Volatility About to Pop? | 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 with me i got my good friend michael fairborne a couple you have already commented about some of the green color that you're actually seeing of the green grass behind me no the green color that that is on the screen uh and we'll take a look at that here in just a moment uh funny comments tom russ amy hello g walter tmtm lewis crazy fox many others good morning good afternoon to you just real quick remember we do postage educational content uh all of us instructors do check that out we also do post kind of some scripts and maybe some educational updates or announcements so make sure you're actually on twitter we do post content there daily now just remember with what we discuss here today on trend thursday remember it is for educational informational purposes only not investment advice recommendation of any security strategy or account type options are not suitable for all investors special risk inheritor trading options okay understand that when we talk about using the platform we will demonstrate the function of the platform uh understand that we're going to use actual symbols also remember that uh when we actually bring up uh examples we will be using a paper money platform for educational purposes only also when we talk about uh trading or investing understand you should review the transaction costs and also remember when we talk about options remember that what the option greeks are as well now today we will take a quick look some of you actually mentioned again the green color on the screen let's kind of talk about that i mean is it kind of like a fake out or is it maybe is there maybe more a little push behind this move we'll talk about that now second we're actually going to talk about some earnings trades two of them we got apple coming up we've got amazon coming up want to actually also talk about facebook post earnings and then i want to actually bring up one airline okay strategy that i really want to kind of focus on here today is really short puts or cash secured puts and also short put verticals third watch we talk about some stock trades that might be more of a continuation of the trend that we're actually seeing on some names and i got a couple last thing i want to do is i want to fast fire and some management examples and i want to kind of talk about some stocks that might be a little bit under pressure so with that with that said let's go ahead and hop right in so first off let's actually take a look here so we got the dow it's been a while but the dow is actually sitting here you know plus uh 5.98 1.8 okay pull that chart up so we can actually see that and uh actually take a look at this chart zoom in on it one of the stronger candles we've seen so you go back to this candle it was it was it was off but what you're going to notice is it never closed above the previous day's high did not if you actually look at this this has been the first candle we've actually seen in the drop since late last thursday where he actually saw the price actually if it were to close here it'd be the first close we actually got above the previous day's high or what we also call close above the high of the low day so if you're kind of saying is this kind of more material we are seeing it's a stronger pushback and it's what you would expect if investors are really thinking we're at an area of support now if you actually take a look at let's say the spx kind of uh open this chart up so we can kind of see that support level if you look at this what i mean by the support is we're down near support if there are bullish investors left and they're willing to actually use their money will they actually buy again two days ago or three days ago you had a strong up move but it just never closed above the high of the low date this is why some investors might not buy a hammer near support if the hammer is not closing above the high the low date it's a start of the move it but it's not really something that's engulfed in the previous day or closing above the previous day's high if this were to close here this would be the first time we've actually seen close above the high the low date in the last week now when we actually take a look at let's say the nasdaq which has been the weakest you're going to see that that's one of the stronger moves we've actually seen so all three of them are showing that right now it's hammer light would like to see a longer tail on that okay to kind of be more of like a more textbook hammer but you know what i mean any if we were to close here you would be closing off yesterday's high would be closing potentially above let's say we were two days ago now if we actually look at the volatility where i think it's actually more interesting this has actually been one of the uh and i want to pull something up just briefly if i can not that i want to pull up a different view of a chart let me see if i can't get that i don't know why the chart changed on me but i'm gonna i'll fix it here in just a moment okay that is that is really interesting so man when you use different computers okay i'm just gonna i'm gonna have to go with it gonna have to run what you've wronged today one of the things i think is interesting is when you let's say look at the vix which again when the vix goes up not great okay downside price pressure this has actually been one of the stronger fades we've seen off the high now remember as bullish investors you don't want to see the vix go up if you're in stocks you want to see the vix actually stay flat to go down so seeing this