Potential Reversal Patterns Showing on Indices | Technically Speaking: Trading Stocks & Options
Yes. Good afternoon, everyone welcome to our Web cast on technically speaking, treating stocks and options. We get to do a couple of my favorite things here where we analyze the charts to see what they might be telling us and put together some trades. Based on that information. Now, how many of you are thinking man? The market is sold off so hard certainly.
It's got to stop right? Certainly the bleeding will stop . We've kind of looked at that over the last few weeks what we could look for. But what if there are some opportunities that we could take advantage of ? Well we're going to explore that today here together to welcome all of you here that are joining. We have people joining us from all over the place from Texas from California. Excuse
me. Ah and sometimes we get somebody from Spain. We get Michael sometimes from Spain, but I'm happy that you're all joining me here today. It also looks like we have bar BArmstrong in the chat. Barb is has so much experience and some great ideas as far as how to approach the market, and she's very knowledgeable over the things that we're going to talk about here today, as well as many other things. So if you
have questions, go ahead and Chatham in if you're here with us, like And hopefully between borrow myself will be able to cover those Now. If you're listening to this as a recording , go ahead if you have questions , put them in the comments section of the back and filter through those throughout the week. So then you can get your account your questions answered as well. Javier says he's checking in from Uruguay. Awesome That's my best pronunciation of Uruguay. Uh I'm
a little a little rest in my Spanish. Well, I'm on Twitter. You guys my handle is at chill. Underscored D A. I hope you're following me. I hope you're also
following bar BArmstrong. She puts out a lot of really nice content throughout the week. Some really educational things, some different insights, and that's what we try to do things that we think you might find interesting. So follow Barbas
while she's BArmstrong underscore T d, a sure she'd be happy to chat her Twitter handle into you as well. What we talked about today is intended for educational and informational purposes only. It's not intended to be a recommendation. Of any security strategy or account type options are not suitable for all investors as a special risk. Inherent option. Trading may expose investors to potentially rapid and substantial losses when we talk about probability analysis results, such as a probability of an option expiring in the money or out of the money. Keep in mind. It's theoretical in
nature and not guaranteed and does not reflect any degree of certainty of an event occurring. Well, this Webcast discusses technical analysis. There are other approaches, including fundamental analysis that may assert very different views. Stock markets are volatile in Canada. Klein significantly in
response to adverse issuer, political regulatory market or economic development, as we will no, no, no, The risk of loss in trading stocks can be substantial. Past performance of any security or strategy does not guarantee future results were success. Although I'm sure sometimes you'd only wish that were the case wouldn't don't we ? All right, well, our agenda here today. Ah I want to take a
quick look at some trays that have completed We actually do not have any active trades in our portfolio right now, so it's time to reload. So we're just going to review a couple of those trades. I do want to take a very quick brief look at the markets. As far as the market posture is concerned, and then I want to put on some new example . Paper trades in our account that we can follow up on and see how they progress, so we'll see here. Up wrong spots were not
ready to apply what you learned. We're just ready to switch on over to think or swim and we are going to start out with Ah! There we go. Just making sure I've got my screen on the right camera and the right screen, So let's start out with Alcoa Corporation. We did. I wasn't with you here last week, Barb actually was going to take over and she has some technical issues. And so Brent Moors jumped in at the last minute to help us out. So I'm not
following up on any traces that we did last week, But a couple of weeks ago we did a couple of bear call spread or otherwise known as short called verticals. There a way that we can take advantage in a bearish market, and I'm going to kind of zoom in here. Here's the six month picture of what alcohol A looked like. The red Line is my 30 Day moving average. The blue line is
my 10 Day moving average. We're going to kind of zoom in here. I'm gonna point out what we did. We entered into this trade right here where I have my green oval Novak candle. We did a 50. Yeah 50 52 short call vertical here would and we wanted the price of the stock to stable owing. Keep
below $50. That was what are short leg was soil kind of mark it up and put it here in green so we can go back to the chart to identify. What did we really? What do we do? Uh so we were in the trade for a few days. It had a day here when it went up above our strike Price of 50. Another day here did the same thing as well. Next day here. At some
point the hype there was 49 75, So it was almost right there with that short leg was Ah, ending a situation Do you need to panic? And that's my question . Do you need to panic? Do you need to go? It's above my short strike price. I know. I've got a month left in the train. No we don't need to panic. That's why we put on some of these trades because we do have our protective leg to help us out.
