Trend Reversal Patterns?? | Trading a Smaller Account

all righty good morning everyone welcome to trading a smaller account it is friday morning the bell has wrong our trading day has started and we are ready to go our chat has been blowing up in this class i so enjoy um meeting with you every friday so who comes to this class and why do you come so i think it's um a couple of different types of people are attracted to to this class one those with a smaller account who are kind of wondering what they might do to make the most of any type of market condition and over the last two and a half years that we've been getting together at various times on a friday um you know we've seen lots of different market conditions haven't we and you know we also have people who might have very large accounts and they just want to trade a smaller portion of it this way and you know for many people this year they might have a whole lack of their portfolio currently sitting in cash waiting for the market to settle down but this is a way that they can um actively trade and participate in the market and and perhaps make a little money as the market is you know misbehaving or doing what it does so you know we trade a lot of options in this class it is a fast play paced intermediate level class and you know by using options if the market's going up we've got strategies we can use if the market is going sideways we've got strategies we can use and if the market is downtrending we have strategies we can use for that and we've got to pull those out of our kit bag a lot this year so what do we do in the current market environment and that's a great question because you know some are saying oh have we seen the bottom and are we setting up some trend reversals and others are saying dead cat bounce the bears have just you know gone off for a snack somewhere else and they'll be back um and so how can we take advantage of what's happening right now so that's what we're going to work on i just i want to say good morning to everyone i've already been in the chat for the last half hour and you know we've been kind of chatting away so to vj special kudos for being the first one in and radio wayne and michael and rosa and um at chuck and ap 5 14 and deborah and peter and juanita and marcy and denise and jules and peter and the rest of the gang love that you guys are all here and that you show up with such enthusiasm every week now if you are watching this in the archive know that this is my personal invitation from me to you to join us live on fridays at 9 30 at the market open a lot of people that come and watch this live also watch it again in the archives and that's exactly what i used to do when when i started on this journey myself but if you have questions we will have somebody join us in the chat who will be helping out uh let me just see let me catch up with the chat um and i don't think they've typed in yet but when they do if you've got questions um hopefully we've got answers for you and then if you're watching this in the archives in the comment section down below if you love the class you can type that but if you've got a question go ahead and type that in i do look at those at the beginning of every market day last but not least you can also join us in the world of twitter um at be armstrong underscore tda is my twitter handle and i am you know i am on there every day it's another way for me to be able to communicate with all of you and so i'll post charts that look interesting uh i posted a little bit of humor every now and then i posted something about heat because i'm going to be in las vegas for a few days next week oh wow it's supposed to be 112 degrees so i don't know what i was thinking but there we go okay so um yeah so that's that let's get through our important information so that we can get right down to business and no guys like a news alert we're going to start having live events again and so keep checking back um i don't know if the registration is open yet i believe the first one is going to be in dallas sometime in august so how cool is that okay so know that everything we do in this class is for educational purposes only none of it's to be construed as a recommendation to trade any particular security or strategy in any particular way we place lots of example trades know that options aren't suitable for all investors there are special risks inherent to options trading that may expose investors to potentially rapid and substantial losses also know that if you're new to td ameritrade and if we have anybody here brand new for the first time please type a greeting into the chat so we can welcome you but no if you're new to td ameritrade you have to apply for option trading privileges know that all investing involves risk including the risk of loss um in this class also we use um somebody made a comment about vegas yeah i'm not a gambler yeah i'm interesting isn't it i don't gamble at all but i love the shows and there are some other things that are appealing down there anyway um it we use the paper money platform on think or swim looks like smells like feels like real money um but it's not so it's a really it's a great place to learn but there are a couple of differences between the platform and i'll point those out as appropriate the biggest one for us because we've traded a huge number of spreads this year is that a short option will never be assigned early in paper money can that happen in our live accounts yes have i seen it happen yes did it freak me out the first time it happened to me on a short put vertical absolutely you bet your sweet bippy it did so you want to be sure you understand what can happen and it doesn't have to happen at expiration yeah okay so what's on our menu for today well you know business as