kind of have like more of an upper shadow that's actually a positive you want to see that price rally and fade and then close down near the lows and maybe st and start to actually break down you want to see this higher low that we actually just made at 27 and a quarter you want to see that break down you want to get down below that remember if you look at when you were gaining you were gaining actually when the when the vix was declining now i mentioned today that i want to talk about some cash secured puts and short put verticals why do you think we want to talk about that with what we're actually just brought up on the vix why might we want to maybe consider talking about that strategy well first off we know the vix can go higher clearly go back and look at it i think it went to 87 i think it was two years ago did it go double check it was up there somewhere i tried not to remember now if you actually take a look what you're going to notice is when we kind of get to these areas and again the vix can go higher but when you get to kind of these areas some of that fear might already be priced in a lot of that negative news might already be priced in and you go back and look at this one rallied and faded rallied and faded rallied and faded so we're kind of up near that area again about plus 30 or so and we're thinking hey maybe could the volatility drop that's the idea now that does not mean all stocks are bullish as we'll mention just we'll show just a sec some stocks are not bullish but we want to kind of look and see are there some stocks that are bullish maybe where the investor could use higher volatility and try to sell a put or do a cash uh short put vertical try to benefit from riding the trend benefiting from time decay and also maybe volatility contraction so this is where the investor is probably looking at their palliative strategies and saying what type of strategies might an investor consider if the volatility is high and potentially forecasting to go down doesn't mean it will immediately but could it mean revert could it drop back down to the middle or even the low so what that actually said let's actually go ahead here and actually take a look at uh one of the stocks that's coming up with earnings actually this afternoon so there's a small company called apple and i thought it was interesting we will talk about qcon we did a trade actually on that example yesterday on qcom and what i want to do is if we look at a stock let's say apple if i were to ask you where do you see the support on apple what would you say where would you actually say the support is on apple now if we went back and kind of looked at this time frame we might say what's the trend on apple it's like sideways okay now here's what's very important i think as investors we would like to have strong upward trends at all times but we don't talk about sideways trends or downtrends just for nothing there's just sometimes different trends where investors have to learn to adapt to different type of market economic conditions and lately what we've been seeing is there's been less of like strong upward trends and there's kind of been more okay sideways moves but there's also been down moves okay so i know what what investor would like to actually do just find the ones that are going up but sometimes the strongest trends tend to be the ones that are sideways right now or down are you trading those sideways are you trading those stronger trends okay or you're trying to always find the needles in the haystack that's not not bad there's some stills there has been some strong ones but those strong ones can get pulled back on by by the indexes if they were to drop so if we actually look at apple right here there's been a support about 155 okay now what i want to do is i want to go right up to the test tube click on the test tube what i actually want to do is i want to type in imp you know where i'm going implied volatility what would you expect the implied volatility to be if there's earnings up coming this afternoon now i thought it was interesting q con mentioned that they had higher revenue based upon a jump in android sales now i'm kind of wondering who's running android android and what okay samsung phones okay is it microsoft uh surface duos what is it okay so i thought that was interesting and we'll kind of take a look at qcom in a moment but if we actually look at this i'm gonna bring up the implied volatility apply click on okay so if we go back if someone was trying to sell puts okay selling puts or cash secured puts it's a bullish strategy does not require the uh the stock initially it's the obligation to buy the stock of the strike price so if the investor actually go back and look at the last four months they might say well james where was the implied volatility highest well the implied volatility was the highest here which is also where the low was on the stock and the implied volatility was kind of like near the high near the high there near the high there so a couple points in there kind of all right in there and as it fell down to support what you're going to notice is the implied volatility is high again and i'm going to tell you what happens okay this is all stuff that you go back and you read a book and the author tells you in the investor would like to sell puts when the vix is high or the implied volatility is high but it's kind of more of a an academic uh kind of uh practice but the question is who actually does it in real life that's the question because here's the thing is the yeah it makes sense sell puts or do selling options strategies