In this case, we wanted to start to stay above 50. If it doesn't we could be put the stock at 50, but we could also sell it to somebody else at 52. That's what that hedge legs does for us.
Well it turns out come the markets opening up here on Tuesday after the holiday. Sure enough, it came down it hit our predetermined spot. Uh locking in some gains there if I come over here real quickly. Ah get the right ticker symbol of Alcoa. We brought in a credit of 52 cents and we said Hey, if we can get out of with a majority, think on this case it was about 80% Let's go ahead and get out of the trade. We had the order sitting up there. Sure enough. A
went ahead, executed it for us. We're out of the trade. Now we have another order. We did that very same day, and we're Going to see that we have some different results from it. I'm just gonna put on here real quickly. Uh what the numbers
were. Yeah and then I want to go out and look at the chart with you. We sold again. It was another 50 52 short call vertical spread. This one was all mosaic. We brought in a credit of 46 cents. And we did the same thing here in terms of putting in a target or a stop.
But we said, you know, on the stop peace if the price of the vertical gets Almost or sometimes we'll do it at 100% of what this value was. This didn't look exactly like that. But we got filled at 84 cents. We took a loss on that trade would take the difference between our 46 are 84. That would be our net
loss between those two prices. But I want you to come. Look at the chart with me as we come over here, Let's bring up mosaic. And it too, had been
embarrassed Stock it had broken down, and she kind of short term support level here. We got in in this day when it was just pounding down hard. That was a really big bullish, bearish candle here for us. And what are
the stock do well it It kind of ran up here a little bit. It went above are 50 Strike price here for one day And then this next day, it was close. Well, yeah, This was a little bit about $50.15. It was higher than that for those two days. But
because we had the stop loss on , guess what happened. He kicked in. It kicked in, and we were sold out of the trade right here on the 28th. Now as we look at this chart, I'm going to zoom in even a little bit more here. Is it possible that it could have worked out? Okay if we didn't have that stop loss on. Some
traders when they're doing spread trades will not put a stop loss on because they're doing it as a hedge position. They're doing it as a high probability trade, and they don't want to choke the stock in our situation where we did put that on. Indeed it did choke the stock. Okay And had we not had on that exit order to get out if the credit went bigger. We either would have been probably knocked out of the trade. Maybe
Tuesday. Maybe Wednesday. Uh, possibly I'm not going to go into think back and check those numbers, but we could. The idea here is that you know, even if it goes a little bit above your strike price, it doesn't mean that it's going to expire there . And it doesn't mean a trader needs to panic. Okay This case, it wasn't a panic as much as it was. We stuck in an order to buy it back if it went to the wrong, wrong direction on us. Now I do want to take a quick look at the questions here. I'm gonna repeat
this question. Even they'll Barb, give you the answer. Didi Data. The question was, What's
the difference between an exponential and SimpleMovingAvg-- Some people might want to know that as well. Uh a SimpleMovingAvg-- is going to take the price. Let's say the 30 day moving average what The average price has been trading over the last 30 days. So it's always a little bit lagging right because it's bringing in the last 30 days. A 10 Day. Uh well, let's say an exponential moving maverick would not give equal weight to each of those 30 days. Instead it would give more
weight to the more recent days within that 30 period, you can put up an exponential and a simple next to each other, and you can look and see what the difference is, and you're going to find most of the time. It's not that much. Sometimes I do like to use on my tan. Sometimes they will have this at an exponential moving average. I'm trying to track the short term trend and therefore I want it to be more reactive and put more weight into the most recent days . So Barb, I do appreciate you answering that, but I thought some folks, especially those on the recording might be interested in that as well. All
right. Those are our lessons learned from our two trades that we don't have in our portfolio anymore. Let's move on to our next piece here. Ah, let's see here. Ah, um. Actually clicked on something. I didn't mean to
click on now. I've got to get the right thing up here. Here we go. All right, let's take a look at the market, so I want to start with the SPX-- Um, I'm in a preface this all with We still don't know, Jay. We still don't
know which way the markets are going to go. Uh let's maybe look a well we can have this. We can have this point of view here.
