Visually Identifying Potential Stops | Technically Speaking: Trading the Trend

[Music] hello and welcome to technically speaking on trading the trend weeks to months my name is james boyd alongside alongside me my good friend cm in the chat also known as cameron may so uh we got you covered here today we welcome him we welcome all of you we would like to uh say hello to joe carlos j moon jonathan jack abu lisa annette and many others now you can follow cameron or myself or any instructor on twitter we do post educational content there daily check that out now just real quick as we're getting started want to give us a quick reminder you should also look at when investing consider what your investing objectives are your risk also consider the expenses before investing remember that options are not suitable for all investors there's special risk uh in uh to using options there can be substantial rapid and substantial losses there's also pamphlet called the characteristics and risk of standardized options feel free to check it out and that gets into more of the legal details there and also remember we're going to demonstrate the function of platform we're going to use actual symbols td ameritrade the broker does not make any recommendations to determine suitability of any security or strategy that's up to the investor decide what they want to invest in and last but not least there's the option greeks now as we get into today we're going to really talk about just a quick view of the market and or sectors we saw some volatility this morning as japan actually shut down the olympics for spectators in fear of the new strain of covid now that kind of might be interesting for amazon if some things were to go more to that direction we'll take a look at that and how that affected some stocks more than others we're also going to get into current portfolio management uh we're inside 10 days now on some of these positions and so we whether we talk about cover calls short put short put verticals etc there's there's going to be some examples that we need to cover here i'm not going to spend uh five minutes per each trade we're going to rapid fire through that area and i want to include as many examples as possible i also want to talk about potential exits discussion okay and i want to kind of show examples of what exits could be and visually show those on the chart and this is where we might have a discussion uh and questions in that area so just know that myself and cam we'll actually be watching the chat as we go we'll also be talking about what are some stocks that maybe even with a kind of little spike in volatility this morning has really kind of maybe gone up or not down as fast as maybe the overall market in general so let's go ahead and push back and let's take a look at the spx first now first thing i want you to understand is that you know we've been talking about really the spx going up past the 100 extension okay or the resistance line and then going up to the 161 extension area now as i've seen cameron and all of you have seen is sometimes the news always wants to attack you know when markets go down they want to attach a reason of why investors are selling have you ever seen that happen and james you even quoted about the japan thing that's true because that's what the news said okay yeah you could come up with a technical reason say well the reason why investors were selling it it went to the 161 extension and that can be an area where some investors really profit take and when investors profit take what does it cost volatility do well volatility goes up okay but again that's what news does they try to always attach a reason instead of just saying the reason why the s p is selling is because the investors are profit-taking at a targeted area now it just sounds better when you bring up the olympics okay does this make makes sense so whether it's the olympics or whether it's a targeted area we see price at that extension some investors are profit-taking now remember when you go to that extension area it just might consolidate it doesn't necessarily mean that it's always going to come all the way back down to where it broke out from okay it might even form a pennant an ascending triangle okay just because investors are selling at that extension area does not mean long-term bearish now when we actually bring up the nasdaq which did overshoot okay that actually did overshoot the 161 matter of fact almost got to the 200 halfway there you're gonna really see that it's holding on okay and when i say holding on it's actually sitting right at the 161. notice today the green candle what does that green candle mean that means the price opened down here when you say here where it's here 14577 okay and if we look at the price now the price is almost trading at today's high okay so earth this morning's earlier action wasn't necessarily sold off a whole lot uh post open market hours because we can see where the tail is of that candle the open was pretty much the low and they've used that short-term volatility to try to get back in so far so again this is where maybe someone some investors decide they want to get out use this opportunity to sell and while some other investors say well that stinks for you i'd like to actually get in and that's why you always have a market someone's selling someone's buying but if we look at right now buyers actually kind of taking advantage of opportunity of that volatility last thing just real quick when we look at the dow and the russell both are the same the nasdaq and the s p had the 161 extension the dow and the russell still fighting to really get up through that area resistance and really struggling okay now i think that's always interesting to kind of take a look at how the portfolio is faring okay so