or try to consider the strategy whatever you want to call it when the volatility is high but is the investor going to put the trade on right so just because why is the vix hot if the implied volatility is high why is it of potential interest well it means that there's a bigger premium that's number one and first off i'll say second the investor could actually sell a strike even maybe a little lower okay go back to number one was a bigger premium but if you get a bigger premium that means you have a lower breakeven and if you have a lower breakeven that actually means there might be a higher probability the investor might be right let's see an example well let's go back to the trade tab let's imagine that the ambassador said james i'm i i right a little nervous well let's say the investor said james i don't want to go to the i'm going to show the example of may i'm going to show the example of june okay now i know i'm kind of stuttering a little bit because you know i have the idea but i just i'm con i'm nervous to actually practice what i see well let's not be nervous let's just practice and paper money account together and actually try to get the confidence from doing this and understand that it's all based on probability now if we go back to let's say the may expiration let's start with an example of let's say selling the 157 and a half now if the investor sells the 157 and a half you could also look at what we call r o r return on risk okay so this return on risk is like looking at the option yield that's what i call it option yield it's just taking a look at what's the option premium relative to the current stock price and it's about 2.5 many investors want to kind of see well how much are they really like getting okay relative to the stock price when you say getting 3.95 and how much are they getting relative to the stock price 163. so if the investor said james i want to sell the 157 and a half we're going to show this in two different uh type of trades number one we're going to actually show the example of selling the 157.5 for 3.95 remember that 157.5 represents where the investor says they're willing to buy the stock okay now if they sell that put right there that has a delta or probability of being below the strike that is 34. okay 34 chance of
stock will be below the strike at expiration by a penny if the investor were to confirm and send this notice for the times sake we could buy now the money put to lower the buying power effect but this is the ira there's money in there we'll actually kind of go with that anyway there's the max profit premium slightly adjusted by nickel max loss is really saying the stock could actually go down to zero break even make sure you understand what this is the investors on the hook to buy the shares at the strike price but they also got the premium so the net of that trade is they really net own the stock for if you include the premium 150 350 okay so if this is what the investor wants to do they could sell it but i'm gonna do one more thing let's say the investor says james i don't mind actually do that type of trade but i just don't want to go as close let's say they actually decided they want to actually sell maybe the put below well if they sell the put below what's the offset of that well it's a lower premium right it's a lower premium but it's still 2.23 percent and for many investments they might say that's pretty good considering there's only 22 days left but we know that this number is inflated the implied volatility is inflated because of earnings now it's saying it's telling us the stock could go up or down right now okay today on earnings up or down 7.50 cents if it were to go down 750 from where it is right now it would be right at pretty much where that strike is paid money account is going to also show this example it's going to sell the 155 okay that has a lower delta slightly lower premium but greater odds of the stock being above the breakeven and expiration so if i were to ask wiley what's the best one for you wiley what strikes the best one for you if i ask roy hey roy what's the best one for you you can't say that wiley and roy are probably going to use maybe the same they might have a different risk appetite they why they might say look i just want the premium and roy says i actually want the stock so if roy said look i actually want the stock roy or an investor might pick a strike that's higher if someone said i just kind of want to do a probability type trade and just go for the premium they might pick the lower strike both strikes have maybe an acceptable ror notice actually the commission again for one contract 65 cents gonna send the order so we did two examples right there sold to 155 sold to 157 and a half okay now comment from roy says why not in earnings i see is did you just say it in iran condor well typically so so first off the question is would you want to be more neutral on a stock that's fallen down to support if a stock has fallen down to support the investor might be thinking the stock might try to bounce up right and if that stock actually bounces back up that's kind of a little bit more of a bullish potential trade so the idea here with this type of trade is that the stock actually might be more bullish off that support area that's the idea so i'm not thinking something maybe more like neutral roy kind of thinking more like a bullish trade so when we actually pull this up when we actually look at a cash secured put as i just pulled this up remember when you look at a cash secured put and you look at one contract the delta initially is like 35.
