Pre FED Round Up & Conditional Orders | Swing Trading Days to Weeks

Pre FED Round Up & Conditional Orders | Swing Trading Days to Weeks

Show Video

good afternoon everyone john mcnichol here and welcome to swing trading days to weeks what we'll do is we'll take a look at the market action as we go into the fed announcement tomorrow along with other news on the week we'll take a look at some swing setups and we'll do practice trade so stick around okay well it's great to see those you that are live with us today such as krishna vj wayne todd sarah we have charles bill el diego dylan mary jack's with us robert mike phillip kiana mt mia hassan quite a few you with us today live we got mr james boyd helping out on the chat if you have any questions i am unable to get to he's more than happy to help shout out to those you listen in the archive session as well uh if uh you're listening to us there uh we do appreciate that and uh looking forward to seeing you at other sessions there you can see my twitter handle on the screen at j mcnichol underscore tda if you wish to follow myself along with other fine instructors such as mr james boyd let's go ahead take care of disclosures folks we'll go ahead and get right into it the content is for educational purposes only non-investment advice or recommendation of any security or strategy options not suitable for all investors a special risk inherent to options trading may expose investors potentially rapid and substantial losses spread straddles other multi-leg option strategies often involve greater more complex risks in single leg option trades and one should consider commissions as important factors and when evaluating any trade there and you're encouraged to practice what you learn here today with tools such as the paper money software which is for educational purposes and success successful virtual trading during one time period does not guarantee successful investing of actual funds during a later time period as market conditions change continuously make sure you make note of the risk associated with long options as far as the entire premium being at risk as well as with short options as far as the risk of assignment in order to demonstrate the functionality of the platform we will be looking at actual symbols keep in mind td ameritrade does not make recommendations or terms suitability of any security or strategy for individual traders any investment decision you make your self-directed account is solely your responsibility and a stop loss order will not guarantee an execution at or near an activation price once activated they compete with other income and market orders a brief bio for those of you that may be unfamiliar with me i along with james have been around for a while and certainly cover the wide spectrum of stocks options various uh trading strategies as well as overall markets and uh if you uh go ahead and look at our agenda here today we'll take a look at the market action as we've seen some volatility over the last two days and at a market action in the afternoon uh whipping a little bit back and forth as we do have a fed announcement tomorrow we'll see if we can piece together some swing setups here whether from both a bullish as well as a bearish perspective and get a practice trade in let's go ahead and bring up the thinkorswim platform we're looking at the s p 500 right now both on a weekly basis keep in mind kind of a longer time frame and here we are looking at a daily now some of the shorter term concerns is as we look at the chart you know over the course of this last year it's uh for the most part it's pretty much been going back to around last november that we've had a break or closes below the 50-day moving average now i have a 55-period exponential which is a little more weighted there and as we kind of look at the current price action uh even though we are in positive territory here today about up about a third of a percent unless we are still inside the range of that previous day so we have a more of a harami pattern uh at least a pause what does that portend well whether the fed will be a catalyst or as well as other news as a lot of people are tracking and someone's been tracking for a little bit longer than the last two days odd china and the uh evergrand uh real estate and whether uh there'll be any kind of bailout there or restructuring of that debt and the impact to our markets as well and from a technical standpoint uh one of the ideas is you know our price is able to break out of this inside range to the upside potentially fill in that gap notice the shorter term trend is still down and so some short-term traders if they are bullish uh maybe looking at keeping their profits uh relatively small you know possibly targeting the resistance of the downward slope that's what we're seeing there on the s p as an example if we look at the nasdaq ndx we've talked about uh not only in this class but on the breakout and reversals uh on how the nasdaq being extended in that upper channel it was looking a little contrarian on stocks such as google as an example kind of backing off of that longer term channel so we can bring up google there and google finding some support in this case 55 day moving average and also kind of the mid channel of its longer term so when we go ahead and look at nasdaq there we're probably seeing a similar situation as you can see an idea over the last year as far as that longer term channel retracement on the nasdaq albeit testing uh lows there still trying to hold above in this case that 55 day average what some traders may look at is look at that low area there as we're seeing more similar lows and kind of more of a neutral area here with the bullish bias being a pop to the upside and a bearish bias being a failure on a bounce and taking off some of those lows still still a few things to work out looking at the dow djx zoom in on that let's get rid of some of these fibs there talked a lot about fibs over the previous week as we've seen some violations as we look at the dow as far as with the low range and an inside day you know basically testing some of those lows from back uh in july so the case of the dow possibly taking on some of the similar characteristics that we had seen with the russell pretty much going over this past year let's bring up our ut now it's interesting with the russell uh notwithstanding the uh range that it's been in uh over this last year and we kind of see the lower range the upper range and kind of around the mid-range even though the small caps took a hit yesterday and we're seeing another inside day nose price action is actually still above some of those previous lows so a little more relative strength in the small caps there that could be some of the drivers on some of the sectors as we come over here on the left and look at the s p 500 sectors we've seen a bit of a back and forth