With the start of Q4, I think it’s important to take a step back and talk about my plans to attack the market from now until the end of the year, as well as 2021.
That’s why I conducted a special live training session yesterday to set the stage. If you missed out, click here to watch it.
For the most part, I want to hone in on my strategies and look for money-making opportunities in which I have a definable trading edge.
I want to go over what my focuses will be and provide you with some options trade ideas I’ll be keeping my eye on.
Here’s What I Plan To Do To Evolve As A Trader
When it comes to large-cap stocks, I’ll have to be a bit more creative. You see, these stocks are pretty expensive and it makes sense to use options.
Take a look at DraftKings (DKNG), which I mentioned to traders in this live training session from earlier today.
With this setup, I mentioned how I was watching the 8-, 21-, 34-, 55-, 89-period exponential moving averages (EMAs). It’s really transformed my trading game when it comes to trading large-cap options.
The reason why those specific moving averages are so crucial to understanding how they is that they can actually identify support levels, in my opinion.
Take a look at how there are pullbacks into key moving average levels.
For large-cap momentum stocks, that’s key. You see, if I can find a key support level, I can structure my options trades around that.
I can identify the strike price more easily if I know where I want to be long, then I just have to identify which expiration date I want to go with.
Depending on how confident I am with a specific setup, I may look to buy calls or puts outright (depending on whether I’m bullish or bearish)…
Or I can look to sell spreads.
What I mean by that is collecting premium in order to establish a bullish or bearish opinion.
For example, let’s say I’m bullish on DKNG and don’t believe it can break below $50 (where the 21-day EMA is).
So what I can do is sell the $50 strike price puts, while simultaneously purchasing the $45 strike price puts both expiring two weeks from now.
Over time, I’ll be able to collect premium and just as long DKNG stays above $50, I’m in the clear. Of course, the upside is limited with this strategy. However, I can improve my odds of winning with it.
Here are some trades I’m keeping an eye on:
- Beyond Meat (BYND) $155 puts were active (I want to see how the stock trades, and if there’s heavy demand I might look to establish a bull put spread).
- I’m also looking at AAPL, NVDA, CRM, LULU, and ZM for potential bull puts. Most are above all EMAs.
If you haven’t done so already, make sure to check out my training session from earlier this morning.
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Although stocks popped off in the morning session, there’s still some uncertainty on the next round of stimulus. For the time being, I’m going to trade the same way I have been.
That means I’ll be laser-focused on hunting down small-cap momentum stocks.
There’s just so many money-making opportunities, and I just can’t afford to miss any of them. I mean just the other day, I uncovered a massive move in PLL using what I believe to be simple techniques.
If you missed out on the trade, I walked through the techniques I utilized to uncover the move in PLL before the stock took off in the video lesson above. Click here to watch it.
I want to walk you through two specific patterns I believe will work extremely well in this market environment, whether you’re trading small- or large-caps…
And how they helped me uncover two massive winners this week.*
How These Patterns Helped Me Unlock Two Massive Winners
In this market environment, I’ve noticed small-cap momentum stocks have been popping off every single day more than ever.
It makes total sense to me. I mean when there’s uncertainty in the market, many traders turn to small-cap momentum stocks because they typically move to the beat of their own drum… and there’s a lot of action.
Of course, there are specific patterns I utilize to signal when demand can pick up.
Timing these moves is pretty easy for me.
I mean take a look at PLL the other day.
Here’s what I sent out to Jason Bond Picks Subscribers on Monday in the pre-market.
Okay so for today, PLL above $30 is on watch. It’s screaming higher on news with TSLA and I imagine it could run to $50+ if this bull flag I’m seeing premarket holds up. If it wants to come into $24 today, I’ll watch for action off that level too.
The pattern shown above is known as the bull flag / pennant pattern. With this specific setup, what I’m looking for is a stock that sustained a large move, and starts to trade in range.
That’s exactly what PLL did. I just wanted to get a good price. So I realized how the $30 level could still hold, and PLL would still be in that consolidation area.
So the closer I can buy to the bottom of the consolidation area (it’s also a key support level), the better my risk-reward.
I was able to purchase shares at $31.67 at 10:21 AM ET on Monday, and not too long after, the stock exploded and hit a high of $54.50!
I was able to lock in a portion of my position for a near 60% gain on those shares.
So if you’re not looking for the bull flag pattern right now, I think it’s important to understand how to utilize it because it can help to improve your trading.
If you want to learn how to spot momentum patterns, click here to attend this exclusive training session.
