Using ATR for Swing Exits |John McNichol | 10-22-19 | Swing Trading (Days to Weeks)
And. Good morning everyone john, McNichol, here and welcome, to swing trading days two weeks, Tuesday. October 22nd. 2019. Good, morning you basil and everyone else who is login, on, today to appreciate you being here let's. Take care of our disclosures, and we'll get right into it. Options. Are not suitable for all investors as, the special risks inherent to, options trading may expose investors, of potentially rapid and substantial. Losses carefully. Read the previous provide a copy of characteristics. And risks of standardized, options, spread, straddles, and other multi, leg option strategies, can, entail substantial, transaction, costs, which. May impact any potential, return advance, option strategies often involve greater and more complex risk than, single leg option trades and investors should also consider, contacting. A tax advisor regarding. The tax treatment applicable. To spreads and other multi leg option. Transactions. Now. In order to demonstrate the functionality of the platform we will be using actual, symbols, keeping. In mind TD Ameritrade does not make recommendations. Or determine, the suitability of, any security at 65, cents per options, contract, if fee, applies, to. Opt accessible, investing of actual, funds during a later time period as market, conditions change continuously. As always. All investing, involves risks, including. The risk of loss now while this webcast discusses, technical, analysis, other approaches. Include in fundamental, analysis, may serve very different views a stop-loss, order, while, not, guarantee, will, not guarantee an execution. At or near the activation, price once. Activated, they, compete with other income. And market, orders. Alright. Michelle, thanks, for being here let's. Go ahead and bring up these thinkorswim platform and, we'll, get into our topic for today if. You, have any questions, would certainly love to hear from you please feel, free to utilize the, chat. What. We're gonna do today is we're going to take a look at an indicator. Called. ATR. Average True. Range we're. Gonna explain. What it is we're, gonna apply, it to the charts and we're, going to use it as an, example. Of. Systematically. Defining. Targets. As well as. A, potential, stop. Kind. Of a an easy. Way of potentially. Being able to practice, swing. Trades to capture relatively. Smaller, moves, so, by the end of the session, you. Should be able to put. The ATR on the chart and utilize. It in a practice. Trade. Tom. Thanks for being here. As. We look at the markets markets, are up once again we. Have the S&P 500 at. The opening, traded. Trading. Higher. Continue. In a swing. That, started, on Monday. Yesterday bring. Up a couple the other indices see, how we're standing. Nasdaq. Is well up, at the opening. Bring. Up the Dow now the Dow had been weighted, down with. Boeing. And we. Can see that's probably, the, same, at the moment as. The, Dow is just slightly, higher than, it was yesterday, down. Really not participated. In as much, in. The bounce as the SP, the, Nasdaq. And as. We bring up the Russell are UT. Russell. Is still plugging, away. Up. To its resistance. Now. Those of you that follow. Me on Twitter. Probably. Are already familiar with, this as we. Not only educate, through our webcast, but attempt to do the same thing via, Twitter, I. Think. I still have my page. Up here. If. You want to follow me it's my. Is the, @ sign. Jay. McNichol, underscore. TD a you. Can learn about myself as well as some of my fellow instructors there, and. As. You go down you can also see some, educational. Content. With charts. Technical. Analysis, and. Kind. Of overviews. Of markets, so what some technicians, may be looking for this. Is just a snapshot of. The. Indices. From, a weekly, perspective. This. Is kind of a sentiment. When, one is swing trading to, get an idea of where the, tide, is going are, things swinging, in your favour or going against. And as we look at the weekly charts. With. The S&P. Continuing. To make some higher highs and higher lows getting. Above the mid-range, of the sell-off from, the summertime, the. Nasdaq has done, the same thing. Continuing. Advanced and the, small caps, which. Have struggled, and are still in, an intermediate. To longer-term kind. Of a slightly downward, bias, is. Coming. Back up on that resistance, once, again, for. Some traders seeing if three, or four is a charm, seeing. If the small caps are finally, able to break out in this, last quarter or if, it's going to be signs of some, downward movement, the. Dow just. Barely, trying. To retrace, from some of those losses there again, probably be and continue to be hampered by bowing. And also. The trade talks so.
