Make no mistake about it—the stock market and the economy are strong.
However, with the market sitting around all-time highs again, how much longer can we expect investors to buy up stocks?
It’s a tricky situation, to say the least.
That’s why I chose my spots carefully last week…treating each opportunity with a touch more care than normal. It kept me out of trouble and my Weekly Money Multiplier thanked me for it.
One of my best setups this week came from YETI, and it’s one of my top picks for this upcoming week.
That said, I’ve got some brand new trade ideas for you this week—three to be exact. And while most investors will be focused on the upcoming Fed meeting— I’ll be lasered in on these three setups.
I had my eye on YETI for quite a while. They may be a niche company, but they have a cult following. Everyone I know has at least one of their drink tumblers in their house.
Last week I alerted members of Weekly Money Multiplier to the following setup I saw in the charts.
YETI Weekly chart
Normally I play daily and intraday charts. However, this setup looked too good to pass up. It contained everything I wanted from a TPS setup.
My TPS setup pulls together three elements:
- Trend – A clear trend, which in this case was a nice bullish trend upwards
- Pattern – I want to see a consolidation pattern that compresses price. Here I drew out the large pennant forming.
- Squeeze – Squeezes occur when Bollinger Band indicators trade inside the Keltner Channel. It tells me that volatility is shrinking.
This setup worked on the weekly chart. So I came up with three potential trades:
- Long calls – This is a straight bullish bet that the pattern will play to the upside
- Selling a put spread – A put spread is where you sell a put option at a strike at or near the money and then buy another one below that strike, both at the same expiration. You receive a credit for the trade. Your goal is to have the stock close above the upper strike price by expiration.
- Long butterfly – Butterflies can appear to be complex trades, but are actually quite simple. They are low-cost trades with big payoffs if you can get the stock to land at the exact price you pick by expiration.
YETI has a lot of potential to push higher over the next few months. It should also offer a few opportunities to enter the trade. That lets me average in over time.
Netflix provides great content, but not a solid investment. The streaming wars competition has put pressure on the stock and kept it from moving higher. That’s given me a lot of opportunities to bet against this stock.
This was a 30-minute chart I shared with Weekly Money Multiplier members this past week.
NFLX 30-minute chart
This is a TPS setup, but in reverse. I expected Netflix to ride the trendline that connected the lower points of the candlesticks. With a downward trend, I expected that it would eventually push lower and through that trendline.
I looked for two ways to play this trade. First, I could buy puts on the stock. That would give me a straight directional bet to the downside with the maximum payoff.
The second would be to sell a call spread. That’s where I sell a call option at a strike price at or above the current stock price and then buy another call option at a higher price, both with the same expiration. Like the put spread I talked about earlier, I would receive a credit for the sale.
If the stock closes below the lower call strike price by expiration I make full profit. However, I can also close the trade early at a profit. You see the price of that credit spread reduces every day until expiration. I can always buy it back early at less than I was paid and still make money. That works well if I think the stock could start moving higher.
Baker Allen Hughes (BAH)
This is a stock I was a bit bearish on a while back that worked out nicely. Now, the daily chart is showing a great TPS setup here.
BAH daily chart
You can easily pick out the nice uptrend, short-term consolidation pattern, and the squeeze at the bottom. The only concern I have is the downward momentum (as noted by the lower indicator).
However, I still think the stock could easily make a run for the recent all-time highs. It’s a great setup that could play out within a few weeks.
Those aren’t the only trades
There are plenty more where those came from. To catch all the intraday action, check out Weekly Money Multiplier. You can still get in before Monday’s opening bell.