I did an entire members blog post on the aerospace and defense sector and what I was looking at when it comes to the charts and multiple squeezes across the biggest names in the AeroSpace and Defense sector. The same set-up happened in the financial sector in January 2018 and again recently in Oil Stocks. Look at the squeezes when on XLE and the top 10 oil names inside. Notice how most all of them have already fired long. (New members receive this custom squeeze indicator)
When this is the case we like to look at those sectors ETF's and the top 10 holdings. You can choose to trade XLE, Oil Futures (we've been long since $65) or some of the top 10 names in XLE. Click to download our XLE Watchlist for Think or Swim. This has the top 10 names inside the ETF. The knowledge of our traders inside our community knows how to trade the ETF (I signaled XLE long calls) or to look at the individual names inside the ETF and which one has the best looking chart. A few names popped out and several of our traders including Devon took Valero Energy Corp (symbol:VLO). Let's take a look at the chart below.
Do you see an opportunity here?
What do you see when you are looking at this chart? We see an opportunity! Let's break it down a few charts at a time.
Plan the trade. Trade the plan.
From start to finish we have to plan our trade and trade our plan.
The chart setup is there so let's continue with out plan.
Here is another trader that has started scaling out who purchased these calls at $1.55 and has 1 runner left. That's a 200% return if you can't read it. Another oil name, this trader is up 100%. Remind me again of the gains you're getting with penny stocks? Great trade by everyone in the room. I love this group of traders and so will you!
**UPDATE April 16, 2018**
We have hit the target area on this chart. See below!
**UPDATE April 18, 2018**
VLO hit $108. We had a trader buy his options at $40 and sell for $200.
I want to throw in a quick look at NFLX before I tell you why you should join today. It's earnings season and we have had some great earnings plays in Q1. One trader was up $28k in that time. We've already jumped on Q2 earnings and it started off with Netflix. Some said to short it as it couldn't break $300. We didn't believe it because again, we saw an opportunity. In two days, Netflix went from $304 to $317. Most of us bought in on April 2. Look up the price on that day and only our members know why we bought when we did! If you missed that we bought more at $300. You do not want to miss out on this earnings season. The big names are in play and there's still time.
Why you should join today?
JOIN TODAY! Chat rooms are great for learning tactics. Having a chat room helped me with was the mental side of the game. Being able to talk to other traders whether as a whole or in private. When emotions get involved, we end up doing a lot of stupid things. Trading alongside Professionals everyday can help that. You’ll find people that you’ll begin to respect. You’ll see various techniques and can apply them to your trading style. You can emulate those that you like or share your style if you can make it easier for others to understand. I told our chat community yesterday that several new things are coming from a new platform to automated trading. Only those within our community will be able to get access to this first. We take care of each other in there. No egos, no one guru and we want everyone to succeed. Our motto is "TEAM WORK MAKES THE DREAM WORK". We’re going to have TONS of traders and a huuuggge, interactive group of smart traders…
AND WE WANT YOU!
Here’s what you get:
While Ruger $RGR may not be my first choice of weapon to buy (I prefer Glock and my conceal carry of choice is my Glock 27), I have traded the stock before at technical levels but this time it wasn't as much technicals when I traded it. Is this a wise choice to do? Probably not but I felt like getting my inner Axelrod on. You know the hit show series "Billions"? Were you mad when he shorted airline, hotel and shipping stocks at 9/11? Then the next plane hit and he doubled down? *SPOILER* What about season 3 when he received the alert of an earthquake and it hurt his funds positions because of a Tsunami? Sometimes these catastrophes can cause situations in the market place that we can predict as well. Same case is with Ruger. What happens whenever innocent Americans are targeted with mass shootings? Gun stocks always go up. Without getting political, gun control always becomes a topic and seems like those who are pro-gun go out and stock up in supplies and guns. Don't believe me? Chart doesn't lie. I'm looking at the Orlando shooting, Las Vegas shooting and the Florida shooting.