like on a day like today what happened well this portfolio yesterday was 543 600 it's literally about 539 000 so it's down about 4 000 ish dollars percentage wise that's three quarters of one percent okay that's for the bigger dollar account so i again i like to express it in percentage okay not dollar amount because if you had a million dollar account you know higher look at it as far as the percentage if we looked in the margin account and said where where did we close yesterday 175 388 and it's actually at 174 100. so it's down about twelve hundred dollars it's about down three quarters of one percent so you're seeing both accounts down three quarters of one percent and it wouldn't be a bad thing to compare that relative to let's say the s p or the nasdaq or the dow to see comparison okay now i wanted to bring that up so just because the portfolio is down does not mean that i don't know what i'm doing or the investor doesn't know what it is doing it just means that these both of these portfolios have bullish positions and if you have bullet positions and when the market goes down what a shocker the account goes down okay vice versa when it goes up now i want to kind of also take a quick view of the um sectors now we saw that the interest rates have gone down quite a bit i post about that earlier but really utilities got okay really kind of being the opposite of that and maybe getting a little bit and even holding in there quite strong now this is looking at the neighborhood of utilities so the neighborhood of utility is showing a recent crossover if someone likes income stocks etc or wants diversification outside tech or discretionaries utilities are kind of holding in there the other area that's also holding in there maybe finding some value is also staples recent crossover sold down a little bit today but still seeing kind of some booing or some higher basing areas of support okay now when we look at let's say but what about the what about the discretionary areas well when we look at the discretionary areas you're going to see that in the last uh yesterday and today we saw the price get above this old area of resistance sold off today not completely unusual but what you're going to notice is re getting back above the old area resistance so discretionaries have not just thrown in the towel here they're putting up a fight and changing that old resistance into the new potential support could amazon provide that leadership and don't forget about nc2 we talked about that now when we look at healthcare okay look at healthcare well yesterday healthcare made a brand new high today again fighting and pushing that price back up now let's also remind ourselves here that when we look at the moving averages okay the 10 period moving average we look at the 30 period moving average both of those lines are still green okay so if you're going to notice this we see shorter term momentum all we see that 30 period moving average still grinding actually higher and it's still moving i want to double check that time frame yeah it is the 30. and why is that why is the lagging moving average of 30. well this class is really trading the trend weeks to months so it's trying to really stay in the stocks longer by using a little bit slower moving average now the other one i want to bring up that i think is also not too shabby uh as far as holding in there is also industrials okay that's kind of looking very much like the staples area can this area turn into a new support area and then last but not least what about that area of like technology again looks very much like uh the the nasdaq itself now there's going to be some stocks in here that are kind of different than what we're seeing on the index or the sector okay now let's now so those the ones that stand out to me still non or lower beta or lower volatility utilities and staples we could also include health care in there of those three healthcare is the stronger area so far when we actually look at tech and discretionary they are not okay or do it a little slower we do not see the surrender flags pulling up in those areas yet we don't even see the green the green moving average line is going red yet okay so we're going to keep an eye on those and we're going to watch also the color of those moving average lines and we're going to get into that and we're also going to be watching the support levels but so far kind of seeing some booing back up now let's kind of now talk about for example the second point which is current portfolio management now when you see volatility in the market sometimes as when stocks go up what we tend to really see is investors tend to kind of forget about their positions why is that well what happens is when the market goes up volatility goes down and it tends to put investors asleep to managing the positions now until someone exits something there is no there's no realized gains so one of the things that is managing positions because i want to see what happens okay now what i've actually done here is i want to actually go first off to so when we have a spike in volatility the type of strategies that concern me would be short vega positions in other words strategies that would be exposed if volatility were to increase and i could think of two of them that would make me a little nervous number one would be a a cash secured put a short put that would be first okay the second one that actually would concern uh an investor that has experience would be like a covered call those are both selling strategies and when you're short the option if volatility were to increase like we saw this morning that could hurt those positions those would be maybe the first few strategies that the paper money account will go look at first now i want to bring up something here why are we bringing this up okay now we're gonna fast fire we got uh aob two contacts the 165.8 days left

