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
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:
Inside the chat!
Last week we looked at ADBE as our trade of the week. We had a target of $240 and we hit $243.34 to be exact! So what made this trade work so well? Let's just check out the charts and let them tell their story!
My favorite trade set-up is the cheat code set-up. Add the squeeze to this and with a stock near the all time high, the probability of the trade working gets higher and higher. Not sure what we mean by all this? Join our community today and watch and learn beside professionals.
The trade of the week is Adobe (ticker symbol: ADBE). Some of the traders entered on Friday and some yesterday. Why am I just posting this now? Well I cleared my portfolio last week and I usually don't trade options on Monday to get a clear market direction. I used a custom scan to find plays that are in a bullish squeeze and within 10% of their all time high. Here were the results:
What made ADBE so enticing? The chart of course. Looking at the chart below. Some entered the trade off the 8EMA on Friday. Others entered after the 78.6 broke on Monday. The great thing about a community of traders is that everyone method is a little different but the charts are all the same. What works for you? That's something you can decide and you gain insight from several traders inside our chat. Let's take a look at the chart.
You can see we are above the moving averages and fibonacci lines. We have a target of $235-$240 and looking a directional calls or a put credit spread. I entered into a put credit spread already and looking to buy directional calls to go with it. To see exactly what I'm looking for, JOIN TODAY and receive our Signals room along with our King-Chat and Earnings rooms.
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Today at the open, I was watching the market internals and price action patterns and wanted to see if we could scalp a quick 5 points on the S&P 500 back to yesterday's low. From there I wanted to see rejection and possibly lower. Hindsight is always 20/20 and I completely goofed on this trade and it cost me $1,800 in about 25 minutes! Let's take a look at what I saw and what I did wrong and if I could turn it around.
This is what the chart looked like at the time. We hit a low point and looked to reverse. If I were to follow my rules, would it have provided me an opportunity to scalp this back to yesterday's low? That was the idea and let me show you what needs to happen and what I ignored.
What happened next?
After entering improperly the market reversed and I need to look at risk/reward and whether or not the trade makes sense and if my stops are too tight or too wide. In this trade, the reward potential was around $300. If I put my stop below the last pivot, I could've had a loss of around $500. So a decent risk/reward. However, I used a wide stop that but me at a risk of around $600. I entered into a 3 lot position and got smoked!
Ignoring the obvious
After the tight stop area was hit, we consolidated, went lower, retested over that spot and fell again. I completely ignored what was going on here, hoping to get back to break-even or eventually hit my target. Once my stop was hit and I took an $1800 loss! I could've cried and curled up into a ball but instead, I looked for another opportunity to turn things around. Not revenge trade but to follow the rules when the next setup took place. It wasn't too long after that and at the end of the day I'm up $400 which is typically my daily goal to pay my bills.
What was the play?
Our community of traders, several were short the SPY, QQQ or futures, whatever they trade. The set-up was obvious. Remember that 78.6 level earlier? That was clue #1 that we were headed to the cheat code at 127.2. I even had that as support level in the chat. I quickly entered into short positions in the /ESM8 and /NQM8 to recover and we hit the target at $2592. The bottom tick was actually $2591.25. My bad for missing it by 3 ticks. I could have looked for another reversal opportunity higher after this but being up my daily goal to pay the bills, I called it a day. Of course hindsight again shows that the reversal was there off that level and we could've played both ways! Look below where we hit our target lower after failing the 78.6 and reversed. This play has been money on futures lately but I was too blind to see the bigger picture this morning and it almost cost me! Hopefully this helps in not what to do when futures trading! Any questions please leave your comment below.
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The trade of the week this week just reported earnings and here are a few highlights:
The stock is currently down $9.05 (6.5%) and was down another $6 at one point today. So what gives? Who cares, let's look at empirical evidence over the last year to plan our trade and trade our plan.
What stock is this?
Given the information above, which would you rather trade on? Stock performance after earnings report or data that is on the chart? The stock in question is Shopify (ticker symbol $SHOP). What I'm looking for in SHOP is a play to collect premium from the stock while having a bullish sentiment. The best play for this is a put credit spread. This particular trade over the last year has had 4 wins and 0 losses after earnings. Had a total return of $3665 (60%). To learn more about this trade you need to join our community today. CLICK HERE TO JOIN NOW. If you follow me and DM me on Twitter or Instagram, I'll knock of an additional $100!