Well, Tesla Inc (TSLA) is set to host its annual shareholder meeting on Sep. 22 to showcase unveil “mind blowing” battery technology.
It’s one stock everyone and their brother want to get in on.
However, a $400+ price tag is a little bit too steep for many. With the insane volatility in TSLA, the options can get a bit expensive as well.
When I notice bullish momentum patterns in TSLA, I don’t say to myself… The stock is too expensive and the options premiums are so juiced, I’m gonna move on to another trade.
Instead, I scout out the “sucker bets” in TSLA.
I try to establish a bullish position by taking advantage of the low-odds bets in the options market.
That’s how I locked in a ~$17,200 winner in TSLA, without buying calls or shares.*
Allow me to show you the steps I took to uncover this winner…
I’m a firm believer in using chart patterns to hunt down stocks…
When I combine that with options, I can stack the odds to my favor.
You see, rather than buying options, I’m using a bull put spread (as the name suggests) to express a bullish opinion on a specific stock.
That just means I’m selling puts with a strike price I believe a stock will have a tough time breaking below, and simultaneously purchasing deeper OTM puts to hedge my position.
So with TSLA, I realized how there was demand right around the 161.8% Fibonacci extension.
So here’s what I sent out on Thursday.
WWF: TSLA bull puts. sold sep 18 (tomorrow) 425 / 415 put spread for 4.30. risky trade, no room for error.
The following morning (spoiler alert if you saw the chart), TSLA exploded and those options were deep OTM.
Here’s what I sent out on Friday morning.
TSLA is trading in the $440’s and I think it’ll stay strong today so I’ll look to go for max profit here, taking the position off when it’s under $.50, hopefully close to $0. TSLA battery day is next Tuesday and it’s very likely to have a bid headed into that, which is what we’re seeing this morning.
Here was my exit.
WWF: booked TSLA bull puts at $.90 +$17,200 or about 80% of the premium.
Don’t want to babysit this all day for the $4,000 remaining premium. If AAPL doesn’t come around, this will offset most of that loss, allowing me to have a really big week afterall. If AAPL comes around, it’ll be a monster week. It’s early so we’ll see.
Gearing up for new ideas for next Friday expiration.
Uncovering “sucker bets” in high-flying stocks and taking advantage of them is one of my favorite ways to attack the options market.
Let me show you my techniques to help me stack the odds to my favor… and put myself in a position to win in three different scenarios.
*Results presented are not typical and may vary from person to person. Please see our Testimonials Disclaimer here: https://ragingbull.com/disclaimer
W ouldn’t you love to know when exactly to buy or sell securities to make the highest possible amount of money? While you can’t ever know with 100% certainty what a stock’s going to do, there are some excellent tools out there to help you analyze trends and make data-informed investment decisions. Learning to identify double bottom patterns on stock charts is one such tool.
Image via Unsplash by Aditya Vyas
A double bottom is a specific technical analysis pattern found on stock charts. This common pattern is a type of reversal, meaning its appearance suggests a momentum reversal for the security in question. It’s called a double bottom because the daily tracking points on the graph create a W shape, with two bottom troughs, before rebounding. Investors can use double bottom trends in both forex and equity markets.
Double bottoms usually signal a stock’s value reversal and the start of a positive, upward trend. This pattern follows a downtrend, either major or minor. Investors use double bottom indicators as a tool for determining when exactly they should buy a company’s stock. If purchased at the right moment, there’s a strong chance to make money in the intermediate or long-term market.
Another common reversal pattern is the double top, which is the exact opposite of the double bottom trend. Rather than creating a W shape, a double top creates an M, with two peaks just before a downslide in value. Double tops are indicators of bearish reversals and help investors know when to sell their stock to avoid losing money.
Double bottom charting patterns have a very distinct visual sequence, which can make them easy to spot if you know what to look for. However, patience is a necessity when looking for true double bottoms. Follow these steps to ensure the pattern you see emerging truly indicates an upward reversal.
If you think you’ve identified a potential double bottom on a security’s stock chart, your first task is to identify the prior trend. Look for a steady decline over the previous months to confirm there’s a substantial downward trend ripe for reversal.
Determine the bottom of the downward trend by marking the very lowest point before the first reversal starts. This spot marks the first of the two bottoms. You’ll want to know the specifics of the stock’s valuation at that point so you can compare it to the second bottom.
Once you’ve identified the bottom of the trend, or the first trough, mark the first peak. This will be the first significant upward valuation post-downward trend. You’re looking for a 10% to 20% advance from the first trough, ideally. Take note of the price point and volume at the height of the peak, since you’ll need to compare this data to that of the second peak.
After the initial reversal, in a double bottom pattern, the stock’s value will drop again. Mark that second trough and compare it to the first. In an ideal double bottom, the second trough should be within 3% to 4% of the previous trough.
One of the key indicators of a potential double bottom is a substantial increase in volume coming out of the second trough. If you see that second reversal paired with an upswing in share purchase numbers, that’s a great sign you’ve got a true double bottom pattern on your hands.
Before you make any investment or strategy choices, you’ve got to wait for the resistance break. Once the second reversal pushes past the first peak (and purchase volume remains high), chances are really good the security will continue its upward trajectory.