Once Again if you feel, you want to follow us on Twitter that's how you do that and, my. Fellow instructors, typically. It would be at first, initial, last name underscore. TDA. Also. As you look at the YouTube, channel that you're on for this webcast, there should be a subscribed, link as well so. Feel free if, you want to be informed on upcoming, sessions, just go ahead and click on that subscribe. Alright. So we can see what some, of the market. Action is doing, now. Let's go ahead and apply. That by. Utilizing one, of our indicators, here. Now. I have a chart, that, we're looking at right now. Has. Some. Multiple moving averages, on it so, some indicate technicians. May be able to identify trends, over different periods. We have a MACD. As a momentum. Indicator just. Trying, to highlight that. So. I can go and change some of our colors here. We. Have a MACD, indicating. Momentum. And. We also have relative, strength which. Is comparing, the stock that you're looking at with the market, you know if one is bullish, you know seeing elements of rise in relative, strength points. Towards that momentum swing, traders are looking for, that, shorter, term momentum in an, existing, trend. Now. We're going to add another indicator. Called, ATR, Average True, Range we. Can do that by going to the upper right. Of, the charts and. Can. Go ahead and select, studies. Now. As we go ahead and click on that. We. Can select edit studies, and. From. Here over to the far left, one. Can weather scroll down as these indicators, are in alphabetical, order or you, can start typing in, the, indicator, this one's called ATR. It's actually right towards, the top of the, list. Notice. There's a question mark if. We go ahead and click the question mark. That'll. Give a background. On that indicator. And. As we can see Average. True Range study, calculates, the average, true price range over, a time period the. True price range is the greatest. Of distances. Between. The, height the previous high and the, current low between. The previous close and the current, high or. Between the previous close and the current low by. Default, we're looking at a 14, period average. And. So. Simply what it attempts to do is looks. At the ranges. Of price, action. Ranges. Of price action over. A period. Of time in this case 14, days and gives. Us a value that. Value, we could potentially use as a. Somatic, approach to, possibly. Determining. Stops, on a trade, as well as. Potential, targets, now. If you go ahead and click on more details. That. Will take you to the learning center. Looks. Like a, little. Lag here it's all right click, on more details that. Will take you to the Learning Center where. One can learn more about this, application, let me go and add it first. Which we have it added by. Just double clicking on it or, make sure it's highlighted and, select, add selected. If. One wanted to modify, the settings that each indicator does have a gear you can click on. And. We'll. Click OK. Now. When one clicks more details, that will take you to the, education.
Tab, So. Remember on the education, tab there are two, tabs once, for education, and that's. For all things, on the TD Ameritrade, educational. Site where. You can learn about the basics of technical analysis, by attending our technical analysis course it's. Also where you can register for, live events that's in your area I just happen to come back from, Denver. For the technical analysis, and option, strategies, course had a great time great, hospitality, from the folks in Denver and in. Mid-november. We'll. Be out in the, Chicago. Area I believe, it's Northbrook, north. Or to the northwest of Chicago. But. The other tab, of the education, is the. Learning Center and that's where you can go to learn all things, thinkorswim, a. Lot. Of things that. Are available to, use, into thinkorswim platform don't, feel that you need to understand. All of it you know think of the Learning Center is kind of an encyclopedia you. Don't need to read that encyclopedia. Hopefully, some of you know what encyclopedia. Is still you. Don't have to read it from front. To back but it's nice to know where you can find answers, to some of your questions, and the Learning Center can help you with that all. Right so we went ahead we have a little understanding of what that ATR. Is now. Let's see how it looks like on the chart. So. We have, ndx. That's on the chart the nasdaq-100. The. ATR. Is on the bottom of the chart here now. What I'll do too is you, can right click on, any indicator, to. Modify, it so, if I right click notice. I can select edit study. All. You do is put the cursor on that indicator. And, just. So you can see it a little better you can make. It thicker you, can change colors, and. I'll, click apply. So. Notice as an example when we look at the ATR, for, the Nasdaq 100 you. Know the current value is about just, shy of. 9999. Points. What. That means or implies is. The Nasdaq. 