This is a six month chart again. We've got our 30 in our 10 Day. SimpleMovingAvg-- is I'm gonna I'm going to zoom in here a little bit, and I want to talk about maybe some technical patterns we might be seen on the screen now. It's not that pattern that I'm interested in.
Let's try this again. All right, we're gonna We're gonna Identify something else. Some of you might be familiar with reversal patterns. We've talked about them a little bit. We're looking
for reversal patterns. We're looking for the market to tell us give us an idea of what it might be doing, Although we never really know until it happens, But here in this chart , we could be having a setting up of a Inverse head and shoulders pattern and so imagine a person standing on their head . The head would be down here. The first shoulder would be here and then you wait for the formation of the second shoulder and really what we're looking for. As this rallies up, the pullback here just cannot go deeper or as deep as where the head is, So we see a little pullback in the markets here. Yeah that could be the setting up of an inverse head and shoulders pattern And then when we see an inverse head and shoulders pattern, it gives us the idea that hey, it didn't pull back quite as well. Perhaps it's going to reverse. This is just very, very new. Now The
other thing I have drawn in here is what's called the neckline and the neckline is essentially where is this after it makes the dip and it runs up. Where does that point go to when it runs up here again as it's forming the second shoulder Now I drew this line in here. All right, just kind of taking the top of that candle there and saying All right, that's probably our second Area to hit on the neckline and is really steep and some might question is this really valid? Answer is it is a lot of the time we do see it be a little bit more symmetrical.
Maybe there's a smaller slant up or down. Usually it's not quite this steep, but In reality, it does meet the definition and what we're seeing here today is a move above that neckline. Typically many technicians would use that as an entry point, knowing it's a little premature . Uh maybe not premature. A little early in a turnaround, Okay. Some might want to look at first, some more evidence. You know, we there was a question about the moving averages and the moving averages. It can help us. Identify what the train
Shandez, right, so The red or 30 days, still dropping but are blue, the short term ever so slightly. It's starting to ramp up. It hasn't crossed the 30. Yeah we've talked about that, in the past of looking for a shorter moving average crossing over a longer term moving averages. Sometimes technicians will use that as a potential entry signal. Okay so we're just kind of thinking about this on the SPX-- and want us to look at the NASDAQ as well and EQ. Oh
$NDX. And I'm gonna back up on here because it looks very similar to the NASDAQ's been more beaten up. Then the S and P has it has had a larger pull back from its peak. And so it had kind of been. Trading in
this channel is interesting and notice here. The Blue 10 Day It's starting to go up our 30 Day. Oh it looks like maybe it's flattening out. We don't see it tipping up yet. And we see a
similar thing on this in terms of an inverse head and shoulders . Potential pattern for me. Okay What? What would it look like? Well, this would be the shoulder. The first shoulder formed rallies up goes even deeper. This is the head down here. Remember person standing
on their head, and then it forms a shoulder pattern in this little pullback. We don't want this to go back as deep as the head, but it doesn't have to mimic the first shoulder either . Okay We're essentially looking for that. Now here's the neckline is not quite so steep here. The neckline. I've drawn it in here. There's the top of kind of that in between peak.
