Art & Science of Active Trend Trading Free Newsletter 1-24-16

Good Day Traders,

Overview & Highlights: The Fed Meets this week and reports out on Wednesday. Up until the new report market action may be muted. AAPL, FB & GOOGL report earning this week. Between these events the fledgling rally attempt may be tested.

2015 EWA Review video at: http://activetrendtrading.com/2015-early-warning-alert-system-performance-review-video/

Webinars: At Active Trend Trading we offer two webinars per week to provide training plus trade and market updates. See the schedule below for the next webinars.

How to Make Money Trading Stocks on Friday, Jan 29th

Register Here: https://attendee.gotowebinar.com/register/809988598096275713

Next Training Webinar: Jan 26th

For Premium Members our Wednesday evening training is developing some fantastic traders!

Mid-Week Market Sanity Check Topic: Leveraged Index ETFs-Pros and Cons

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Managing Existing Trades: Current trades are for Strategy III. Waiting for set-ups for Strategy I & II.

Strategy I Portfolio Building: No Open Trades.

Strategy II Income Generation: No Open Trades—if you trade options this is a good strategy to send up trial trades to see if the market’s direction may be changing. 1-5 contracts of one of the Index ETFs may provide less downside risk than long position in the underlying Index ETF. Trading options is not for everyone and I strongly encourage members to first become successful trading stocks and ETFs.

For members wanting to better understand this Strategy there is a very good training video at: http://activetrendtrading.com/basic-option-strategy/

Strategy III Wealth & Income Generation Trades: Two Foundational Positions are in place to sell weekly options against. The recalculated weekly revenue needed from these foundational positions was forward in an update report earning last week. My objective with this Strategy is to collect enough weekly premium during the life of the LEAPS Strangle on both SPY and TSLA to both pay for the capital invested and gain between 50% – 100%.

Trade 1: Foundation Position is 4 contracts of SPY Jan17 205C and 4 contracts of SPY Jan17 200P.

Last Week’s Net Profit: $494

Open Positions for the week ending 1/24 = Sold 4 contracts SPY Jan5 192.5C collected 1.22 in premium = $488 Gross Premium

 

Trade 2: Long TSLA Jan17 250C & Long Jan17 220

Last Week’s Net Profit: $229

Open Positions for the week ending 1/24 = Sold 1 contract TSLA Jan5 195P at 2.63; Sold 1 Contract TSLA Jan5 207.5C at 2.17

Combined= $480 Gross Premium


Several members have asked about this strategy and a more detailed explanation is available at: http://activetrendtrading.com/wealth-and-income-strategy/

I posted a video about how to choose the weekly options to short for this strategy. It can be viewed at: http://activetrendtrading.com/videos/

Additionally some of these trade may be selling weekly puts on up trending stocks. If you are interested in parallel trading this strategy register at this link: http://forms.aweber.com/form/99/1278533099.htm


 

General Market Observation: After 3 weeks of hard selling buyers came into the Indexes to provide a rally attempt that started last Wednesday. Price action rebounded from a lower low and a retracement back in to the Fib Box defined by a lower boundary at the 38.2% retracement and an upper boundary of 61.8% retracement defined by the high on 12/29 and the low on 1/20/16 could be expected. Buying from a lower low has a lower probability of success than waiting for a consolidation or pullback to retest around the lower low. If price merely blast up from Wednesday’s low with no consolidation the rally will be suspect of being a “Dead Cat” bounce and a collapse can be expected within the Fib Box or at the 20 day or 50 day EMA. This is where stalling would be expected and a good place to plan short side trades.

The daily SPX chart below shows where trades can be planned. If price pullback in to the oval zone and show reversal candles at support this would be where we want to go long. If price action spurts up into the Fib Box and shows signs of stalling this is where we plan to either go short the SPY or buy shares of the inverse SPXU.

While the positive action over the past three days can be encouraging we must realize that this move up was not accompanied by strong volume. This clue tells us that the upside may be short lived because market weakness still reigns. Additionally this week has the added drama of the first Fed meeting of the year. Many have questioned why the Fed seems to be out of synch with the global economy trying to raise rates while other countries are calling for cutting rates and more stimulus. Watch for a very dovish statement that may result in a market rally if the Fed issues a statement indicating they will slow the planned schedule for raising rates in 2016.

