Technically Speaking: Trading the Trend | James Boyd | 1-30-20

Technically Speaking: Trading the Trend | James Boyd | 1-30-20

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hello and welcome to technically
speaking on trading the trend weeks to months my name is James Boyd today’s
date January 30th we welcome Helen Jeff Mike CW and many others or you can also
if you’d like to stand contact with some of the things we discussed from an
educational standpoint you can also find us on twitter at jay boyd underscore TDA
as well or just type in James Boyd if you’re not on that make sure that you
are let’s make sure as we go through some of these topics stands we talked
about stocks and options remember that options are not suitable for all
investors special risk inherited trading options please make sure that you’ve
read and have the current copy of the characteristics and risk of standardized
options and also remember that in order to demonstrate the function of the
platform we will be using actual symbols as always remember that TD Ameritrade
does not make a new recommendation determine suitability of any security or
strategies that is up to you decide what you want to invest in and also remember
that when we talk about investing and if we talk about options here are the
option Greeks today what we’re gonna be covering are the following well take a
look at the index update today’s been kind of a slightly down day kind of a
chop we’re going to take a look at kind of where that range is and what levels
we could be watching number two we’re gonna really be talking about post
earnings we had Microsoft Facebook Verizon etc let’s talk about some of
those the good ones and the bad ones so far then we’re going to talk about third
is identifying accents now be honest with me and type in the chat how many of
you feel like you need some help with identifying accents how many of you
think you need help identifying short-term trend change how many of you
also maybe think you might need it maybe some help and have some questions on
protection okay and what does that really mean how does it play itself out
we’ll also talk about new position examples as well our learning outcome
here today I haven’t written down identifying potential exits and entry of
pretension that’s we’re going to focus on now think of these agenda items as
I could actually understand the entry of the protection what your options are
now what I’m going to do is let’s go ahead here and let’s take a look at the
SPX and I got the SPX here let’s pull it up and these are the levels that we have
drawn so from a day-to-day basis we’re not probably going to see a change of
levels from day to day it’s probably just not gonna happen okay there’s no
change from yesterday no but the difference is we see this we did have a
low okay this week question and I posted on Twitter last night about 9 o’clock my
time I questioned whether this was a lower high maybe what was old support is
this 10 day exponential moving average now becoming the resistance okay just
saying that because I’m planning to a Paris with Mike fair border to see the
French Open so I’m working on my French I’m dead serious now if you take a look
at this what you’re going to notice is lower high this down here is the lower
low and now what you’re going to notice is we’re not too far off that prior low
so if the market were to take out that previous low that I mark let’s label
that as number one that would mean it’s a lower low price action needs to stay
up above where we are to even hold to consolidate okay horizontal support
levels we’ve said 232 19 no change there and we have a level below us and the
marker above us no change there when we do take a look at the futures now we’re
not going to trade the futures today but if we take a look at let’s say where
this is in terms of a shorter term chart this range we’ve been sitting in I’m
gonna go to the D not for the daily chart let’s look at let’s say the
15-minute chart let me tell you what I kind of mean by this little sideways
consolidation since yesterday no since this morning we’ve been seeing that this
we’ve been after the sell-off last night we’ve kind of been an arrangement area
32:43 acting as support and really down over time you’re gonna see that kind of
over well throughout the day the market day kind of been seeing lower highs on
the index again so pressure on that support level okay
so shorter-term you’re gonna see that if we start taking out thirty to forty
three at the last hours a day just that just tells us there’s more sellers
coming in which means the price action could be dropping down to its next
potential support level now Nasdaq we’d like to take a look at the Nasdaq really
to get a sense of our investors fleeing are they fleeing those higher momentum
names well the Nasdaq didn’t get down below
the ten – the Nasdaq is actually did close above the ten day moving average
yesterday but it closed let me kind of highlight that it faded off the high but
it did close above the ten today what we’re gonna see is this is the second
day here’s day one here’s day two if we close here this