100. Theoretically. Can, move, on. Or has been moving on average, about, 99. Points, from, high to low and. As. You can see that ATR, will, change, over, time. Notice. That periods. Of time, that. ATR, may, have been lower and, other. Times it may be higher, significantly. Higher you'll. Notice that 8 ers will probably, be much, higher in. Volatile. Markets, and, or. When, markets, are down trending, and, that. Is a key. Point for this indicator, it. Is dynamic it, adjusts. As price. Action may, get wider, or, get, narrower, so. Being. Dynamic. It could potentially be a useful tool on. Realistically. Setting, stops, and targets based. Off of current. Volatility, now, the ATR, is not a volatility. Index. Per se, but. The implication. Is when, there are wider. Ranges. In, price action, lends. To more volatility, whereas, if the ATR. Ranges, are smaller, may, land to less, volatility, so. Instead of having a stop that is always fixed at a fixed percentage which. May work for some, stocks may. Not work as much for others may. Increase the probability, of being stopped out if the stock whether, temporarily. Or, systematically. Has, a wider. Range. So. Let's go ahead and apply this to some individual, stocks and see, if we can go ahead and, possibly do a few practice, trades as well. Now. Just kind of a little, bit of a highlight. Here. Just. Want to take, a glance, at a couple of stocks that may have have earnings these, may be. Set, ups, although. Sometimes as stocks have a tendency. To, gap. And. These. Are just a couple of Dowell stocks that where they have earnings. Whether. They had them at the opening, today some of these may be coming out at. The close. Let's. See United Technologies is. Up. In the a.m. kind, of faded back. Looks. Like on an example, of a breakout. Like. To refer to gaps. As overachieving. Breakouts, so. It, gapped up kind of fading back some, traders may look, for a bounce here. Maybe. Take a closer look at that along with few other stocks, let's. See. Traveler's, insurance trv. Stock. Gap and down continuing. Its downtrend. Procter. & Gamble. PG. Looks. Like a gap up, after. More, of an intermedia, correction. That. Gap, essentially, breaking out of a. Fallen. Trend. What. Some traders may look at is. When. One thinks of that flag, pattern, you know sharp move up you, know gaps are still part of that move, in. Some cases if price settles down gaps can act as support some, traders may look for a bit, of a flag, formation. And look. For a follow through bounce. If. The gap doesn't close in. And. Then Eric likes the comment, yep. Overachieving, breakouts, that are that's what a gap is, and. Let's see I think finally as far as with the Dow components now there may be a few other certainly.
Many Other stocks that have had their earnings I, just. Happened a last night look at some of the Dow components, since the Dow was lagging with, Bowen. McDonald's. You, know gap down at the opening. Potentially. Forming a hammer. Now. With this being a little, more of a an. Intermediate, downtrend, some traders may look at a longer. Term area, of support maybe, go back and look at some of those weekly, charts. Let. Me go ahead I'm going to right click and. Let's. Clear the initial drawing set here let's start fresh. I'll. Zoom in, and. We'll take a drawing, tool trendline. And. We'll go ahead and draw. Across. Some, of these longer, time lows. Here's going back you. Know to the summer of last year, and just. Kind of looking at where, that price gravitates. To we. Can see examples of multiple touches. Low. Low. There's. Three there's. Four and, notice. On earnings, pretty, much train down a level now there's potential that you know we may see a. Long. Term break of that trend. If. That, momentum continues. But. Notice you know there are some, investors or some traders, if that forms to be a hammer that could be a potential. Reversal. Candle reversal. Even. Though the short term. Or. Over, the near-term little. More on the downtrend, side, from. It and inter. Meet the longer-term perspective you, know we could potentially see a bounce here we may explore this one -, on our ATR. One. Indicator of that longer-term, support. Is what's, referred to as a divergence. We've. Discussed