Using Fibonacci is my go to technical analysis. Why else would I call this website FibKingTrading? Fibs don't lie and in this case study of ROKU you'll see why I love using Fibonacci.
What do you see when you look at the chart above? How would you start to analyze this chart? In my Fibonacci Learning Center traders learn where to begin their Fibonacci analysis and then what set-up to use. Let's break down ROKU using Fibonacci.
The chart below you see that ROKU fell over $70 from the all time high at $176.55. It pulled all the way back to the $101.59 level? Why? This is the 50% retrace level from the daily chart above. When we are at the 50% level one of my favorite trades is the 50/50 trade. This idea came from someone who would take the NYSE prices each day at the close and find stocks that were near "critical mass" and doing this all via spread sheet. This guy was so old school in his search that I built a scanner to expedite this process. Now I don't use this particular method to search for stocks as often as I use to. The 50/50 trade I have adapted to be able to use on other time frames as well. It's a very popular trade set-up in our community of traders.
So you see above we hovered over the 50% level for sometime. Does it continue to fall? What's the next support? What if it doesn't fail? When do you get long? Check out the chart below. A custom built tool to show a particular reversal candlestick pattern is used to find when there's a good opportunity to get long. This signal was on October 3, 2019. No, ROKU didn't take off immediately but you can see the trend was ultimately higher.
So what's next? We have a support level at $101.59, got an entry long signal at $108.84 (this was the close price). What's the upside target?
Target 1: is the 50% level and is at $137.32
Target 2: is the 61.8% level and is at $146.57
A $36 dollar move for ROKU to target 1. No way that's happening right? From the date of the signal (Oct. 3) to the hitting the first target (Oct. 17) was two weeks of trading. Add another week and 2 trading days to hit target 2. A nice swing trade and in the options world this was a huge win.
How do we know how long to go out on the options? Swing trade for 2 weeks? 1 month? 2 months? This is where Fibonacci Timing comes in to play. What does it tell us? Well on October 4, 2019, here's some projections based on Fibonacci Timing.
This section highlighted red is between October 14 and October 17. Why didn't I use October 8 or October 10 levels? It's Friday, October 4 when I looked to enter, weekend is October 5-6. Monday is October 7. No earnings report, realistically will ROKU make a $30 point jump from Friday to Tuesday? Common sense should tell you no. What about the 10th? Two extra days? Probably not happening. So in this case, monthly option expiration was on October 18 so let's shoot for that time option series and it fits inside our highlighted section. I don't want to buy way OTM option when the stock on October 4th is trading around $108. I'm not going to buy $30 out of the money that expires in two weeks. I do notice though that the $110 and $115 strikes have a lot of open interest. Now gauge your risk and do you want to spend roughly $500 a contract or roughly $300 a contract?
We fast forward to the 17th at the end of the day and look at this chart. The Fibonacci timing lines up on this day and we happen to hit Target 1! That's Fibonacci at work for you!!! What about the options? How much are they worth now? Check out the chart and option chain below.
Paid $500 Worth $2,900
Paid $300 Worth $2,400
How about that risk/reward?
So I didn't take screen shots of the next levels and such but check out the charts below and see how Fibonacci played out. I've labeled the chart 1-12 and there's info regarding each number.
A big shoutout to BlackBoxStocks.com during these trades as well. The most recent trade, the flow on ROKU couldn't be ignored. You can look at some of my most recent tweets and see the ROKU flow I posted all via BlackBoxStocks. If you are interested in a free, one week trial of BlackBoxStocks, follow me on Twitter and DM me. No credit card necessary. You'll get all access next week. If you like it, I can give you a link to join and become a member. You're crazy if you don't take me up on this offer. Again, no credit card, just DM me and I'll get you set up.
This week brought us to monthly option expiration which is great for pinning plays. Not only was it a normal monthly option expiration but it is also consider triple witching. With that in mind I wanted to find a couple stocks that in the past I've had success with in pinning. Those have been SBUX, FB, JPM and BAC to name a few. This time around I used BlackBoxStocks for help. Let's dive into the details.
What is pinning? Pinning, I'm looking for a stock that has high open interest on both the calls and puts at a certain strike. The strikes are usually the closest multiple of 5's and 10s. Say a stock is trading at $182. I would like at $180 or $185. A stock trading at $77, I would look at $75 or $80.
I'm not going to get into the basics of options here so hopefully you understand some of the terms I'm about to use. Let's dive into BlackBoxStocks. This is one of the greatest tools in trading I've used other than Fibonacci! You see real time option flow and can follow the funds. What are the big boys doing? Do you ever wonder what the big boys look like? I'm guessing, 6'3" 300lbs in an Armani suit. But seriously, they have an option scanner to follow institutions. See what option dates, strikes and more of what the "Big Boys" are buying or selling.