usual right we're going to go out have a quick look at the market we're going to place some new example trades and we're doing that first which was a suggestion from someone in one of the surveys and then we're going to look at a couple of trade management examples i will be i promise recording a new trade management mini session today um it's just been a whirlwind couple of weeks so look for one next week okay um on the trade mini management session so if you're new to this um in order to give us a little more time in the class to place new trades i've started doing these trade mini management sessions on trades that have kind of hit our targets and that we're out of or on new trade management strategies that we may want to consider and those have been a huge hit i also partnered this class with the long options class on monday which is at high noon eastern and so be sure the next couple of weeks that you're joining the long options class or that you're tapping into that and um watching that one in the archives because often i'll place trades in that class for this account and it's just kind of a way to kind of expand um what we can do in this class because otherwise we have one 45-minute session a week okay so let's get out to the platform um you don't have to sign up for the mini trade classes what you'll see is that um if we go out and just let me go back to full screen if we come let me bring you over this is to youtube so if you just kind of bring up youtube and then you type in trader talks sorry i i want to double my a's today trader talk webcast from td ameritrade and this is um this is something that you'll want to subscribe to this and there there's a little button oh sorry i went to full screen dang it there's a little button you can subscribe so if you haven't subscribed you're gonna want to do that so it so i just went to youtube trader talks from uh td ameritrade come to playlists there's a playlist button here and then you'll want to come down and find trading a smaller account and and i'm doing these also in the long options class so some of them are in the trading a smaller account and then when you view the full playlist you'll see trade management mini session we reviewed eight trades so it wasn't that many a session yeah so uh you'll see the screen in a sec and and then there was another one here short put verticals gone wrong we've actually had a very um you know and these i just record so i don't do these live and then if you go to the long options class you'll see the same thing okay but if you subscribe to this channel that'll that'll help you out okay uh yeah and then the other thing that i do is every time um one gets posted i go to twitter and i post some kind of crazy gif and like there's another trade mini management session so that those of you that follow me on twitter know to go look because i can tell you i'm recording it today but we have to have a review team go over it and make sure i didn't miss speak and say anything incorrect and and they do that for you know to make sure that i'm guiding you appropriately okay so um so yeah okay so let's have a look at the markets and we're going to do that lookity split because i know a lot of you go to a lot of classes okay so oh let's start with the s p so you know this is a six month chart i i typically bring up year to date um and then i often will come over here and and say like show me the price as a percentage so you know we've had this little rally you know which you know is giving people hope and some say is it false hope because we're still down 19 year-to-date still down 19 year-to-date so we're you know we are still running with the bears even though we've had this little rally and so when might you say well when might we look at this and say okay it's not just you know a dead cat bounce it's not just another bare flag setting up because for the first time in a little while we've now seen a high a a higher low but we haven't yet seen the second higher high so you know we and it once we see that and that would occur at the same time that we see a diagonal resistance breakout some might say i want to wait for that to cross the river come back test the ice and bounce and if that happens then i'll say maybe we're on on our way but so far the downtrend still intact now having said that that you know it what it could mean for us is that there are a lot of reversal patterns setting up some of them may follow through some of them may not and you know we don't trade what we think do we we trade what we see um and then you may say well i think i see yeah that can happen too so and then here's our nasdaq now the nasdaq you know was trading in this downward channel and i mean it's down even more it's down 27 year-to-date like holy smokes batman um that's a lot of that's a lot of pain um and but it's broken above this diagonal resistance line and then the question is is it going to continue yeah oh somebody typed into the chat my my account has not only crossed the river it's gone over the rainbow bridge that's treating pain with the sense of humor my friend yeah yeah i had a friend that used to say you know with respect this was and and i just found it so memorable i still use it you know when you see um a downtrend like this you're waiting for something to come and cross the river being this diagonal resistance line and then come back and test the ice and say is it going to hold and then continue on and if it doesn't it wasn't a breakout it was just a fake out and we have seen a lot of fake outs this year my friends haven't we you know where you're thinking oh maybe it's over and then it's like oh and it's not and then the russell kind of similar right and again you know not down quite as much as the nasdaq only down 22 22 in six months is