Here's that letter. The I kind of drew that bad. I mean, redraw that. Let me drink. Redraw that . Ah because it actually should be a little bit steeper. I'm going to remove it. Here's our running up point for the first shoulder. Here's our running up
for the second shoulder. Really We would want a trend line to be drawn. Similar kind of toward the channel happens to be, but it's going to be a little bit different than it. Okay and what we have today, Hmm. Looks like the NASDAQ is breaking through its neckline as well. The moving averages haven't really caught up the 10 days starting to catch up, right. It's starting to move
upward. And so we're looking for all these clues. Now I want to be the first to say that this does not necessarily signify a bottom. We need price action to confirm it. We need to see higher highs and higher laws at this point. Really the, uh and this is true on the SPX-- as well. Really We do see this
higher low. We see this low. Here is higher than the previous law. We don't see a higher high yet, and that's when you say it's really early in the determination if we really are starting to see a reversal, But we're going to make this Sumption that maybe if the market is starting to reverse, maybe there are some stocks that are being bullish that are helping it out. Because they happen to be bullish, even though a lot of the market is bearish. Now we talk a lot about
using, uh, sector rotation as a way to identify what sectors are doing. Well, where do we want to go hunting? Where do we not want to go hunting? We're going to jump over here to think or swim or not Thinkers one but Tdameritrade website. And I've logged in and we're just going to come over here. I went to research and ideas come to sectors and industries that's going to bring you to this page . We're going to bring up the TD market monitor, and that's tells us for the different sectors in the S and P 500. What is
happening now? Today we're having a bullish day. We're seeing a lot of green. I'm entertaining change our timeframe to the last 30 days. And just hopefully they're being able to get a pretty decent look at this. You might not be able to see, uh Something unless I move it, So I'm gonna move it. We're going to scroll up just a little bit. If I can get my
scroll bars to work. There we go . That should be easier for you to see get a better picture so we can see over the last month overall s and P has been down. But there have been a little bit . There's a little bit of sunshine poking out here. Okay It's over the last month healthcare sucked to the worst stock. It sucked the best. I
guess. Maybe it's the way to say that meaning it wasn't quite a stinky. As everything else. The energy really took it on the chops right down 21.75% Healthcare only down less than a percent and same with consumer staples, and these typically are areas of going to say safety and quotes in that, you know if we are in a recession, or we're coming upon troubled times, we still may need to buy the medicine. We still may need to buy those things we consider staples like food and paper products and all the things that I find are in my car when I go to the grocery store type of thing, Okay, we're still going to have to buy them, but we might not necessarily take as many vacations this energy being up so much, and we've been really some of those stocks in the oil industries have been hammered recently because of the pullback in crude oil prices. But it does influence kind of every single sector. Ah ah, and
any case, we're starting to see a few rays of sun Strange, So we're going to go see where those rays of sunshine are now if somebody were trying to make a watch list And you're like, Okay, we're let's run a rock Sunshine Watch list. You could just bring this up if you wanted to, and you could see over the last 30 days, and that's a shorter time frame, which has changes drastically. From what we see. In three months. You might go up here to the top, and you might go. Oh, look at that.
The very best performing Nazar are, uh, healthcare stock is Moderna right? One of those that has the vaccine. For Covid, Then we have versus six pharmaceuticals. Another pharmaceutical Humana, Eli Lilly , another pharmaceutical company , So you could come in here and just start looking at all these companies that are doing well and then you could go out to their charts and see. Hey are these these trans relations changed? Are these trends really bullish? And make that determination for yourself. You
probably aren't going to do a lot of hunting and information technology right now. Utilities There may still be a little bit not a ton. It looks like maybe just this one stock in the last month. Okay Gonna be hunting on the top edge of this chart where the green is now I'm going to hit us back. To our think or swim over here, and I want to propose that we set up some trades that we can track and follow in our portfolio based on the thesis, which is not yet proven that the market might be starting to rivers and looking at some of those stronger stocks. So first one, we're
going to take a look at here. Ah yes, D Q Now I jumped with you. Sometimes that it reminds me of dairy queen and really is not a dairy stock. It sends energy in
its name, but it's actually a technology stock. They do some if you go into the analyze and look at what the company does they make a little wafers and ships. Okay so they're definitely in the it industry even though I think there are a queen and it says energy we've seen a lot happened with this stock. This thing has been on the move. Uh you can see how long the tan and the 30 Day have been upward. Trending here on
this stock. You can see Previously we had looked at this. Ah we had identified this big flagpole and then a little flag. And then, uh, we took a little entry into it a while back. Okay We ended up being stopped out on it is what happened after we moved our stock loss up. But interestingly enough, the stock never got to its peak potential points.
