Bearish Market - Trades For Monday 08-04-24
Summary
TLDRIn this weekly trading video, Pete Sters reviews his past stock picks, discusses market analysis, and shares systematic trading approaches. He advises on day trading due to an anticipated market inflection point, cautioning against swing trading without technical confirmation. Sters emphasizes the importance of adapting to market conditions, using trend lines and indicators like the RSI for entry and exit points. He also provides specific stock examples, such as ULA, COST, RTX, and MC, detailing their performance and potential future trades. The video concludes with a strategy for identifying short-selling opportunities in a declining market, focusing on stocks with significant breakdowns and resistance levels.
Takeaways
- 📈 The speaker emphasizes the importance of reviewing past picks and not just presenting new ones, ensuring that the audience can see the performance of their trades over time.
- 📉 The speaker has been encouraging day trading due to an anticipated market inflection point, advising against long-term swing trades until technical confirmation is evident.
- 🛑 The speaker warns of the potential risks of relying on bullish trades without adjusting portfolios and trades in response to market changes, highlighting the importance of reducing long exposure during a pullback.
- 📊 The speaker discusses specific stock picks, such as ULA and COST, providing analysis on their recent performance and future predictions based on technical indicators and market trends.
- 📉 The speaker mentions a preference for short positions in certain stocks like Costco, based on bearish patterns and the belief that there's room for these stocks to decline further.
- 💡 The speaker highlights the significance of watching market reactions to earnings reports and economic indicators, using these as cues for trading decisions.
- 📊 The speaker provides a detailed analysis of the market's technical levels, including trend lines and moving averages, to predict potential support and resistance areas.
- 🚫 The speaker advises against taking swing trades without clear signals of market direction, emphasizing the need for caution and waiting for confirmation of market trends.
- 📈 The speaker suggests that after a significant market pullback, there may be a short-lived reprieve or bounce, but anticipates a continued downward trend towards the 200-day moving average.
- 📉 The speaker discusses the impact of mega-cap tech stocks on the market, noting their recent negative earnings reactions and the potential implications for the broader market trend.
- 🗓️ The speaker anticipates a seasonally bearish period for the market in the coming months, influenced by factors such as election uncertainty and a news vacuum, advising traders to be prepared for a choppy market.
Q & A
What is the main difference between the approach taken by the speaker and that of 'Internet gurus' when giving stock picks?
-The speaker emphasizes accountability and follow-through, stating that unlike 'Internet gurus' who may give a pick and then not discuss it further, they review every single pick they've made, showing how it has performed and providing updates while the opportunity to act is still available.
What is the speaker's view on the importance of technical confirmation before starting bearish swing trades?
-The speaker believes that technical confirmation is crucial before entering into bearish swing trades. They have been encouraging day trading instead of swing trading until such confirmation is evident, to avoid premature entry into the market.
How does the speaker describe their approach to teaching trading strategies?
-The speaker teaches trading strategies through a systematic approach, which includes reviewing past picks, market analysis, and finding new trades. They also encourage viewers to watch their videos from the 2008 financial crisis to understand the validity and time-tested nature of their teachings.
What was the speaker's strategy for the last few weeks in terms of trading advice?
-The speaker had been encouraging day trading for the last few weeks due to an anticipated market inflection point. They advised against swing trading until there was clear technical confirmation, aiming to provide lead time for adjusting portfolios and trades.
What is the significance of the stock 'Ula' mentioned in the script, and what does the speaker suggest about its performance?
-'Ula' is a stock short pick given by the speaker about a week and a half ago. The stock had broken down below a major horizontal support level, and the speaker reviewed it in recent videos, still favoring the short position as it had digested some losses and then experienced renewed selling pressure.
What is the speaker's view on 'Costco' (COST) as a short and why?
-The speaker sees Costco as a potential short. They highlighted a bearish engulfing candle on the stock chart, indicating a likely downward move. Despite the stock being relatively stable due to its nature as a consumer defensive stock, the speaker anticipates another leg lower, possibly to the 100-day moving average.
What trading strategy does the speaker suggest for the stock 'RTX'?
-The speaker suggested 'RTX' as a long position, citing it as an example of a stock that showed relative strength during market selloff. They mentioned the importance of having both longs and shorts in a day trading strategy, especially during periods of intraday volatility.
What is the significance of the 'HWM' stock mentioned in the script, and what trading actions did the speaker take?
-'HWM' is another long pick highlighted by the speaker during a live event. Despite the stock opening below the average volume weighted price (AV WAP) on Thursday and Friday, the speaker took advantage of day trading opportunities and set an alert for a potential entry off a bounce based on the LSI indicator.
What is the speaker's view on the current market conditions and their implications for trading?
-The speaker believes that the market is entering a soft patch, with mega cap tech stocks showing negative earnings reactions and economic indicators pointing to potential recession. They suggest that traders should be in cash for now, waiting for clear signs of market direction before entering swing trades.
What advice does the speaker give for identifying potential short positions in the market?
-The speaker advises to look for stocks that show relative weakness, especially those that have displayed recent relative weakness. They suggest waiting for the market bounce and observing if resistance levels hold, which would indicate a good entry point for short positions.
What is the speaker's outlook for the market in the next few months, and how should traders adjust their strategies accordingly?
-The speaker does not expect a significant market rally in the next two to three months due to factors like election uncertainty and a potential news vacuum. They recommend traders to be cautious, use high implied volatility for selling out-of-the-money bearish call spreads, and consider buying deep in-the-money put premiums for swing trading.
Outlines
📈 Weekly Market Review and Trading Philosophy
The speaker emphasizes the importance of reviewing past trading picks and not just presenting new ones. They outline their systematic trading approach, which includes market analysis and finding new trades. The speaker encourages viewers to subscribe and like their content to reach a wider audience. They discuss the recent market conditions, suggesting that it's more suitable for day trading due to an anticipated market inflection point. They also mention specific stock picks, such as ULA and COST, and provide updates on their performance, highlighting the importance of not taking their word for it but to verify through past videos.
