I'm often asked how do you find trades and when you do what do you look for? There's a couple ways to answer this question but the most common answer I give is "It depends". I know that's a generic answer but the beauty of trading is there are several different ways we can trade. Some of us like swing trading, some are day traders, some like leaps, some like earnings plays, some only trade ETFs so the most important thing is to figure out what you like and ask yourself "What kind of trader am I?"
From the people in our community I would say most would fall under the category "swing trader". Most like to hold a position 3-7 days. So if I wanted to find a stock that I could trade and it last 3-7 days how do I go about doing so? There's a couple ways so let's break it down.
COST is within the 10% of the all time high. Does it have a pattern?
We had a wedge forming and looking for a breakout. What about the squeeze? Can we see if it is bearish or bullish and predict the breakout?
We are in a squeeze but are we bullish? We can say we are bullish just because we broke out of a wedge but look at the momentum histograms. All indicate we are bullish? Let's take a closer look and let's look at the chart with candles that match the squeeze histogram.
Now do you see the momentum shift from the squeeze? This indicates the bullishness. Now I see all this but what about the fibs? Show me your fibs!
Before using the squeeze I would enter at any of the candles that were above the 78.6% level ($194.72). I probably would not have enter on a red candle but a close above would be valid to get this to what we call in our room "the cheat code". Our members have unlocked the cheat codes! With the squeeze in play, now I can wait for a better entry looking at the momentum histogram and understanding how the squeeze works. If you notice, i'm not using the wedge breakout as my entry. It's great to have this pattern but let's add other technicals to get the most precise entry we can. So now we have an entry point. What about short term targets? Can we get to our main target of $206?
As you can see after our entry, the very next day we hit a short term target. We still have a higher target at $206 but I did take some profit today. You can see the 193 were as high as $10.55 a contract and the 203s where as high as $4.13 a contract.
The squeeze has still yet to fire and we still have room higher and plenty of time using June monthly options. A good more in a day so far but hopefully this gives you a better understanding of how I look for a trade. To join our community you have two options:
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