a lot of pain and again we're seeing here a higher low have yet to see a higher high and it's bonking its had right now so it would seem on this 30-day moving average and then the dow which is you know the least dark of the four major indices it only being down 14 um you know which isn't great either again similarly high or low but we haven't yet seen a higher high and it's got to get across this red river called the 30-day moving average first and it has a long way to go to then break above but you know if it gets above this 30-day some people who like to trade indexes you know or or something similar to that might say you know could we do something that is in this range assuming it might continued uptrend now we're not going to consider that you know today but it's it's a thought and the vix while falling once again today but you know what we're seeing you know at at 25.50 means still in in historical context i mean that is still really high if we come back and look at a five year chart you know well maybe a five year doesn't give us the picture but you know it's for years we were sitting around this you know 10 to 15 range 25 i mean that's that's huge okay so and then what we're seeing if we come over to our td ameritrade sorry i got kicked out we're seeing a bit of rotation happening you know um we have traded a lot of bullish trades short-term bullish trades and energy this year um and why was that well because energy was kind of the darling and was doing really really well but now there seems to be this rotation in the last month come to mama there may be a delay on this so this may not be loading yet but if we change this to a 30-day time frame we can see that all of a sudden energy which you know has been the darling is down 20 in the last 30 days and consumer staples and health care tend to be rotating into favor and and you know when we see staples and utilities kind of up in that top third these are recessionary signals yeah these are kind of recessionary signals because you may not need you know to go on a cruise um but you're still going to need toilet paper and groceries you know and you're still going to want to be able to turn the lights on you may not need to buy a new car um you know you may be able to keep running with the one you've got but you're going to want to keep your house cool in the summer and warm in the winter yeah and that's utilities but you know even utilities the last 30 days the only stock that's up in that sector is is nextera you know this whole sector down four percent but you know that's a walk in the park compared to you know energy down in one month now if we go back out to six months we can see energy still at the top of the pack so it's given back you know a chunk of its gains but over the last six months still up 18 and you know it may have pulled back and be starting to move to the upside again so so anyway that's a quick and dirty for us okay so what might we want to look at and if we come and we look at something like a costco and we're going to come back because we tend to trade shorter term here you know some might look at this and say if we oh let me just redraw this line so you know we had a stock that overall was up trending you know when we look at the last year you know had a really nice move to the upside and then got kind of clobbered but you know this unlike the s p and the nasdaq we we're seeing here a series now of you know higher uh higher lows so and some might say well i don't know this was a low high or low and so you know to me this looks a bit like a an inverted either a cup and handle and and it's kind of like the stacking doll cup and handle and that some might say well i saw a cup and handle here or kind of a skew double bottom and others might say well i see this being the cup and this being the handle and it's breaking above either one of these is bullish now the difference is where you'd measure from if you're looking for an expected move and so if we're looking for an expected move and we're saying well let's be conservative and go with this you're looking from 446 to 486 that's about a 40-point move so then you'd say well you know a technician then might expect this to go from 486 and add 40 to that so 90 106 26 to 1 26 or 36 okay so so if we're saying we're expecting this to go to 126 this is an expensive stock we can't really afford to do a you know a long call on this but could we do a long call vertical and so you know if we come out to the trade tab and you may so if anyone here is new um you know we started the year with twenty thousand dollars we're now close to thirty thousand so we're up close to fifty percent in this account you know depends on the week the last couple of weeks we've had a couple of trades go against us but i mean still we're up almost fifty percent in a year when you know the best index thus far is down fifteen 15 you know the um and the the nasdaq down 27 so you know we're we're pretty happy with this and could this change by the end of the year absolutely um but if we look at this and we say okay our max position size is 5000 if we were to buy a stock and we haven't done a lot of that this year in this account or um you know our max loss is four to five hundred dollars on any one trade which represents about two percent of our account value so even if we had five losing trades in a row you know we're not going to blow up our account we might be down 10 but we're not going to be down 50. and so if we come to the trade tab and we look at this and we say well if we were to come out to august you know to buy a call first of all you know what's our bid ass spread on costco yes 1845 i'm surprised it's actually this wide um i can use my calculator it's it's you know just under two bucks so it's about a dollar seventy