📉 Technical Analysis and Trading Adjustments
The speaker discusses their upcoming break and the importance of the instructions given in the video due to their absence. They analyze specific stocks, such as HWM and MC, detailing how to trade them based on technical indicators and support/resistance levels. They also explain how to set alerts for potential trading opportunities using indicators like the RSI. The speaker provides insights into market behavior after significant selling and the importance of recognizing bounces and retracements in the market.
🌐 Impact of Mega-cap Tech Earnings on Market Trends
The speaker reviews the performance of mega-cap tech stocks following their earnings reports, noting a general trend of decline. They discuss the broader market implications, including increased bearish sentiment post-earnings. Economic indicators such as ISM Manufacturing and ADP job numbers are highlighted as showing weakness, contributing to recession concerns. The speaker also touches on the psychological aspects of market behavior, such as dip buying and the potential for a market decline.
📊 Market Outlook and Economic Indicators
The speaker provides an outlook for the market, suggesting a period of potential decline influenced by economic data and the behavior of mega-cap tech stocks. They discuss the importance of watching economic releases like the jobs report and initial jobless claims, which may indicate a weakening employment picture. The speaker also mentions the impact of the Federal Reserve's statements and the potential for a rate cut, as well as the market's seasonal tendencies during the summer months.
🚀 Swing Trading Strategy Amid Market Volatility
The speaker outlines a swing trading strategy for a market that is expected to experience volatility. They discuss the importance of staying in cash during uncertain times and the potential for taking short positions once the market shows signs of struggle. The speaker advises on how to add to short positions at key resistance levels and the importance of identifying market patterns that suggest a struggle to advance.
📉 Trading Through Market Resistance and Support Levels
The speaker discusses how to identify and trade through resistance and support levels during a market downturn. They emphasize the importance of taking profits on significant drops and reloading on bounces, as well as the benefits of trading options during periods of high implied volatility. The speaker also provides guidance on how to manage trades and expectations in a market that is expected to be choppy and bearish over the next few months.
📈 Market Bounce and Short Selling Opportunities
The speaker provides guidance on identifying stocks to short sell following a market bounce. They discuss the importance of finding stocks that show relative weakness compared to the overall market strength, especially those that have broken key technical support levels. The speaker also mentions the significance of watching for economic indicators and how they can influence market direction and trading opportunities.
🛑 Trading Caution and Strategies for Market Downturns
The speaker offers a cautionary approach to trading during a market downturn, advising on how to identify stocks that are likely to continue their decline. They discuss the importance of watching for stocks that do not bounce significantly with the market and have broken key resistance levels. The speaker also provides examples of such stocks and how to set up trading alerts for potential short selling opportunities.
📊 Post-Earnings Analysis and Trading Stock Breakdowns
The speaker analyzes stocks that have recently reported earnings and have shown significant breakdowns in their price action. They discuss the importance of watching how these stocks behave post-earnings and how to trade them based on their technical levels. The speaker provides specific examples of stocks like Micron and Dell, detailing how to identify entry points for short positions and the importance of avoiding trades around earnings announcements.
🚀 Final Trade Ideas and Market Expectations
The speaker concludes with final thoughts on trade ideas and market expectations. They discuss potential strategies for trading the market's bounce and identifying stocks with high implied volatility for option trading. The speaker also provides specific examples of stocks to watch and how to structure trades using bearish call spreads and in-the-money puts. They remind viewers to subscribe and turn on notifications for future content and updates.
Mindmap
Keywords
💡Systematic Trading Approach
💡Inflection Point
💡Holding Up
💡Breakdown
💡Relative Strength
💡Gap Reversal
💡Support and Resistance Levels
💡Bounce
💡Mega Cap Tech Stocks
💡Economic Releases
💡Swing Trading
💡Option Implied Volatilities
💡Bullish Engulfing Candle
💡Long Exposure
💡Watch List
Highlights
The video emphasizes the importance of reviewing past trading picks to demonstrate their performance over time, rather than only presenting new picks.
A systematic trading approach is used to find new trades, which includes market analysis and is validated through videos dating back to the 2008 financial crisis.
The speaker encourages day trading due to an anticipated market inflection point and advises against swing trading without technical confirmation.
A watch list should be developed based on provided picks to prepare for potential market pullbacks and identify opportunities.
The stock 'Ula' is highlighted as a short pick with a breakdown below a major horizontal support level, demonstrating the speaker's analysis of stock performance.
Costco ('Cost') is discussed as a potential short, with a bearish engulfing candle indicating a likely downward move, despite its status as a consumer defensive stock.
The video mentions 'RTX' and 'HWM' as long picks, showcasing the speaker's strategy of balancing long and short positions amidst market volatility.
The impact of mega-cap tech stocks on the S&P 500 is discussed, noting that their performance is a key driver of market direction.
Economic indicators such as ISM Manufacturing, ADP, and the jobs report are analyzed for their influence on market sentiment and potential recession fears.
The speaker outlines a trading strategy for mega-cap tech stocks post-earnings, focusing on identifying support and resistance levels for potential trades.
The FED's statement and its implications for market expectations are discussed, noting the lack of new information and potential for increased market nervousness.
Seasonal trends in the market are highlighted, with August through October being typically bearish and the upcoming news vacuum affecting market liquidity.
The speaker provides a detailed analysis of trading opportunities post-earnings, focusing on technical indicators and market sentiment.
The importance of identifying market struggle points and transitioning to cash is emphasized for effective swing trading.
A trading strategy for the next few months is proposed, focusing on short positions and the use of technical analysis to identify entry and exit points.
The video concludes with a reminder to subscribe for continuous trading ideas and education, and an invitation to participate in live events for real-time interaction.