would be the second day we’ve closed down below the ten it’s not really
crashing down but again if we start losing momentum on the Nasdaq that could
mean other names could be getting sold off like semiconductor stocks so we need
to really be watching that okay now let’s take a quick gander we also want
to keep in mind that bonds really give us a nice way to kind of see the macro
what is going on and if you take a look at ten year note and we’re looking at
the interest rate of the ten-year maturity
you’re still noticing that the yield one point five three five or so one point
five three eight currently up top what you’re going to notice is even though
the market is kind of holding a support we’re not really seeing yields where
they’re stopping at a support level you’re still continuing to see this
bleed to the downside it’s not necessarily great okay fed to not say
that they’re gonna cut in the immediate future but nevertheless we’re seeing
rates continuing to drop and as those rates drop areas like utilities are
continuing to get a bid up as the interest rates drop so there’s two
options here hey you could actually just buy the 10-year note
okay try to get the yield or two you can actually just buy utility stock which
probably has a percent higher than the tenure know some investors as we’ll see
in a moment they’re saying look forget the ten-year notes some investors and
there are obviously there’s been a real demand for utility stocks and we’ll see
that in just a moment okay now the last area that I really want to take a look
at is commodities same thing we’ve mentioned this day after date doctor
copper still getting slammed to the downside and when we also take a look at
let’s say gold here you’re gonna see gold is getting a little bounce off that
temporary moving average so in the backdrop what we’re kind of seeing is
equity markets not really crashing to the downside not yet but what we are
seeing is interest rates falling copper okay we call it the PhD in economics and
what you’ll really notice is we are seeing gold push to the upside sir oh
there are some warning signals here that we’re kind of seeing some darker clouds
in the backdrop now that could mean that some of our stocks might not be able to
make a higher I some of the stocks might pressure support okay so let’s look
we’re going to keep an eye on that now are there any questions on the indexes I
think so far what we would say is the indexes they’ve held up pretty well so
far but we need to keep an eye on those support levels those support levels
break all of a sudden that selling momentum could get more pressure now I
want to go to a for example let’s talk about agenda item number two okay so
first off when we talk about the index update I think we covered that if you
have any questions on that go ahead and type those in and let’s see if we can’t
address those questions but let’s going to talk about three stocks here in terms
of let’s kind of hit this right now in terms of the post earnings so I’m going
to start with one of them first off is Microsoft not going to get into it fully
on talked about more not all of them equally I should say but you’re gonna
see that Microsoft the portfolio was long
stocke with a protective put microsoft push to the upside in a continuance of
trend no major change there again when you go back to kind of looking at
Microsoft compared to its peers they’re doing a really good job as far as
differentiation and also kind of continuing to push themselves into the
cloud done a really good job when we go back to the monitor tab let’s take a
look at the position it’s gonna show you what this looks like so here it is we
have a hundred shares of stock check hundred Delta that’s our directional
risk we have plus one yes we have that bought put yes the ball put is negative
Delta it’s negative Delta because when you buy a put by itself that’s a bearish
position but when you put that bearish put with stock it’s protecting the stock
and we have the protection at 165 that 165 you could think of it like a stop
some similarities but some differences that’s really saying we want to have the
right to sell the stock at 165 now if the stock goes up that value of the put
continues to decline and what you’re now going to see here today the stock is up
325 that’s the good side and now what you’re gonna see is the pullet has lost
some value 156 and what we’re really making is net the difference now what is
it that an investor really wants they want the stock to go up not just a
little bit you want the stock to go up a lot okay the higher up it goes the more
profit you have on the stock and if that happens then the put gets closer and
closer to zero and we’re really making the net difference some profit on the
Microsoft year Microsoft was up higher here earlier today now when we also
bring up the second one which is Facebook now Facebook was interesting
because the position we took yesterday was and let’s show that position sold
the put on that that was January 29th sold to put for three nine
five and we’ve talked about yesterday how the implied volatility was pretty
