As we come to the close of a hectic quarter… traders are still trying to put the pieces of the puzzle together to gear up for the second quarter of 2020. For the most part, it’s been pure chaos — as the coronavirus pandemic continues to damage the global economy.
I take pride in being known as The People’s Trader around here… so I opened up a discussion with my readers, and since it’s been a tough time for many of you out there… I want to try my best to help as many people out as possible.
As I looked through all the responses with my team, I found one common question: what’s going on in the market?
Well, at one point, the S&P 500 (SPY) was down 35% from its high… and the velocity of the move was unprecedented. If you just take a look at the heatmap for stocks (for Q1 2020), from Finviz, you can see there are very few stocks that are up.
Today, I want to walk you through exactly what’s going on in the market… but more importantly, how it directly affects you.
Of course, if you’re an investor… It’s been a tough environment. However, If you’re a trader like myself, this is an exciting environment. The moves I’m witnessing are anomalies, and there are plenty of opportunities to take advantage of.
Even though the market has been decimated, there have been pockets in the market that have been quietly skyrocketing… which is exactly how I’ve locked in more than $450K in March alone!
How have I been able to do what… and what the heck is going on with this market?
Right now, there are a few large catalysts on the table… and I don’t believe they’re going away anytime soon.
As I mentioned earlier, the coronavirus is one catalyst on the table. It’s become widespread around the world, especially in large cities such as New York, Los Angeles, and other densely populated areas. In order to stop the spread, governments have advised citizens to practice social distancing.
Of course, if people are able to freely move, it damages the economy and specific companies. This has led to the one thing market participants hate: uncertainty.
The uncertainty led to panic selling… but that’s created opportunities for me. You see, the U.S. government passed a $2T bill, and I expect things will look up for the market very soon. However, there’s one thing to be mindful of in this environment… timing.
When it comes to fast-paced markets… timing is everything. It’s so easy to get caught up in the noise and buy stocks randomly — and get whipped by the market. However, I’ve found success in remaining patient and stalking for the right opportunities.
For the most part, I haven’t changed much with my trading style.
I’ve found that if you look for stocks with catalysts and develop a trading plan that includes simple buy, stop-loss, and target zones… it helps remove some of the emotions and time trades to near perfection.
That’s exactly what I’ve been doing in this environment — leading me to more than $450K in profits in March!
In order to prove to you that doing something as simple as looking for catalysts and writing down your buy, stop-loss, and target zones… I want to walk you through some of the ways I’ve been able to navigate this market with ease.
With the whole coronavirus pandemic, there are plenty of names I keep on my watchlist. Why? Well, it doesn’t seem like that catalyst is going away anytime soon.
Inovio Pharmaceuticals (INO) is one that remains on my list. A few weeks ago, INO actually took a hit and I figured it could catch a bounce. Here’s the chart I was watching in INO.
On the hourly chart, INO took a big drop… but it found support right around $5. With the massive gap down, INO had to potential to run up to $6.80.
So what did I do?
I planned accordingly. I waited for INO to start popping before I bought shares. My target zone was in the mid $6 area or higher… and I would stop out if the stock broke below the support level (the blue horizontal line).
So you could’ve had a plan like this:
Catalyst: Coronavirus stocks got hit today, but they could bounce since there is still news coming out… and I believe they could bounce.
Buy Zone: $5.50 – $5.95
Stop-Loss Zone: $5.00
Target Zone: $6.50 – $7.25
Pretty simple right?
I was able to pick up 12K shares of INO at $5.90 at 11:11 AM the day I traded it…
And guess what happened?
Just about an hour later, I was able to take my profits off the table!
In this market environment, it’s not only about getting into the trade… It’s also about knowing when to get out. If you overstay your welcome, it’s very easy to give back all your profits… and turn a winner into a loser.
For the most part, when it comes to my trading strategy, I like to keep it simple. Just take a look at the daily chart in CHF Solutions (CHFS).