if you look at the typical ion condor they're probably going to be between about zero and 10. if the stock has fallen down to support and the investor's thinking that it's going to about they they might want a higher delta than that okay so that's why our example is showing a trade that has a higher delta it wants more of a bullish position maybe not as much more neutral this is also positive theta but if volatility were to drop okay so the stock goes up time goes by and volatility drops that would be like triple whammy in a good way okay that that wouldn't be bad okay i mean that's that's like the best case scenario stock goes up time goes by and volatility goes down okay now what i want to actually do in this case is let's kind of go back to let's say a stock example just real quick i want to kind of pull up a stock that kind of came out of nowhere today okay if you want to call it that so we got stock actually merck okay and if you actually look at merck it's kind of been more sideways it's gotten post earnings and i want to kind of actually just change this maybe view up for just a moment but if we actually looked at this we kind of have like a prior high right right there you actually have kind of another rally up there and then it faded and let's kind of just ask the question okay so where you kind of had another resistance did we just have a break up through resistance went to the next level then it pulled back could this area right here really be a flag could that be a flag right there all right now if i zoom in what you're now going to notice is look at a lot of these candles as of lately right not really big candles but on today's earnings that was actually a pretty large candle on that shorter term moving average it actually turned from red to green so starting to show a little momentum you sure hope so on a candle that's that big and now if we went back and said well let's kind of look at that three-year weekly chart let's pull it back and see what it looks like longer term this is what it looks like so when you look at this it's kind of actually kind of end up maybe an almost an all-time high this 90-ish area it's never been able to get above that now would it be a wise decision potentially to say i'm just going to buy a full position right up against resistance and what's kind of making this chart look a little awkward is this long tail and we'll correct that bar i'm just going to go back and kind of sometimes you get a maybe a misfire on data let me kind of fix that it's going to make it where the chart doesn't look as awkward let's let me just remove that for the time save close okay now if we actually go back now it looks a little bit more more normal but so if we could kind of go back to this the investor might say i'm not going to buy a full position but this is kind of interesting where it does have a cup like set up with a pullback and this pullback as of lately might be that handle now if we actually go back and look at let's say merc and we ask ourselves the question okay well what type of volume does it have on the stock well it has about 12 000 excuse me 12 million thousand shares uh so far today now let's imagine the investment said look i wanna buy some shares but i just don't wanna maybe buy a full position let's imagine the investor want to splice their position by a third third third third and so they're trying to maybe buy on a pullback let's go back to the daily chart okay so it ran up and then it pulled back and this is the first day we've actually seen like a close above the high the low take so far and a little pivot or turn now i'm going to kind of set up the first two or three entries number one paper uh we're going to show a paper trade where we actually buy the stock right at the current price buy custom with stop and what we're now going to do is we're just going to set the stop right underneath this low area so what i'm saying right underneath this low area i'm talking about let's say 84 32 okay so what i'm going to do is i'm going to take on a calculator 8432 less 2 to 3 percent it's going to give a stop at 81.79 so in other words if this load does not hold and the price goes down lower than that it's going to say get out of the trade okay now we go back over to the left where we see the pool balls we know where this goes click on it dollar percentage click on the percentage go dollar it's going to go dollar map so we can actually say well let's imagine the paid money account now we're talking about the ira the ira typically actually invests about forty thousand dollars so if we splice this in three we're talking about maybe what thirteen thousand three three three something like that if you did it in thirds which would really be about a hundred and fifty shares okay so the first third of the entry is just saying buy the stock at the current price with a stop underneath is this right huh well need a date of gtc remember how that stop works it's saying if stock goes to that price or less sell the stock okay and it can be filled at a lower price confirm and send notice there's not a commission but there's the capital right to buy the shares now i want to ask you a question where might the investor try to add this i hate when it does that i got to figure out why it's doing that but let me write that down because i i did fix that the other day merc i'll fix that order 8864. i want to see what's causing that but if the investor would actually say hey james i want to try to get in on a secondary entry where might the investor try to get in whenever you get these large green candles right big ones some investors might say james can the middle of that candle really kind of become like maybe a shorter term support area so the investor might say i'm going to go buy custom same thing with stop and this order is really going to be a limit we just put our cursor or marker right in the middle of that candle which is about 87 13 or so okay and that's why you'll notice it right there so what we're going to do is when you when you do a limit order it's saying buy the stock at that price or less okay if you're doing that it's actually going to be not a day order typically it will probably be a gtc a good till cancelled so now what you actually going to see is it's going to go back and say okay what was that position size again well going to go back pool balls percent dollar amount gonna type in that second amount okay and if we actually take a look at this i'm gonna go back and type in about 13.