five that's about ten percent and so you know we could go with that now if we come and we say we'd rather do a shorter time frame what's the advantage well the advantage is we reach our target faster perhaps but if we're wrong we have less time to recover and so you know there's a couple of ways to look at it one of the advantages of weekly sometimes is that there are smaller bid-ask spreads so if we come out here to august then we've got a well actually this has five dollar wide spreads as well and so you know if we wanted to compare and contrast them we could do you know one at each time frame and just see how they work out but the idea being it's currently trading at 500 pretty even number here so it's currently trading at 500 so could we do the 500 and the 505. and so you know we're just looking for it to continue to move up just five dollars now it's broken above this line here so is it possible for it to come back and retest and would we be surprised we wouldn't yeah so no this we are not doing a long term option call we could um but we're not in this class this year we've done a lot of short-term trade so 42 days is a long time to go up out do we intend to be in it for 42 days we do not we intend to be in this for maybe two weeks so and if we come out to the 21 days this is a weekly option doesn't tend to have as much volume on the options and you know we've got but a similar bid ask spread just over a dollar a dollar ten so it's got about a ten percent bid ask spread we've got 90 contracts at the 505 we've got 187 so it meets our parameters of if you had a guideline you might say i want at least 10 times the number of options so we're going to come here to buy vertical so it's 270 to get in how much can we make um 230 what's our theoretical max loss 270 but what we've started doing in this class is saying well if i'm paying 270 to get in i'm going to multiply that by 1.5 and say hey when this is worth about four dollars or four dollars and five cents i've got a fifty percent gain on this i don't have to wait until this gets to five dollars you know so we we we'd like to just take little wins little wins and then we can stay in longer and if the trend starts to change we can get out now we aren't doing a one atr strategy on this one because we can't afford to buy a call these calls are too expensive it's fourteen hundred and seventy five dollars to buy the five dollar call we don't wanna risk more than five hundred dollars on any one trade and so if we look at this now one thing we haven't been doing that we're going to start doing in this class and i'm going to talk about that in the trade management mini session is we haven't been putting in an exit so how much could we lose we could lose this entire amount and so what we're going to say is if it gets to the point where this is worth say a buck and a quarter where it's down 50 we're going to exit okay so what we're going to do here is come to single order we're going to change it to first triggers oco and then we're going to create two opposite orders and on the first one we're going to say hey when this gets to the point where it's worth 405 get us out or if it gets to the point where it's worth a dollar 25 then we'll have lost 50 percent but at least we won't have lost you know the whole amount okay and we're going to make that good till cancelled we're going to make this a stop because we're saying hey if this gets to the point where it's worth a buck 25 it's not going in the right direction we want to exit ideally we want out when it's worth 405 so then how much could we make on this well about a buck 50 which is 150 and you might say like barb that is not going to have me on a private jet going to you know fiji it maybe not but 150 is still 150 and on a small account a two hundred dollar gain when we started out was half of one percent of the entire account value so it's a base hit so confirm and send when you know so we're looking to buy one vertical expiring in 21 days we're paying 258 to get in we want to exit when it hits our target so a 50 gain or a 50 loss our our max profit 242 dollars we're not going to wait to get all of that um and our theoretical loss here 258 dollars is that within our range of acceptability it is and we can say here you know please note it's it's reminding us we've chosen a weekly option series um and so we are aware of that and you know it's saying also that you know if there are liquidity risks um this order can be substituted for a limit order and worked until so in other words they're saying if the market gets really crazy crazy we'll try and help you get out of the trade so long call vertical is what this is and we've got both an exit and then if we wanted to just be able to compare and contrast and i'll make sure this one fills let's do one at the august time frame also and you can right click anywhere on that line we want to buy a vertical and this one has more time value so you see we're paying a little bit more and so if we say okay well that's at 283 times 1.5