expiration now once we get inside 10 days to expiration we can't really play around because now it's do it's kind of like could could there be a potential gain or or is it maybe getting close to potentially assignment risk assignment risk is where the investor could be put the shares 200 shares of stock at the 165 strike now if the investor had two goals number one make income number two try to take ownership of the stock if they said james making income is more important than taking ownership of the stock and i'm uncomfortable with the vix reversing we talked about that yesterday okay if we look at this it was sold for 430 and now the marked value is 235. if the investor saw volatility expanding okay and they said well i would like to get 50 i would like to get 65 well what you like in reality could be different so i have to say that okay now if we take a look at this if the investor said we're inside 10 days this is where we look for the exit and if volatility is actually starting to spike up i the investment says i don't want to own the shares create a closing order buy that back now if they buy it back what they're really doing is they're ripping up the contract okay they're saying in this case no i do not want to have the right or the obligation obligation to buy the shares i just want to take that 395 premium and get out of the way of volatility spiking get out of the way of maybe the price going down and potentially owning shares of the stock as it's starting to drop okay so here we go we're just going to go ahead and actually say buy that back let's say the 230 confirm and send buying it back remember it's giving some of that premium back it's also paying a commission okay 65 cents per contract there's two of them gonna send this order okay there it is and now what it does is it takes that 395 dollars and puts it realizes that game second one i want to just discuss about just briefly is also something like microsoft okay now remember when you look at a short put strategy it's a bullish strategy positive delta it's positive theta but look at the vega the vega that's actually saying that what is the life up what volatility were to expand implied volatility were to go up one percent how much does it change the option price well if volatility were to go up one percent the implied volatility were to go up one percent the options would increase by about 23 cents per contract for every one percent rise in implied volatility wonder if the implied volatility went five or ten percent the investor would have the option price inflate thus creating a bigger loss now the investor might say on a stock like let's say microsoft are they okay with owning the shares of microsoft now this still has 44 days left if the investor said i'm okay with actually owning the shares of microsoft and there's 44 days left they might just let this position play out that is how this portfolio is going to play it okay it's going to say we have 44 days left it's only a 30 game it's not inside 10 days expiration we're going to let it play out and maybe the investor wants to on those shares anyway now the question came from regarding well what about verticals well what about the verticals we'll tell you about the verticals you got to remember that on a vertical you're short and you're long so why does that even matter well the reason why i said that we wouldn't really be concerned about this as much as short puts is because the verticals are what are they negative vega are they neutral on the vega what are they froze up there for just a second i want to see if it unwinds itself when we actually look at a vertical is it negative vega neutral or is it for example positive vega so the answer to that question just waiting for that to unwind yeah the answer that question is more neutral okay now i know we have this box up i'm just waiting for it to unwind but the reason why we wouldn't care as much initially as much as cast secured puts or cover calls is really when you take a look at let's say okay it's unwinding the vertical since the investor is short the option and long the option it's more neutral on the vega okay so if we looked like a position like adobe what might the investor consider with eight days remaining what would you consider now again this is where investors might say yeah i got eight days left i don't need to do anything that is not true okay is the investor managing the profit loss well what you're going to notice right here is it's 98 the investor can only get 100 they can only make 1.74 more because you can only get 100. and

if the investor can only get about that 1.74 left that means in this position at the only way you get that last one is you have to hold expiration or the stock has to go up a lot more so in this type of situation what would the pig money portfolio be doing is number one is they could say i'm going to exit the position number two in this case what could they do they could say i'm going to roll the position now that's going to bring up this question why would the investor roll the position so i want to ask this is a question that gets asked so much i think it's over complicated the investor would roll the position if they think that stock could continue to go where i'm going to shut this down for just a sec if i can it just kind of froze up but we can answer a question as we go so the biggest reason why someone would roll the option position is if they think the stock is still going to go where yeah they still think the stock is really going to go up so if they think the stock is really going to go up they might roll the position but in this case if the investor said james i'm concerned i have too many positions that investor