Orlando the price before the incident closed at $57.41. The high after the incident $63.57
Las Vegas price before the incident closed at $51.17. The high after the incident $55.13.
Florida School shooting price before the incident closed at $48.75. The high after the incident $50.25.
So some short term trades here but I want to look at a bigger picture and not trade off of news related events like this. Can we get a larger move? Let's dive into the technicals!
My latest position was after Florida incident and it also had some technicals that I considered. Let's take a look below.
We hit a 100 Fibonacci level and the red arrow shows you the day after the shooting. Now why did RGR go up but stop? That last swing high to low is a half way back (HWB) move as shown below.
So sure, after the event we hit a R level. Look at other clues here. What do you notice? We hit the 100% level and bounced back to the 50%, failed back to the 100% level and back to the 50. What happens next? A case of symmetry! We fail that 50% level and create a new low to a new 100% level. Beauty. Look at those two RED daily candles followed by a GREEN candle. Is this a reversal off the 100%? Does it do a HWB move higher? If you add additional Fibonacci levels to the previous wave you'll notice they create a cluster at the new 100% level. This area should be a good area of support and looking for a longer term buy opportunity here.
Plan the trade, trade the plan
Maybe you've heard that term before. If you haven't check this out. Contrary to popular belief this isn't something someone at some educational firm says and owns the saying to and says I can't re-create or be silenced about. It's information that a quick Google search can your friend in learning more! As we bounced off this new low at $43, we see the daily candle is green and from there we are looking to take out the previous days high before entering. You can see the red arrow that shows the candle where we entered this position on March 2, 2018.
Planning the trade and trading the plan doesn't end there. What are the targets? We can see below the targets from taking the last two swing highs and running Fibonacci levels. Entry around $46.20 and our first conservative target would be the HWB move we've been seeing around $47.25 and $49.33 depending on which wave you look at. I want to focus on the Fibonacci Clusters around $49.33 - $50.82. That's my initial target. As you can see we hit this area. We took profits here but in a swing account I continued to hold.
Swing for the fence
In our chat, we took profits around this area however I continued to hold in another account and as of this post, I continue to hold. I will sell end of the day today. Let's look at what played out and one of my new favorite price action patterns that I'm looking at. The bull flat pattern below has played out. What makes this a unique pattern and how does it work? I'll discuss below but let's look at the chart.
You can see our entry level above $46.20. We hit the fib clusters mentioned and had some down to sideways action setting up this bull flag. We stayed inside the tight range and broke out. How does a bull flag work? You have the initial advance of price that we found off of Fibonacci levels. We had the flag form and then we broke out higher. So to find a target using this pattern you take the first initial advance low to high and draw a trend line. Then you duplicate it and go from the lowest point before the break and start it there. You can see these YELLOW lines on the chart above and how we have hit targets based on this pattern.
Now if you know me and how I trade you should know that I'm not using a flat pole I drew on a chart as an exit. I'm using Fibonacci! Remember those levels from the last swing high to low. The purple ones on a few charts ago? If we remove those and use our cheat codes we know we also have levels for additional upside targets. Let's take a look below.
Here you can see the daily candle slow at the first target after the bull flag at $53.81. Then it stop twice at the next level at $55.41. Then last and at the top of our bull flag pole we hit the $56.75. So a $10 point over 1 month and you can see again, at the time of this post we are currently down after hitting the upper level. Do I take profits here or do I look to hit the larger wave high to low target at $59? I may close out today or continue to hold as I own April monthly options.
I spent $350 a contract ($1,050) of risk and currently at a profit of $2,052. I've almost doubled my money and if I had sold yesterday I would have. Great trade hitting first targets and taking profit or waiting for the continuation and hitting these upside targets.
So sure a sketchy play off some horrendous acts in the US but if we throw in technicals and plan our trade and trade the plan you can do great things when trading options. Don't trade off news but learn to analyze a chart and what is it telling you? If you want to sign up for our community chat room and get these alerts you need to JOIN NOW!