high yesterday we kind of ran the example that if Facebook were to go down
$5 in the implied volatility were to go down 5% what would happen well when we
really take a look at this today it’s horrible it’s $365 I’ve lost all
confidence that can ever become a good investor I mean is that really the
takeaway come on now here’s the nice thing about the
implied volatility even though the stock has gotten well let’s just say a little
carnage if you will down about 13 dollars that implied volatility offsets
some of that movement okay so what you’re going to see is if we
kind of said look James I don’t like Facebook I want to get on Facebook well
if we did that from yesterday today you’re gonna see that it’s down about
$380 notice that when we sold it at 395 if we wanted to exit today we’d have to
pay a higher price for the punt because the stock has gone down and so that is
actually down 380 from yesterday are there any questions on that now the one
question I have for you is are we at the maximum loss on that trade remember what
was the maximum loss what was the maximum loss so on this portfolio and I
like to kind of see the answer to that question I’ll wait for it what is the
maximum loss and I think sometimes this is when we kind of sometimes forget what
was it that we were going to try to potentially lose when we taught it when
we supped this portfolio 175,000 we said the maximum loss per position was about
1,300 dollars per trade and we said it was three quarters one percent was what
we were going to risk so we’re not anywhere near the $1300 we’re down 380
now this stock for example were we have 22 days to expiration left 22 days right
there sold the to fit team and if we got about $4 there what
you’re gonna notice is the break-even at expiration so two fifteen minus four is
a break-even of two eleven the stock currently sitting at 210 what we really
need the stock to do is just stop going down level out if we go fast forward
twenty two days and the stock is now at let’s say 210 today’s expiration day
we’d be down about a dollar a hundred dollars okay so why do we sell the put
versus buying the shares we but we sold the foot because we wanted to have less
directional risk the Delta has increased and that’s saying James the chances of
the stock being below the strike price are higher now the stock just went down
twelve dollars so as the Delta gets higher that per dollar loss as the stock
drops dollar becomes bigger and bigger we can see that we are down some it’s
not at maximum loss the one thing you will notice is the stock is pancaked
really down to its fifty period moving average if we put that on you’d see that
but it is below let’s say the 30 and the stock cents this morning has been bid
back up it is interesting to note their gross profit margins went from 46 to 42
not like that’s not enough anyway and also they did announce their buyback
program was 9 billion 10 billion who’s counting right 9 or 10 billion more than
what they were saying the obvious is not buying all of those shares at a time but
Facebook with their share repurchase they’re buying back about three three to
four percent of their outstanding shares now if you’re the CFO the comptroller
you might try to take advantage of a down day to buy back some of your own
shares to boost your earnings per share not saying they’re doing that just
throwing that out there all right so we’re going to continue to watch that
we’re pretty much now a dollar below the break-even but that one was a bad trade
so far hasn’t closed there but so far that’s the bad Trey
you’re gonna see that that 773 dollars is the bulk of what this portfolio is
down here today like 90% of the down movement in the portfolio today comes
back from good old Facebook so far all right so let’s kind of go back let’s
kind of take a look at so we talked about two out of three and I’m gonna
keep it to two out of three Verizon didn’t move a whole lot it’s
still holding there we talked about the index update yes post earnings we talked
about that we talked about Microsoft and Facebook no major changes there down on
Facebook we say stated that let’s now move into identifying exits and
protection okay now what I’m gonna do here is I have a couple stocks that I
have brought up and I would like to take a look at a couple the stocks that I’m
gonna brilli bring up I think these are going to be stocks that you’re probably
maybe well you probably look at them quite a bit and we’re gonna evaluate
identifying exits so I’m gonna ask you a direct question the direct question is
as follows how do you identify short-term trend change how do you do it
is it a moving average is it drawing a line okay answer that for me how do you
identify short-term trend change and/or X’s now what I’m going to do here is
let’s bring up a couple stocks and one of the stocks that I really want to
bring up is I’m going to bring up a stock if you don’t mind I’m gonna go
back to that stock of McDonald’s now what I’m going to do really with
McDonald’s I’m gonna just clear this chart I’m gonna completely strip it and
I want to see if I have on here yeah there it is and I’m gonna put on there