I usually like to start looking on Tuesday or Wednesday for these "pinning plays". You should have a sense of direction of the market that week and key levels should be easy to find now for that stock. Here's a look at the chart and flow on Facebook on Tuesday, September 19, 2019. Few things to notice:
At the time of this chart a big flow of 190 calls start appearing. So that has caught my attention big time. Do we pin at $190? Again, if you've not tried BlackBoxStocks you really need to comment below and leave me your email or DM me on Twitter.
Now that I have more faith in the $190 calls than I do the $185's I needed to see add my fibs to the chart.
I wanted to set up two possible plays. One was a call credit spread. Sell the 190 and buy the 192.50 or do a butterfly where I sold the 190 and was $2.50 wide. The risk reward was better on the butterfly. I alerted the trade and here is the set-up. I waited until Thursday to enter the trade because we had FOMC this week. Normally I would've went for it on Tuesday and it was really hard not to enter then because of the nice flow that came in on 9/17.
Like any trade I make, the goal is always to make at least 50%. For this to happen, I needed to sell at $1.65. Today around noon this was trading near $1.80-$1.90 and I like round numbers so I put in an order to sell at $2.00.
Closing this trade out at $2.00 netted me an 80% return! Enjoy your weekend everyone!
One of the biggest names in the market Apple (Ticker Symbol $AAPL) goes level to level for a $25 gain in the stock. So whether you buy stocks and/or options, this method will work on macro and micro time frames. Inside our MEMBERS AREA you too can learn how to use the Fifty 50 strategy.
Trading ROKU $ROKU using Fibonacci and the Squeeze. Bought call options at the money at our trigger for a profit of $100 per contract. Watch the analysis below.
S&P 500, Gold and Oil futures all had set-ups today during the US cash open to the Euro close. Take a look below at what I saw. To learn more and join FibKingTrading CLICK HERE!
Pre Earnings move in Apple (Ticker Symbol: AAPL) and what to do post earnings.
By now you know that we love earnings season at FibKing Trading. In fact we have an entire chat room for earnings related trades whether it is pre-earnings or post earnings. To learn more about our membership CLICK HERE.
We like to look at various days before an earnings event and test them. In this example let's take a look at 3 days before earnings on AAPL.
What we're looking for:
The chart shows us data over the last two years. Of the last 8 earnings, 6 of them moved up 3 days prior to earnings for an average of $1.52. Only twice did the stock move down 3 days prior to earnings. We also look at the 10 day moving average and see that we are above this technical indicator. When the stock is above the 10 day EMA, it typically moves on average 6 bars or $4.07. So we see that this could have a bullish tone but we are looking at Implied Volatility as our main play. I ran the back test of buying a 40 delta call and over the last 2 years, this particular setup was 2 wins and 0 losses for a total of 126% return. What if we didn't use the 10 day EMA? The results were near the same as far as overall return goes but you had 4 wins and 4 losses. I'd rather cut any losses and play the winners!
Options were purchased for 2.87 on Friday, January 25 and sold on Tuesday, January 29 for 3.25 and 3.05. While the returns aren't huge, a win is still a win!
Want to know what we are doing post earnings? Join today!
It's the most wonderful time of the year! Yes Christmas just wrapped up last month and I'm not talking about that. I am talking about the gift that comes 4 times a year. EARNINGS SEASON! We are going to take a look at Netflix (Ticker Symbol: NFLX).
What's the chart say? To start, the last wave low to high shows we just completed to the 1.272. We can also see that the timing was complete when we hit the 1.272 level. Now we take the last swing high to low and we see we are currently at the golden ratio of 61.8. So a nice bounce off the low and where do we go from here? Ideally I like to wait for us to get above the 78.6 level ($284.28) but with the backtested data that I'm about to show, I went ahead and entered the trade.
Here are the last two years doing this trade. 8 trades and only 3 losses. A total profit of $2,445. But what if we could use other technicals to trim the losses? Would it help? What about at the key fibonacci levels? Should we wait to see if it could clear the 78.6 like I mentioned above? First let's see the opening trade 14 days before earnings. I purchased a $285 call for $11.00 each.
The next day...
So here we are above the 78.6 level the very next day! Here is where I would load up and try to take this to the next target, 127.2. Above, I mentioned what about another technical? Let's add the 50 day exponential moving average to the chart and let's only take the trade if NFLX is trading over the 50 day EMA.
So now over the last two years, NFLX has only been over the 50 day EMA when this trade takes place. No losses and a $1,685 winner! So of course I had to buy more. So now I own 285 and 300 calls.
We need target levels but let's also look at a tool that was made for members to show us stats regarding NFLX when it crosses above the 50 EMA. Let's take a look and I'll explain what it all means.