Transcripts
hello Traders it's Sunday August 4th and
it's time for our weekly video you know
you've got a lot of Internet gurus out
there who give you a pick and then you
don't hear from them you don't know how
the pick did that's how this is
different I don't do that I go through
every single pick that I've made
previously and I show you how it's
performed I give you that pick when you
still have time to act on it I'm not
showing you a photoshopped p&l I'm
giving you an actual trade then once we
review our picks we do our market
analysis and then we use our systematic
trading approach to find new trades
that's how all of this works and you can
go back and watch my videos since the
financial crisis in 2008 and see that
what I'm actually teaching you is valid
it's time tested it works week in and
week out if you like the content that I
produce please give me a thumbs up
subscribe to my YouTube channel all of
this helps the algorithms and it helps
me reach a larger audience because
ultimately that's what I'm trying to do
I'm trying to teach you how to trade so
you know that for the last few weeks
I've been encouraging you to day trade
because I felt that the market was
coming up on an inflection point we
really didn't want to do a lot of Swing
trading we needed technical confirmation
before we could start getting into some
longer term bearish swing trades we'll
get into the market analysis in just a
little bit but I know how all this works
I only do a couple of videos a week and
by the time you're able to watch those
videos there's a lag so if I'm coming
out with bullish trades and bullish
trades and bullish trades when the hurt
finally comes you're going to be stuck
because I've been giving you bullish
trades so instead I'm trying to give you
some lead time to make sure that you're
adjusting your portfolios and your
trades and you're reducing your long
exposure eventually when we get the
pullback you're going to have a lot of
stocks that you can take a look at
because you'll have developed a watch
list based on the picks that I've given
you so please again don't take my word
for it go back and watch my videos from
two three four weeks ago and get a feel
for the warning signs that I was already
seeing in the marketplace
Ula that's a short that I gave you about
a week and a half ago that was during
one of the Live Events and you can see
how the stock had broken down this was a
break down below a major horizontal
support level and then it
compressed in my most recent videos I've
reviewed the stock and I've told you I
still like the short it had to digest
some of these losses and then bam the
sellers were right back again this week
so that's performed well uh uh a week
ago I showed you cost Costco the stock
has been relatively weak I love this
long bearish engulfing candle here that
told me that the next move in the stock
was going to be lower you can see how
the stock sold off and then it
compressed had to digest some of these
losses eventually the sellers were able
to knock it down again and then it's
compressed I still like Costco as a
short I believe it's going to have
another leg lower perhaps down to the
100 day moving
average I do feel that right now we're
seeing a little bit of a flight to
Quality after this market decline that
we saw this week CCO is a relatively
stable stock because it's a consumer
defensive stock these are not typically
Big Ticket items for Costco people are
buying groceries and such so it's going
to hold up relative well but I am
looking for it to Stage its next leg
lower I've also mixed in a couple of
Longs in there so we'll take a look RTX
was a long that I gave you about a week
ago I'd mentioned we're day trading lots
of intraday volatility so it's good to
have some Longs and some shorts and you
can see this is what relative strength
is all about this is the market this is
the daily chart of the market here here
you can see Heavy selling in the S&P 500
what has a stock done during this
selloff it's continued to move higher
hwm was another long that I highlighted
during the live event this week mind you
during a live event we were pre
fomc we were pre Amazon we were
preapp we were pre jobs report lots and
lots of information coming out this week
so I was not willing to commit to one
side or the other on a swing trading
basis but that's about to change so make
sure that you watch the rest of this
video I'm going to be taking some time
off so I'll be doing this video I'll do
a live event Wednesday and then I'm
going be off for about a week or so so
the instructions that I give you in this
video are going to be very important
because they're going to have to serve
you for about another 10 days days so
you can see how
hwm held up well until
Thursday Friday morning we get this open
below AV wape and we already know that
when we have a stock that's reported
earnings we need to give it four five
six days maybe even two weeks to let it
kind of digest these gains but there
were some nice opportunities to day
trade that when we did the live event on
Wednesday Wednesday so I'm going to take
a look at Wednesday's price action live
event took place in here stock did have
a nice move higher and then it closed a
little bit lower but you can see even
Thursday nice opportunity to take some
gains and now you get into a little bit
of a gap reversal in here there's no
reason to day trade this stock from the
long side MC in the Wednesday live event
was a short that I gave you so let's
take a look at MC let's see what
unfolded I'll tell you how I traded it
so we had this nice decline in MC on
Wednesday and the live event came out
somewhere about in here and you can see
how the stock continued to move lower
closing on its low so from the time the
live event was put out uh I know I was
trading the uh August puts and those
were the 115 puts those are somewhere in
the
$280 level when we started the live
presentation and by the
low this was on Thursday morning I
exited them at about
$370 that was a nice trade a good winner
after a couple of heavy days of selling
you can expect that the stock is going
to find some support that's a theme
you're going to hear a little bit about
in just a second when we're talking
about the market so in any event yes
Merk did bounce so you had to take some
gains take a look at the daily chart
here and you can
see big heavy selling after
earnings big follow through selling well
this is what we were taking advantage of
Wednesday and Thursday morning so you
got to take some gains along the road
and you can see that we had a
major long-term trend line
boom boom boom that we were bumping up
against these are our automated trend
lines I would pay attention to them
they're very important especially one
that's that long term so look at where
the stock bounced huh I wonder if these
trend lines are valid so these are all
automated they make it very easy for you
to see where these major support and
resistance levels are coming in these
are significant level so you get the
stock bouncing this is Av WAP right here
and you can see that it's going to hit
some resistance there's the 200 day
moving average it's going to hit a
little resistance around this AV WAP e
the news was not good for the company
they lowered guidance so I would like
another bite from this apple because
this is a major technical breakdown what
would I do how will I know well I can
use a couple of other indicators like