You're based on the height of the flagpole. Because that's what we'll use as a target, right? We'll say, How long was the flagpole? Let's put it here . Let's see where the stock could go to. Well it didn't quite get there. But my goodness
, this was an enormous flagpole . They come and put my mouse on it. Let's see if it'll Little balloon out for us here. Yeah it goes from 43 change up to 66 change. Okay We're looking at a
23 point flagpole on a 70 down here is a $55 stock so enormous, so If you were playing this or, you know, trying to paper, trade it and see what it does. This really was a pretty decent move that it made now. What are we looking at, right now, many times when stocks are flagging or demonstrating the flag, they will have a tendency to do a series of flags. It's not always Full proof and you're not going to see it every single time, but it's just kind of seems to be a common characteristic when the stock is trending nicely or stranding bullishly or conversely, if it's embarrassed stock, and those bear flags have a tendency to pick up well right here. I did a little bit more
drying. So I said, Hey, we've got another flagpole now compared to this giant Goliath flagpole. It looks dinky, but it really is not that dinky. Okay, I'm gonna put my mouse on. I went from the bottom of the first candle. That was a bullish
candle, making some upward direction change, and I took it to the peak point of wherever it ran to So you get the idea. Hey, this is a bullet. This is an optimistic poll because it's gone from very bottom Two very top, and this started at 63 went to 74 so basically an 11 point flagpole, Okay? Percent twice. That's not too shabby. Come in here and redraw it. Uh huh. And
just. Kind of like, draw it again here. I want you to see the calculations that form as I start drawing the line, Let's see if it will cooperate with me. You should start a box. There it goes, There's the box, you'll see how many days were encompassing. What's the percent move on? What's the point move, So I was just kind of doing some fast math, saying it was about 11 points. It's looks like it's 10.78. Okay Ah, and about 17%
Okay, that move took, uh, Over the course of four trading days to pop up there, 17% That is a healthy move. Now What are we seeing today? We're seeing it break out of its two day flag consolidation. Let's see where it put could potentially go up, so we are going to duplicate this flagpole. I'm gonna drag it. I'm going to bring it here and there's two places we could put it. We could put it where it
starts at a very conservative place, which is at the bottom of the Consolidating flag. We could put it there. That would give us our most conservative estimate, But it's interesting. The stocks
making a big move today it had pulled back earlier in the day. Ah and so wasn't quite nearly as much as it is right now is down below 10% but the other place we could put this is we can put it at the breakout point. Okay and that's what I'm going to do with this. We're going to put it at the breakout point. Lock it in and see if there's some potential for a move there earlier when I was doing some calculations, uh, I was looking at maybe a target of about 79.
Let's see if that's what that shows. Ah 79 24 Alright, And how much further is that right now In a 79 from 76. It's not looking quite as desirable as it was a couple of hours ago, when I was eyeing this. It had about half the range in now it looks like it's more than half the range. When I was looking at it
early. It was only about half the flagpole. And so there could have been the idea of having a target and a stop. Now I'm going
to still go ahead with the trade here. We're going to do a swing trade We're going to put in a target. We're going to put in a stop loss. But we're going to be a we're gonna kind of after tinker around with that Stop loss a little. A typical stop loss would be if it breaks back down into the area of the consolidating flag. Ah this one because it's up so much right now. 14% Like I said earlier,
When I was eyeing this it was up 10% and my comment to you was going to be some traders might wait towards the end of the day and see if they can get it to pull back. Even more. This case it didn't pull back and then it decided to run again. So let's look at this. Let's put our target here. Let's do it. It's we'll do it. We'll go 79 24.