With this specific chart, CHFS had support at $0.30, and had the potential to break out above $0.50 (a key resistance level).
The thing is, the chart signaled the stock could bounce… but I needed to find a catalyst. Guess what?
CHFS announced it was holding a conference call about its product and how it was being used in Italy to help with the coronavirus. This was just the following day after I spotted the potential trade.
With this specific setup, all of the buy, stop-loss, and target zones were pretty clear. However, I knew I wanted to be out of the trade before March 17 at 11 AM EST.
Shortly after I got into the trade, CHFS actually got to my target. However, I didn’t take my profits off the table because I thought it could have gapped up the next day.
Of course, as you can see, I should’ve taken off when it was in my target zone. However, I’m not too mad because I was still able to lock in a profit.
If you’re struggling in this market environment, don’t beat yourself up. I want to show you that if you can make sense of the market, there are money-making opportunities out there. For a limited time only, sign up to hear me, as I address The State of the Market
Attending this event could easily change the way you look at the current market landscape and provide you with a trading edge amidst this volatility.
Who would’ve thought?
The shortest bear market for the Dow in history is “over”, according to the talking heads at least. However, despite the S&P 500 rallying by more than 10% last week, it’s still more than 20% off its high.
The coronavirus is devastating one economy after another, and traders are still trying to put the pieces of the puzzle together… as they wonder whether they should “buy the dip” or “sell the rip”.
To help as many people out as possible, I opened up a discussion to try to figure out where traders are struggling… and it seems like many are having a tough time generating trade ideas.
Of course, you could listen to all the talking heads on the tube for ideas. However, I won’t be doing that — instead, I’m focused on what I believe is the number one indicator out there.
What indicator am I referring to?
In this market environment, it helps to have a few tricks up your sleeves. For me, one of my favorite indicators is order flow. In other words, I’m tracking where some of Wall Street’s largest players are shoving their chips.
More specifically, I’ve turned to the options market to try to figure out where the elite are placing their bets. That way, when I see a juicy trade setup, I can take advantage of and potentially profit alongside them.
How does this work?
Well, it’s something known as unusual options activity. Don’t let that term scare you off, because I lay out everything you need to know about it in my eBook Dollar Option Trader — you can grab it here for absolutely free (while supplies last!).
In the meantime, let me walk you through a quick example.
Stock ABC trades 1,000 options contracts per day, on average. However, one day, it traded 8,000 calls. That would be an example of a stock option that saw unusual options activity.
However, if you’re following the order flow… it’s all about thinking in relative terms.
For example, 5,000 contracts on a single order in the S&P 500 ETF (SPY) might seem like a lot, but it’s not when you consider that SPY trades millions of options contracts on any given day.
If you’re able to decipher options activity, it could provide an edge like no other.
The idea is simple.
Hedge funds and other professional traders often use options to express their opinions.
So, whenever they, you, or me, place an options order it gets reported to the Options Price Reporting Authority.
In other words, we can find out exactly what some of the largest players are doing. We don’t know who’s behind the trade, why they’re getting in, or anything else really.
The only thing we do know is someone with massive financial backing is getting into the trade. The challenge then becomes trying to dissect why they’re doing it.
For example, a trader could come out and buy a massive amount of puts. To the naked eye that might appear like a bearish bet.
It’s similar when there’s massive call buying in a specific stock.
As you can see, it isn’t black and white, and there is a lot of noise you need to filter out.
You’re probably wondering, Kyle… does this actually work?
Let me walk you through a real-money case study from a few weeks ago, during one of the worst bloodbaths in history.
Of course, during the first few weeks of March, we witnessed some wild action in the market. Traders were just starting to realize how the coronavirus was impacting the global economy, and fear was rampant in the market.
However, I was able to remain calm, cool, and collected because I was relying on my simple-to-use indicator.