I would score the NDX as the strongest Index with the S&P coming in second. The Russell is still tail-end Charlie and currently in Bear Market Territory. At this point we know the markets were overdue for a bounce and that bounce is underway. What we don’t know is what the quality and personality of this bounce will be. Trade support and resistance.

SPX 1-22

SPX: Downside Market Short the SPY, SPY Puts or SPXU. Preferred ETF’s: SPY, UPRO and SPXL

NDX: Downside Market Short the QQQ, QQQ Puts or SQQQ. Preferred ETF’s: QQQ and TQQQ

RUT: Downside Market Short the IWM, IWM Puts or TZA. Preferred ETF’s: IWM and TNA


The How to Make Money Trading Stock Show—Free Webinar every Friday at 10 a.m. PDT. This weekly live and recorded webinar helped traders find great stocks and ETF’s to trade with excellent timing and helped them stay out of the market during times of weakness.

How to Make Money Trading Stocks on Friday, Jan 29th

Register Here: https://attendee.gotowebinar.com/register/809988598096275713

To get notifications of the newly recorded and posted How to Make Money Trading Stocks every week subscribe at the Market Tech Talk Channel: https://www.youtube.com/channel/UCLK-GdCSCGTo5IN2hvuDP0w


 

Index Returns YTD 2016

I’ve added a column to the Index YTD performance chart. The column on the far right shows the depth of the current correction with respect to the highs of the top from 2015. Currently RUT is in Bear Market Territory. Also be aware that the Nasdaq Comp is currently 13% down from its 2015 top.

Index YTD 1-22

 

ATTS Returns for 2016 through Jan 22, 2016

Percent invested $100K account: Strategies I & II invested at 0%; Strategy III invested at 20%.

Current Strategy Performance YTD (Closed Trades)
Strategy I: Down -407.85 or -0.58%
Strategy II: 0%
Strategy III: Up $1686 or +8.43%
Cumulative YTD: +1.4%

Active Trend Trading’s Yearly Objectives:

  • Yearly Return of 40%
  • 60% Winning Trades
  • Early Warning Alert Target Yearly Return = 15% or better

For a complete view of specific trades closed visit the website at: http://activetrendtrading.com/current-positions/

Updated first full week of each month.


 

For our all Active Trend Trading Members here’s how we utilize our trading capital

Trading Capital Setup and Position Sizing: Every year we start the year off trading a $100K margin account split up into the three strategies used with the Active Trend Trading System.

  • Each trader must define their own trading capital in order to properly size trade positions to meet their own risk tolerance level!
  • Strategy I: Capital Growth—70% of capital which equates to $140K at full margin. This strategy trades IBD Quality Growth Stocks and Index ETFs. Growth Target 40% per year.
  • Strategy II: Short Term Income or Cash Flow—10% of capital or $10K. This strategy focuses on trading options on stocks and ETF’s identified in Strategy I. The $10K will be divided into $2K units per trade.
  • Strategy III: Combination of Growth and Income—20% of capital or $20K. This strategy will use LEAPS options as a foundation to sell weekly option positions with the intent of covering cost of long LEAPS plus growth and income.
  • The $70K Strategy I portion of the trade account is split between up to 4 stocks and potentially a leveraged Index ETF. Actual number of shares will vary of course depending on price of the entity traded and amount of margin available. We have found that limiting open positions to only 5 entities greatly reduces the trade management time requirements for members.
  • Naked Puts or short term options strategies will be used occasionally for Income Generating Positions
  • None of the trade setups are recommendations to trade only notification of planned trades from set ups using the Active Trend Trading System. Each trader is responsible for establishing their own appropriate risk level if they decide to parallel trade.
    • The Active Trend Trading System objective is to provide a clear and simple system designed for members who work full time.

Outs & Ins: SHW makes its debut on the IBD 50 list. SHW has been on the list in past years. Currently only 18 of the 50 IBD 50 stocks are above their 50 day EMA. Stocks of interest include CRI & GGAL. If the market strengthens look to the 18 stocks above their 50 and if the market weakens look to the stocks already below their 50 for potential downside movers.

in-out 1-22

 

Share Your Success: Many of you have sent me notes regarding the success you are having with the Active Trend Trading System. Please send your stories to me at dww@activetrendtrading.com or leave a post on the website. Thanks.

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