Alright as our target and in this case rather than using creeping back down under the flag consolidation because it's such a bid Tall, green candle many times, not always but many times, the midpoint of a big candle can act as support, so we're going to use it in this scenario. Okay We're going to say alright, my eye is going to judge Money, naked eye. I'm gonna put the midpoint. About what? There Now. You can do the
math. If you wanted, you could sort it out. But let's say this stock should stay above 72 14. We might give it a little wiggle room, but not a ton. Let's put
our stop. I'm just gonna do a quick calculation and see if the calculation makes sense if we do 72 for 14 times, 140.99 give up 1% leeway below the midpoint of the candle. That would put our stop here pretty tight at 71 41 . That's what we're going to do. So we're gonna put our stop. 71.41 now if you don't like that. Uh you could do is another
methodology. If you feel uncomfortable that maybe a lot of the move has been made for the flagpole. There might be some people the same. I'm just not interested in it. The other thing to keep in mind is even though this was a short flagpole. This stock has been
making really big moves and some people might use the 80 are we're not going to do it in this situation, but they might use the average true range and basic target and a stop based on that, And now I am not. To seeing there is a survey out in the chat area. And from time to time, and many of you know this from time to time. We'll take a survey ask you. How the this this particular class has gone for you and we'll ask you three questions You just fill in the radio button, pop pop pop, and then there's two places for you to communicate with us and our questions there have changed. We
just started some new questions there this week that have to do with Ah! Are there some things you would like to communicate to the instructor of maybe some other topics you're interested in or things Maybe we can cover in the scope of this class. Absolutely send those in. In fact, Barb and I both do this when we get comments from people that asking for certain pieces of information, we try to incorporate that into the next class. We have okay. So I will
appreciate you just clicking on the link for now. You don't need to fill it out. Our class isn't over yet. But if you could do that for me, that would be great . Let's go ahead. Let's put our D Q order in. We are not going to do an option trade. Some
people might choose to. Ah the open interest on the put side. Isn't too bad. The call side has
a little bit more, especially deeper in the money. We're just going to do a stock trade here. We haven't done to start trading a long time. Because we've been doing so many bear strategies. We've been using bearish options strategies, so we're going to come over here. We're getting a hit a right mouse quick by custom with Ocho brackets so we can put in our target and our stop risk wise. Let's see what
we're looking at here. Risk wise , uh, we should just do this real quick. Some position sizing . If we're going to put our stop . I think that's supposed to be a period there and not a slash 71 41. We're going to take the price of the stock right now. 76 65 subtract where that stop loss would kick in. So we're going to
come up here. Just take the difference between the 2 76.6. Gives us risk of about 5 18 in the trade. Now in this class, we never want to lose more or risk more than 7 50 Least That's our intent in the trade, so we're going to take our 7 50 divided by our our risk. So that's our portfolio. Risk of 7 50 position risk of 5 18 me see how many shares we could buy? Ah with this so far 7 50, divided by 5 18 gives us 144 shares that we could buy of this $76 stock.
That's because we're we are putting a pretty tight stop on it. If somebody wanted to give it more leeway they could, they would end up possibly risking more per position. But when your position size it, then it's just going to give you a different number of shares to buy instead of 1 44 if we bought 144 shares Times the current price of the stock. 76 59 were about $11,000 , and that's certainly is less than 10% of our portfolio in this position, so we're going to go ahead and do that on. Ah let's see here. Yeah There's a
question here if I can explain the volume average indicator. Absolutely I'll go back to that . So let's put our quantity in here. We're going to do 1 44. We're going to click on the link to make him even going to put in our stop loss price here which is 71 41. We're going to put in our target here. That's gonna be
79 24. The strategy here is we're going to move up our stop loss gradually because we are doing it as a short term trade and Maybe at the end of the day , if something different If this turns into a giant candle, you might adjust where the halfway point is, Okay. The idea is we're going to keep inching up the stop loss on this trade. Let's get back to our tab if it gets down to 71 41 little trigger market order that says, Get me out of the next available point. Some we're going to make both of these good til canceled that'll last about six month so we're going to submit that. Just
review it. Ah this is a nice little warning that says hey, with with stop orders, There's no guarantee that the actual execution price will be equal to that actual trigger price their activation price. It's not guaranteed to be 71 41, but the intent is to hopefully get out somewhere near there, or at least get out of the trade. If it gaps down, so we're going to send that off. And we have our
order. Okay Another one. I want to look at a couple of things with this one. We are going to use Madonna M r n a right. This
is the stock that we spine out on when we're looking at the, uh , best performing sectors and the stocks in the sector. This one actually happens to be the best performing one in the S and P 500 for the last one month only. And I'll tell you what I found interesting here about this stock. One thing I noted,
is had a triple bottom. That's a reversal pattern. Bottoms here. Bottoms here comes down here again around that 1 20 area, okay. The other thing is that it was kind of trading sideways here for a little bit like there was some resistance here about 1 53 yesterday. Somebody may have thought. Hey maybe that's
breaking out there Today. We have Way a lot more evidence that it really does look like it's breaking out. I'm going to go back and answer the question about the volume and the average that we're using. Here It is just tracking the volume today, but it does put an average in here. If I go to my studies, I'll show you Let me get rid of my pink there. The studies will
come up. It's called Volume average. You can type it in here , and it'll come up. It defaults with a 50 moving average. I usually like a little bit shorter than that. I usually will go to 30 many times. I'll
haven't matched my intermediate moving average. So if I've got my intermediate center to 30 output, the volume at 30 if I'm going with 50 that I want to maybe a little bit longer time range in there that I might put my volume here. Leave it at 50, and then just on the volume average. I just made it wider so you can see it. Usually I make it dark, too Dark purple, so it shows up a little bit nicer. Okay so that's the explanation on that Now, as we examine this stock, and actually I shouldn't have been zoomed in quite yet.