the whole moving averages now last week we talked about this we gave us kind of
some practice here and what we’re using and you can see up top it says the whole
moving average ten okay whole moving average and we actually looked at this
and you’re gonna see the whole moving average 20 so those are the settings now
what you’re going to know is as we zoom in on this let me zoom in
we’re gonna really evaluate are we seeing cell signals right now and I want
to kind of go back to where we were about right here now when I say really
right here I want to kind of really highlight and I’m going to remember the
blue line that is your 10 period halt moving average color-coded that the 20
that is the green line okay so I’m just trying to show you the difference
between the 10 period and the 20 period okay what we’re looking for is if we
want it being a bullish trade we want to see the price action above not only the
blue line but also above the green line okay now what you’re going to notice is
when those lines so it’s kind of go forward to where we are about right
there when both of those lines become red what you will notice is that’s kind
of saying it’s not only a warning sign but it could be a confirmation to make
sure a do you have a stop set – are you planning on exiting on that day or near
there 3 are you entering protection now on a lot of the stocks that I’ve seen
lately especially coming into earnings we’ve been seeing this behavior the we
had an upward trend couple days prior to earnings all of a sudden we start to see
the red lines the red lines what you’ll notice is 2 to 3 days before earnings
why is that happening well maybe some some investors are deciding to sell out
of the stock ahead of earnings now could they be doing that shirt maybe they
wrote the stock from down here and they want to profit take and they want to be
in something where it might not have gap risk okay now let me kind of read some
of the questions comments ok now Cynthia said so when I asked you
how do you identify trend change Cynthia Xu says the change in the whole
moving average okay so the change in the whole moving average could have been
right on that day the red candle or right on that
green candle when it was down number two thing that Alfred said breaking
short-term support or the whole moving average okay
so let me kind of combine these two so you’re saying if we were to draw this
line and let’s just draw good old support here if we were gonna draw
support and let’s just say for example that my name is Alfred okay and Alfred
is saying he’s using the whole moving average looking for those both those
lines to be red and breaking support so if I draw a diagonal line up think of
that as the momentum train line you might say James on that day if I draw a
line down and say how far did we go down below that line you’re going to see that
we are about 1.3 5% below that line so if Alfred said James I did see the
warning I did see the confirmation where both lines turn red I had my line drawn
of support and I set the stop two to three percent below that line that day
which would have been on the day of the 27th that came really close to getting
stopped out okay now Chuck actually says to the only change at the end of they no
they don’t they change intraday okay Francisco I’ll address that so if we
actually take a look at that what you’re gonna see is that if you said if Alfred
mentioned as the stock actually goes up okay he’s looking for the the moving
average line to turn red they did identify the support alpha it’s actually
setting a stop okay that stopped on that day got very very close but nevertheless
if someone said James I’m gonna actually sell based upon both of those lines
being red that would actually been the days right in those two or three days
now here’s the most important piece of this if you get a cell signal okay a
potential cell signal where both lines read answer this question how quickly
can you get reentry signals sometimes how quickly can you get reentry signals
sometimes answer that question for me if you get like say for example like both
lines turn read how quickly can you get reentry’s is it like you have to wait
typically 2 to 3 weeks a couple days it might be just a couple days so if you
actually see a both lines turn read and then a couple of days later let’s just
say the random number of four days later that all of a sudden both lines go up
again or turning up price action buck back about both of those lines that’s
not unusual so you have to just understand that what you’re trying to do
is when you get both lines turning red you don’t know how long those lines are
gonna be read for but you need to be prepared that if those lines go back up
you could have a potential reentry signal okay now wouldn’t it be nice to
know ahead of time how long the pullback was gonna be nobody knows that right
okay all right so what you’re gonna see is I’m Mickey now if someone chose
protection what you’re gonna notice in this case is they might still be
protected as they’re waiting to kind of see can the stocks stay up above okay
that support level or get back above it and can we get a couple days past