might take the opportunity to just in this case exit the position okay now what i'm going to do is this pulls back up i'm just going to exit the position this is another question that was asked how do you exit a short vertical well you can just hold the shift key down right on your computer okay so let me go back down into verticals here just bring this back up and what i'm going to do is i'm going to go to the verticals and we're looking at adobe i'm going to hold the shift key down and i'm just going to highlight both those lines okay now what i'm going to do is i'm going to right click create a closing order buy now if i do that what i'm now going to do is it's saying that it's buying the it's at buying the 505 which is short selling the 495 which is long and the debit there that we're buying it back for is about three cents yeah and when in doubt we always like to joke but it's true when in doubt right click okay now if we exit this what we're trying to really do is realize now when do investors tend to realize the majority of their profits when the volatility spikes why is that because when the volatility spikes or is low both what happens is the stocks are probably at highs when the volatility spikes the stock tends to start to go down okay and the investors might look to profit take when those vol when the volatility spikes in this case what we're going to do is we can see it's a 260 commission because it's two contracts okay and if that's okay we're gonna go ahead and send that order now what i'm gonna do is i'm gonna leave it right there so we talked about three management examples it's very important that if you see vixx spiking we talked about the divergence yesterday okay just go back watch the caller and synthetic class yesterday we talked about the bullish macd divergence when you take a look at let's say the vic spiking you also need to recognize the the moving average crossed over and when that moving average crossed over we need to be careful because if that actually crosses over and we start picking up momentum on the vents some of those trends can actually start to drop now it's funny when you say that because the next section i want to talk about is i want to talk about potential exits i want to discuss this with you and i think it would only be fair to really bring up the second chart all right now this chart what i'm going to do is i'm going to bring up a stock and let me just kind of show you if you don't mind we're just going to look at a couple stocks okay now i'm just going to use this one to start let me set the table and then we're going to attack it together so what this really shows this is nothing unusual here's our moving averages right and that green shade again is really telling us who is in control now uh nasa actually says why didn't you roll adobe well the answer to that question would really go down to is how many positions does the portfolio have if the if the portfolio has maybe too many positions which i would say in this portfolio there's probably near the top nathan i wouldn't really mind in this case to maybe sell some positions to free up some capital but if someone said james i could have 10 positions and i only have three that's a different situation so if i showed you the number of positions in this portfolio you would not say he only has four or five positions based upon the trend of adobe and if you look at what that trend is doing it's strongly up so if could someone uh roll that trade and try to play that trend further yes but based upon the number of positions that are in this account you know for this account it's just going to exit all right now when we actually see the green shade right there it's just saying hey look buyers are in control okay now by the way those lines it's using a whole moving average the 10 and the 30. why the 30 well because this class is trading the trend weeks to months so it's not necessarily trying to be so sensitive to shorter term price fluctuation that's why we're talking about trading in 10 weeks to months now what you're going to notice is down here and i'm going to use my pencil here let me kind of just give you some understanding what we're looking at what are the green dots again represent can anybody remind me of what these green dots represent these green dots represent the day where the price actually was showing or exhibiting what we call cohold okay these are all those green dots can go back okay and what you're now going to see is it's going to show you over time how many k holds were there in this recent upward trend now i'm only looking at go holds i'm not looking at a 20 or 55 day breakout now i want to kind of say something that's been on my mind okay if you ask most people can you show me historically an example of every stinking entry signal you got in whether it was on a daily chart or a weekly chart can you visually show me cricket cricket cricket cricket cricket i and you're gonna be waiting a long time okay so when you look at this what's interesting is when we look at the whole dots and that's just saying hey the price was closing above the high the low date okay we can see that there was probably eight or nine of those over time now what are the what is what is that gray line really doing well the gray line is really showing what we call the 10-day low now there's some waste now this is not new i've done this since really 2010 okay but it does do a phenomenal job as far as really showing a mechanical way in which to raise a stop and there's pros and cons of these two different settings so if someone said hey james i like to trade a little bit more shorter term what you're really going to notice is they might use a 10-day low so what this does is it goes back over the last 10 days and says which of the last 10 days