Good Day Traders,
Overview & Highlights: This week the stock candidate selection area of the Trader’s Report and Market Update will change a little. I will be honing down the over list and listing stocks that are close to action points. I will identify where I will be taking action (primarily pullbacks towards 8/20 period moving averages), and getting more text and email alerts out afterhours. This way the alerts will be ready for traders first thing in the morning on the mainland or late in the evening for those night owls on the Mainland.
Great feedback on the Trend Candles training from last Wednesday. This week we’ll learn more about how to use these candlesticks in combination with the Active Trend Trading rules.
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, June 24th
Register Here: https://attendee.gotowebinar.com/register/9221871578880388612
11:30 a.m. PDT
Next Training Webinar: June 22th
For Premium Members our Wednesday evening training is developing some fantastic traders!
Mid-Week Market Sanity Check Topic: Be Absolutely Sure About the Trend
Managing Existing Trades: Positions open for 3 strategies.
Strategy I Portfolio Building:
Position 1: Bought 240 shares of SIX on 6/7 as outlined by the text and email alert. Opened price at 57.45—Position up about 1.8% and running into resistance. While the technical are positive don’t want to give back up a full 4% stop loss. Setting new stop loss at $1.00 below 57.04
T1 = 5% -10% to close 120 Shares
T2 = Return to past resistance at $62
Stop Loss = 56.04 Hit 6/16 sold at 56.01 loss = -$245.60 or -2.5%
Position 2: Long 100 shares of TZA
Bought 200 shares of TZA at 41.60
T1 = 5% -10% to close 100 Shares
T2 = Attempt to hold remaining shares up to earnings and then close
Stop Loss = Will hold and sell weekly covered calls on remaining position to reduce cost basis while waiting for the Market downturn. Will hold until July 1st.
Hit T1 sold 100 shares at 43.79 for a gain of 5.26% or Profit of $219.00
Strategy II Income Generation:
TZA Trade: Sold 1 contracts of TZA 24Jun 38.5C at 1.24
Thus far $106 has been cleared to reduce cost basis of the TZA position.
I will monitor volatility for a potential trade when VIX turns around. Right now there is very little fear in the market place!
Strategy II stocks of interest for this week: TSLA & Index ETF’s. Will reload with new candidates after this weekend’s review.
For members wanting to better understand this Strategy there is a very good training video at: https://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%.
Tip for Experienced Option Traders: Occasionally after a weekly trade goes against me but the trend appears to be changing I will add one naked contract over and above my foundation position and close this out after it gains at least half of the premium I’ve collected. Doing naked options is not for everyone and I keep my risk small by only doing one contract above my covered limit. In other words, if I can sell 4 contract covered by my long leaps I’ll sell one additional. This helps hedge the losses a bit but it this tactic is not without risk and must maintain a tighter stop than I would normally use with the regular position.
Note: We do our best to get both text alerts and email alerts out in a timely manner, occasionally there will be trades that are missed because of delay in the Text or Email alert applications. Additionally, please double check with your broker to assure they allow spread trades like we do with Strategy III. Some do and some don’t.
Additionally, it is crucial when selling premium against the Long LEAPS position that the premium collected cover the weekly cost of holding the LEAPS plus an additional amount to over this amount as a gain. This is one of the reason I sell premium of weekly options that are close to be “At The Money”. I base my selling on the expected move during the next week. If one is not bringing enough weekly premium this trade will not work out as well and may wind up being a losing trade.
Strategy III Weekly Results Week ending 6/17:
SPY: Profit +$496
TSLA: Profit +$987
Trade 1: Foundation Position is 4 contracts of SPY Jan17 205C and 4 contracts of SPY Jan17 200P Current Trade—Currently Up 19.84%; Premium Collected since opening trade on 1/4/16 = $4,890
Waiting for set up for this week’s trades.
Trade 2: Long TSLA Jan17 250C & Long Jan17 220 + New Positions Jan17 210C and 220P: Current Position Total Invested $14,900
Currently Up 52.7%: Premium Collected since opening trade on 9/28/15 = $12,347 + New Positions at $1,356 = Total Collected $13,703
Waiting for set up for this week’s trades.
Update: Purchased the TSLA 20Jan 17 210C/220P Strangle at $5890 to increase exposure to Strategy III moving forward. Having multiple positions to sell premium against provides some additional opportunities for growth. I will again protect the downside with a stop loss of $4.90 over the amount of premium collected. The average amount I’ll need to generate on this portion of the trade is $350 per week.