We have the 1.272 extension level that was hit the next day. Then it consolidated 3 days after that. We didn't hit any timing levels yet until we reached the next 1.618 level. That's all fine and dandy but what about the 50 EMA? What does this info tell us? Over the last 2 years when NFLX is over the 50 days EMA it usually last on average of 9.4%/$32.98/19 bars. So can we hold NFLX longer into earnings? Based on this information, I think it would certainly be ok.
The results are in
Today is Netflix announces earnings and profit has already been taken.
Thanks for reading and up next is Microsoft (Ticker symbol MSFT)
Next to Christmas, earnings season is the most wonderful time of the year. Unlike Christmas, earnings season comes more than once a year. It reminds me of that scene from Talladega Nights.
This earnings season has provided us yet with another opportunity to trade some of our favorite stocks including Microsoft ($MSFT), Netflix ($NFLX), Amazon ($AMZN) and Google ($GOOGL). I'm going to share with you a play I took on Nvidia ($NVDA). There are many other names we've taken this quarter and really, all year long and you'll see we do have our favorites but being able to back test these trades allows us to find gems that we may over look. So while we are not making a bet on earnings itself we are looking at how implied volatility over a period of time effects the option prices before an earnings event. Something we've also added has been post earnings plays. I'll show you a recent example of Advanced Micro Systems ($AMD) and how we can capitalize on moves after an earnings event.
Before we dive in, just look at this conversation in our chat with one of the traders. He sticks to six names and it's all he's traded this year. His IRA manager called and asked if he even needed them. His returns are killing the whopping 4-5% his Edward Jones guy is getting him. Talk about Wealth Management! Join the chat just to watch this guy!
While it is fresh on my mind let's take a look at a recent post earnings play on Advanced Micro Devices ($AMD). AMD beat earnings and had over a 10% jump after earnings. I post back test results on Twitter (@FibKingTrading) but you can check out the results by CLICKING HERE.
A few things this chart is showing me.
NVDA Pre Earnings
There are specific times that we like to take our pre-earnings trades. We have back tested several time periods and some work better than others and we have it narrowed down to certain stocks and what works best in part to our wonderful community of traders. One of the names we like is $NVDA and looking at an earnings run 21 days prior to earnings. I've shared the back tested data on Twitter and you can find it by CLICKING HERE. Beyond just that data we also need to look at the chart.
The chart and the particular tool I'm using (free to members) shows us a lot of details. In the last two years (based on the back testing data we used) the stock has moved up six times 21 days prior to earnings. Average move of around 5%. Only twice did it go down. Well the back testing results were anywhere from 6-2, 7-1 and 8-0 depending on which delta you bought. For this particular trade we took in 30 and 40 deltas and now we wait!
For a limited time I have discounted our membership to $597. You can CLICK HERE to join today and August 1, 2018 the price returns back to $1,497.
Before we take a look ahead, let's do a quick recap of last week. I posted the following in our chat (check out the time stamps). We were looking at completing a move barely higher on Monday and expecting a pull back. During the pull back, I personally did not get short any option positions (just futures) but I did see the pull back as a buying opportunity. I alerted call positions in COST, BA, ADSK and even TSLA for a short term play higher. We also took profit on WTW this week. Check out my last blog post anatomy-of-a-trade.html
Show me your fibs!
Knowing your Fibonacci levels and knowing which are support and resistance levels are key to your trading. I always start with the indices to find a direction in the market. Once I can figure out a direction (usually on Monday) I can plan my week accordingly and know how 1. I can balance my portfolio or 2. what trades I want to take depending on market conditions. Right now the market is only giving us an opportunity for shorter term trades. I've been finding several on smaller time frames meaning the trades are only lasting over night or 2-3 days max. Personally this isn't my style but we have to adapt to what the market gives us. If you're not a fan of day trading or you are a day trader, you need to approach the market something like this. If I could only make 1-2 trades this week, what are the best set-ups that are no brainers? Where would I put my capital to work for me for this 1 or 2 trades this week. I like to post usually on Monday afternoons the trade of the week. If i'm only given one shot or were allowed to only place one trade, what would it be. Stay away from the Twitter pros and news gurus and do your own analysis.
What's the plan?
I'm going to post several charts below starting with the Nasdaq and S&P 500 futures. Pay attention to the time frames on the charts (hint, this is the chart I use to enter the trade or plan to enter the trade) and the various number levels on the right to decide for yourself what you think are potential trades. For our members, you'll get a full video analysis of the weekly outlook later this evening. The link will be posted in our King-Chat and in the members blog section. We have a limited time to receive a free trial in our chat room. For details CLICK HERE. No credit card required.
Chart work is my artwork