we'd want to hang in there until it was worth 425 and again single order first triggers oco and opposite order opposite order we're going to make them both good till cancel we're going to say we want to get out of this one when it's worth about 425 or if it gets to the point where it's worth about a dollar 40 we'd like to exit so if it loses half its value and we're going to make that a stop confirm and send um yeah somebody's saying thank you for the yeah so we did a stop here which says hey if this option that we've gotten into falls in value to the point where it's worth 140 and then our limit is saying once we get in don't sell it until it reaches 425 yeah yep the target is a limit um it the way the system works when you put in a limit you're saying i want you to sell it but not until it gets to this price and so if it doesn't if it hovers in between and doesn't ever hit 140 or 425 we won't exit the trade 425 is about 50 higher than what it's currently trading actually it's just gone down a bit so 270 times 1.5 is actually 405. um so if we do get in at 270 we'd get out at 405 so we could change that to 405. you know we're live in the market so as i'm talking things are changing we can make this 135 because we're getting in for a little bit less okay yeah somebody's saying we could use the one atr targets yeah we could okay so that's costco check um let's look at let's look at dollar tree because this is one that we got snookered on we had done a short put vertical and that was in my short put verticals gone wrong and it was a case of trade mismanagement so you can go back and and i'm not going to talk about that one again because we've already clubbed that one to death but you know it came down hit our expiration we should have been out um you know prior and we weren't but it it popped then right back up and now it's kind of breaking out now today we have a day of pulling back and so this might be one that we just choose to watch and we could talk about this one you know next week um we could look at something like a roblox now roblox has been totally clobbered this is a relatively new stock at ipo'd i think a year ago in march like if i bring up a two-year chart on this yeah you see we don't even have a two year it came out march 10th but you know when we come in up close and personal it's it's a gaming stop um you know a lot of kids are really keen on this game this gaming methodology with roblox where well i am not a gamer so you know i cannot help you um understand this but it's been it's had a lot of popularity and so you know some might again say well i see you know a potentially a little cup and handle here um and and recognize you know i would expect that the options on this will be pretty darn volatile i mean this is a stock that was over a hundred dollars that has now come back up and it's trading at 36. you know it's come from yeah 115 or something you know so when we kind of look at this though we can see this you know if we're playing i spy with my little eye and you know technicals are kind of in the eye of a beholder you know so could we do you know a one atr trade on that we could so if we come and we look at this to the trade tab yeah here's our volatility 98 and you know keep in mind this is a 40 stock if we we buy this call this call is 10 of the account value now is it heavily traded yeah it sure is but it so if we look at this believe it or not we cannot afford to do a trade at the 40 level we'd have to do a vertical because this is 615 either that or we'd have to come out to a shorter time frame and typically you want at least three weeks plus however many days you're going to be in the trade so you know in here we don't have as much volume we still have a pretty tight bid ask spread but you know if we wanted to do just a one atr trade here this is you know our max and again we could come in here and buy and what would our target be well our one atr on this is about 317 and so if we looked at this and we said okay 317 let's bring up our scratch pad and change that yeah this was our account at the beginning of the year um so here's our example with roblox one atr there's 317 and so we'd be getting in at the current price 41.46

plus 317. that's our target and exit if we went based on today's low and this is one where at the end of every trading day you're going to start like on monday at the end of the trading day you'd move the stop up to 20 cents below that day's low so this is not a trade we're in for a long time but if we look at today's low being 38 53 38 53 minus 317 um that is going to equal oh sorry and i didn't do the math on here so our target is 41. and please do the math with me 4146 plus 317 4463 and our exit would be at 38 53 plus three seventeen thirty five thirty six and that is would be our accent uh if you're having issues with toss i would say um shut down your system and reboot and then if that doesn't work juanita call the trade desk call the trade desk is what i would suggest and they will help you get to their technical support people so we want to buy a single we're going to come to first trigger sequence and then we're going to right click opposite order and why am i doing it this way it's just a faster way of being able to come in and vote put both our target if it goes at or above 4463 we want out or at or below 35 36 oh that didn't take 35 36 so if it goes at or above 44.63 check

add or below 3536 check okay confirm and send you would change the stop daily you're not going to change the target you're just going to move the stop up to whatever the low of that candle was for the day and knock 20 cents off it so whatever the low for the day was because if it keeps going up you want to stay until it hits your target and if it doesn't then you you want to take your losses uh quickly small losses you know can be a beautiful thing believe it or not because they beat the stuffing out of a large loss okay so that's roblox um let's look at and probably do one more here but we look at zoom you know china's shutting down again and you know this is kind of like am i thinking when i just said we're trading what we see um yeah you want to be aware that there is a company behind these ticker symbols and you know having an understanding of kind of what's going on so you know what we're seeing here is an inverted head and shoulders setting up you know but it hasn't broken through yet so what we may want to do is say you know what i want to place an alert oops i'll get rid of this i'm going to put an alert on this and when it