let's say
LSI and I'm going to put that on the
chart and I'm going to go into maybe a
30 minute basis just a little bit longer
term what I'd be looking for is a
breakdown below 80 because that's how
you trade L RSI and right now that
signal would have come through and this
would tell me that yeah you'd want to
evaluate this stock for a potential
entry off of a bounce there's your
bounce
that now the stock is starting to weaken
and it could move lower so one thing I
can do here is say yeah you know what
the stock held up pretty well on Friday
Market had really really weak price
action but the stock held up strong so
maybe I'm a little bit early on this
short so instead of taking a position
I'm going to double click on the low of
that bar right there and I'm set an
alert if the stock rolls over I've
already got lrs
going my way on a 30 minute basis if it
breaches the support level yeah the
sellers might be back but after big
selling like that and big follow through
selling like that and follow through
selling on Thursday it's not going to go
down forever you're going to get a
bounce in there somewhere shorts are
going to take profits buyers might
nibble a little bit so you can expect
these retracements but longer term this
stock wants to go down so set some alert
alerts I can also go into an H1 basis
take a look at that and go oh look LSI
is still well above 80 so why don't I do
this if I want to have an alert I'm
going to create an
alert based on
LSI being below 80 so I'm going to click
that below 80 on an H1 basis click that
less than sign right there add it
now I'm going to get an alert if this H1
goes back below 80 that would be a
legitimate cell
signal and I don't have to act on the
signal right away but what I want to
evaluate is what happened on that bounce
how tall was that bounce did I see any
heavy volume and stack green candles
that might be a warning sign that hey
this stock still has more upside to it
or was the bounce weak shallow wimpy
mixed overlapping candles what was the
bounce like that's where I'm getting my
information from that's the clue I
already know blam sellers are there what
did the bounce look like is it time to
get
in so I set my alert and I'm going to be
going to be evaluating it I'm going to
be evaluating the market as well so
let's go in let's talk market we've been
waiting for this news and we knew that
there was a major window that was
approaching and that window was this
week Mega cap tech stocks we had a
couple of them the previous week super
super important so let's go through a
quick rundown of Mega cap Tech and how
it did Tesla down after the number
Google down after the number Microsoft
down after the number Amazon down after
the number Apple down after the number
the only one that was up after the
number was meta and that gave a lot of
its gains back so as one piece of the
puzzle that we're looking for which is
earnings mind you when the market was
rally rally rally mode for
the
last six months actually probably the
last eight 10 months since November
scroll out that was November you can see
the powerful rally that we
had it was all driven by MEAP tech
stocks 60% of the gains this year had
come from six or seven stocks in the S&P
500 and they comprise about
25% a quarter of the S&P 500 so when you
talk about gee what would be important
during earning season what would really
drive the market what would excite
investors it would be if Mega cap tech
stocks actually
outperformed well good results have been
priced in and there's been a lot of
excitement over AI valuations are
stretched that means that there's some
room on the downside so any kind of fear
that short sellers would have had before
Mega cap Tech earnings
releases waned very quickly and they
were going to wait for these tech stocks
to report because they didn't want to
stick their head in that news but once
all the mega Camp tech stocks have
reported shorts could get much more
aggressive and especially when almost
all of them had negative earnings
reactions
so now you've got Mega Camp tech stocks
out of the way what happened on the
economic front we had a ton of economic
releases this week we had ISM
Manufacturing weaker than expected in
fact haven't seen a weak level like that
for quite a while I believe it was the
lowest level of the year
46.8 that's contraction territory ADP
how did that come out well ADP I believe
the number was somewhere in the
122,000 range much softer than expected
so job growth in the private sector was
starting to
slow we also had the jobs report on
Friday much weaker than expected I think
it was 114,000 if my memory serves me
much lower than the
172,000 that everyone was expecting so
now all of a sudden where the economic
releases had been chug chug chugging
along everything was looking pretty good
now all of a sudden everyone's fearful
that hey we could be going into a
recession the unemployment rate is
starting to spike here we did have a
couple of Clues we had initial jobless
claims came in at 245,000 so that's just
a weekly number and we get these weekly
numbers constantly
that was the highest level that we've
seen this year
uhoh little bit of a warning sign maybe
so we're starting to see the employment
picture Wayne and that Beed out in the
jobs report on Friday now in the initial
stages of a market decline when you have
this type of trend strength buyers have
been conditioned by the dip by the dip
by the dip so there will be a little dip
buying in here now that we've tested the
100 day moving average but for me there
is a pretty good tell and it was right
in here when we had the 50-day moving
average that we had poked below okay so
now we've had a decent little pullback
we're looking for a bounce this week
again we have been day trading for about
the last 3 weeks with fantastic intraday
ranges there was no reason to take any
overnight risk let's wait and see if my
thesis was right that the market could
possibly be rolling over so we're in
wait and see mode and you can see how we
had this test of the 50-day moving
average and a really pretty substantial
bounce on Wednesday and then we also had
the fomc statement which was kind of a
nothing Burger on Wednesday but I think
the real selling started to come through
Thursday and Friday especially after
those Mega cap Tech earnings releases so
what did the FED say well the FED said
you know economic growth seems pretty
stable right now and they didn't really
give anything new for us to sink our
teeth into the market has been waiting
for a rate cut in September and the FED
certainly didn't give the market any
warm fuzzies to latch onto the FED is
going into recess for the next month and
a half Washington DC is going into
recess for the next month so who's
minding the
shop
nobody well the market gets nervous over
all of that and August and September
even through most of October that is a
seasonally bearish period for the market
I also think that the election are going
to start Weighing on the market where it
seemed fairly certain that Trump might
win a few weeks ago the market Was
preparing for that and I'm not making a
political statement okay so just dispel
that but the market had some
certainty okay it looks like the
election is going to go this way right
now there's a lot of uncertainty all of
a sudden the polls have shifted and it's
more of a 50/50 proposition and I'm not
trying to predict
what the election is going to do or what