this concept. Price. Action, has. Been making, lower. Lows. At. Least over the near term but. Indicators. Such. As the MACD, are making. Higher, lows so. It's called a positive, divergence. Your, own tools working a little bit better that's. What's called a positive. Divergence, some. Traders, call that a bullish divergence implying. That downward momentum has slowed down at that. Support. So potentially some value players stepping. In as it. Looks like from. The highs, of. McDonald's. Which. Is at around 221. Going. Down to that. Low you, know just, shy of a correction. Territory as. You. Know price is off about, eight to nine percent off of those highs. Okay. So. That's. What's going on with a few stocks. Let's. Look at some stocks that, may, already be, in, an uptrend and we'll. Apply. The. ATR to those once. Again if you have any questions feel free to utilize the chat we'd love to hear from you, and. So, we'll go ahead and look at one, of the public lists, pending. Increment lists, and. Look. At any stocks. That. May be bouncing, in. That, existing, trend. And. Let's, see healthcare. Stocks. Have. Been making some moves, here's. UnitedHealthcare, after, earnings, has continued, swinging up we. Can see an example of price, trading. Above the high, of the low day a. Little. Flag pattern. Now. Some traders may look to enter this weather. As soon as it trades above they. May look for it in the latter part of the afternoon. To. See if prices are still trading above there but, let's go and apply the ATR. In this. Example. Right. Now the ATR, is currently. Shown up with a value, of five, dollars and seventy. Two cents. Now. What we can do is, go. Ahead and. Let's. Say put in a practice, trade now this stock is, trained at two hundred forty three dollars. Some. Traders may look let's, say as an example of an option. Let's. See what kind of options we have here as, we go to trade tab and.
Go. Out into. Time. Now. Some, of the issues when it comes to options is the difference between the bid and the ask sometimes. Can be a bit larger, where. It may be a little hard to improve. On, price. And. As. We look, at the difference, between the bid and the asks, on some. Of these one. May look at the ask price, and as. Long as the difference, between the bid and the ask is. Less. Ten. Percent of that ask price. So. Right here, ten percent would be eighty cents, of the difference between this bid in the ass right now is about thirty five cents. Certainly. Not a nickel or a dime but. These options, are priced. Higher as well. If, we wanted to go ahead and do an example of. A practice, trade on this one, what. We can do is I can, right. Click on. The. Order. We. Can do a buy. Custom. And. What I'll do is I'll do a buy custom, with stop and what we're going to do is we're going to modify, it. And, create a, conditional. Order. Now. This. Is certainly going to be more suited, for stocks, that may have smaller, spreads, but, what encourage you to do is practice trade, with. Different. Options that may have tighter spreads, as well, as some of them that may be a little bit wider but still in the 10% see. What your results, are. Now. What I'm going to do is I'm going to change the, stop. To. A market. And. We're. Going to change the time, and force next to it to GTC. Now. Notice. You'll see an initial error, that'll, say market. Order must have a day, time in force, that's, okay, that will go away once, we put in a condition. How, do we put in the condition, if, one. Moves their cursor, on top of, that sell order, you'll, see on the right a little gear, that will appear, that. Gear we can click on and this is where we can put in our condition. Now. One bit of information that we. Would need. Is. Utilizing. That, ATR, and. Determine. Where. The initial stop, or. Exit. Price will be whether, for a gain or a loss so, if we're looking at around fifty. Seven seventy. We. Can look at the current. Price at two 4905. We. Utilize our calculator. By. Switching, a gadget here. Or. Having, a separate calculator, and, if. We go ahead and take 249. I'll. Put, I'll. Just do 249. Since the prices are adjusting, a little bit here we, can always adjust afterwards. 249. -. Five. Dollars and seventy. Seven cents. That'd. Be a price of 243. 23. That. Would be the low price and if we look at the potential, target, we'll. Go ahead and take that. 249. Plus. 5.77. Equals. 254. 250. 