was the lowest point and then what it does is it plots a point and you could see over time that the gray line increased because the 10 day low overtime was increasing as the trend went up now just as what you would expect the 20-day load goes back looking now going back 20 days ago what's the lowest point over the last 20 days and what it does is it plots it on the chart so the investor can see sometimes there's periods where the gray line was the same what is that telling us what that's actually really telling us is that stop adjustment did not change the 10-day load was not increased but when you see this line going up up up up up that is actually okay i'm not gonna have fun with this okay i'm gonna be serious now but when that gray line is increasing that's saying that to the investor they have the opportunity if they want to to raise up the stock okay now if the investor said james in this case i would like to use the 10 day low okay so first off let's bring up okay we're talking about trading the trends and what i have is one of the stocks that's in the portfolio and i made a watch list okay this watch list is the s these are stocks that are currently in this portfolio they're there okay now what i'm going to do is i'm going to kind of look and see has there been opportunities as of lately to raise up the stock okay now what you're going to notice is i'm going to go back into microsoft and what you're going to notice is there's not a stop on this right now now i'm going to right click on that stock position i'm going to say create a closing order and i'm going to say with stop where are you going to set the stop well if the investor said james i like to set my stops based on that 10-day low increasing i can visually see on that chart where that 10-day low is and the investor can put their cursor right on that gray line and they could actually say you know what in this case i'm going to set my stop at about 264 35 okay and go day to gtc now remember how the stock works it is saying if the stock goes to that price or less sell the stock at the market price the price can be sold at a lower point okay that's the risk of a stock now i want you to notice in this case is the investor is being disciplined okay they're saying if these lines are continuing increase they have the option which one of those stocks might they want might want to use now let's talk about pros and cons right if the investor was using a 10-day low would they have a higher probability of being stomped out or when they have a lower probability of being stomped out higher or lower if they used a 10-day low mechanically for a stop adjustment in a stop exit the tighter that number is or 10 compared to 20 they would have a greater chance of being stomped out okay now i want to kind of also express something to you again if the investor if we said hey investor can you visually show me where you would have gotten in based on hold setups or a 20 i or 55 day can you show me on any stock on a daily or weekly chart where you could have considered an entry sure okay that's what we've been talking about right this week second question hey investor could you also show us a mechanical example of where the stock would have been exited over time and how did it work over time yeah sure okay these lines are plotting what those days lows would have been at that time okay and also what's interesting if you ask most people that question can you show me how your stocks work over time this is what you'll probably hear cricket cricket cricket i'm not sure if you want to hear that okay i think if you get experience you should at least know i want to see how the stocks work over time now that leads us into the next comment okay so if i actually come down so there's the cell on microsoft now it's a cell stop okay we talked about how those stocks work okay now what you're going to see is i'm going to go to send the order now the other comment came in hey maybe this is a cover call that is not a cover call that's a long call on microsoft okay that's a long call by the way that call was bought for five it's not only 18. okay but that's not in our discussion today now if i go to the next example let's kind of talk about stops and what the investor needs to be aware of okay now what i'm gonna do is so i want you to imagine now pay attention to this we're gonna take four minutes and talk about this and we're gonna talk about new examples but if i take a look at this what you're gonna see is if the investor said james i like to consider bullish entries when there's a moving average crossover well load and stink and behold what you'll notice is when there's a moving average crossover hola there is also a kohl dock and that tall dot is saying it's closing about the high of the low date and yes that will show intraday now if the investor were to say hey james i got in on that day and the stock ran up and then i set my stop at a 10-day low there probably would have been the exit okay right there now say yes in the chat if you say i get that if the investor said i'm getting in based upon a cross or a hold we can see the entry if the investor said i'm going to get in and i'm going to move and raise up my stop to a 10 day low right where my cursor is that's probably where uh the stop would have been taking place so the entry was probably right about 56 and change the exit was probably about 58 and change okay now i want you to notice something once an investor gets stomped out guess what so we go forward to the next let's say day and what you're going to see in in this case is this is showing a hold the problem is on this day what do you notice well what you'll notice is both moving average lines are red that probably not is a setup okay so that's why you want to kind of take a look at cold and