After the stock has pushed past the resistance break, it’s time to consider making an investment move. Historically, passing the resistance break in a double bottom is a good signal it’s time to buy a long-term holding.
Ideally, you want a gap of at least four weeks between each trough in the double bottom. This pattern is a long-term developer. You should use daily or weekly charts rather than intra-daily charts to look for the emergence of the pattern.
In addition to tracking the double bottom and ensuring the peaks, troughs, and volume all indicate a positive reversal, there are a few other signals you can assess to ensure a low-risk investment move.
Y ou can identify double bottom patterns and benefit from their guidance on stock charts. There are lots of different stock chart styles out there, but the easiest ones to find a double bottom pattern on are line charts, bar charts, and candlestick charts.
Line charts are the simplest and most common type of stock chart out there. Each line chart represents a single security’s valuation by time. The x-axis represents the date or time, while the y-axis represents monetary value. The points plotted on the chart indicate the corresponding security’s value by day, with a line connecting each point for an easy visual read of the stock’s trends over time.
You can easily see a double bottom pattern form on a line chart — the lines connecting the plot points will create the pattern’s signature W shape.
Bar charts are slightly more complicated stock charts than line charts, but they can also be more useful to investors. They’re also called Open High Low Close, or OHLC charts, because they provide four data points — the stock’s opening price, highest valuation, lowest valuation, and closing price — all in one bar on the chart.
The bars themselves have three parts: a vertical line, and two much smaller horizontal lines. The top of the vertical line indicates the highest price point the stock hit during the day. The bottom indicates the lowest price point for the day. The horizontal line extending from the left of the vertical line indicates the opening price for the stock, and the horizontal line extending from the right side of the line indicates the closing price.
You can use bar charts to identify double bottom patterns, but you might have to scrutinize the graph a bit more closely than you would with a line chart, simply because there’s more data present on the chart to parse through.
Candlestick charts are incredibly similar to bar charts. Their set up is identical but for two elements — rather than a vertical line, the candlestick chart’s bars are open rectangles, and the opening and closing lines are vertical, extending from the top and bottom of the “candle,” rather than horizontally. Candlestick charts use colors to indicate whether the security made or lost money overall by shading the inside of the bar. Usually, green or white shading is positive valuation and red or black is negative.
Like with the bar chart, you can identify double bottom patterns here, but look closely to ensure you can see the patterns clearly through all the included indicators on the graph.
The biggest risk factor in using the double bottom indicator is the misidentification of a trend. Misreading the pattern could result in a poor investment decision. For that reason, it’s best to remain patient and wait until you have all the identifying elements of a double bottom before making any moves. Look at weekly charts to see that predictive W shape rather than intra-day charts which will have much more volatility.
Reversal patterns are super useful tools for identifying powerful investment moments. A few others to know about include:
Double bottom charting patterns are a useful tool for those looking for intermediate to long-term investment options. Stay patient and watch the pattern emerge over several weeks before taking any action for a better chance at a successful maneuver.
There’s one question I get all the time: What’s your favorite options strategy?
I like to keep things simple and try to stack the odds to my favor.
I’m not talking about buying calls and puts outright because the odds can be against you.
You see, when you buy options, you would need the stock to move to your favor and the implied volatility to pop by the expiration date. Additionally, time is working against you, when you’re an options buyer.
To add to that, sometimes, the odds of winning on an options trade (if you’re long) can be less than 10%…
So what do I do instead?
I take the opposite side of the low-odds bets, which helps me improve my chances of winning… and the strategy I utilize allows me to profit in three different scenarios.
How does it all work?
Let me show you with a case study in my ~$6,100 winner in CRM using the strategy.
Here’s what I sent out on Monday at 8:45 AM.
CRM above the 21 EMA around $240 interests me for bull puts. Earnings winner with some retracement into the gap no doubt was accelerated from overall market weakness. Like my quick $15,000 win on ZM last week, I think something similar here is possible.
The stock held up pretty well at the 21-day exponential moving average (EMA), and that meant there was demand for the stock.
Since Salesforce (CRM) is an expensive stock, a more efficient way to trade them is to utilize the bull put strategy.
Around 11 AM that day, I entered this trade. CRM bull puts. sold 9/18 CRM $247.50 / $245 vertical put spread for $1.10, looking for next Friday too.
That meant I was bullish on CRM and believed it could stay above $247.50.
Well, here’s what happened with the stock.
CRM made a move, and I was at my profit target and it was risky to continue holding them…
SO here’s what I sent out on Wednesday.
Booked CRM bull puts at $.49 from $1.10 entry or $.61 or $6,100 profit. over 50% of the premium. Just playing it safe here ahead of the Fed, though I do believe markets will go up, this trade has met my goal and I recognize nobody knows what this afternoon will bring, so I’m taking the bacon.
So I used $14,000 to make $6,100. You can see why I love this strategy. Where it hurts is when I don’t manage a loser well enough and take max loss … because 1 max loss wipes out like 2 of these wins. Management is key and I feel I’m getting better at that all the time. As I type CRM broke topside so this is a bigger win now but oh well, I cashed in the win.
In just a matter of days I was able to lock in a ~$6,100 winner.
Of course, you’re probably wondering how you can develop the skills to take advantage of the low-odds bets and potentially win in three different scenarios…
All you have to do is attend this exclusive training workshop