the election is going to be the market
trades off of uncertainty and there's a
bit more uncertainty in terms of the
elections in terms of where interest
rates might go in terms of economic
growth in terms of earnings all of that
is starting to weigh on the market and
it happens in August September October
most years the other thing that you have
coming into play right now I've also
mentioned this recently is we're heading
into a news
vacuum this was the last really big
piece of news that we're going to have
for a while and so whatever happened
this week whatever result we had up or
down is going to impact the market for
probably the next five or six weeks
Traders are going to take time off
because the market liquidity starts to
dry up the kids are going back back to
school we're kind of in the summer
doldrums there's no news to trade off of
earning season is starting to WAN so
we'll still get some pretty decent price
action this week so the bottom line is
that I'm expecting the market after a
decent little pullback like this I'm not
looking for the bottom to absolutely
fall out just yet and it may not do that
I'm also not looking for the market to
just absolutely crater and have like a
30% decline anything super nasty like
that I'll show you in just a second the
pattern that I think is going to unfold
but after testing the 100 day moving
average here's what I'll be looking
for and here's what I think we're going
to get we'll get a little bit of a
reprieve okay they're going to try and
bounce this thing after a really pretty
decent selloff and they're going to try
and get the market back to the 50-day
moving average but I think we're going
to find resistance there I'll certainly
be watching for it so let's get into a
little mentality here because this is
important so for swing trading I've told
you you've got to stay in cash right now
you should not have any swing exposure
because we don't know how this is going
to be resolved are we going to run right
back to the all-time high with ease if
so that puts us into a bullish Camp I
didn't feel that that was likely I
needed proof because I do not pick
Market tops that is the easiest and best
way to blow out your account so lots of
people looking for Market tops in here o
o there's a dip I'm going to get short
this is it I knew the market ran up so
far this is the big one and then the
market continues to go higher you get a
nice little pullback like this back in
April ooh ooh ooh o here it is by puts
by puts I knew this was a time sell in
May and go way uhoh uhoh uhoh uhoh they
had their ass handed to
them so for anybody that tells you their
super Guru right now that they knew the
market was going to roll over and I'm
Bel a lot of puts well this time they
could get lucky CU I think they're going
to be right back in here you didn't know
that so you didn't trade like that we
were trading like we were going to get a
bounce and we did and then we added here
and we watched to see what happened at
the breakout and we could have added
right in here but more likely in here so
we're still riding this light volume
rally higher but as we start getting
into these tiny compressed candles with
a major window that had a lot of news
coming out we went to the
sidelines and we waited okay so we
didn't start loading up on puts here
we're waiting to see is this thing going
to bounce now we finally got the
information we need everything is lining
up for a soft patch in the market so we
can finally start to swing trade now
here's the Dilemma for any of you who
might feel looking at this price action
the fact that we tried to bounce in here
and we got absolutely squashed on
Thursday with this long bearish
engulfing candle for those looking to
swing trade yeah you absolutely could
have gotten short on that you could even
be short in here
what do I do right now Pete can I short
this Market on a swing basis you
can
if you have the
wherewithal to take some heat and if you
feel that based on where the market
closed Friday that the Market's going to
minimum come down to a 200 day to the
200 day moving average between now and
the end of September end of October I
would would say you're right I agree
with you I think based on the price
action I've seen that we're going to be
able to reach that 200 day moving
average the problem is you mentally have
to be prepared for the market to get
back up to AV weap Q maybe even this
downward sloping trend line so if you
are a nervous Nelly Trader oh my God the
bounce it's killing me then you should
not be taking swing shorts until you get
some kind of a bounce in here but if
you're willing to weather that little
storm knowing that getting down to the
200 day moving average is very very
likely then take a starter position in
your shorts and know that you're going
to have to weather a bounce somewhere
along the line and when that bounce
comes and stalls below a technical
resistance level like this downward
sloping trend line AV weap Q 50 day
moving
average I expected this this is not a
bad thing it is an opportunity for me to
add to my short position is now I'm
confident we're going to hit the 200 day
moving average and now I've just got a
better entry point to add to my short
position but I have not loaded the boat
because I want to see that resistance
hold and I want to see the market start
rolling over and then when we take out
the 100 day moving average on the next
leg lower you can add again and add
fairly aggressively because now you've
got one position on another position on
and when you test that 100 day moving
average your average cost is way up here
so you have staying power and now we
take out another key support level now I
can add now I'm just adding and my
average cost is going to continue to be
way up here as I get that follow through
selling that's how you trade and that's
how you add to your trades and your
positions again the most important thing
is to be able to identify where the
Market's starting to struggle to advance
so then you go to
cash and it's a beautiful thing some of
you have been so PTI
hats off to you I've been telling you
this for a few weeks a lot of people
don't listen to me but some do and how
nice was that to start watching the
market come in and instead of fumbling
around and running around with your head
cut off wondering how you're going to
manage these losing positions and ah I
really can't take the loss right here I
needed that money whatever your mindset
is you got to take the loss in here you
should have been on the sidelines
instead of having that mindset you're in
a I got a lot of cash I've been waiting
for this pullback I'm going to be
waiting for really nice shorting
opportunities to set up so I kind of
talked about the person with the mindset
who's able to take a starter short and
will be adding when that resistance
level is tested and rejected and adding
again it's the mindset you should all be
in from a swing trading standpoint but
there are going to be some of you who
don't have that Comfort level you need
to see a bounce okay well then here's
what you would be watching for if you
can't weather a bounce so you don't have
a position on watch for the 50-day
moving average to provide some
resistance and then avap Q so in this
area probably around the 540 level
that's where I'd be looking for the
market to maybe get back to and then to
take another leg lower that'd be an