The question is going to be. Where is he going to find resistance again? Right seems to be reversing our tents headed up our thirties, edging up ever so slightly. Let's go out to a year here. And I want to kind of show you a couple of areas Now, we might say, Well, where's the next area that it's going to come to? What could we use as a target? I mean this up here, this 2 32 39. I guess it is. That's really up there. That's quite a ways up there. But could
there be an area of sooner? Yeah I think there really could be. What about here? Kind of the high there. That's about 1 87. That's about $15 away. That could be the next area. But what if we don't make this a target trade? What if we just put a stop loss on with the idea that you know it's a steady company? It looks like it's reversing. It broke through where we had wanted to break through as a technician to get into a trade that was giving us a triple bottom, right. We'd pick the top
area through here and once it busts through Then a technician could use that as an entry signal, even though again, it's a little bit early in the in the transition. We're going to assume that this is a stock we really want to hang on to. So we're just going to put a stop loss on it, and then we're going to do something else with it as well as we come to the trade tab. Well actually, let's figure out where Stop needs to go. This
1 53 should act to support now. It hasn't tested. It is support . It's tested it a lot here is resistance, but it should have to support now. So we're gonna we're gonna say alright, We're just gonna use that. And if we
come over here and say 1 53 13 times, let's give it 3% leeway lot of technicians like that That gives us 1 48 53. As our stop in this case, and let's see how many shares we could buy. So we'll take our 1, 48 and change minus the current prize 1 72 tan. Oh, thanks. Get in the box here. Let's try it again. One
72.2. Okay The risk per share is going to be about 23 66. This is an expensive stock. It certainly is, might not be in everybody's budget, Wow or portfolio range. But if we go, say 7 50 divided by a 23 66. It's going to say we could buy 31 shares. That's fine
. It's an expensive stock. Don't worry that it's not as big as maybe you had dreamed of And we're just gonna put in by custom with with our stop. We'll put our stopped in. We said that the 1 48 53. We're just going to do. 31 shares here. Let's change
our quantity. 2 31. And click on this link. Very good that gets inked up. Our first order doesn't go. We're not going to have that Stop order sitting out there. It's dependent on it
being filled if the price of the stock gets to this point or lower, that's when it triggers the market order might not give filled at that price. Hopefully the intent is to get filled somewhere near there, if indeed it goes down on us. Will make this good til canceled. We're going to hit confirming sound. I forgot to send that last trade over to our account for a class . I'm going to do that. With this one notice on this one. There aren't any commissions, but it does give us out. Little
warning about the stop loss, letting you know Okay, It's not guaranteed that that price, all right, we got filled on it. The other thing I want to do with this is take the approach that maybe Ah, um somebody might be interested in buying this as a longer term dated option. Now this is going to be an expensive option. Open up our chain. We're going to go out here. We're going to go to January. Okay,
Percentage July, So this is six months out with the idea that we're going to buy the option instead of putting money, it would be cheaper than buying 100 Centers of stock. Ah, We're going to come down here and working to look at the 1 75. It's a little bit out of the money. It's gonna be a 32 $100 contract for us. Okay We're gonna go ahead and put it in with the idea. It is going to
run around a little bit here. Maybe it gets back up to this area here. Uh, maybe That will be a point. Um that maybe we decided to roll the contract. We're going to keep track of it. We're going to make sure that were active on it. And not just
kind of forget about it. Okay, so let's put it in. Ah 32 sixties going to be the cost of this. We're just going to do the one contract. Some portfolios. This might be too rich for it, and you might not as your position size it It might be too much money for you to put into one position in our account.