say i want to see cohort where the moving average lines at least one of them are green okay so that right there on 524ish that's not an entry okay moving average lines are and when i say an entry and entry set up what you're going to see is those lines shows to hold but the both those lines are red with the red shade the only time you're actually seeing this where you actually got a cross where you saw at least one of the moving average lines green was on about 531 okay so let's fast forward the investor gets in and then what you're going to notice it goes up goes up goes up and then it pulls back now i'm going to say in this example that the stock actually pulls back to a point where maybe what happened it probably could have gotten stomped out so someone that is using a tighter stop they would have gotten stomped out here where someone that's using a 20-day load did not someone that for example got stomped out at a 10-day low the 20-day low did not but i also need you to recognize that when investor gets stomped out using a shorter stop they need to become accustomed to really that the re-entries could be within a week go back and look at it okay you're probably gonna see in the in in the couple days okay a good chance of a potential reentry if you are not good at seeing potential entries which kind of makes me wonder it's like i wonder if the dots were already there once the lines were there 20 55a high it kind of takes down that likelihood of not being able to see it okay so but we'll just play that that it is tougher for someone to see that but what you need to understand is if someone struggles with a re-entry they might consider using a lagging 20-period moving average as a an exit so if the paper money account and let's be disciplined here okay so let's say in trading the trend weeks to months we said if the price goes to a 20-day low the stock is going to be sold well we take a look at this position now we say where is it well the stockx yesterday touched the 20-day low now here's what you need to be careful of okay if that red line starts going down does the investor consider moving their stops down okay well you're good but that might not be a great decision okay we don't talk about moving stops down if the price goes down below that red line that means the stock is meeting a sample exit criteria of hitting a 20-day law now but james don't you like exxon look we're not asking you if the investor likes the stock it's just meeting the exit criteria so there's not really any emotion to this okay there's if it goes down to that 20-period moving average that looks 20-day low excuse me it could have a stop at that line or a manual a jet now why is it um more of a manual jack when you say manual eject what does that mean it means the paper in account is selling the stock right now or trying to and if we're saying hey sell the stock at 59.97

limit we're saying that price or what higher confirm and send and if we do that we know now this is not a stop this is saying sell it at this price or higher send the order and now what you're going to see in this case once that stock is sold how do we know if it will go down further no one knows but if that stock actually goes down below that 20 day loan that's not typically viewed as a bullish signal does that make sense now what we need to watch out for is if we start to see let's say bullish reentry setups what would be so here's the thing people will tend to struggle with exiting if they don't know what they're looking for in reentry so let me bring this up if we said what would the investor be looking for a bullish reentry let's go back to that first term well number one would be a hold where one of the moving average at the minimum would actually be green so if we got it to hold today those moving average red lines are red it would not be an entry setup based upon that criteria neither do we have a stock that's hitting a 20 or 55 day high so based upon a breakout it does not meet the criteria okay so if the investor sells they should be able to immediately state what constitutes a potential entry setup well i would like to see the investor says that kaholt where at least one of the moving average lines or both is green that's a potential setup or the second one would be one of the two or both uh where the price is getting above the 20 or 55 day moving average and we could see that by the price hitting that green or yellow line and clearly we're not anywhere there at all okay now no that was not that position uh peter now uh the comment came in could you share this chart okay so let me just kind of do something this is uh now so let me uh i got only got two minutes left to answer this and we're going to move on to new examples over the last 10 minutes what i'm going to do is you got a split chart the left hand side of the chart is really just kind of more or less really reviewing potential entry setups meaning that we see the hold dots but we also see in this case the 20 or the 55-day high okay the right-hand side of the chart is really showing potential exits based upon 10 or 20 day lows it does also have the whole dots there why well because you're not likely gonna get brand new highs first the reversals will tend to start with call holds first okay that's why i left the dots in there okay so what i'm going to do now is let me kind of just save this grid and i want to kind of say something just again one more time okay sometimes the first time we don't hear it but the second time we get it if you were to ask somebody could you show me examples of where you would have gotten in over time based on a daily or a weekly chart show me where show me where the potential entry signals were these charts would show that does that mean that all of those work no does it guarantee or