excellent entry point for swing short
positions and then you would add on a
breakdown below the 100 day moving
average that
breakdown has got to be really hard so
we don't want to come down and poke poke
poke poke poke that's not how we want to
attack the 100 day moving average we
want to come down and absolutely
annihilate it obliterate it usually on
the first test you're going to get
bounces off of these major moving
averages so you want to make sure that
they're brief and shallow and when the
market kind of tests the upside so
they're testing the programs are testing
to see what's on the ask is there
anything there can we lift it very
easily or is it stubborn are they
replenishing the ask replenish ing
replenishing if they're replenishing the
ask that's selling pressure that's
telling them don't go there there's a
lid here the next move is down if they
can lift that ask then you got another
leg higher if that resistance
holds then they know okay that's it
that's as high as we're going to bounce
it was brief and shallow we're going
down there's a lot of selling pressure
so that's what the programs do out there
is they evaluate this so we want to see
resistance holding at the 50-day moving
average possibly at AV WAP q but yes
it's going to be time to start looking
for some short positions on a swing
trading basis now one more word of
caution and that is that when you get a
market that declines it comes in really
big spurts so you get this wave of
selling and then the market finds
support and you get a
bounce and then you start seeing a
series of lower highs good that tells us
wham wham wham resistance wham wham wham
resistance lower high couldn't even get
back to that previous High why is that
significant because the guys who were
selling like mad right here and that see
this little drop they're like oh my God
I really didn't get all my shorts off
and I wanted to sell more the people who
are along are also thinking gosh we've
got to get rid of as much stock as we
can to reduce our risk exposure now
we've got another little opportunity so
they keep the pressure
on little upward sloping trend line this
is where you want to short you've got
signs of resistance in here so on this
leg lower all right we found some
support we had a nice bullish Trend day
in here all right we might bounce a
little bit after a nice decline like
that so take profits on your shorts if
you are an option Trader you get the
double whammy hello thank you very much
when the market sells off like this the
bonus is option implied volatilities
explode they expand so you're making a
lot of money based on where you're put
is relative to the strike price and the
fact that the stock has fallen but
you're also benefiting from this
explosion in option implied volatilities
so don't wait for the bottom when you
get a nice really big drop like that and
especially when you get a nice bullish
Trend day take some money all right you
get another little chance here we get
another bullish hammer in here don't
wait around now you get the market
releasing and showing signs of
resistance this is where you reload on
your or put
positions you have
signs that resistance in a downward
sloping trend line is forming so you
reload here whoosh another big
drop take the profits expect a bounce
because this is a really big move in a
very short period of time look at that
right above the 200 day moving average
so you're taking taking profits here
again then when you get another bounce
you're waiting for signs of resistance
hey we're hitting resistance around the
50-day and the 100 day moving average
this all looks good ooh nice long red
candle through AV WAP Q all right this
might be another opportunity for me to
try some shorts so when you're trading
the short side big fast steep
drops take your gains wait for the
bounce
reload whoosh big selloff take your
gains especially on those major moving
averages wait for a bounce
reload those are your instructions for
the next two or three months I really
don't believe that we're going to see
much of a market
rally over the course of the next two or
three months I think through o uh
October just because of the election
uncertainty
we could see a fairly choppy Market
what's going to matter is what are the
economic numbers look like are we
continuing to see some softness so as
August unfolds watch those numbers
there's a big number coming out tomorrow
ISM Services 80% of our economic
activity is tied to the service sector
very important number if that number
comes in below 50 you're going to see
elevated concerns that we going into a
recession now ism is a really
interesting economic release to me
because it's a
survey they're service surveying
purchasing managers to find out what
their current intentions are for the
next month so it's extremely current
reading on what's Happening economically
watch that number tomorrow but then
that's really it we don't have too many
other major major economic releases for
the next few weeks so we'll see how that
comes out but even apart from ISM
Services number
tomorrow any
bounce is going to set us up with a good
entry point for shorts especially on
stocks that have relative weakness
especially on stocks that have display
play recent relative weakness so when
you get this Market bounce and those
resistance levels
hold guess what you're looking for in
the underlying
stock what do you think just try and
visualize what do you think you're going
to want in that underlying stock that's
showing so much
weakness you're going to want to see the
stock not bounce very much with the
market because then tells you that the
institutions are still in there wham
wham wham wham wham beating on that
thing they need to get out
okay if the stock does
bounce ideally it's broken some key
technical was
support now becomes resistance levels
and the stock can't get through that
resistance when the market is bouncing
so if that resistance is in place that's
going to be an excellent short so let's
go find some stocks again I'm giving you
the road map for the next few weeks okay
I'm going to be taking some time off
make sure to visit the live event that I
do with Harry on Wednesdays that'll be
another snapshot of what's unfolding
maybe just maybe we'll have a little
bounce in here and that'll give us that
entry point that we're looking for
so I'm going to go through I've already
spent a lot of time in this video I'm
going to go through and I'm going to
find some stocks I'm just going to go
into my red Royal Flush search and I'm
going to click through some daily charts
it's all I'm going to do it's so simple
this is one of my favorite swing trading
searches pop bear is another one I
haven't looked at that one so let me
just scroll through here visually and
see if we've got anything really
compelling that uh is jumping out at me
these are lot be really good stocks
they've all broken down take a look at Z
here uh afrm this has been a leaker just
gradual downtrend we're going to stick
with red Royal Flush go through the top
stocks here Amazon being one of the
first ones this is a pretty major
technical breakdown here you can see all
of our automated trend lines that have
been coming into play on this drop big
bullish hammer on Friday so the stock
dro dropped dramatically you can see how
that 200 day moving average is still
providing some resistance but after the
price action
Friday Market sold off finished near the