earnings to make sure that we’re past earnings and we’re in that upward trend
okay so I’m Mickey D’s some of you mentioned James I’m gonna sell based
upon the two lines that’s what you’re gonna follow realize that if you take
that route you need to understand those reentry signals might come in just days
after that be prepared for that if you said James I’m using those two lines but
also incorporating support fantastic kind of using that additional trendline
that wouldn’t have probably stopped you out you’re still in the trend but you
had a risk of holding the stock over earnings now remember if the stock
is above both moving averages okay that is telling you you’re probably in your
classic you’re above your 30 period moving average you’re above your 10 day
exponential moving average you have a trend in momentum now let me bring up
for example another stock I’m gonna go back to a stock called work day now
we’ve talked about this stock quite a bit this is not the first time we’ve
actually kind of touched on it okay please tell me you’ve actually remember
us talking about it so first off on a stock like workday
what I’m going to show you is here is when you look at a stock like workday
and I’ll show on our position the stock had a resistance level right about 180
and if someone took an entry signal let’s say they took an entry let’s say
maybe right in there let’s say January 13th right on that day right there stock
it above the resistance both of those lines were up we are above the we had a
blue and a green line showing momentum and a trend you’re gonna fast forward
about two days or so that blue line then turn red Singh momentum was kind of
pulling back a little bit remember we called that warning signal okay
warning what you’re going to notice is that Green Line it did not turn red now
let’s go for it I don’t know what it let’s see what it exactly did so if we
go forward what you’re gonna notice is that 10 P removing average it is red and
now what you’re going to notice if we fast forward a couple days that price
action we’re gonna see that the we went from blue to red
that’s our 10 period moving average and that 20-period moving average it never
went red so what you’re gonna see on this chart is it is still showing an
upward trend and it’s still kind of showing that so it is still showing that
now and we’re seeing that both of those lines they are blue and green haven’t
seen a sell signal based upon just both lines turning red has in turn red and
sometimes important piece of this is being patient okay to letting that trend
consolidate sometimes and establish a new
level support so if we’re talk about potential exit signals based on the
moving average lines we did not see it if we said my name is Bob and Bob
includes looking at not only the lines but the support levels well we might
draw that support level and say look we see the support level right around about
let’s say 183 or so and we might be saying look we’re looking for both of
those lines to turn red yes but also for the breach of the support level okay yep
can’t I already have that okay all right so here’s the deal now Cynthia you asked about the the
secondary alcohol let me know which stock we were referred to on that so
what we’re seeing is on stocks I’m kind of bringing up some stocks that kind of
consolidated these are ones that did not show sell signals at least on work day
I’m talking about now let’s go to bring up a stock and let’s kind of go back so
first off I want you to have a starting point number one you might be saying
James I am gonna use the whole moving average that when both of those lines
turn red that could be just a I could view that
as I could sell that’s a potential sell signal right that does not imply we
don’t know how long the stock is going to go down fall or consolidate and you
need to be prepared to that stock and maybe a couple days might give a
potential reentry number two if you said James I want to see the moving averages
those lines turn both red yes but as Alfred mentioned you might want to
incorporate support and when the both of those lines turned red that you have
identified the support level and you’ve also made that stop you’ve set that and
you make sure it’s there okay so here’s the deal
I think exits really are not that bad it’s just having what is your plan and
sometimes when stocks go down there’s no real plan so we talked about two plans
one based off just using the moving averages by themselves the second plane
was using moving averages in context of a support
trendline and they’re just having to stop underneath that diagonal line okay
now what I’m going to do is let’s kind of go back to some of these other stocks
and let’s kind of bring up so do you have any questions on exit signals we
talked about two main ones okay now what I’m going to do is I’m going to talk
about the new position examples we’re going to look at the number of stocks
we’re going to look and see are there some stocks that have some trends let’s
evaluate together now one of the stocks that today announced earnings speaking
