Despite the worst jobless claims report in history, the market went on to have the best 3-day run since the Great Depression.

But what now?

Stocks went from severely oversold to now being overbought?

The beauty behind my strategy is that I don’t have to guess where the market will be over the next few days, weeks, or months.

I’m just trying to get it right today.

And thus far:

My Daily Deposits is returning a whopping 100%+ this week!

…I’m continuing to lock in gains even if I pick the wrong direction.

All this back and forth volatility is giving Daily Deposits some of the best opportunities.

 

 

How does the Trade of the Day do it?

These returns are from a custom five-step process designed to pinpoint momentum in the markets.

Today I want to share with you that process.

It’s done wonders for my trading, and I believe it can do the same for yours. 

 

Daily Deposits

 

The strategy that is used at Daily Deposits is focused on intraday momentum by anticipating the markets based off of a custom set of pre market analytics.

And why even bother holding stocks overnight when you are able to crush the markets only trading intraday!

Just by focusing on a few key indicators and the pre market trading session you have the opportunity to make triple digit returns week after week.

In fact, even on these last two huge days higher the system pinpointed perfect opportunities to make short trades.

So let’s take a look at exactly how I got my trades off to capture huge profits over these last few days.


Pre Market Analysis

 

The first step in finding trades is searching the pre market for clues as to what the market may do after the bell rings.

Daily Deposits is based around a set of indicators that have been put to the test in one of the hardest to trade markets in history.

And the momentum trading strategy that I have developed and actively trade has been crushing the markets.

The pre market is broken into 3 key parts:

  1. The global overnight outlook
  2. Sectors for the US Markets
  3. Daily chart on SPY with Technical Analysis reviews

 

But those are 3 of 6 key premarket indicators I review in order to get a better understanding of what’s about to come.

In order to get the best understanding of what’s exactly going on I use 6 pre market indicators to get a jump on the markets.

And I always start with a global overview and analysis of the world markets!

 


Source: www.finviz.com

 

And to narrow your search, it’s best to focus on only a few time frames… such as the 5, 10 and 15 minute charts.

Let’s take a look at how to correctly use these three pre market momentum indicators to determine the direction of the markets before each trading day.

 

3 key momentum indicators:

  1. Price action and volume
  2. Moving averages 
  3. Volatility analysis

 

The Pre Market Momentum Indicators

 

Momentum is all about catching the right stock, at the right time, and determining the right direction it’s going to take.

And it can stop and change direction on a dime without much warning.

By using these momentum indicators you are able to pick swings and breakouts easily.

So let’s take a look at each one of these indicators and how to use them to determine the direction of the markets.

How it works:

  • Understand the major trend based on the highest timeframe first
  • Use lower time frames for immediate trend analysis
  • Confirm momentum using moving averages, TTM and volume analysis

Here is a small sample of what Daily Deposit premium members receive every morning as I break down the markets.

 

 

Now let’s take a look at how the charts break down and give us the trade signal for the Trade of the Day.


Pre Market Chart Review

 

Here is a chart of the SPY in the pre market session.

 


Source: Thinkorswim

 

By looking at the 5 minute chart before the market opens you are able to learn a lot about how the traders are thinking. This analysis can give you a clear picture of what direction to trade the markets in the day ahead.

Here are the key factors that we saw in the SPY’s trade for today.

  • The long term trend is neutral
  • The short term trend is bearish
  • Price sold off twice when extended above the upper Bollinger Bands
  • 10 MA < 20 MA
  • Momentum was signaled to be coming soon with the TTM_Squeeze showing red values before the open

 

So before placing any trades it is always best to analyze what these indicators are telling you about the stock.

From the analysis above, we are going to be looking to place a short trade in the SPY.

Note: It’s always a good idea to lay out where you believe the nearest stop levels are to place trades or stop prices. Then once the markets are open you can use these information to help guide your trades.

 


Source: Thinkorswim

So looking at these levels we will want to look at going short the SPY at or near those two resistance levels as we watch the price action once the markets open.

Now let’s take a look at the trade breakdown…


The Trade of Day

 

Now that there’s understanding of pre market price action and key resistance levels it’s time to select what options are going to be traded.

One approach to contract selection is to use weekly or monthly options. It’s important to make sure that they are more than a few days until expiration but less than two weeks.

Pro tip: At-the-money or out-of-the-money options are always selected, based upon the price of the contracts.

Now let’s take a look at where to find the options contracts that were selected to trade.

At the time of the trade, these options had 6 days until expiration.

 


Source: Thinkorswim

And looking at the highlighted box on the right you can find the puts and the out-of-the-money contract that was selected for the trade.

For members of Daily Deposits here’s the signal that was alerted to them.

 

Now it’s best not to react immediately at the open.

It’s very common for options to move wiIdly at the open and it’s best to wait for things to settle down.

Once they do it’s highly likely that you can get a better price of the option you want to buy.

Let’s take a look at the chart of the options prices and see how this played out.


The Trade:

 

  • Price moved above upper Bollinger Bands
  • Price closed significantly above Resistance Level 1 
  • Price traded directly into Resistance Level 2 
  • Price reversed above the Bollinger Band at Resistance Level 2

 



Source: Thinkorswim


And we timed the trade perfectly with this combination of indicators.

Here’s how we were able to return over 60% on this trade!  

 


Source: Thinkorswim

And if you timed it perfectly, you could have returned almost a 90% return on investment on this trade!


Wrapping Up

 

The strategy that is used at Daily Deposits to find the Trade of Day is focused on intraday momentum by anticipating the markets based off of a custom set of pre market analytics.

And why even bother holding stocks overnight when you are able to crush the markets only trading intraday!

Just by focusing on a few key indicators and the pre market trading session you have the opportunity to make triple digit returns week after week.

Click here to join Daily Deposits!

Author: Ben Sturgill

Ben leads two services at RagingBull. IPO Payday can help you pinpoint, position, and profit from IPOs. In Daily Profit Machine Ben guides day and swing traders to profit by trading the SPY Index. Ben hosts the RagingBull.com weekly podcast WealthWise where he shares thoughts on wealth and success with traders, businesspeople, entrepreneurs, and experts to uncover and share the wisdom needed to live a wealthy life.

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