477. So. Now what we can do, is goto, back. To our order now. If you already have the order if you'll notice on. The, bottom of the, screen. Underneath. The chart there's a little arrow there if you, click on that that should bring up the existing, order unless you cancelled it and, so. Now we can click on the gear. For. This. And. We. Can go ahead and put, in our conditions. So. The, conditions. Can. Be put right here on the left side and, we'll. Start off from symbol and work, our way over. So. I'll click on symbol it automatically, put in UNH for UnitedHealthcare. We. Go to the method that's the mark, that's essentially, between the bid and the ask price, and the. First option is a trigger, less than or equal to now. Since it just comes up happens to come up less than or equal to. We. Can go ahead and put in that, lower, price. Now. To apologize, that the. Boxes, are little truncated, I have the fonts large so, it's easier to see sometimes. It makes a little bit harder for me to enter, some. Of the information so it's gonna be two forty three point. Two three make. Sure you hit enter so it, sticks. And. I. Don't know why it, doesn't like my Enter key let's. Try this one more time. It's. Going to be two, four three, point. Two three, we'll. Hit enter there, it took that time and, I'll. Click on the second box you can put up to three conditions we're gonna do - so. UNH, mark and we'll put greater. Than. Or. Equal, to and then. We'll put in that target, price and. That. Would be two fifty four. Point. Seven seven. All. Right that took and we'll. Click Save. And, if. We were to hit confirm, and send. This. Will basically explain, what, we're doing as, well. As the potential, risk, with, that. Looking. To buy the option. At.
Whatever The current prices or as the price is trading higher, and, then. We have a sell order that is conditional. What are the conditions, there's, two conditions, whether if the price goes below two 43:23. That's, the one ATR below. The current price or, if it goes above. 254. Either. Way that will close out the order, at, whatever. The market is, now. What's the maximum loss on this it's what we paid for the option that's, set for eight hundred and fifteen, dollars now, theoretically, if. The price goes down to 243, there. Would be potentially. Some value. In the option left, and. We. Would be able to at least recover. Some of that but. What will it do for illustrative, purposes is, position, size to, that maximum, loss, that, way we're incorporating, in the best, worst-case. Scenario. Some. Traders may go ahead and you know attempt to position. Size assuming, they may lose half of that position but. Keep in mind that's not as well defined, markets. Can gap. Prices. On stocks can gap as well and so. What I'll do is I'll do approximately, about. Half. A percent of our, practice account which, is currently setting up at three. Hundred and seventy, thousand, was three hundred seventy, one at this. Moment so. Two contracts, would be about sixteen hundred which, should fall within that. Half. A percent. So. I can go ahead and select edit and. Go. Back and adjust a contract, too to make. Sure the sell order says, the same amount there's, usually a little chain link here, to link them, and. We'll. Go ahead and click confirm and send and. Send. Now, one thing to keep in mind. As I'll. Send this through, we. Went ahead and we got a fill on that is. For. Example you. Know the lower part, of our, exit, we. Go and go to the monitor tab. And. Let's. See there's UNH. Now. I actually have some, other positions, on UNH, on top of the. On. Top of the calls, that we just bought I actually, have covered calls. Actually. Looks like to. Do to do up you know what that's a vertical. Should. Have another UNH. In here as well. Let's. Just go and go to the filled orders. Let's, see, 250, ok. So, if. I was to go ahead and look at the working, orders, this. Is where our sell, orders are. You. Can go in and click on the gear and that. Lower price at 240 323. Go. Into the charts. You'll. Notice that's not much lower, than, where today's, low, is. Now. Theoretically if, prices were to fade and go. Lower. That, may create a situation, which would be a day trade if you get in and out of the trade on the same day that would constitute a day trade and remember there, are such things called day trading rules if. You have a for. Positions. That you're in and out on the same day, within. A 5 day, period if it exceeds that you. May be designated as, a pattern day trader to. Continue doing that you'd have to make sure that you maintain over. 25,000. Dollars in equity in. Your. Account, so, what some traders if they have smaller accounts may look to do is try. And initiate, positions, closer, to the end of the day so, if.
