in the upward trend but one of the things we that maybe some investors don't like is this momentum okay macd has been staying low for a long time and i and rompton i love where you're going with that you're also saying what about amazon prime and i think that's fair to say too okay so on apple's actually earnings on amazon's earnings i think this kind of goes back to do we actually start to really see consumption being shifted now i'm not telling you that amazon prime has better movies than so so i don't watch that many movies okay but where's that consumption going if it is or is it just dropping out people don't do it now i would also say are people using youtube which also has tb as well okay where's that consumption being shifted now i want to kind of talk about maybe a bearish trade just briefly okay i want to bring up the example of nvidia tell me what you see on nvidia now again when i talk about a bearish trade don't think that i hate the stock that's not my point okay but i think it's fair when we talk about kind of markets or trends we know that not all trends are bullish surprise right now and being fair as an educator you can't just pull out bullish bullets bullets okay there are sometimes you got to educate and talk about different types of trends net nvidia today struggling to hold that 212 support area and lately that price has been below looking up at that 10 period moving out boy that's not nice is it when that stock is below the 30 but especially the 10 oh it could hurt don't go down that's what it feels like right i mean it i don't think anyone enjoys when their stocks are below a short term moving average it's not fun okay so this kind of goes back to understanding how to play defense but when these stocks are starting to drop down below support levels where do you think investors probably have a stop if they have a stop well if someone said where's the major air support we'd probably say that major area support is let's say 212 okay so it's understandable to think that if this were to continue to skid lower and lower and lower it might trigger stop outs okay now i want to talk about nvidia from let's say a short call perspective so as an investor let's do one bearish trade so let's practice just one okay you can do one practice if you say i've never done it before well we're gonna get in the pool today and we're gonna practice okay my name is james boyd and i'm the lifeguard okay so i'll teach you how to swim we're not gonna drown we're in a paper money example here let's learn together okay so here we go so nvidia see a downtrend this is not a bullish stock example okay this is going to be a bearish option example i want you to think about if stocks were to go down what type of bearish strategies do you consider one of the most basic the investor might say is a short call vertical now if we actually take a look at this let's say the investor says they're going to use a short call vertical which is a bearish trade now thomas dunlop was actually mentioning that until today i was monitoring nvidia for a possible bounce what's interesting to notice is this is not a cohold it never got above the high of the low day this is not gold it never got above the high of the low day this is not gold it never got above the high of the low day you've had some opportunities to bounce but it never went up high enough to get even a bullish bounce setup which is interesting if you see selling down near at support why are investors selling at support is that bullish or bearish if investors are selling at support where do they think the price might go they might think it might go lower let's do a quick example let's say the investor says you know james i want to sell the call at a delta of let's say 30 to 40. well if they chose one that's kind
of in that area well the first one kind of might be in that area of let's say 215. that's going to have a delta of 40. so this is saying there's a 40 chance of the stock to close one penny above that strike right now okay now if you actually said well what i wonder if i'm wrong what if the stock goes up well the investor could also buy a call above to cap the max loss now hold on this is a trend trading class right trailer trend weeks to months so let's just kind of verify we see what's doing on that one year daily chart but let's go to a three year weekly chart just kind of make sure trading the trend weeks to months would you say that the trend is breaking down on that weekly chart again i don't want to talk any i'm not trying to talk i just want you to look at the chart and tell me would you say that trend is breaking down on this three-year weekly chart okay so we saw the one-year chart breaking down but when we look at the weekly chart we had a negative moving average crossover right there we rallied up faded back matter of fact the short-term moving average is still below the 30-period moving average and this is actually a lower low so could this be something that we talk about trading the trend weeks to months where this actually kind of sets off maybe a series of lower lows and lower highs over time how many of you ever looked back and said oh my gosh someone made a lot of money from that decline right that happen over time especially on these weekly charts so let's kind of see if we can't practice an example here gonna actually sell the 215 by the 225 now understand when you actually buy the let's say sell the 215 buy the 225 we're now talking about a 10 dollar spread width okay why okay so we know that if you did 215 220 you're just going to double up on the number of contracts okay we know that if if we want to verify kind of the bid ask spread on these strikes let's go look at the option that's being sold contracts 7700 my goodness gracious and then go down to this one the 225s the answer is could even do the 220s but if someone doesn't want to kind of have more commissions they might say i'm just going to do the 225s okay now what you're going to notice is we want to look at confirm and send let's practice a bearish trade okay max profit 315 max loss 685. so the investors saying what how much can they risk if the investor says i can risk a thousand dollars it would be just doing one contract now if the investor said james this is a little close this stock might be more volatile they might choose a higher strike