of red lines and also I’m going to use this in context of what we just talked
about so here is a company called Eli Lilly and so first off when we draw
support the question might be well where do we start it from I don’t know where
to set this this stop because I don’t know where to draw the trend line
well let’s gonna start with where we are now so if I draw the trimmer and I just
kind of start from where we are now and I try to Nick some of these bottoms I’m
going right to left and my goal is to Nick some of these bottoms okay so what
you’ll notice is we started on the right-hand side and we just use a
trendline and our goal was to try to come as close as we could to some of
these lows and what you’ll notice is he or she that touches the most number of
candles ding-ding-ding-ding-ding that’s probably
how most investors see the support tray line how on earth could you trade the
trend if you couldn’t see where the trend line was no wonder people don’t
get in sometimes they can’t see the trend line it’s not that they can’t see
it it just are they comfortable with how they draw the line so we’re drawing the
support we could go from the left to the right or the right to the left the
answer is it doesn’t matter we can come up with the same line whatever you’re
comfortable with now if we take a look at this what you’re gonna see today and
let’s show this let’s identify so we see an upward trend number two we actually
see the the line was read and now what you’re
gonna see is that line has really turned blue now member that’s telling us that
we’re kind of going I like to think about this like a V we’re pulling back
okay pulling back and we’re looking for the lowest point in the V well what is
the lowest point in the V well so far this day right there that’s the lowest
point in the pullback so as I kind of put an arrow right on that some
investors might call that that is the low day and that low day technically
it’s a well of the color it’s a green candle nevertheless some investors might
use that day as the low day if the price of the stock gets above that price level
closes above that either or they might say look I have an example of close
above the high of the low day so what you’re now seeing is the current price
action is above the high of that day so member think about like a balance where
the stock pulls back okay and then starts to bounce and then come up and
what we’re looking for is can the place close above the high of that lowest down
day that lowest down day could be a red candle or a green candle this
technically is a red candle because you still closed lower than the previous day
okay it’s green because it’s saying it closed higher than where we open okay
now if we take a look at this this company had earnings here today we’re
gonna right-click on this chart go down to where it says buy custom gonna set it
Wis top and just like alfred was talking about in terms of setting a stop okay
now historically we really have talked about buying puts as protection okay and
i’m going to show you for example both so what you’re going to notice is that
whore is that diagonal trendline is right around 130 789 less
whoops less 1:37 let’s go back 130 789 yes okay there we go last two to three
percent that’s going to give us a stop at about 135 13 if we change that stop
day GTC there it is right there there’s the entry there’s the stop that’s saying
if the stock goes of that price or less sell the stock trade risk if we look at
that if we did a hundred shares it would be about seven dollars and fifty cents
that’s if we just did a hundred shares okay so the trade risk if the stock goes
down to that and stops us out near that 135 price about seven dollars and fifty
cents now we might say jeez based upon this company having earnings today could
we maybe look to buy output especially if the company just announced earnings
where does the implied volatility tend to go the implied volatility hasn’t
dropped massively it’s still about 26 but if we go back and say James upon
initial entry could we maybe look to buy a put and we’re just checking the prices
here we’re looking at the column heading called return on risk and you’re gonna
see that if we were to do that I’ll just show these we might go out 20 30 40 days
something out of the money meaning below the current price we might look at the
140 once 140 is there 139 s all of those are showing below 2% if we’re picking
the deltas that are in that 30 to 40 range okay but for this example I’m
gonna show the the example buying the stock setting the stop and go confirm
and send I remember that stop is saying if we get to that price or lower sell it
at the market price which could be lower transaction fee zero if we go ahead and
actually send that order there we go on Eli Lilly now what I want to do is I
want to kind of take a look at a couple Aqsa kind of want to show you maybe five
or eight stocks and let’s kind of maybe look at a couple examples so one of the
stocks we actually saw here today that was pushing to the upside a stock that
we don’t typically talk about but we thought about it when we’ve thought
about gold you actually take a look at newmont mining kind of showing an