now why are you doing thirteen thousand three three three three well the position size about forty thousand if you did the full position okay and if you did a third of that that's why the 13 000. so now if you go back and actually take a look at this you're now gonna see that what was the stop on the first just going to repeat it data gtc okay now again i think in the current market where we have volatility like we do i'm not really sure if maybe maybe the investor might want to try to scale in because when we're when the investor's in the market where it's up down up down up down putting the full position on even if it's just 50 shares but that might not be the greatest idea historically like scaling into a position you you would always have to kind of say it's the commission right well we're in an environment where you don't have the commission so if someone said look i want to kind of try to get in at different times and dollar cost average we've never been in the condition or time that we actually have right now where you can actually do that where it's not commissioning someone to death so why not try to use that okay so here we go so we got there's the shares second order right at the middle of that large green candle limit buy the stock at that price or lower the stop at that price or less sell it if it goes to that price or less and now what you're going to see is send order now if someone asked me the question i know it's going to reject me i'll fix that but i'm going to write down the second order was 87 13. so if someone said hey james where might that third order be well guess what we're going to set an alert right right above resistance and we're just going to say create an alert that if it goes at or above that resistance area this might be that third position okay if i can spell ah there we go question mark so if that stock goes to 90 18 or higher it's going to say hey james you might be getting that opportunity to add to the position okay so now if we actually take a look at this when we actually zoom back on this okay so if we look at this right here this is actually if we look at a a pole okay the easiest way that i've ever seen to see poles and flags is if you actually did this if you went to let's say style and went back to where it says chart type to candle go to hakanashi and if you actually take a look at this this is going to be the easiest way i think i know two ways to actually see the flag the best okay and the pole if you look at this the long section which you sure hope it's the long section is really going to be this right here is the pull i mean how many candles in a row is that of just green color candles there is only one little doji in there this is the monster pool here okay and this where you're seeing more red candles this is what we would call the flag now our canadian friends would call it the fleek okay we love all people okay i don't care if you call it flag fleek whatever you want to call it there's the flag so someone might look at this and say why in the why on earth is someone looking at merck well if you got that long of a pull and you've actually had that shell of a pullback even if when just up half what the poll did the previous rally that's quite a bit of a little push there so uh board that's why that's the flattest flag with the doji i would push back on that i would actually say i don't think you're seeing it right and this is probably it's a bigger measurement than you probably see than maybe you thought it was this is actually one of the bigger polls that we actually see in the current market given the market condition that's how we see that now uh silas d says just a random note james you are an amazing teacher coach i appreciate that you know i i really like to just do this because i like to share with what i've learned my greatest lessons are learning from pain and i just don't want people to go through stuff that you could probably just avoid okay all right thanks for that all right now just real quick any questions okay so we did the apple actually short vertical put we did the merck example the stock position like entering adding if it got to this price or lower and then even adding kind of looking at that third spot if it broke resistance now what i want to do if if i see okay okay i want to go back to just real quick a stock and one of the ones i want to actually take a quick peek at it you guys are gals remember us talking really about let's say super target now i you know i we we here at nauseam uh this old resistance becoming new support and i always like to ask myself you know uh that's wonderful that i could recite that but show me an example of how you took advantage of that okay i don't want to just remember cliches okay when the vix is high it's time to buy great if that's what you think show me examples of what you did in the paper money account if the investment says old resistance is new support wonderful tell me where you actually got in in the paper money account okay i want to see it so if we said hey now when these stocks actually break out okay when the stocks actually break out it is not uncommon to see the stock break out of resistance rarely up to let's say a high and then actually pull back really touch you where the resistance uh where the old resistance was this old resistance is kind of that triple top area okay now a shorter term investor is saying well this stinks because it broke