currently we're seeing real estate being up about three quarters of a percent uh energy which was negative earlier in the session uh information technology coming back in uh with health care and consumer discretionary so in the afternoon here you know we're actually seeing some positive moves on some of the various sectors on a more broader basis with actually pushing into positive territory outside of materials which is flat and industrial is off about a half a percent now the question was from phillip does an inside day in the current context reflect bearish sentiment or in decision that's a good question so when we think about a smaller candle with a relatively small body or no body and uh even a smaller range uh a doji or spinning top considered to be a little more indecision a lot of times this is common when there is a a big move in price action in this case to the downside and at least in an attempt to find some support and to take a bit of a breather uh is that going to be a reversal to the upside or a continuation to the downside well time will obviously tell in that there's no uh foregone conclusion in that although some traders as far as with the bulls which have been buying the dip we've seen how that has generally been positive for those bullish traders but there will be a point where that may fail and uh there have been some arguments up until as late as this morning and may continue uh into this week pending any of the news uh if you know we're not really seeing as strong of a bounce as we've seen on previous sell-offs now maybe this is just a matter of waiting to see what some of the events are for the week so if we go ahead and go to the td ameritrade website under research and ideas and take a look on the calendar what are going to be some of the drivers this week as we scroll down and take a look going into wednesday and we'll select economic events now it's not meant to be all inclusive but we're going to get a gauge of some existing home sales which can impact what we're seeing on the housing stocks there is the fomc rate decision now there's not a an expectation of a surprise uh as far as with rates in this case i believe looking to hold that range but whether there may be some verbiage on cutting back on some of the asset purchases there's a consensus that they probably won't mention anything but you never know there's also going to be some speeches uh after the fed decision by chairman powell and i don't think it's necessarily on this calendar but i believe he's also going to be speaking on friday as well as we go in the latter part of the week we got new home sales and we'll get some more information on the job front now we're not necessarily going to see uh as much information on inflation possibly and get some ideas from consumers uh on the leading indicator report that's coming out later this week but one of the other guides that we have is looking at the treasury yield tnx for the 10-year and we can see that we've pretty much been in a bit of a range here a little bit of a back and forth we did see a bit of a surge later part of last week but notice we're seeing a bit of indecision kind of at a midpoint there so again probably waiting to see what the fed has to say tomorrow and see where that push is now conventional wisdom is if we see a push in yields uh to the upside uh we may still see some performance possibly in the commodity front as well as in the financials but then we're also seeing a bit of a spike here in real estate uh information tech which a lot of these may be a little more benefiting from rates being a little more stagnant here so unfortunately we're not going to answer all those today but kind of give you an idea or how things are setting up for tomorrow if we look at the vix volatility index we've talked about this over previous weeks how the bias on the vix has been a little more to the upside as the lows have been rising and then we got that spike between friday's sell-off and a continuation as far as monday the volatility has backed off from some of those highs still elevated as we go into the fed uh tomorrow there all right so that's kind of how we're setting up uh with uh the overall market and uh granted as we uh go ahead and we'll look at some potential setups here we certainly don't have control for this one hour segment you know as we go in the last hour of the market here on necessarily having the perfect set up for a swing some traders may look to forgo some trades until post a major announcement to try and find some of that direction and that momentum so all that we've seen is potential bounces off of some previous lows which may make it more neutral in nature and now it's a matter of seeing if we see some follow-through on that so with a couple examples that we'll take a look at today and you know can also whether provide some clarity or muddy the waters a little bit uh as we take a look at a few stocks uh you know on the transportation side was looking at the airlines previously as you know the airlines didn't take as much of a hit uh over the previous few sessions as you know they've already taken their licks with covet and some of the travel restrictions now some of those travel restrictions are potentially going away some of those announcements we even saw some intraday movements up to that resistance in this case on delta potentially inverse head and shoulders this may be something we may talk a little more tomorrow actually not tomorrow because that's education day i will be teaching an education day tomorrow and i'll give a little more of a promo that in a few there but keep an eye open for a potential breakout of that area that can lend towards a bullish case there is going to be some earnings coming out in early october if we wanted it to we could potentially do a a buy stop uh on this what's a buy stop buy stop would be if price breaks above a certain level to possibly enter in to a potential trade let's say as an example wanted to do a a stock trade we'll do that for simplicity we can go ahead and right click on the chart and we'll do a a buy custom and i'll do with oco bracket as we take a look uh this is where we can actually place a trade with a potential entry and also have potential exits whether at a target utilizing a limit order and utilizing a stop order in an attempt to give a little protection on the downside keep in mind stops are not guaranteed to fill out a particular price now if we go ahead and take a look uh at that resistance what a trader may do is possibly look at the high of that resistance and if we go on this day here we've got 4180 as a high if we go to this day it's about 41.77 so it's like the highest point over this range is around 41.80 so let's go ahead and mark that on it and let's look for a trigger about let's say 20 cents above that so that would be at around 42. so i'll go ahead and plug in 42.