imply that they were guaranteed growth no if someone were to actually show what their exits could have been based on for low etc could they visually show how that would have worked pros and cons over time well this could okay and so it's very important for you to kind of see how it worked potentially over time pros and cons of using one versus the other so let me share this with you and i'll send it now what i'm gonna do is i'm gonna just put it right here in the chat and what i'm gonna so i sent that script in the chat now when you bring this up so if you go to the very top right go to open shared item right there click on the gear top right open shared item now what you're going to see is i'm going to copy and paste in what i just sent to you okay how do we do that go to the gear click on open shared item there it is what do i do now preview and import it now in this case what it does is it brings up a little box guys and guests that's not hard how do we do that well what we did is we went up to the top right we click on the gear what do we do next go to open shared item if you got there okay you're half you're 75 of the way there we click on open shared item what i sent out to you in the chat copy and paste it in and once i do that i can say preview and import that and now what it does is it brings up a little chart but how do i save this to my chart well what you'll notice is watch both eyes both eyes we're going to click on those two lines right there and you're going to see that it'll say hey save grid ass and so we could just call this potential entry potential exits okay setups okay and that's how you could do that so i showed that twice i do like to see the both of those charts differently because sometimes you're either looking to get potentially considered an entry where the right hand side is kind of really more taking the viewpoint of the investor is already potentially in okay now let's kind of talk about well the fourth agenda item now by the way is this nice to visually see potential entries currently and historically that are potential entries okay is it nice to see a mechanical way how the stops would have played out over time using a shorter term and longer term low point guys can gather i'm telling you you ask most people show me visually where you would have gotten in yeah i don't know if they're going to answer the question okay we're showing you a tighter setting in a lower setting understand that some of these trends can last longer and the last point i really want to bring up here is talk about these new positions based on relative strength now the one thing i have not so if we're talking about an entry i'm going to use the chart on the left so let's kind of i'm going to click on these three lines right there the three pancakes gonna go down to maximize cell now i'm gonna bring up a stock and i'm going to bring up let's say the stock of the amazon but i'm going to bring up let's say not a daily chart i'm going to bring up a weekly chart why are you pulling this up well because this class is really called trading the trend weeks to months and what you'll really notice is we've actually seen about four weeks ago okay we saw in this case where there was a both green lines on the moving average plus a green dot now we talked about that but d don't don't get upset i'm not upset but i'm just making sure that you you understand we said if we see let's say one or both of those lines green that means that there's a little momentum and a little trend it will also on a weekly chart plot where that cohort was and we could see it right there that was one of the recent ones and the second recent one which we're seeing this week is going to be right cheer now again look at the color of the moving average lines both green look at the cut look we also have a local hold dot now chiefs were also sitting on this that we saw the price go uh at or above the 20-day high which is the green line and the 55-day moving average the yellow line so what you're going to notice it's hitting both that doesn't have to be like dominoes all of them in a row crossover cold dot 20 knee high 55 day high no okay it doesn't have to be all those now it what happens if it's all of those well what it's telling you is the movement is quite strong okay now this is a 300 uh 300 3700 stocks so when we're looking at something like this the investor might consider a strategy that might be more vertical like okay does it mean someone can't buy the ships that i'm not saying that okay they might consider buying the shares but for this case we're going to go look at let's say selling a put spread now what we're going to do in this case is if you've never done a put spread we're going to look at this the 3600 and the 3550 now now by the way what delta did that have the delta that this actually really had in this case was the uh the 34 delta so it's a little closer to 30 okay now the earnings is upcoming okay and that's gonna inflate the options okay premium now if we came and looked at this we took a look what you're now going to see is the max profit the max loss now i'm going to show this as our example but it won't be the only one the max profit the max loss in this case it's only going to be done in the ira okay only now the investor might say geez james on these monthly options it's over and aboard or above the max loss that i can take what could the investor do well they might come down to the august expirations and what they might do is they might look for strikes i did this on purpose i want to show you this one of the purposes of doing the weekly options is they might choose strikes that are closer together this is why the investor might like options and i'm going to go a little lower okay maybe like the 3600 35.90 this is something a little bit