We're okay with that. I'm not even going to put a stop loss on it yet, but I'm going to do a couple of things. Let's go ahead and let's see if it will give us the midpoint price a little bit cheaper. We'll see if it will fill us on that. And then the other thing I want to do is I want to set an alert. Okay let's
see if the price of the stock really gets to our stop area for our stock. We want to know about it now. We should know about it because it would stop out our stock. But let's put an alert on it as well. So we're going to do a right mouse quick. We're going
to say Create alert. We're gonna do that alert at. Price of the stock goes to 1 48 53 add or below, We're going to create the alert. It's going to put us a
little marker on the chart there as well. Okay So we are going to find out about it. I don't have time to show you this right now, but I'm also going to put an alert on the delta. Every we have just a moment. I'll show
you real quick. Uh I'm interested in knowing here when the delta gets up to say and 80. Something Delta. We're going to just go with 80 because many times it starts to lose its leverage at that point, and so we might decide to roll it if it's doing what we expected to do. So here I am on the Delta column. I just did a right mouse
click and I'm going to say Create alert. It knows. Hey, you're doing this on the Delta Great. And I want to know when it gets to 80. Alright At that point, we might consider rolling it. So we've got a good scenario
about scenario for tracking this option. We're going to create that alert, and it'll probably sit out here on the page somewhere. Not really sure where that is going to show up. This is just simply for the stock.
Delta is a little bit trickier to show. Just justice says this kind of looks like a re an inverse head and shoulders pattern as well. Yes some people might view it that way. Um with the had been maybe tiny bit lower. I mean, I feel more actually on this one as a more as a triple bottom, but also breaking through that resistance that what a triple bottom technician might consider entering in. So it can be
similar. Somebody could also look at this and say this is the shoulder their heads a little bit deeper. And then look for the formation of the shoulder.
Um doesn't really look it like it really formed a second shoulder there, But I'm glad you're thinking. I'm glad your eyes are picking that up. Cornelius says If you were making an option straight, what do you do? A bull calf spread or a put spread? Both are bullish. What would you use to determine which one you would do in that scenario, one implied volatility is pretty high on this stock.
There's a lot of movement going on. So if you're doing an auction, it might make sense to do a spread and you could choose Either one. If you want to be more directional, some people might set it up as a bowl call spread. If it is, it just wanted to stay above a price. Many
people would maybe do a short put vertical in that case, just saying, Okay, let's make sure the stock or we want the stock to stay above a certain point and not drop. You could paper trade both of them and see how it might turn out in the scenario. There's never G It's got to be one. It's just the idea that Hey, if you've got some implied volatility, Yeah, sometimes it's nice. To use a spread their take advantage of that, this one that we did. We could also if we wanted to go out and sell us shorter, dated option against this long call.
It's called the diagonal spread . Uh we're not going to do that. We're going to keep it a little bit simpler. For what? We're going to keep track of here, But it doesn't mean we wouldn't do it in maybe a future session. Sell a call against it, So we've care kicked off our agenda. Items cleared amount. What I would want you to do is keep track of these indices. Alright look at him every day and see if it looks like maybe we're starting to get some evidence that the markets reversing, or maybe we get evidence that it's not okay and then take appropriate action with whatever you're trying. Raids are keep on
top of him, and you wanted some new ones to go in. Great We used , think or swim quite a bit here today, And if you're new to think or swim, you might want to hit this class here getting started with, think or swim. It's going to be at five Eastern tonight. We do a little bit
easier break you in teach you the various areas of the functionality that you really need to know. Now again. I'm gonna encourage you to fill out that survey for me, and I'll appreciate it every single one of you that do that for me. Barb knows we really appreciate getting that feedback. We look
at every single one or managers Look at every single one. We don't know who you are right. It's completely anonymous, but it's good to get that feedback from you. Well, I just need to remind you what we talked about. A is for educational and informational purposes only not intended as advanced investment advice or recommendation of any security strategy or account type. Barb Thank you so much for helping out in our chat here today. Answering questions.
Thank you, all of you for being attentive and contributing to our dialogue here. We'll check back on these positions next week. Coming up. Next is James Boyd with trading the trend. I know you will enjoy that class.
If you go. We'll see you next week. Bye bye.
2022-07-09 16:31
