Sometimes when you can’t find a stock to trade you cycle through your usual suspects…
And then you probably end up placing trades even if you don’t have an edge
Unfortunately, that’s not trading… but instead gambling!
So how do I make sure to stay away from gambling but instead trading with an edge?
Now how do I select my trades anyways?
By leveraging technology to help remove the guesswork.
And I do this every day with a simple set of tools.
Just give me a few minutes and I’ll explain to you how it’s possible.
Filtering The Markets
In order to filter the market – a trader needs to have a winning pattern that they wish to locate.
And when looking for stocks to trade, guessing is not the right thing to do as it can lead to disaster.
For example, it is not recommended to apply a filter such as, price > 0.50, or price < 10,000 as you will not do much in terms of actual filtering.
Typically, what you would want to do is filter out stocks that are much more specific to your style of trading.
- Price > 20
- Avg Daily Volume > 200k
- Technology stocks Only, No ETF’s
- Earnings this month
In this case, I only want to see stocks with a specific price, volume and excluding ETF’s from the list.
Now there would be no way to find those stocks without software.
As a trader, you need to make sure to cut down the 20k stocks down to a couple handfuls to make it a worthwhile filter.
Now I don’t have time to scan through that many stocks by hand every week.
Instead, when applying these filters to a software package, you can get a head start on your next trade.
Here’s an example of applying those filters to the markets.
As you see, this reduced almost 20k stocks down to 27 total to choose from
Now that’s a far more manageable list to review every week.
Now let’s take this one step further and look at some ways that I filter for stocks that give me the best shot of landing a winning trade
Applying “Hands On” Filters For Credit Spreads
So, do you see the power of filtering down your stocks?
Even though I just said it’s important to get the lowest number possible on your scanner… that’s not always true.
You need the best filters to get your stock list lower that represents your trading strategy.
Sometimes there is nothing you can do but have to manually sort through 200 or more names.
Now let’s look at a few examples that you can use to find great setups to sell credit spreads around.
Support and Resistance
One way to manually filter stocks that a scanner like Finviz can’t do is by using the naked eye.
And one pattern that I love to look for is stocks that are trading on a technical level, called support.
In order to trade credit spreads that have a high probability of being profitable, I need to find stocks that are trading at or near these support levels.
Here is an example of this working in a popular stock,
As you can see, GOOGL price bounced off of the support zone and went straight to all-time highs shortly afterwards.
And even though there were little wiggles throughout the last year, no move compared to the price bounce seen at the technical support levels from the prior year
Pro Tip: For my own trading, I would like to locate a longer-term area of support that is supported by the stock trading into the 52-week lows.
The Bollinger Band Support Pattern
Now, the 52-week (1 year) or 104-week (2 year) lows tend to be extremely strong support levels…
But other important support levels can influence an active trader instead of waiting for those major levels.
One type of these support levels is when traders utilize Bollinger Bands for support instead of major price pivot levels.
Here’s another example of the major pivot low for comparison that caused a V-bottom in CMG
But who wouldn’t want a piece of that action when the CMG traded at that huge of a discount? I sure know that I would!
Pro Tip: When selecting this pattern, make sure the lower lows are increasing to confirm the bear flag is not taking over. Here is an example of this
So… now that you understand why it’s important to pick good stocks that are trading at or near support levels, there are many additional filters you can use to find stocks to trade.
If you are interested in using more filters than those few described, feel free to experiment with what works best for you.
Some additional popular filters are narrowing down a stocks sector, industry, earnings, fundamental, or insider ownership transactions.
Some of the most popular filters are:
- Fundamental fiters
- Price and volume filters
- Insider transactions
- Short floats
- Earnings dates
And just as you used filters to narrow down the stocks that met those specific fundamental criteria, there are ways to filter more technically as well…
Some ways to filter down stocks even further are:
- Filter stocks with prices above their moving average
- Uptrend breakouts
- Downtrend breakouts
- Patterns with increasing volumes
- Prices near support or resistance
With a few steps and basic filters, you can effectively reduce thousands of stocks to a smaller qualified list that meets your specific criteria.
To pick the stocks that align with your market outlook so you can make a more objective decision about what and when to trade.
There are also some various free tools that are available for you to use on the web. One of my personal favorites is FINVIZ which I use to screen for my perfect trade.
Who doesn’t love making money in just a matter of minutes or less than a day?
As traders, we can get impatient sometimes and force ourselves out of a trade… just because it didn’t move within a certain timeframe.
Listen, the market doesn’t care about me or anyone else for that matter. It’s just going to move when it wants to.
However, there is one factor the market cares about…
Supply & Demand
By understanding how to identify where demand can pick up, and where there might be supply (sellers) in a stock… it can help you better time trades.
I want to show you how I spotted the trade and remained patient for the move higher.
Why You Need Be Patient As A Trader
Here’s what I sent out to Rooster Report subscribers last Friday.
ROKU is my trade today. I think this is gearing up for a $170 breakout, again, assuming the overall market doesn’t take a dip. It’s in a squeeze on the daily chart and rounding nicely right off the 34 EMA which would offer a really tight stop.
Range to $170 before resistance. Same as always on these options trades, I start ITM (in the money) so maybe $145 calls to give me high delta and more safety from quick decay of the option.
This is what’s called directional trading in which I play the higher priced stock continuation pattern with the lower priced option. As a general rule I’m looking 6-8 weeks out because if I’m too close on expiration and it stalls, the decay of the option speeds up.
Rooster Report is my highest-conviction trade idea for the day, so it can be tempting to hit out before the move happens…
However, there’s one tool I use to help me practice patient — chart patterns.