more than we're used to okay so i looked at the weekly options what are the weekly options do they tend to give us a little bit more strike selection which is kind of nice okay we need to also verify open interest etc now when you're doing it at the mark value it's trying to really get or the mid value it's trying to get something in the middle between bid and ask now the wider the spread is the more the investor is probably going to hold closer or if not to expiration if the investor goes to confirm and send what you're now going to see is a max profit of 322 and a max loss of 678. so if the investor said james in the ira i could really risk about 1500 it would really be doing about two contracts okay now the other thing you got to understand is on these bigger dollar stocks you're probably going to have a wider spread okay now this is the next question you need to ask yourself what stocks could have a correlation to amazon boy that's a question okay now i'm going to bring up a stock we might take a look at but if i were to look at this and say okay we're going to do this 260 is the commission the paper money account comes in and by the way how much collateral is it tying up it's about 13.50 okay for the ira if that's okay send the order and now it's going to try to fill it might be a little harder to fill based upon the spread being white now i'm going to go to another stock in that same area we're going to go back to a stock like etsy now if i look at a stock like etsy what you're going to notice is two weeks ago that stock and weekly chart had a green line on that shorter term moving out we can see it what we're seeing is that latin moving average the 30 period on the weekly has not turned over yet but we're actually seeing a recent crossover now if you look at let's say go to the week to the one day let's bring it up on the daily now what you're seeing is some investors might be trying to buy that okay on that recent dip of price action they're coming to support the stock really right at the horizontal level support now this one might be kind of a little more risky but some investors might be thinking james it kind of more looks like flagline so let's play these two consumer discretionary stocks if we came in and said and let's kind of look at first off the monthly options first if we did this and said hey i want to look at the options that are maybe a delta of let's say 30 and look at the 180s and the 175s okay same thing vertical now what you're gonna see is it's a five dollar wide spread dollar sixty on the credit confirm and send okay now what you're gonna notice in this case is there's the numbers whenever you have a situation where the max profit is less than the max loss it tells you it's a probability based trade okay higher probability if we're position sizing this for the maximum loss this would be our last example we're probably looking at about four contracts this position is gonna be uh this is the second time the paper money account has entered this on two different this is the second occasion and we can see what the maximum profit is max loss for the four contracts okay now if you take a look at this that 520 is for the four contracts okay now i'll keep that there for just a second but what what do we actually do today okay what ground do we cover number one we talked about quick for you the market in sectors we talked about how it's really the nasdaq and the sp kind of selling or consolidating at the 161 extension the dow and the russell uh really struggling to get above horizontal resistance number two we said the discretionaries in the and the tech those are really not necessarily selling off aggressively okay yeah still showing strength we talked about the current portfolio management especially as we come inside 10 days to expiration we had that discussion on exiting based off 10 day lows or 20 day lows and then talked about if the investor were going to actually set tighter stops we talked about kind of the understanding and using the whole dots and with that that the investor if they get stomped out they need to be prepared to see potential reentry signals which will or probably could be the cohold setup as being one of the setups most likely okay the last thing we did is we did the example on amazon and also etsy as well okay now again i'm going to ask you that question if you ask an investor show me your your entries on a daily or weekly chart over the last year okay your entries and your potential exits ask that question and see if you get an answer if someone cannot give you the answer you know it makes you really wonder how systematic are they how disciplined are they and what we saw today is on exxon mobil it hit the 20-day low and when they hit the 20-day low we showed the example just manually selling the stock doesn't mean that the company's not a good company just means that the stock technically is well it's not performing great and so it took the opportunity to sell the stock we'll look for an opportunity again to see if there's a re-entry but until then we're going to send this order okay and see if that order were to fill now i'm out of my time here today i want to thank cameron may for answering as many questions in chat as possible uh i think one of the biggest things is this would be a great class to go back and review and actually see uh also kind of did you actually pick it up and it always helps when you see it the second or third time also remember with what we discussed okay remember we talked about this from for example for illustrative purposes only and also remember that all investing involves risk coming up right next we have barbara armstrong be doing a class on really portfolio management basics

2021-07-12 07:35

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