One day, I noticed 766 NVTA April 17th $15 Puts swept for $0.45 a piece — that was a $34,470 bet. They were purchased when NVTA was trading above $18 per share!
That meant this put buyer was expecting NVTA to drop below $15 on or before the expiration date (about a month away at the time). So I decided to place the stock on my watchlist.
On March 10 at 10:34 AM, I actually pulled up NVTA, and noticed that the stock was relatively weak against the broader market — SPY was actually catching a bounce that day.
So I bought 50 NVTA March 20 $15 Puts at an average price of $0.61. That trade cost me about $3,050 to put on.
Well, guess what happened just 2 days after I entered the trade?
Those NVTA puts were going for $2.00! That $3,050 bet turned into $10,000, or approximately $6,950 in real-money profits!
In just 2 days, I was able to lock down a 233% winner.
The thing is, we see this type of action frequently in the markets… and if you want to start to take advantage of these options plays, then click here to claim my complimentary eBook Dollar Option Trader — in it, you’ll find out EXACTLY how the “smart money” uses options to generate insane returns.
The market has been a tough read for market participants, as many are still trying to figure out exactly how much the coronavirus has damaged the economy. Over the weekend, traders will try to sink their teeth into the $2 trillion virus bill and the implications on the market.
Of course, that’s a tough task… and we simply don’t know how the market is going to open up come Monday morning.
Instead of trying to figure out the overall direction of the market, I’ve been tweaking one of my profit buckets — my Dollar Ace strategy.
You see, over the last few weeks, I’ve noticed some wild bets in the options market… trades that one would think are pure gambles. However, shortly after these bets are placed, they actually move in their favor.
Wall Street’s elite players are capitalizing on their best ideas amidst the coronavirus crisis… and I want to expose what it is they’re doing to eke out massive returns.
Stocks finally caught a bounce this week, as the market raged on Tuesday — as the S&P 500 surged by 9.3%… while everyone and their brother were focused on the relief rally, I was zoned in on the options market.
As I was scouring through potential trades, I saw one trader come in and place some heavy PUT BUYING activity — they didn’t look like a hedge either.
In fact, it reminded me a lot about something I noticed a few weeks ago—aggressive put buying in Chimera Investment Corporation (CIM).
Someone came in and bought 10,000 $16 puts expiring on June 19th for $0.70 per contract.
That means they spent $700,000 (excluding trading costs) in a long-shot trade…
As you can see, the stock was trading at around $18.67 on March 11th.
Fast-forward to March 18… and CIM hit a low of $6.52. Heck, even when the market was rallying on Tuesday, CIM traded lower… and those put options are worth more than $9 a piece.
In other words, that bet could have been a 10 bagger (the trader could’ve made more than 10X their money if they took profits).
That’s why I believe it’s advantageous to follow the order flow in the options market… because it could help us uncover potential trading opportunities.
Don’t believe me?
Let me walk you through a trade example.
There’s one thing you should keep in mind about the options market in this environment… the bid-ask spreads could be wide, so it helps to remain nimble. In other words, being able to move swiftly and understanding when to take profits… and not taking on massive position sizes.
For the most part, any trade I get into, I’m properly risk managing and I’m not aggressive like these Wall Street traders. Basically, if things get really sour — one trade won’t ruin me.
Now, you know the name of the game… following the smart money, and I want to walk you through a quick trade I had in MRNA.
I bought puts in MRNA and let my clients know about my moves. Basically, I saw some interesting activity and figured that there would be some profit-taking after the stock experienced an insane move.
Just take a look at how far and fast MRNA moved in just a matter of a few trading sessions. At some point, I expected the stock to pull in as traders would take profits.
The move happened… and those options EXPLODED!
Pretty simple, right?
If you understand how to follow options activity, trading becomes a lot easier. It may sound like a daunting task at first… but don’t worry, I’ve outlined everything you need to know in my eBook Dollar Option Trader. Click here to claim your free offer!