and what we can do is going back to the order we can change this order from a limit we're going to make it a stop limit if i change it to a stop limit that is going to basically give us two prices one being a trigger price in this case we got 4190 that's currently in there our trigger price we're going to utilize as being 42. and if we go ahead and click in 42 as a trigger price we have that now notice there is a second price which is the limit what we can do is if we've determined that if we enter or trigger a buy order if it hits 42 then we can specify at what price we're willing to pay for that and usually that would be at or maybe a little bit above that so let's say i'll go ahead i'll make that 42 and i'll account for a little bit of slippage let's say make it 20 cents above that okay now as far as time and force we can make this a day order since it is a horizontal resistance uh we may look at it from a standpoint if it breaks above there at any time to attempt to trigger that order i'll leave that there for an example and then likewise on the exit orders we want to make these gtc for good till cancel as well what that means is that if this order fills by trading above that 42 area then these orders would continue working for us now we can go ahead and set a potential stop order a percentage below that breakout point let's say we'll use three percent as an example so we can go ahead and go up to the gadget here we'll switch that live news by switching that gadget to a calculator and what we'll do is we'll take that 42 times 0.97 that'll give us a level of 40. and 74 cents basically below that resistance okay so what we'll do is we'll go ahead and plug that in now keep in mind that 40.72 cents if the