Anything Would happen it would occur in the next trade in session even. Though it may happen at the, next day is not, considered, to be a date, rate so, make, sure you take note of that. Alright. So we went ahead and we put that through for. UnitedHealthcare, now, what. One. Can do as far as a matter of, trade. Management. Is. As. The, price goes higher. Each. Day, is. To, adjust, your. Stop. To. 180. R of the, current price so. Let's say if the price tomorrow, or. Going, into the close let's, say closed, at, 251. Well. One can do is take. A look at the value. Of the ATR, and. That. ATR, value may change however. Make sure that stops, adjust. Up not, down. But. If we were to take let's say 51, if that's where the price closed at. Minus. Five. Dollars, and seventy. Nine cents. That. Would be potentially. The new. Stop, and one. Can adjust, that stop, as the price goes higher until. The limit is reached, therefore reducing. Risk on the trait and if. You need to modify that you. Can go back to your monitor tab and. Whether. Go to the work in orders. Or. As I need to get sorted out as far, as with that individual, option it actually may have been that one. That. Is in here I think it just happened to create a vertical, there. Few. Trades. Nope. That's another trade. To, do. I'm. Not sure what happened to that UnitedHealthcare, trade that we just did but. That's okay I can monitor that in. Today's. Trade activity, there under the working orders if, you, click on the. Gear. That'll. Go ahead and show that order. And. Then from there you can go ahead and change the price now in this case we'll probably gonna let you view that so you'd have to, right-click. On. The existing, sell order and, select. Cancel. And replace. Order. Cancel. And replace order, go. To the gear, and. Once. You click on the gear you, can go ahead and modify. That. Price, so, previously. It was 243. And. Change. Price. Goes higher. Adjust. The 180 are below that current. Price we. Would change this to 245, and change as we looked at and continue, to manage, which hopefully would be a profitable, position. Let. Me know if you have any questions on there as well now. I know it also came out a little bit earlier I think we have a little bit of time left there folks but there is a survey. On. The chat, so, if you have a few moments to fill, that out would certainly love to get your feedback, hopefully, you're learning a lot in this session. Let's. See what, else we have going on. And. We. Can do another one. Again. These would be examples of stocks that may, be bouncing. Think. Of your, flag, trades or they can be breakout trades and we've, been seeing a few. Of those as you know markets. With. A few exceptions are attempt into trade. Up, to. Some previous highs, now. One thing to keep in mind on shorter term trades we are in the middle of earnings season so. Some traders may forego, that. Swing, trade unless they believe they're able to capture that, move. Prior. To earnings. That. Could benefit option buyers as volatility. As a tendency. To rise going. In earnings, so. Probably, less susceptible. To decay. I'm. Just going through a few of our stocks here. You. Know a few healthcare stocks are, showing some signs of reversals, as we're getting above some of the moving averages. What's. That a Marin.