to sell okay but if they said they're going to sell that that 2 to 15 and buy the 2 and what is the purpose of the 225 the purpose of the 225 is for built-in protection if the 225 makes money that means the stock went the wrong direction what position what side of the trade do you want to have benefit you want the 215 to be in a positive gain if it is that means the stock has declined send the order notice the commission there send it now here's the deal a lot of times when stocks start to go down investors can see it going down but they're a little gunshot they're thinking oh my gosh it's a bearish trade makes me nervous the whole purpose of paper money is to practice how do you get good at something you practice if we said orlando how did you get good at tennis orlando would say you practice okay you're not gonna get good at anything unless you practice you can't do it for let's say one do one trade a month and say i got good doing one trading a month it's too little okay probably need to practice two to three times a week okay to get good at something now if we paper trade this and try to actually kind of hone the skills send the order the goal of really this short call vertical is to maybe try to grab 65 to 80 of the premium or more and then if the stock were to go up you're gonna see that this would really be in a max loss situation okay now the other one i'll just briefly point out okay crm that's also another one where you actually take a look at the intermediate longer term trend if we maybe add a couple more minutes we actually might say boy that doesn't look good either guys and gals when you look at the formula that i actually post on twitter practice looking at those numbers if the cost of equity borrowing costs for these companies are actually going up it's going to put pressure on these companies for their justified price if earnings per share starts to go down uncle okay it's going to create a lot of pressure so if you get borrowing cost up slowing growth earnings per share down it's gonna actually mean that some of these stocks could be mispriced and the reason why they go down so quickly is especially when the rates go up as high as they have a one percent rise in borrowing cost could make a significant drop in the justified stock price okay you don't need to have a phd in fundamentals to know that three pieces of information if you could type in just very basic numbers just right on scratch pad matter of fact i did that myself okay i just kind of went through the math i said geez one percent just rise and cost of borrowing costs makes a substantial difference in the justified stock price many of these tech stocks not all that's the pressure they've been under lately now james you said the fourth agenda item uh but before we do some of you want to take a look at let's say american airlines okay we mentioned american airlines last week we said could american airlines maybe breach that area of resistance talked about this tweeted out this morning that stock opened up very high high to that resistance area the position on american airlines if we go back to the trade tab pull up the margin account where does the position stand we'll pull it up and show you it's about 646 to the good what is the position that position is a long synthetic there it is right there whenever that call is making is up more than the short put what does that tell us about the trend it tells it tells us that the investor got the trend right so that's not a bad thing that call is actually higher gain than the short put that means the stock went up quickly okay now the last piece right there so you're going to see that the short put sold to put for 116. it's at 74 cents 35 percent of the maximum gain 124 you know there's a little cheese there okay uh but you know maybe the investors thinking maybe they could get a little bit more now what about some new ones okay and i'll just go back to one other one that was mentioned james and i want to kind of just kind of make one quick adjustment on this the stock is target okay if you look at a stock like target and the investor owns 85 shares and the stocks up near an area of resistance is there anything the investor might consider anything 85 shares of stock gotta stop way down here can you hear me hear me way down there go to the position it's up sixteen hundred dollars it actually it has eighty six here stuck is anyone thinking maybe about buying let's say 14 more shares of stock and considering applying protection is anyone thinking that could the investor maybe buy just 14 more shares to make it a hundred and then actually try to maybe sell a call against it is anyone thinking that same thing okay now i'm gonna show that and then we're gonna look at two new trades so first thing is now don't typically like to buy shares up at resistance but it's buying 14 more shares to make it a hundred okay which is not substantial okay buying 14 more shares you had 1486 you get 100 confirm and send try to get filled gets to a hundred first thing it's going to be doing is it's going to click on the cell it's going to cancel these stops and then what it's going to do is it's going to go back and say is there a call that could be sold why is the investor considering selling a call well you got a stock that's had a nice rally up near that area of resistance and that's where the investors if they're trying to do covered calls they might try to put on those covered calls right at the area of resistance now i want you to say that with me wheezy zones not resistance resistance okay good i can hear you now notice if you take can you hear me you know i'm just having a little fun with you okay now notice now notice if you click now notice the paper money is going to go closer to the 40 actually delta gonna click on that 685 that 257 that still gives the stock about seven dollars to still go up but that premium is actually 6.85 if you actually move it over here to the mid price 690 okay confirm and send it's selling the the strike with the delta about 40 690 dollars of premium with seven dollars more to the upside here's what i'm convinced of i'm convinced people don't look at resistance i'm convinced that when it gets the resistance the investors get so greedy they don't look at how much premium they could be getting and how much more upside they could be