For example, check out ROKU on the daily chart when I was eyeing it for a trade.
My stop was the 34-day exponential moving average (EMA), the blue line in the chart above.
That signaled to me I could remain patient and hold onto the position, just as long as it didn’t break too far away from the blue horizontal line.
I stuck to my plan and I bought ROKU $147 Sept. 25 calls for $11.33 apiece, on Aug. 21.
Typically, when a stock gets close to a key EMA, the demand for the stock picks up. With ROKU, it can move fast, and it’s a little bit expensive to trade…
So that’s why I used calls to get more leverage.
Well, just a few days later…
The 34-day EMA held, and ROKU broke the 8-day EMA and exploded.
So that little move from around $147 (where the stock was around when I bought the calls) to $153 or so, those options went up about 25%…
And I locked in my gains.
My charts allowed me to be patient, and stick to my highest-conviction trade idea.
If you’re struggling with timing your trades or just have trouble coming up with ideas, you’ll want to check out Rooster Report.
It’s the 1 trade idea that I believe will grow my account, sent out to subscribers EVERY morning.
For those who missed my last grand slam trade…
I was able to pull down nearly 200% gains from MARA after it signaled unusual dark pool volumes in the days before a major news announcement.
And recently… more unusual dark pool volumes are starting to come across my scanners.
That’s right… just like MARA, I am getting tons of huge trades going off in stocks that have been quiet just the other day
So what changed?
Well, whatever it might be from, it sure caught the interest of Wall St. and the traders who are hitting the dark pools as hard as they can to secure the shares they want to trade.
And this is the same action that predicted the price jump in MARA days after the dark pools signaled this would happen.
Want to know what stock this is?
Dark Pool Profits
Dark Pool Profits is focused on identifying unique and obscured trading activity that is done in one of the most secretive markets.
This is so secretive that nobody can trade in it without some serious capital and being registered as a hedge fund.
Now we don’t need to worry about secrecy and anaymonty with Dark Pool Profits… Since I monitor these markets and find the trades that stand out as suspicious.
And once a trade hits the tape it’s considered public information…
Meaning you don’t have to worry about insider trading violations!
So let’s take a closer look at how unusual dark pool trading activity gave away the move in MARA.
Unusual Dark Pool Trading Activity
Let me explain how this works…
It’s important to remember that Dark Pools come in two different flavors:
- A market for insiders or people “in the know” to place trades discreetly without impacting the public markets
- A market for hedge funds and large institutions to execute trades on stocks they want to buy aggressively
Now, these are two reasons why monitoring the Dark Pools is so lucrative.
It boils down to just two main things…
Greedy investors and supply and demand!
Now… let’s take a look at what happened to MARA last week that spiked the stock more than 450%!
MARA – Did Somebody Know Something?
So… I think someone might have known something.
On 7/22 I noticed a huge spike in volume in the Dark Pool markets
It all started with this seemingly random and non threatening alert that triggered.
But what does it mean?
It’s telling me 5 pieces of critical information about this stock on the dark pools.
Let me break it down for you:
- Last: MARA is trading at $1.03 at the time of alert
- DPVolume%: Dark Pool volumes are surging to more than 211% greater than it’s 20 day average
- DPMoney%: Dark Pool money spent is over 200% greater than it’s 20 day average, meaning this volume is real size
- TradeCnt: Total trade count on this stock is almost 10k unique trades. While this doesn’t mean much at first glance, it’s telling me that it’s actively trading and not a small stock giving a false signal.
What did it look like on the charts?
To the average trader without monitoring Dark Pools, 7/22 seemed like an average day
Even though the charts don’t show it, it was one of the largest daily volumes for Dark Pools!
And traders were buying this stock up all week…
Here’s what happened… just check out this insane price action shortly after patent information was publicly announced!
Now that you see the power of the Dark Pools and how I spotted MARA from my scanner…
Let’s take a look at what else has come out of the scanner recently
What Do I See In The Dark Pools
Now, I know you might be asking…
Aren’t the dark pools always active?
And yes, they are…
But the real edge comes in the way that you pick through the noise.
And today if you were able to see the Dark Pool scanner light up around 9:30 to 10am, you would have caught this huge move higher in HX.
And if you were able to identify the trade right at 9:40 when it hit the scanner…
Those are some huge gains right in the middle of the day for this stock!
EMAN – Can It Be The Next Big Winner
Now let’s talk about another stock that I saw and took a position on this week.
I’ve spotted unusual Dark Pool activity and heavy volume in this seemingly sleepy stock.
Let’s take a look at this stock a little closer.
As you can see, EMAN has had some interesting volume spikes within the last few months.
But those volume spikes are in the regular markets… How about the Dark Pool Markets?
My custom software shows similar activity in exclusively these markets as well.
Similarly, EMAN has had some interesting volume spikes in the dark pool markets as well.
Which makes me question… who or why would anyone go out of their way to trade in these exclusive markets when they can just trade in the public markets?
Do they know something about EMAN that I don’t know?
Now whoever jumped into the dark pool market last month must have known something good was coming for this stock.
It was just a matter of time until the news broke.
But that’s ok if it moved up from there because it’s still showing some amazing volume and this stock is added to my watchlist and maybe something I will trade in the days ahead!
Thanks to a Dark Pool scanner, I am able to search for and find hidden orders that hit a non-public market.
Which allows me to find the trades that the insiders are taking and putting huge money on at their exclusive clubs.
But this is usually impossible to see, but a scanner makes the ability to monitor what the insiders are doing in these dark pools just a little easier.
And this is an exclusive service built specifically for monitoring this hidden action that I want to share exclusively with you.
So are you ready to be a part of this wild action?
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