example of getting above staying in the upward trend getting above the area of
resistance and a lower price taller stock about $45 back to chart off that’s
what the trend is on Newmont so Newmont again kind of trailing that path that
we’ve actually seen in gold lately if we also take a look at let’s say a stock
and I mention these on Tuesday actually is Monday but if I look at let’s say a
stock like ice okay ice the internet’ll condo exchange or CME what you’re gonna
really notice on both of these exchange stocks this I should say ice is the CME
Group okay as well you’re gonna see that kind of this is kind of more your
classic cup grinding back to the upside bullish engulfing today I’m CME and
closing if we were to close here closing above the high of the most recent load a
and our example is when we say load a we really look at the lowest most recent
red candle okay now other ones we actually saw here today and I mean this
is gonna be a little variation when we look at let us say a stock like
Hershey’s not everything in our portfolio is gonna have the same beta
some are gonna have higher beta so we’re gonna have lower betas we did see her
she’s today a big move up post the earnings the reason why I bring up a
stock like her she’s a staple stock is we did also see the explosion of
Mondelez did I say that right Monday lays my clothes tell me if I’m close so
Mondelez Hershey’s hsy the reason why we’re bringing this up is there has been
a flight if you want to call it that to some of these staple names Coke Pepsi
set cetera Costco’s and the utility stocks I just want to
give you a quick visual we know that knee has gone up okay
we know that knee is gone up we’ve talked about that but I want to kind of
show you some of these other stocks that are in those utility spaces that I think
have been some of the strongest moves I’ve ever seen in utility stocks and to
me again that’s really more about investors maybe a could be leaving some
of the higher beta names running to lower beta that pay yield but it’s also
from the standpoint is as the tenure interest rate goes lower they’re saying
look I don’t want to make make less on the interest rate give me something that
might be what we call a bond surrogate and that is something that kind of has
some similar interest rates but also maybe has more potential upside the risk
is you buy the utility stocks they can go down okay so these stocks we would
take a look at let’s say other ones like a southern okay huge moves on these
stocks I think when you take a look at some of these stocks you know it’s not
just been a slow move into these areas this has probably not been someone’s
neighbor or two neighbors or three neighbors get in this is institutional
money plowing into this space okay not saying
your neighbors can’t buy one hundred two hundred thousand shares but of this
magnitude with this ferocity of a trend kind of probably more reeks of
institutional money now when we also bring up let’s say a stock and I’m going
to go back to a name that we’re gonna bring up so one of them we want to bring
up is and I’m going to go back to that stock of nem okay now nem does have
earnings coming up and that earnings is coming up on February 20th now this is a
stock that would be labeled or classified in basic materials I can’t
tell you the last time that this portfolio has bought a base material
stock it must have been years ago okay that I can remember now when you take a
look at this stock it’s gonna be correlated so
two gold prices but it also is going to be correlated really to what the stock
market does this is not an ETF that’s tracking or trying to track the gold
price this is a gold company that’s tied to the sector base materials that’s tied
to the market so there’s both risk we have gold risk underlying price risk and
we also have risk of where that stock market goes if we take a look at this
and i zoom in here what we’re gonna do is we’re gonna kind of go back to
drawing that diagonal line again okay and I want you to get very comfortable
with drawing the diagonal line now if you said James I don’t see it the way
that you do I don’t see it well I want you to kind of think about when that
stock pulls back pulls back pulls back imagine you had a little fat marker in
your hand and I just told you just draw it just draw a line every time you see a
pullback okay let’s say we identified for step two we’re going to go from
right to left or left to right it doesn’t matter now
because all we’re now going to do is play the game of dot 2.2 dot or line to
line the line and that’s really going to give us the angle of support and if we
carry for this angle of support well you’ll really notice now is a support
area not the only one it’s probably right in the ballpark of about 40 350
now that’s a support level that’s a tighter one the second one could be down
around a old high and an old low maybe you’re thinking maybe around the area of
about 42 dollars okay maybe somewhere right in there and what
you’ll notice is now if we’re gonna we’re gonna do this as an example of a
stock trade so if we looked at this I’m gonna show the example of buying the