price was a dip down and touch that level it will trigger a market order hence what we see market and uh we have no control over what that price is so with that in mind uh that can uh be more of a greater loss than one anticipates those of you that we were looking at win previously and i think we also did an example of a defined risk spread so we didn't necessarily have to worry about the stock price once it broke below our strike but notice win took a big hit from around that 108 level trading down as low as 79 with exposure to china so even though one may have a stop loss at a higher price if it gaps down that exit is going to be potentially a significantly lower price so keep that in mind that's always a risk one can choose to potentially trade options that may have a little more of a limited risk strategy and so you know we've done both of those examples uh in this class here utilizing both stocks and options all right so we go ahead and we have that potential stop and then you know as far as a target although you know some investors may look at this as more of a intermediate reversal may look to see if that trend develops since this class is more days to weeks more of a shorter term we may have a potential price target in mind and one way of doing that is measure in the size of that pattern simple enough one can use a rectangle tool or use the fibonacci tool that we utilized last week there let me go ahead and adjust this just a little bit here kind of around that resistance there but my eyes are giving me a little bit of a issue here okay a little conservative area there so as far as price and distance i can go and activate that drawing and put it up towards that breakout point at least in that range and so the idea being if the price was to break out it may make a similar move uh over that similar period in this case you know maybe trading back up in that range on where it was back in july or actually mid-june and if i look at that where that price level is we can go ahead and mark that we can use that as an example of a bracket order in this case around that 46 area so again we'll plug that in oh what happened here okay now we're still good plug in 46. there we go now if i go and do a confirm and send is where we can double check the order so in this example we're doing a hundred shares on this practice trade again it's not a recommendation of buyers selling a security trying to demonstrate the platform and some of the trading techniques for a swing trade so potential entry nope i actually messed that up there let's try that one more time we did something wrong there that's why we go ahead and measure twice and cut once meant to put the 46 in the limit order on the sell side and did not mean to change our limit order which is 20 cents above the trigger okay that's why it's confirm and send not send send so we hit confirm and send and we see the trigger at 42 on the stop attempt to buy it at 42.20 or better if that condition is met and then we have the bracket order one cancels other and uh looks like something changed there as well that's one of the challenges uh sometimes on the price action these things offset if you change the price up here it may reset it down there our stop is still 40 74 but i'm going to go ahead and adjust our limit price to 46. there we go let's go to confirm and send three is a charm trigger price attempted limit price there and then with the one cancels other whether selling if it hits 46 dollars or if we're potentially stopped out if the price triggers with this being an oco if we're stopped out it'll cancel the limit order and if we happen to hit our desired price target it will cancel out that stop order all right let's go ahead and we'll send this through and so notice that order will work until intra-day we see a price push to that 42 level to trigger that limit order and then likewise that bracket order will be working there let me know if you have any questions uh on this technique a couple things to consider again i was doing that for illustrative purposes there is that fed announcement as was mentioned uh usually around about 15 minutes after uh 2 p.m eastern time i believe you can usually see those times give or take a few minutes uh some traders may look post that announcement and then possibly place an order after that see where that is you know otherwise for instance this order may trigger if the price goes higher in the morning and then post fed if things don't shake out uh prices may cascade back basically blow back in that pattern there's pros and cons as far as an intraday entry versus waiting going into the afternoon prior to that close there all right and sometimes if you go back to some of the news events unfortunately we're not seeing it here actually it is here you know right here it's saying right at the top of the hour but that can be a few minutes around there usually is keep an eye on the market uh at 2 pm eastern time and then watching the market to see how that moves there all right i do appreciate that i'm not seeing any questions uh let's go and look at another example uh this one from a little more on the bearish side potentially and we're going to bring up a dks for dick's sporting goods now some traders may look at this one being a little more contrarian this is kind of similar in aspect on the google example uh did a few weeks back when prices were kind of more in the upper part of the channel and looking for you know kind of more of a drifting to the downside uh if we bring up a dick's dks you can see here's the overall channel for dick's sporting goods over this past year we did break out of it and notice how that broken resistance may be acting as support now dicks hasn't uh uh necessarily sold off uh that much over the last uh few sessions there but hasn't necessarily had much of a rise uh over these last two weeks bit of indecision now that indecision could point towards a a bullish break to the upside so if one's looking at it as the glass half full and one can look at a similar technique that we had done on uh the previous stock which was uh gosh my mind's going blank here today uh which we're looking at uh delta thank you and or a little more of a ryzen wedge example here too uh some bears may be looking for a breakdown and possibly a short-term run maybe down to the moving average or in this case the mid channel of the stock okay now for this example we'll utilize a put and i'm going to do an example of kind of a contingency order if the price basically breaks down below this low to go ahead and look for that entry now if we have a close here someone may look for a break and down below though but i'll look for a break basically below this support so if we look at that low that's going to be a low of 129.77 so i'm going to go ahead and mark that 120 129.77 let's say we go 20 cents below