low of the day this stock actually
rallied most of the day you can see such
that early low when the market was
making new
lows making new
lows the stock had actually bounced and
was starting to try and fill in some of
this Gap that 200 day moving average is
going to provide some resistance so I
would not be looking for any Longs right
now I wouldn't be trading Amazon because
it has a chance to maybe get above that
200 day moving average but watch that
key critical level this is a significant
breakdown so I wouldn't be trading
Amazon right now it's just post earnings
I'd be waiting to see what happens GE
would be nice if it can get below the
100 day moving average you've got a nice
upward sloping trend line here's how I
address that I click GTC boom boom
double click on the low from Friday if
that's breached I'm going to get a trade
alert all right then it'll be of
interest to me Microsoft I talked about
the mega cap tech stocks Microsoft
there's your earnings announcement no
bueno it's really sold off hard it found
support at the 100 day moving average
average it's finding support on this
major upward sloping trend line so I
wouldn't be shorting Microsoft in here
because there's a good chance it might
bounce a little bit if it struggles to
get through the 100 day moving average
then maybe you've got a shorting
opportunity set alerts like the LSI
alert that I showed you earlier today
Micron beautiful nice clean breakdown
lots of room to the next upward sloping
trend line below the 100 day moving
average below the 200 day moving average
and I can tell you on June
20th I did a live event go back and
watch my video on June 20th I knew that
bearish engulfing candle on Micron now
it came before earnings was a sign that
this stock was heading lower and there's
your earnings announcement and it has
not been able to recover ever since
don't take my word for it go back and
watch
coin coin has a nice breakdown below
this upward sloping trend line here it's
below the 100 day moving average has
plenty of room to the 200 day moving
average
but it's been pretty resilient Stock's
holding up pretty well relative to the
blood bath that we've ' seen in many
other stocks oo like this one zoom out
take a look see where that long-term
trend line comes into play all right
it's breaching major trend lines mRNA is
below the 100 day moving average mRNA
didn't just poke the 200 day moving
average it blew through it on earnings
see you later on
Friday it's a nice short I like this
short what am I going to be looking for
I'm going to be looking for a little
bounce in the market off of The 100 day
moving average when I get that little
bounce in here I want to make sure that
mRNA is staying below AV WAP e and this
low post earnings right in here just
looking for it to
Reserve as much of this selloff as
possible so a little weep a little weak
whiy bounce is going to tell me that
sellers are still wham wham wham in
there selling it on the market bounce so
Market bounces most stocks should bounce
when the stock can't bounce and these
resistance levels stay intact
that's how we know we're going to have a
good entry for a longer term swing short
stock has a major breakdown lots of room
to fall okay I like it mRNA looks like a
really good short that could be one that
I would have for a bearish pick upward
sloping trend line right in here go back
and watch my video from two weeks ago I
know Dell was on it as a short with we
wanted to see a breakdown below the 100
day moving average it had already
breached that upward sloping trend line
and you can see how the stock has
continued to sell off below that 100 day
moving average now it's testing the 200
day moving average and look you there we
got a breakdown below it earnings coming
out though 829 so you still got plenty
of time I would watch that if it can't
get above the 200 day moving average on
any Market bounce this is going to be a
really good
short Dell could easily
be my short Pig and the nice thing too
is if you can try and find stocks that
have already announced earnings kind of
gone through enough but I'm going to be
looking
for H there there are a number of stocks
that I can highlight I'm GNA go into GM
for one reason and the reason is that
this stock has also broken a nice
horizontal support level and it was not
able to get above the 100 day moving
average when the market was bouncing
earlier this week just couldn't do it
there's your earnings
announcement you can see they didn't
like the earnings even though they beat
estimates and all stock continued to
sell off and it easily breached that 100
day moving average well if this was just
a head fake then buyers would have come
in and they would have scooped the stock
as soon as the market had a little bit
of upside to it but they didn't Market
sold off and then on Friday the stock
really got hit pretty hard you do have a
bit of a fundamental
twist to this play and that is that if
the economy is slowing down if people
are having difficulty finding work then
they're not going to be buying Big
Ticket items like cars and so that is
why GM is falling and it's got plenty of
room down to the 200 day moving average
so what I'd be looking for is a bounce
in the market and GM not not even able
to recover this entire red candle just
struggling struggling struggling if by
chance it fills in this little Gap right
in here H okay I guess that's tolerable
for me I'm looking for a longer term
swing short so we continue to get weak
economic numbers everybody's getting a
little bit nervous hey the fed's in
recess are they going to cut are they
going to stay in tightening mode you
know are they going to do anything with
quantitative tightening are they going
to miss the boat here are they going to
wait too long now there's a Jackson Hole
conference which they'll talk a little
bit about it but I don't know that the
fed's going to give any big Clues and
say yeah we're going to ease and right
now you'll get a little bit of a bounce
in the market on the notion that the FED
could ease this is going to increase
their likelihood to cut rates in
September so the bad news is good news
crowd will be out there going yay we
should get a rate cut be careful what
you wish for I've been saying this also
for a long time we don't want the FED to
cut rates because it means that the
economy is starting to soften what we
want is for rates to stay relatively
high and for economic growth to continue
and we got GDP at 2.8% very backwards
looking number very old number felt
pretty good when when the number came
out but that's the problem with looking
at GDP so now all of a sudden everyone's
thinking nah this is looking like we're
going to go into a recession so that is
going to be the fear hopefully the FED
will respond and cut rates I think
they'll have plenty of reasons to do it
and they've got lots of ammo they're in
the driver's seat right now because
inflation has started to come in so
they've got wiggle room this is they're
in a really good position and I think
that's what they're going to do in
September but hopefully between now and
then economic conditions don't
deteriorate too rapidly so tiny little
bounce when the market bounces we don't
want the stock to bounce and that's what
tells us that sellers in that stock are
still very aggressive they want to
unload shares and that gives us our
opportunity to enter the short at a very
good price on a swing trading basis so