resistance and it went to the resist the next resistance well we know resistance tends to be an area where investors try to sell kaching and they did it went up to the next it broke resistance 225 it went up about 10 percent and investors sold into that strength now if you look at this it's now falling down to a little support area now when you fall down to a support area what type of bullish candles could you be getting well i mean if we're talking about what type of bullish candles tend to be near a support area we might say candles like inverted hammer hammer piercing line bullish engulfing right candles like we would say close above the high of the low day etc this candle so far is kind of more like it's like a hammer i'd like to see a little bit longer tail on that right the tail being twice the length of the body but if we actually go back and say let me see the three year weekly chart what do we actually see on this this is really a kind of a stock that was falling down let me kind of take these lines actually off this was a stock that was actually falling down and re broke back above where it fell down from and then has the twin peaks you like that the twin feeds right kind of at the old high so if it broke back up inside this whole channel the question is could it try to go back up to the old high okay so let's say the ambassador said james i see that and maybe that stock is trying to bounce off that support but maybe they said james i kind of maybe want to do let's say a cash secured put and maybe they want to actually try to buy a put that's out of the money to define the risk okay now i'm first going to kind of start with a classic let's say short put vertical now i'm going to kind of show you maybe something that's off the beaten path i wonder if the investor said look i want to maybe actually sell uh in this case like a strike at 232 and a half well if someone actually sells a strike that close to the current stock price they are feeling a little bit more confidence that that stock is at an area where it could bounce they're trying they're saying technically that's what they're forecasting but they're also saying i might not mind in owning the shares at that strike price anyway so if the investor said i'm going to sell the 232 and a half but if they're wrong men men you need to answer that question too wonder if you're wrong okay okay good me and fairborn are the only ones that get it tell me if you laugh please tell me you laugh if you didn't laugh i'm just i'm just gonna close it up now and say i'm done for the day okay now let's say the investor said okay i'm going to sell that put at 232 and a half sell vertical and now what you're going to see is the investor can widen the spread to whatever they like they're every two and a half but if they want to make it like a five dollar spread there you go two thirty two and a half two two twenty seven and a half and what you're now gonna notice is the credit is a dollar ninety seven now golly when you look at that credit you actually say 197 i appreciate that i i felt hung out there on a second but i i thought man it'd be really nice if they actually kind of chuckled a little bit now let's say for example the the maximum gain on a one contract basis is a hundred and ninety seven dollars and we can see that but the maximum loss is 303 well that ror is 65 now can that number be inflated can that percentage could the premium be inflated by let's say what the vix is in the market does the higher vix in the market actually impact the implied volatility on stocks sure could the higher premium be affected by upcoming earnings the answer is yes okay so that is not normal that you see something that high notice actually what you're going to notice is there is upcoming earnings if someone does one contract it would be a dollar 30 if if the investor said james i could risk a thousand dollars it would be three contracts okay now what you're gonna now notice is when you take a look that's gonna go to edit gonna go back to where it says cell one two three and what we're now gonna do now the price has changed to 195. so got to take two cents less if it's gonna try to get phil quick 195 confirm and send these numbers have now adjusted for the three contracts and so is the commission now robert says my wife my wife told me i could i love that robert i love i love where you're going with that now what you're going to see in this case is the break even to 30 55. okay so
what we're going to do is because i got to fix that ira we're going to put in the margin notice the buying power and the max loss are the same send the order we'll make sure the ira does that as well i'll write that down to double check that fix that and now we're going to see if that order fails it was trying to sell it for a dollar 95 okay 1.95 now let's kind of go back just briefly and kind of take a quick look at where the market is and see if there's any questions so first off if you actually take a look at let's say the dow still holding 601 okay remember we kind of said that the investor if they're bullish they would love to see the vix fade okay and we want we might even say what bob barker used to say come on down okay uh and if you if that drops okay there might be some investors that might sharpen the axle to say on the cash secure puts or the short put vertical every time a trend trader gets in to a trend it doesn't have to be on a stock position let's not