that and i'm going to see if i can mark that we'll make that 129 57 okay so represented by that gold line there and we'll go ahead and go to the trade tab and we'll look at an option let's say we'll go out a little bit here kind of do potentially a stock replacement or in this case simulating a potential short stock which does have unlimited risk and keep in mind some of those stocks could be hard to borrow although it's not the instance here with dicks but keep in mind with a short stock risk is limited unlimited to the upside whereas if we were to buy a put our risk would be limited to what we pay for the option so kind of a similar situation uh to the upside uh as we saw to the downside with win from the previous week so if we want we can go ahead and look at an option that may be a little more into money a little higher delta to kind of simulate the stock move so if we go something that's a little more into money let's say around a 140 strike 61 delta we'd be paying about 12 at least at current prices for that now there is a little bit of a spread here as will happen with more expensive options uh we'd like to see the spread being no more than ten percent of that ask price the smaller the better so with a ten percent of about a buck 23 uh this is a spread of about uh 60 cents could probably be smaller could probably also be uh larger as well now again we're going to do this for illustrate purposes uh i'm going to uh right click on this and i'm going to do a a buy and i'm just actually going to do a buy custom with stop although we're going to adjust that and we're going to utilize the contingency or the conditional order function in the thinkorswim notice here over on the right you may see a little gear up here that's where we go ahead and actually modify this so i'm also going to make each of these market which keep in mind we have no control over price and one may be paying more or less for that option there could be some slippage on that so keep in mind uh consider uh more widely traded stocks as well as widely traded options uh if we want we could potentially calculate a most we're willing to pay for that option we'll leave that at a moment let me go here and go to the gear over on the right and once we go ahead and click on that gear we'll notice that we have the option to buy the option and down here over under conditions we can go ahead and click on the symbol and we can tie this order to the stock price now in this case since we're looking for dicks to go in lower we can select that mark to be less than or equal to and then we'll put in that trigger price which i believe was 59 and 57 cents looks like i remembered something uh over the last five minutes there there we go uh let's double check make sure that's correct okay uh we're looking at it uh going below that level there okay so basically 20 cents below that low to trigger that now what we can also do is if we do want to kind of have a little more control over that price we could put in a limit order for the most we're willing to pay for that option and one way of doing that is utilizing tools such as the pricing calculator up here at the top if i go up here to layout and bring up the theo price so we can go ahead and manipulate that and here we can go ahead and change these values it looks like i have to click on and reset that but let's say tomorrow we can change the date this is the kind of close to the current price but let's say we want to go ahead if the stock goes down to that 129 57. now it's going to be about four dollars below where it is right now so what we can do is basically do the math we'll take that current price 133 point i'll just do 38 i know prices are going to be changing i'm going to go ahead and minus 129.57 that's about 81 3.81 below where we are right now so looking for some of that downward momentum so if i come up here click on the drop down and go to the price adjustment and go ahead and just put minus and 3.81 cents one we can see with that result in prices and i actually think i did that off a few cents there looks like that's actually around 129.42

we're off about a few cents but if you look at the theo price that's approximately what that option may be worth so you know let's say at a worst case scenario i may be willing to pay that amount um now looks like we're seeing a spread here get a little bit wider here if i'm looking at this right i didn't notice this earlier here yeah we may have to kind of table that since that's a much more wider spread where which that means is if we pay 1310 for that option and we go ahead and we see that 11.40 there the difference between the buying the sell price in this case exceeds that buck 30 there let's go ahead and try see if there's any other options maybe go a little bit further out looks like the spread is a bit different if we go out a bit further out to december so maybe we can go ahead and take a look at that and we still have the theo prices on here as well and spreads are opening up here and this may be happening just as we go into the close here too so i may have to go ahead and possibly table that trade or we can just do it for illustrator purposes just so you can actually see it at work i'll go ahead and i'll make a limit order that'll basically be if i do the 140 i'll still stick with the 60 days out i'll go ahead and i'll put in a price that's close to that level there so let's say about 14.50 so what i'll do is i'm going to go ahead and click on the gear and let's just confirm our trigger price which is if the price drops below 59 57 it'll trigger and then what i can do is i can come here and change this to a limit and then specify that price let's say 14.50 uh that way if the price uh hits and we got a marketable order it will get filled if not it won't be marketable and it will go ahead and close it out or will not fill it should say now we can do we can do the same thing on the sell side by setting our exits where do we believe the price if it drops or rises where do we want to get out we can put up to three conditions here so again we'll do two of those let's do one looking at the previous move let's say we are going to target around that 55 day moving average we're kind of that mid channel that would be pushing closer to around that 119 mark so we can go ahead and put in a target of 119. what we can also do is if the price goes ahead and breaks above this resistance if it was to get that trade uh then we can go ahead and close out the position so let's say we look at three percent above that area so i'm going to go ahead and go to the calculator and we'll take that resistance of 135 says about 135.70