goes above that 123 50-ish level then let me know potential entry this is just a note from you to you so you can type in here whatever you want but it's not quite there yet it's percolating okay so i did answer kevin's question on how do you manage it daily so like let's say if i come back to this chart so let's say we had placed this trade already on roblox that we had placed this trade here on this day that it was really moving up so our stop on that day would have been let's say 20 cents or it would have been one atr below so it would have been like say here and then the next day we would have moved our stop to 20 cents below this candle and then 20 cents below this candle and then 20 cents below this candle so now our stop has gone from here to here of course if we had placed this trade on this day depending on where it was we may have already hit our target but if we haven't quite hit our target so let's say we're looking at this now and we're like 15 cents away from our target so we might say well it's still moving up nicely but it is a friday we're gonna have time decay over the weekend if we've got what we feel to be you know the majority of the profit we were aiming for we could just go and close the trade out so that's how we would manage it day to day it's a daily managed trade we're not moving the target because we just want a we're just looking for a base hit so it moves up one atr where where it moves down one atr when we're on the other side yeah so you know it's just a trading strategy is it the only one out there no like and is it one that we use very much in the past couple of years no but in this kind of environment we've used it a lot and so you know let's just come and look at a couple of other potential setups um am gn so when we look at amgen we have this big double bottom perhaps setting up and it's kind of moving and today it kind of consolidated here for about a week but then we're seeing it moving to the upside again today so could we do a long call vertical even within this channel to say hey this might continue up and why a long call vertical as opposed to one atr is because we're just trying to take a little win and we can't afford uh you know if i come out to you know this is a 9.40 option or at the 250 mark it's a 615 to 750 option we can't afford that so if we look at this and we say but we could do could we do the 245 and the 250 i wonder if there'd be enough premium in it because it's almost at 250. so you know could we come here and say buy vertical so you know the most we're we're risking 315 theoretically and the most we can make but it's it's all almost at the target it's at 249.34 and so we could come here you know our break even is this is a bullish trade and our break even is lower than where it's currently trading so you know we could you know come in and look at doing something like that on and and again so i'm going to put this one in after the class but you know put in that 50 percent higher target and a 50 loss and that way you know there's not a guarantee that we're going to get filled which is why we're only doing one contract and not two but you know could we take advantage of that um how about dollar tree oh yeah we were looking at dollar tree and then i got we already did that one okay um avgo on the bearish side you know is this setting up a bare flag here kind of looks like it doesn't it you know like when we kind of come in a little closer you know it's going down so down lower high down lower high down lower high then we had like two up days and it looks like it's coming down again so this one you'd do a conditional entry and again 500 stock so it would have to be a long put vertical on this one you know and this is saying hey this little rally may be done now an optimist might look at that and say you know i see this as a bullish in that this one it's going to be a one day pullback but you know this this looks an awful lot like a bear flag now do all bear flags follow through so we could put in a conditional order and say we want to get into this if it goes where well if it goes below today this high we're looking for it to trade below the low of the high day so we call that a cup load cb lod close below the low of the high day or at least trade below that and again we don't have time to set that up in class um yeah but on avgo you could set that up as a bear flag okay so guys that's all the time we have today um i appreciate you being with me keep in mind if you enjoyed this um if you can come over and just subscribe to this channel if you haven't done that if you can smash that like button it's just kind of a way of saying hey i found this content to be valuable thanks me and helps other people find this content i don't know if there was a survey posted let me just yeah no there was not so there's no survey today you're off the hook for that um if you're not following me on twitter um you're missing out you'll want to follow me on twitter um and yeah and so that's a wrap i think we did what we set out to do keep in mind that everything that we do in this class is for educational purposes only none of it is to be construed as a recommendation on the part of td ameritrade or myself also know that all investing involves risk with the paper money platform a short option will never be assigned early and also know that um you know options aren't necessarily suitable for all investors there are special risks inherent to options trading that can lead to potentially rapid uh losses and um and know that all investing involves risk so guys have a really awesome weekend please join me on monday for long options um it is at noon eastern so take care everyone i'll see you soon bye for now foreign

2022-07-09 16:38

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