what kind of time frame am I looking at
what would I want to be doing with my
shorts right now well if you have high
option implied volatilities with these
major resistance levels in place then
you're going to want to look for stocks
that have relatively High option implied
volatilities so let's say that you were
in looking to short Qualcomm well what
you can do on a swing basis you can see
there's the earnings announcement and
there's what the stock did after the
earnings announcement close below the
200 day moving average Market bounces
you're going to be looking for an area
where you can sell some out- of- the-
money bearish call spreads maybe keying
off of this 180 level if the stock can
bounce to
175 but you're going to be evaluating
that based on the option implied
volatilities if they're above 35 it's at
45 then you favor selling out ofth the-
money bearish call spreads because the
stock will be more vol volatile it'll
move farther you want to distance
yourself from the action take advantage
of accelerated time premium Decay and
you want to be selling those with three
or four mon three or four weeks left
until
expiration so that's one way that you
could approach this fairly passive great
way to swing trade higher option implied
volatilities look for those resistance
levels that the stock would have to get
through and sell out of the money
bearish call spreads you want to make
sure that the company is announced
earnings we do not want to sell these
and have that spread span an earnings
announcement no bueno bad move horrible
move okay so make sure that you don't
have earnings coming up on those types
of stock plays the alternative is that
you would be looking to buy deep in the
money put premium with two or three
months worth of life where the stock has
it it's so far in the money that the
options are trading at a Delta of say 7
or so so you buy those options almost
like a surrogate stock position short
stock position and you just wait for the
stock to continue to drift lower that's
the other way that you can be shorting
on a swing basis so as you go through
and start taking a look at some of these
shorts like micro on right here you've
got the
stock right around 9270 is where it
closed you've got this nice Massive
Resistance level at the 200 day moving
average so if you get any kind of Bounce
in the stock you can see it's at 10128
that's where your 200 day moving average
is so that's where you'd want to be
selling your bearish call spreads above
that
level we want to be able to get in
a 20% difference in the strike
price so take the strike
price so if you have five points between
the strike prices you want to be able to
get 20% of that in terms of a credit
that's going to yield a 25% return so
let's just take a look at Micron and
these spreads are not going to be there
right now let's go because we need the
stock to bounce a little bit so if we're
looking to get that type Ty of credit
we've got to go up to
the oh let's call it the 10250 if
they've got that type of strike
price and they don't so they've got $1
increments here and we're selling a call
spread so we're going to be selling that
and let's say that we do a fivepoint
credit spread we'll go to the
108 and so for this you can see it's
almost there 280 bid off offed at two
the spread is trading 79 cents bid
offered at 134 so you can almost get
that spread right now and that's only
going out to September 6th on this
spread so wait for the bounce maybe you
can even get that spread done using this
resistance level which that high was at
111 so maybe a 110 115 bearish call
spread now you've got the 200 day moving
average to lean on and you've got this
horizontal resistance level here the
more resistance level levels between the
current strike
price uh the current stock price and the
strike price the better so your strike
price would be up here your stock price
is down here you want lots and lots and
lots and lots of resistance levels in
there as much as possible so that's how
you would play it you could see that the
option implied volatility on Micron is
50 7 so the alternative is to find an in
the-
money put that's relatively cheap and
then you would buy that so we're getting
a little long here so excuse me I've got
to find a pick I think that's what I'm
going to go with I'm just going to give
you a micron pick I like that GM
breakdown okay I would have no problem
buying GM puts take a look at the option
implied volatility there 31 so this is
going to set up really well for that I
would like to see the stock not get
above the open from this long red candle
okay so that'll be resistance and this
upward sloping trend line is
resistance and we'll take a look at the
low there which is $43 so I'd like to be
buying in the money
puts and let's see what we've got here
on GM now mind you we're buying option
premium Pete thinks that the market
could go down for a while here so let's
give ourselves out to October and let's
go deep in the money maybe the $50
puts and we could see that those are
trading at $9 with the stock at 41 okay
let's think about this they're
intrinsically almost
worth
$9 okay so the $50 puts watch the stock
if you can get the $50 puts maybe at
that juncture you know the stock rallies
up to maybe $43 or $44 you can even go
with the $55
puts go as deep as you possibly can you
won't be exposed to time premium Decay
and that's why we want to use this
strategy so I don't know what what the
stock is going to do or how high it's
going to bounce I would be looking to
buy these $50 puts if the market tries
to bounce to the 50-day moving average
and it gets rejected then I would like
to get into these maybe somewhere around
the $7 level okay I want to see this
long red candle hold I want to see the
stock be very very stubborn in trying to
re capture that long red
candle so when the Market's rallying I
want to see the majority of this thing
hold that tells me wham wham wham wham
the sellers are still in there if I can
buy it for $7 or if I could buy it for
$6 as long as this red candle is intact
I'm going to be pretty happy putting
that position on because again
I'm operating on the notion that the
market is going to struggle over the
course of the next two or three months
in that companies that have a lot of
ccal to them are going to really
struggle as well so that's how I would
play GM that's how I would play Micron
I've given you a couple of stocks to
look at watch our Wednesday live event
please come in sign up for it we do it
live during Market hours we feeli your
questions so there's a good chance that
your
question is also going to be someone
else's question and you'll get to see
how we respond two different
professional Traders both with different
perspectives answering your questions
those Live Events are great hope to see
you then if you have the ability to take
some time off typically mid August to
the end of August is a great time to
also take some time off because you will
see the volume start to dry up over the
course of the next couple weeks thanks
so much for watching hit that like
button and we'll see you on state thank
you
thank you for watching this YouTube
video I'm Pete sters and I'm going to
keep the trade ideas coming along with
lots of education so make sure to
subscribe to the channel and please turn
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we'll see you soon
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