getting to this is where the investor might want to look okay with a 40 implied volatility that's some decent premium that's over two percent for uh over a little over 20 days notice the credit less the commission gonna send the order turn that position on a cover call again we can go back and actually adjust the stop now let's kind of talk about in the last five or six minutes about what are some stocks that might be kind of rebuffing uh maybe what the market is doing i want to go back to a stock like abbott how many of you like to maybe look for some stocks and by the way this is where american airlines was last week okay american airlines was kind of right back at the area of resistance okay go back to where american airlines was last week so was caterpillar okay and sometimes when investors like to see stocks that have actually pulled back that have flattened out and maybe they're past earnings okay well maybe might the investor be thinking about could they maybe try to enter now the one thing i want to kind of show here is every time someone gets in it doesn't mean they have to put in the whole position up front you don't have to do that the investor might say i might do a third of my position a half my position etc the paper money account is only going to do a half position it's going to buy the stock at where it is here and it's going to go by custom with stop so there are some investors that don't like to buy stock and highs they like to buy stocks that are kind of basing and maybe trying to break out and what the investor might be doing here is they might say look instead of doing like a full position i'll just use the example given ten thousand dollars they actually might say james i'm not going to do ten thousand i'm only going to do five thousand and then say james i'll put on the other five thousand dollars when that stock actually shows to me that it's make its broken resistance made a higher high and that stock is actually trying to make a or make made a higher low and if they saw that they might add on that other half of the position full position example given would be ten thousand this is only putting on five thousand if the investor used one seventeen fifty as a support and set the stop three percent below that that stop is going to be right about 113 97.
now if you notice this data gtc this is saying buy the stock at this price or lower and set a stop here just has a half position the investor confirms and send there's not a commission but it's the capital the investor wants to do that they can send the order it buys the stock but where might the investor actually try to add to the position now the paper money account is just going to set an alert okay it's going to set an alert right click right above the area of resistance an alert is an alert in order to get in no it's like an alarm clock other half position question mark so if that stock actually gets above that area of resistance the investor might say hey i want to get an alert might the investor add to the position just like what was done with caterpillar just like what was done with american airlines so many people think that you'd have to get in the whole position at once some investors like to actually say why don't you show me trend and i'll show you capital right they're saying as you show me a stronger trend that's making a hotter high and a higher low etc they add more to the position or and or that trend now what i want to kind of do in kind of closing here is when you take a look at some of these other stocks uh ual gapped up on earnings okay pretty strong maybe actually breaching an area of resistance love that's another stock that actually breaches area resistance okay i thought it was actually also interesting when you look at stocks that are in the reit space some of these stocks like avalon bay kind of more showing like an ascending triangle interesting when you look at let's say another let's say read stock equity residential another brand new high con continuation of that longer term trend when you go back to ess as well continuation of that trend so i think it's interesting when you look at the where the rates have actually gone some of these reits they've actually broken through resistance they're kind of more of that continuation pattern now i'm out of my time here aren't you surprised how fast 45 minutes can go it's unbelievable okay but one of the things we want to kind of talk about here is number one is we did see some stocks today break down we did also see some stocks for example that were up near in air resistance we wanted to practice like how to put on a cover call as a trend trader how to put on protection going in earnings like a caller as a trend trader the second thing we actually talked about is what about like a bearish position like nvidia we practiced that and the third thing we actually talked about is what about maybe some stocks that might be more bullish what about example given maybe like an abbot and maybe how to add to a position last week we did that with caterpillar american airlines over the last two weeks we talked about that we just showed another example here today of a stock like abbott and we also kind of brought up maybe some of these stocks like in the reed space avalon bay eqr ess they're actually showing brand new highs showing that relative strength and showing an interest of investors that may be kind of wanting revenue stability potentially but also maybe some potential dividends as well and also maybe some exposure so some real estate areas so with that said i'm out of my time also remember that in the act in the chat there's a survey i would appreciate if you fill that out it's a quick five questions i read all of your comments thank you in advance for doing that i also want to say thank you for all your questions i tried to intertwine some of those questions as we went but again thank you so much for all your comments and your participation i love when we actually get to together on thursday and talk about trend thursday on thursday morning when the alarm goes off it's the first thing in my mind it's not thursday it's stinking trend thursday okay sorry i love it i love being here with you thank you so all also as well for mike fairborne answering those questions and chat i wish you a great day take care and bye
2022-04-25 10:22