Kind Of pushing a little bit out of a flag, here after. A sharp, move. Now. This is a. Relatively. Cheaper. Stock there. Some. Traders may forego if it's just a relatively. Smaller, move. You. Know the ATR on this one is only about 64, cents. But. It's something that you know some traders may be, willing to practice with. Facebook. Again. Earnings coming up but pushing, up on resistance. Some. Traders may look to see if there's a breakout so. In the case of Facebook whether, that breakout occurs prior, to earnings, or. It's one of those overachieving, breakouts, that Eric. Likes to. See there or at least the air we talked about. Will. See there so nothing as, distinguishing. Today Microsoft. Trade. Above the high the low day again, another earnings, event here. And. Let's. See I think I do have a couple of other ones here. Financials. Here's. A Bank of America. Now. Bank of America, looks, like is, breaking. Above kind. Of more of a slightly downward, Channel let's. See if I can get thinkorswim to catch up with me, represented. By that gold line. And. We just recently have a breakout kind of flagging, at that resistance. Now. It is a lower. A. Lower. ATR. You know now as volatile but let's. Just do an example you. Know of a simple stock trade. If. I go ahead and right-click on the chart we. Can go ahead and select. In. This. Case which. Since it's a stock we can basically do, a a buy, custom, with. Osio bracket, and. In. This case we can go ahead and take. The. Current price. We. Can, leave our limit and stop will make these each GTC. Now. There. Is some capability, although it may be limited, on on paper. Money. Where. You know some traders may utilize. A. Study. To. Go ahead and trigger, some. Of these orders, I may. Do a little more research and next, time we talk about ATR, we can see if we can possibly use the, technicals. To, trigger, a, Pacific. Entry or exit. But. This way by. Specifying, the price we know we have somewhat, control over, the price, now. With, that if we were to go ahead and take that. ATR. $0.65. Now there is a fraction, there so you know we can choose to round up, or down on that let's. Go ahead and we'll we'll, just round, up to the nearest cent of. 66. So. Then what we can do, you. Know based off the live price we, can go 66. Cents above which. In this case would be. 31. Point. 68. And. In. The case of the stop. Let's. See that would be I need. To get my caffeine. I'm. Kind of vulnerable, in the morning when it comes to math and then I also get vulnerable, in the late afternoon, fortunately. The market closes at 2:00 p.m. local time all. Right, let's see I'll take thirty one point. Zero two. Minus. Point. I think. We said 66, and, that. Should be 30 36. Now. It's also in this case to some. Traders. As we, can see relatively, low, dollar.
Amount There. Some. Traders may be looking for stocks with higher betas, or you. Know generally higher atrs however keep in mind volatility, can swing both, ways now, this is just a hundred shares one. Can position size based off of you, know allocation. Or how much they anticipate, to. Lose. In. This case I'll go ahead and we'll, edit this to a couple, hundred shares. That. Would be about nine thousand. Dollars that, falls. Well. Well, in this example probably. Only about two and a half percent of. My. Account. So. A little diversification, there and we'll, go ahead and we'll send that through. Alright. Unfortunately. I can't take recommendations. For individual. Stocks to look at there Doug but do appreciate it, you. Know in the farm. Area, healthcare, stocks there are some nice swings, in. There and. What. Some traders may be looking at is looking, for prices to, trade. Or. Slide back. We. Have a gap on. On. Bristol-myers, earnings. Coming up kind. Of very similar to what we talked about on I believe it was UTX one. Of the other stocks that had an overachieving, breakout, you know may look for prices to pull, back kind of flag a little bit and look, for that bounce. So. We got time, for one, more here. So. If any other stocks may have been breaking out today. Capital. One on the financials, potentially. Reversing, again, there's an earnings event coming out. Tesla, there's. An earnings event coming out on Tesla, but. Just kind of show you some of the patterns, Tesla. Is form. In a bull. All. Right come on. Work. With me work with me here we go. You. Know Tesla's forming a a nice, bull flag you. Know sharp, move up pulling. Back over a couple of days traders, look for price to trade above the, hide load day how, we're from a time perspective with, earnings. That. Some. Traders may not wish to speculate, on that. That. Would be a judgment call some. Traders may look at a spread trade and you, know risk going into earnings, on that let's, see when are they coming, out. It's gonna be after market, I may. Take a closer look at this one tomorrow, in our trading, verticals, class which would be at 3:00 p.m. Eastern Time. So. If you want to join me for that we'll. See what we can set up so we can find some. Examples of reasonable. Reward, to risk on, our practice trades. As. Tesla. Is you know kind of hanging around that resistance, possibly. Investors, expecting, to see some. Better news compared. To what happened last quarter when the stock had gapped down. So. A lot of financials, still, going up we. Tweeted about this as well with. Yields. Rising. That. Typically, benefits, a lot of the banks so we've been seeing that for. A good part of this month we'll see if that continues as. A market attempts to retest those highs. Again. With a few of these you know there are some. You. Know technical, setups, weather flags or, breakouts. But again, earnings, events, coming, up shortly here. Now. One thing and you know even I haven't sometimes. An overlook, some. Of the productivity, tools, of. Thinkorswim. But, you know when you are looking at a watch list it. Will tell you which, stocks have upcoming earnings, they're based off that little blue Bowl so. What one may do is you, look at some of the stocks, that. You know do not have anything coming up at least within a week or two and. Possibly. Go through some. Of those, but. It looks like a lot of these are in. The hopper there when. Was another one that we had looked at. There's. An earnings event, coming. Out but, they. Did. Briefly. Between, yesterday, and even today kind. Of pushed out of this. Double. Bottom that, we discussed yesterday and technically speaking you. Know some traders may look for a flag, here and look for the bounce, but, in this example we're not seeing as much of that momentum, as. The price is kind of forming a little more of what we call a dark, cloud, so. Possibly. Waiting for that next bullish, pattern. All. Right let's go ahead and wrap things up as. It. Looks like we're again bumping on earnings, on a lot of these. Let's. Look at Siena here. See. In a little more on the downtrend. Could. Potentially be some bear plays out there as well. Palo. Alto Networks. Kind. A little more sideways, some. Traders may be looking for a a breakout. And, some traders may consider that to be a, diagonal.