fool ourselves here now let's i want to go back to one stop but i want to kind of just take a quick timeout are there any questions okay any questions now roy actually says i have a delta of .15 i'm being right okay so roy is obviously a very very humble man i like that but roy i i think i'm gonna have to push back on that i i think you're you have a higher probability than that i know your spouse would actually say that as well so but you're humble i that's that's very nice to you now i want to go back to one other stock that's actually kind of talk about trends right we're talking about stocks that have shown relative strength if we were to look at all of the s p 500 and say what stocks are up near 52 kai's that list would go very small quick well one of the stocks that we actually saw and i'm going to kind of pull this up on good old twitter and if we actually pull this up i actually posted this surely before and when you look at let's say stocks in the dow jones a stock like pg is one of the stocks that we'll notice that is at a number four train condition now we hit this pretty hard this week but a number for train condition is when the stock is really up near an area of resistance now that's not necessarily bad at least it's up near an air resistance i'd ha i'd rather have it up near an area resistance than something where the stock is in the number one trend condition is falling down below both moving averages or below both moving averages so if we actually see that pg is let's say the number four trend condition but it's actually been something appeared over time where the relative strength has been quite high and the stock if we actually go back and look at this and say price pattern wise a little potential bull flag potential and it's actually showing a close above the high the low day potentially from that darker that green color background let's go back and quickly take a look at this okay so if we were to go back and look at this this is another stock kind of like merg that's right up against resistance okay now when you look at a stock like this it has made higher lows along the way it rain up and then it plateau okay then what happened is it rained up in a plateau it ran up and it plateaued or pulled back made a higher low it ran up in a pull back where did it pull back to and i'm just going to mark that right there so over time these lines really represent higher highs and higher lows i know the higher lows are your best friend i know that's what you want to see we all want to see that so now we're making higher lows going up into resistance and now we want to kind of just quickly re-practice this right if the investor said james i want to buy the stock at least want to buy maybe let's let's do the example of half and half right so let's say uh half of the position size and the other half might be if the stock were to break out of resistance let's show that so let's say we're going to do this in the margin account the position size i think was on average about 13 thousand it's going to go the trade tab gonna right click on the ask price right click buy custom with stop now first thing i'm gonna do pool balls percent dollar amount geez it's almost like if you did this over and over again it kind of kind of seems like it kind of gets like like a little routine here 6 500 it already kind of says how many shares that is good to go back and it's a limit order dave that's fine it's buying the stock right now at that price or less and then we need to know where the stop is when we actually go back and actually look and see where the stop is if the investor were to set a stop below 159 that's kind of really more like a short term type of trader if the investor said james i really want to kind of set a stop let's say below the secondary level of support well that's 156.95 less let's say two to three percent that would give a stop of survey says okay it's going to be right at the price of 1 52 24. and all i did is i just took
the secondary line i'll repeat what that stop is i took not the first touch the second touch 156.95 less three percent and that's why what you're going to notice is the stop is at 152.24 the stop does not guarantee an exact price fill it just says sell the stock if it gets to that price or less now that's half the position going to go back say confirm and send there's for the 6500 sell the shares if it gets to that price or less no commission if that's what the investor wants to do fire in the hole now now what you see is the secondary spot now this kind of becomes as how far do you want to see the stock potentially break out now here's the thing even if it did break out it's not a guarantee that it's going to be in the continuation and it's going to go up as a guarantee okay if someone says i'm going to guarantee just don't listen just run okay because they're lying you can't guarantee anything we don't know what the orders are going to be of future investors we don't know that nobody knows that okay now let's say the investor said james if it gets above resistance by hypothetically a dollar hypothetically okay well that would be about 164.84 right click on the chart buy custom go back to where it says with stop i'm going to actually type in 164.84