stock okay setting a stop be low and you might
choose forty three and a half in this case we’re going to show the example of
setting the stop below 42 if we set the stop below 42 less 3% it is a lower
dollar stock 41 steam so if we take a look at this now
when we look at this I’m gonna right click on the price graph drop down to by
custom and I’m going to change the widows seal bracket when we go with Osio
bracket member we’re saying look the current stock price 45:41 16 okay that
stop change the data GTC dated GTC technically we could probably buy nearly
about 300 shares we’ll go a little bit more conservative with 200 and now what
you’re going to see in this case is we have an entry price 45 current price
level stop underneath us at 41 16 and we have also that upside potential target
now on this chart we don’t really see where the target is we might have to go
back over a longer period of time now this is a good problem to have
maybe where that target is when you see this picture right here you should be
thinking of Fibonacci Fibonacci is that we’re seeing a previous high here we see
a base we see a handle or a pullback there’s your flag right there pulling
back and then breaking up through the resistance again and here’s your support
level tell me you saw that should have seen it immediately okay without
prompting so when we see this we can kind of now go back to the tool of using
Fibonacci and say we’re going to draw down from resistance down to support if
we draw down to maybe some support levels and I’m not going to take the
very lows and tried to go down to support levels some support levels a
target area number one could be 47:56 think of that as more probable it’s not
saying it’s going there but that’s a target the second target which is the
channel width okay from really the hundred percent down to the zero all
that’s doing is just taking this width and adding
on top and it’s really getting to about 50 187 okay now we didn’t get in in this
example of near 40 we’re probably not going to get in for just two dollars
okay gonna probably look for a deeper target and that deeper target we’re
gonna show the example of is about 51 and change if we go back and set this
okay so when we bring this order back up what I’m going to do is I’m going to set
the target about 50 150 so I’m gonna go limit GTC there we go right there and
now what I’m gonna do is I’m gonna go confirm and send so repeat the target 50
150 stop underneath us move my cursor out of the way 41 41 16 sadness stop
below the diagonal line remember what we talked about today is identifying trend
change if we see that stock break that diagonal line that could be short-term
trend change which then can lead into longer-term trend change we’re emitting
that we’re wrong okay we don’t know if it can continue to go down but we’re
just saying we’re exiting based upon position sizing when we go back down and
look at the transaction fees zeros and if we want to go ahead and actually send
that order we can and if we do that right there now remember when you’re in
this when you’re in a gold trade clearly you’re hoping the underlying gold price
goes up and you’re hoping that some of these gold stocks are tracking that
those earnings might be better than what the forecast was now coming up also in
just momentarily we will have Ken Rose be doing a class on long verticals and
diagonals after actually that we will have a Mike flat B talking about growth
in value strategies as well okay so that would be the next two classes after this
one so hopefully today I want to make sure that you’ve got a real nice dose of
identifying the trend changes especially shorter term trend because that’s major
that’s where that trend could become more severe if it were to break that
short term trend line we talked about the agenda items that we
covered here today okay the index update whoops we talked
about the index update saw the markets still holding the support level told you
the area to watch too we talked about post earnings Microsoft and Facebook
talked about identifying exits and also did new position examples as well and we
talked about the example of Lilly and also an e/m as well it also gave us some
other stocks we might take a look at from a trend perspective
stay tuned for ken rose coming up as they’ll talk about long verticals and
diagonals just momentarily I will be in most of next week I’ll be in Monday
through Wednesday next week be traveling to Houston to do to be doing the
technical analysis and option strategies in Houston
Tejas where everything is bigger in Texas so with that said thank you so
much for your comments and questions remember in order to demonstrate the
function of platform we did use actual symbols remember that TD Ameritrade does
not make recommendations determine suitability of any securities or
strategies any investment decision you’re making a self-directed account
solely your responsibility with that said I wish you a great trading day and
also ah stay tuned for ken rose coming up just shortly thank you you

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