Breakout, You know little rise in relative strength. ATR. Around 5, so. Get the options, on this. One here. Now. I really didn't address Delta's I kind of went closer to being at, the money. Some. Traders may go a little more in the money to, try and capture more, of that Delta. Kind. Of simulate, the stock a little bit. So. Let's say I go ahead and look at this December. A little more into money to do a contrast, here and I'm. Gonna right click buy. Will. Do a a buy. Custom. With. Stop will do another conditional, order. So. Will make the stop a market. GTC. And. Will. Take what, was on the chart. That, ATR, of about 520, and. Will. Put will put it about 520 above, 235. So. Let's go ahead my pop-up window came up over here once, again if you didn't catch it a little earlier as that survey came out a little bit earlier if you didn't have a chance to click the survey please go ahead and do so so we get some feedback from you I also. Remember, you can follow me on twitter @. @j. McNichol. Underscore. TDA, or. You can continue to learn and see. Some examples of some technical analysis, and price patterns, so. I'm gonna go ahead and we'll add that. Thing. It was about 5 20 so, that'll be 26. 55. That'll. Be for the upper one so let me just go and do that while it's fresh, we'll. Make that greater. Than, or. Equal to. 20. Well. We got to do it based off the stock not, the option. So. Let's make sure we're looking at the actual, stock price which. Is 2 15 24, so, that should be about 2, to. 20, I'll, just say 2 20, 45. 45. Make. Sure that takes and. Then. As far as the stop we'll do 5. 20 below that so. That should put us just, at about, 2:15. And a. Bout, a nickel. You. Got that set we'll click Save, we'll. Hit confirm and send. This. Will probably be sufficient with the one contract, now if you have a smaller account you know one contract, as far as position size to a max loss yeah, that may exceed, your tolerance, for risk so, therefore you may need to look at another candidate. But, here in this case if it goes to 2 1505. We're. Out at a loss if it goes up 180 our two two twenty point four or five hopefully. We'll have a game and as. Price, goes higher you, can adjust your a ATR. Adjust, your stop up based. Off of 180, are below that current, price on the next day okay. I'm going to go ahead and send this through and. There. We go, so. Once again folks hopefully you learn something new as we go ahead and wrap up today.
Would. Encourage you to do is go ahead and, through. Your watchlist go. Ahead and pick, a stock or to. Apply. The ATR. So, you can see what the average true range on that individual, stock is. Notice. Some of your stocks and may have higher betas, or more. Volatile will have a larger, ATR, so notionally. Possibly. More, to gain on a dollar, basis, but, also translated. You know volatility, can swing both ways to. Whether it gain or a loss. And. Then go, ahead and practice. Adjust. In, stop each and every day until the, price hits that upper, target, now. Remember folks in order to demonstrate the functionary of the platform we had to use actual symbols, keeping, in mind TD Ameritrade does not make recommendations. Or determine, suitability of, any security or strategy, through, the use of art any, investors.
2019-10-29 00:52
