We retired our “Five Bull Market Barometers” in 2020 to make room for a new weekly post that’s focused on the three most important charts for the week ahead.
This is that post, so let’s jump into this week’s edition.
Expert technical analysis of financial markets by JC Parets
We retired our “Five Bull Market Barometers” in 2020 to make room for a new weekly post that’s focused on the three most important charts for the week ahead.
This is that post, so let’s jump into this week’s edition.
Look, we’re not going to sugarcoat it: it’s hard out there right now.
Regardless of your timeframe, if you’re trying to make aggressive long or short bets in this tape, you’re getting chopped up. So are we.
These types of markets grind us out and wear us out. It is what it is. We can’t choose the market we’re given, we can only control how we react to it.
This much we know — forcing directional bets right now feels like a fool’s errand.
But with options premiums elevated across the board, there are opportunities to put on delta-neutral short premium trades where charts suggest some consolidation may be taking place. However, we need to be careful not to sell premium on stocks that have earnings releases coming up soon. So to avoid that all together, we’re going to limit our universe to index and sector ETFs. [Read more…]
The best trade I ever executed was a loss.
That is not a typo. I lost money on this trade. Actually, it was a series of trades. But it was executed with one decision and one combination of keystrokes.
It was the summer of 1998, and it was my first year trading.
The Long-Term Capital Management debacle was weighing on markets. There was money being made on the short side. Big money.
Many of the more successful traders in my office had already earned a boatload of cash with aggressive short trades on this particular morning. And at lunchtime, they decided to head out to the golf course to celebrate another day of crushing the markets.
But not me.
Nope, I was still a piker trader at that time, still trying to figure out how to stop losing money. So while the rest of the guys were high-fiving each other on the way out the door to the golf course, I stayed at my desk banging keys, trying to catch up to the big shots.
As we moved through the sleepy lunch hour, markets were showing signs of another leg down and I was building a short position in about 8-10 stocks. Slowly at first. Small amounts of shares. Nibbles, really.
But my conviction in my bearish position continued to rise as S&P futures fell. So I continued to increase my position. I was shorting the big dogs at the time: Microsoft, Intel, Yahoo, Worldcom, Dell, eBay, and a few other semiconductor stocks.
Over the course of about an hour, I had gotten my position big enough that it was actually starting to make me uncomfortable. It wasn’t my largest position ever, but it was still uncomfortably large for me. I was making a little bit of money – not a lot – in this position, but I was already starting to count the winnings I was surely about to earn when the bottom fell out of the market and skidded toward the closing bell.
And then the unthinkable happened… [Read more…]
According to the Wall Street Journal, options volume continues to explode – driven primarily by the growing popularity of short-dated options.
Whether looking to speculate, hedge or collect premiums, options players are increasingly flocking to options that have fewer than 7 days to expiration. And with the proliferation of weekly options and three-times weekly expirations in popular index ETFs like $SPY, $QQQ, and $IWM, traders frequently have the opportunity to trade options expiring within 24 hours!
It is no surprise that these types of short-dated options are attractive to some players. They offer the best characteristics of options: defined risk, leverage, and affordability for even the smallest of traders.
Of course, there is no free lunch. As nice as all the pros are, the cons are equally supersized when the ass-end of gamma smacks your trade in the face. As quickly as profits can accumulate when you nail the timing of one of these trades, any hint of delay for a long options position or fear of swift reversal in a short options position can rapidly erode whatever gains you may have in your position. [Read more…]
Even though stocks have broadly advanced on the first two trading days of October and Q4, today’s market action reminds players that stocks are still risky here and the options market continues to price in this fear in the form of higher than normal options premiums.
As such, the odds favor net premium sellers in these conditions — so that’s what we’re on the hunt for.
Ideal setups are ones in which a nearby support level has revealed itself so we can lean against it for risk management purposes.
One such setup can be found in Brookfield Asset Management, $BAM: [Read more…]
…Berkshire “B” shares, to be precise.
One of JC’s favorite trades when volatility is spiking and bearish sentiment seems a little overdone on the downside is to either buy stock in Berkshire Hathaway $BRK.B or even better — sell some naked puts to fade the fear.
During our morning meeting today, JC was feeling that the time was right to pull the trigger on this idea again.
Selling naked puts is the move for us today, but we have to be aware that earnings are on the horizon in early November — which may be accounting for some of the extra premium in November monthly expiration options.
As you can see from this chart, $BRK.B has undercut a significant level ever so slightly, but if this move is false, the whipsaw back up should be swift: [Read more…]
Eventually, even thick skulls like mine get the point.
Pretty much all summer long, the team here at All Star Charts has been mentioning Enphase Energy $ENPH as a strong outperformer that is on the verge of a potential epic breakout. During today’s internal Analyst meeting, the team agreed that now is finally the time to get involved.
JC and I did a video on a possible trade in $ENPH ahead of today’s Fed Reserve Interest Rates announcement. We did just get into it moments ago. Enjoy this video to get a great idea of why we like this trade and how we’ll play it:
A Bull Phase for Enphase Energy? @allstarcharts https://t.co/INbp6CH827
— Sean McLaughlin, NLD 📈 (@chicagosean) September 21, 2022
by JC
You notice how folks these days are all up in other people’s business?
What do the decisions other people make with their money have to do with you? or me?
I don’t care if someone I don’t know makes an irresponsible trade and blows up their account.
Why is that my problem?
Let them blow up.
It’s probably for the best anyway. You gotta learn somehow.
But that’s not of my concern.
You want to put all your life savings into NFTs? Go for it. I don’t care.
You want to sit in cash during a bull market watching everyone make money but you? Sure. Knock yourself out. [Read more…]