now in this case we're going to multiply it by a dollar three which would be 103 that would be a level of 139.77 so let's go ahead and mark that 139 77 and then with that information we can go ahead and plug in these values for the conditional order to sell that put if the price breaks higher or it breaks lower so i'm going to go ahead and go to the trade tab let's make sure we get that order back up we'll click on the gear and again we can click on the first box brings up the stock go to the second box mark's fine less than or equal to that's going to be the downside target which i believe we said was about 119. click on the second box below mark is fine and we say greater than or equal to remember this is a bearish trade so the price levels are going to be opposite we're looking to trade to the downside the upside is where the risk is but to define risk based off of what we pay for that option so there we go with the 139.77

we'll click save and hit confirm and send now there's uh various other ways of uh doing this trade i'm keeping it simple with just an individual option someone mentioned about synthetics i think that's a great opportunity for james to promote his webcast which i believe he has a class on synthetics our emphasis here is typically on stocks individual options and the fine and spreads okay so as we look at this example if the price goes at or below 59.57 it'll attempt to buy that put at 14.50 so that's basically about 1450. we're putting on this trade if the stock trades down to 119 it'll go ahead and sell to put at the market price or if it goes ahead and trades up to 139.77

it'll go ahead and do the same now we don't have control on what that price is however that's why we're defining the risk based off of the maximum loss which is 14.50 okay so again we'll click send on this we'll do one contract and uh let's uh let's make sure one thing here as i go to the order we'll leave this as i'll make this a gtc so this will be in effect for tomorrow as well i may need to go ahead and adjust that otherwise it'll cancel if it doesn't fill today and we're also going to make the order that would be triggered a market gtc as well so that will continue working so we hit confirm and send again we got that in place we'll go ahead and we'll click send all right by the way our trade from last week which was a defined risk trade uh to the upside a long call vertical on z scaler uh looks like recovered today kind of flat overall we got 24 days left let's just take a quick look at that chart and unlike other stocks some good relative strength didn't get battered down but still a bit indecision here as we go into the fed tomorrow and probably look at the direction of interest rates where uh interest rates falling may be positive for this stock whereas if we see a spike in interest rates maybe not as good all right let's go ahead and uh round things up making sure we're covering down on what we said we were going to do today which was take a look at that market action pre-fed and uh what to potentially expect went through some swing setups we did one on a bullish uh setup uh in the case of delta on a potential breakout and we on the upside and we did a example of a potential break to the downside on dick sports and anything can happen with that but planning for either contingency and we got those practice trades in would encourage you do the same thing now i did notice we have a survey uh so you have an opportunity to provide some feedback for us and we'd love to have that feedback if you go and click on that link it's just a few questions hopefully you've enjoyed this session today for those of you that are here live with us and for those who listen to the archive session you can vote as well by clicking like on the video that enables you to let us know that you enjoyed the presentation and also gives an opportunity for other traders to see some of that content as well all right so would it uh encourage you for those you had live again give us some feedback on the survey we'd love to hear from you and also if you want to vote twice you can click like as well uh so other people are able to see that yep that's right vijay it is survey time there and todd you're very welcome there and what we encourage you to do is practice what you learn here today go ahead and translate that knowledge into wisdom and you can only do that by practicing and speaking of knowledge and wisdom if you do want to acquire more of that uh and tell a friend who may not be uh affiliated uh with td ameritrade education uh those that join us on these webcasts uh know what we provide and hopefully find some value into that but if you go ahead uh on the td ameritrade website under education go to webcasts you will see that we're preempting our program and tomorrow for our education day i'm going to be talking about etfs tomorrow that's only going to be a live only session however many of the other sessions are going to be live and also archived i'll go ahead and i'll paste that link in the chat if you have not registered there and for those of you that are on the archive session you can simply go to that webcast link and register too make sure you forward out to a few friends we'd love to see you there all right i'd like to thank mr james boyd for helping out on the chat uh more importantly thank you for joining us and sticking with us each and every week as we go over the short term trade setups we'll see what the fed has in store for tomorrow and we've got 15 minutes left for the close there folks so i wish you all to have a wonderful day and a happy evening looking forward to seeing you tomorrow for education day and remember in order to demonstrate the function out of the platform we had to use actual symbols keep in mind td ameritrade does not make recommendations or determine suitability of any security or strategy for individual traders any investment decision you make your self-directed account is solely your responsibility so take care everyone we'll see you real soon bye now you

2021-09-24 04:37

Show Video

Other news