Next up, another pattern I want to bring your attention to is the overnight gap and how to play it.
Check out this chart in Houston American Energy Corporation (HUSA).
The stock gapped up, and typically, if it pulls in there’s support around where the open price is. That’s what I noticed in HUSA.
So when the stock pulled into where the stock opened around, it was a favorable risk-reward setup. You see, there were clues that signaled HUSA could pop off.
First, the stock pulled into that lower blue horizontal line twice and it held up. That signaled there was demand fo the stock.
Thereafter, the lines above signaled key resistance levels, so that allowed me to spot target areas.
Well, the stock took off and got to the resistance level right around $5, and here were my sells.
My entry was at $3.26, so this was a pretty nice win for me.
That specific pattern is known as the gap, hold and go.
Listen, my patterns have been spotting so many money-making opportunities in small-cap momentum stocks.
Right now is the time to learn how to trade momentum stocks.
With the way the market has been acting, I think it makes the most sense to buy on dips unless the price action changes.
Of course, there’s the debate tonight, but I believe the catalyst that most traders will be focused on is the potential stimulus.
When it comes to large-cap momentum stocks, there are actual risk-defined strategies that allow you to establish your bullish or bearish opinion.
Especially in this market environment, I believe it’s important to keep my options open because it can help stack the odds to my favor.
Let me show you some cheaper alternatives to “buying the dip”, and why I believe it makes sense to consider these strategies if I find a large-cap momentum stock that can take off.
Alternatives To Trading Large-Cap Momentum Stocks
Listen, I get it… large-cap stocks are expensive. I used to believe that because they’re expensive, I couldn’t join in on the action.
However, there are actually cheaper alternatives out there.
What do I mean by that?
Well, options provide leverage and there are plenty of unique ways to utilize them to make money.
For example, on Monday, I sent this out to subscribers.
Nice wins on AAPL to end last week. I’d arrived to that trade a week or so too early or it’d been a monster win. Once AAPL starts trending though, which is probably happening now, due to the iPhone rumored in October, I’ll be jumping right back in. AAPL is at about $115 this morning so I left a lot and I mean a lot ($160K potential) on the table but because I arrived to the trade too early, I felt with a week to go on the big position it was too risky for my appetite. Bottom line, I was right but slightly miss timed the entry and therefore got a small $28K win versus what wouldn’t have been significantly more.
AAPL at $112-$110 on any dips this week interests me, AMZN $3100 / $3190 and TSLA $410 / $400 as well. Bull puts across the board as speculation over a stimulus deal is favorable right now.
That said, I don’t want to chase moves, but I am mindful of a trend starting so I don’t want to be super stubborn about waiting for a dip either. I will take smaller positions and try to run with the bulls here as long as they can control the trend. A big thing that’s happening this morning is the QQQ is taking back the 21 EMA, that’ll be really important to monitor for decision making.
So let’s use Apple Inc (AAPL) as an example. I want to look around the $110 to $112 area for a potential play to the upside.
You see, around that area, there are key moving averages. The 8-day exponential moving average (EMA) is right around $112, and the 55-day EMA is just under $110.
Since I believe that area can hold up as a support level, I want to get in around there.
Of course, since the stock is above $100 a share, it’s pretty expensive. The simplest alternative is to buy calls. The deeper in the money (ITM), the more expensive. The opposite is true for deeper OTM options.
So let’s say I think AAPL can get to $125, I might look to buy the at-the-money (ATM) calls because they’re cheaper than the deep ITM calls, and the odds are better than deep OTM calls.
The thing is, selecting strike prices and target areas, as well as expiration dates, can be a little tough if you’re new to the options game.
Another approach would be to utilize a bull put spread.
This strategy actually involves selling OTM puts, and simultaneously purchasing deeper OTM puts (to hedge the short put position).
I get it, it’s tough to grasp at first.
The way it works is, I identify areas in which I believe a stock won’t go below within a certain time frame.
For example, let’s say I don’t believe AAPL can get and stay below $105 by next Friday.
Well, I can look to sell the $105 puts, while simultaneously purchasing the $100 puts.
This way, if AAPL stays in range, runs higher, or even drops a little… I would be in a position to win.
Over time, the time decay would eat at those puts, and I would collect a premium for that. The closer AAPL gets to expiration (if it’s above $105) they would lose a lot of value… and I would collect a bulk of the premium.
Depending on my risk tolerance and conviction on a specific trade, I might look to buy calls or use the bull put spread, if I want to “buy the dip”.
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