going to also kind of put back the old stuff 1524 data gtc i'm going to just go back to the pool balls percent dollar man type in the 6500 here it is done so what the investor is actually trying to do is saying where are the trends where are the stocks that are really making higher highs and higher lows and if that stock is making higher highs and higher lows and it's doing that into the resistance okay the first order fill second order we haven't sent yet but if that stock were to break out of resistance might just be in a continuation instead of trying to chase it as it broke resistance it's fine it's trying to buy some below the resistance and then adding as it shows a new high i think this discipline is probably not very much focused on i think in a volatile market this might be a discipline of scaling in that i think is pretty important as far as how to like try to actually put on bullish positions or even bearish if the investor said this is what they want to do confirm and send notice not a commission we talked about how the stock works if this is what they want to do and notice what this is doing it's saying buy the stock if it goes to this price or higher okay want to make sure that says gtc no so we need to change that day to gtc this is why we review the order okay confirm and send now i see the gtc right there because we don't know if it's going to go to that price or higher today okay the stop is gtc good till cancel if that's what the investor wants to do fire in the hall and reject i gotta see what that will be so i'll add that to it i'm getting rejected left and right on that but i'll actually put that back on so we set a half position of pg okay my computer was acting a little funny today but i will fix that so we said 164 84. okay we said the stop was 152 24. okay now i want to kind of just quickly and i'm not going to do any more trades but if i go back and look at a stock like amazon remember that stock has earnings today they have an upcoming 20 for one split kind of at a point where prior it was where it was before prior got a little bounce could it bounce here we also see a stock for example like lily care here you go back to a stock like lily post earnings pretty strong bounce how many stocks have you seen lately that actually had a moving average crossover not many not not to the bullet side lily's trying to cross to the upside if you look also look at the stock even like mondelez that's also one that's actually in the staples space staples have actually been the strongest sector if you look at the stocks if you look at the sector excuse me that have stayed above the 10 and the 30.
okay that's a stock where if you look at this it's kind of carving out another higher low okay uh and try to actually maybe get back to the prior high and maybe even extend notice that some of these stocks that are more let's say value or income names tend to be the ones right now so far not all be the ones that actually have slightly uh stronger trends now i'm out of my time here today but i want to just give us a quick reminder uh as a uh let me just pull up something just briefly just as a reminder we actually do have actually upcoming uh uh an opportunity if you said i have questions on how to actually use the platform and i want to customize it we do have an open window right now where you could actually work with one-on-one with the consultant for 30 to 45 minutes uh so i want to kind of give you that bitly link you've probably uh maybe heard of this before and maybe you have questions about it so if you said i'm new to using the platform i want to customize it or does it actually have maybe certain you have questions on functionality etc i'm going to send you this bitly link and what you're going to notice is and i'll put that in the chat right now and mike if you could actually uh put that in the chat could you actually put the bitly link in that link is gonna be too long mike if you could actually put that in this link is gonna be a little too long had it before but i think it just timed out but when you actually click the bitly link that mike fairborne will actually put in the chat it's going to be uh showing where you can i'd like to demo the thinkorswim platform for 30 to 45 minutes click on continue and what you're going to notice is i timed out but as you go through that it will actually show you the time slot what day and time would work best and that way you could work on one on one with someone that could actually help answer your questions okay so we want to make sure that you realize that's available to you right now and actually uh mike fairborne will actually post that in the chat as far as the link and thank him for that now also i want to kind of make mention with what we discussed here today it was done for example illustrative purposes only we discussed doing two different short puts on apple over earnings we also discussed as far as an example of a stock trade on merck we showed an example of a short put vertical on a bounce off support on target and we also mentioned a stock trade scaling in stock trade to proctor and gamble i want to thank you again so much for your comments and your participation and with that said uh stay tuned for our next webcast coming up right at the top of the hour if you enjoyed today's session reach out and smash the like button subscribe to this channel that way you can see all of our video content right on youtube and right on your mobile device you don't have to be on a computer you go to youtube subscribe to the trader talks or investor inside channel you'll be able to see all the content
2022-04-30 04:45