Several members have asked about this strategy and a more detailed explanation is available at: https://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: https://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
Pre-Earnings Trade: No weekly candidates. Pre-earnings trades can be a great supplement to the portfolio building portion of Strategy I. Depending on the stock and technical analysis they tend to be predictable and repeatable. For busy traders focusing on pre-earning opportunities can free one up from the necessity of constantly chasing stocks during other periods of the year. The process repeats four times a year and capturing a 5%-15% return four times a year can compound very nicely!
Potential Set Ups for this week: This week may be as volatile as last week. There are several promising candidates to watch in both directions. Typically, there will be a little bounce after Triple Witching Friday as Institution readjust the balancing required the previous Friday. If the markets continue to just churn between support and resistance be ready to take smaller profits and keep stops tight.
Still valid: One observation over the past few weeks is that many stocks are showing ‘V’ bottoms. This type of bottom tends to be weak and can provide some violent correction once the momentum starts running out. Because of this we need to adjust expectations for returns on individual trades to smaller profit targets and tight stops. 5% – 15% are great objectives for initial targets and if hit setting breakeven stop losses is prudent.
Upside: Inverse Index ETFs, SPXU, SQQQ or TZA. Stocks: CME& WYNN (both of these stocks are showing excellent trading patterns.)
Downside: Some very strong weak candidates for this week if the Indexes continue to weaken. These include: NFLX, TSLA (prime candidate), NTES, EW, CTXS and BIDU
On the Radar: Stocks & ETFs that could go either way include: UPRO, SPXU, TQQQ, SQQQ, TNA, TZA, TSLA (270 resistance/140 support), NFLX, BIDU, CME, WYNN, PAYC, ELLI & NTES
Stocks identified by ** that are close to a potential entry point.
Early Warning Alerts for Leveraged Index ETFs: Waiting for New Entry trigger and Alert reset.
A upside trade for TZA triggered on 5/17 and a courtesy alert was sent to all EWA members. I plan on holding this position until July 1st or until price hits $55. During this time rather than a stop loss I will sell weekly covered calls. A major reason of choosing TZA is that it has weekly options which provides the opportunity to collect premium while price oscillate. Going forward Mike will trigger the long EWA alerts and I will trigger the short side triggers as courtesy alerts to members.
The Early Warning Alert Service hit all eight major market trading points in 2015. See this brief update video for more details: Early Warning Alerts Update Video or at https://youtu.be/GJwXCL4Sjl4
If simplifying your life by trading along with us using the index ETF is of interest, you can get the full background video at: https://activetrendtrading.com/etf-early-warning-alerts-video/
General Market Observation: Well last week was a wild week in the market concluding with Triple Witching Day on Friday. The FANG’s were hammered Friday, with NFLX and AMZN holding up best. The last two weeks in June look like they could be “Roseanne Roseannadanna” kind of weeks. “If it’s not one thing, it’s another” was her famous line on SNL which certainly describes what to expect over the next two weeks. Numerous things could rock the boat this week including Janet talking to Congress about economic policy, the Fed’s Stress Test on Banks and of course Brexit on Thursday. With the volatility spiking up a bit as people are more apprehensive regarding the unknowns. The best trading tactic to follow when uncertainty picks up is to plan trades around levels of support and resistance. When price action is between these levels treat it like no-man’s land and don’t trade or chase.
Tonight I’m looking at the weekly SPX chart for both support and resistance and patterns. This week’s price action completed a bearish reversal Evening Star pattern which typically means the current uptrend has come to an end. This week’s drop was not severe enough to cause the weekly Trend Candles to change from blue to red, but the TSI and Momentum oscillators look like down is the path of least resistance. There is a strong level of support at the 2050 level that was tested during the week. The 2050 level corresponds with the 20 week EMA which is equivalent to the 100 day moving average. If the Evening Star confirms (it is a self-confirming signal) and price drops the 2050 level a fall similar to that in January could be holding symmetry.
I will be waiting for a pullback to the 8/20 day EMA’s on a daily chart for potential downside entries as the daily oversold condition is worked off.
The NDX is the weakest of the three Tracking Indexes and may provide the best shorting opportunity on a pullback to around the 8/20 day EMA’s. If price do break loose to the downside, then also watch the Russell to potentially drop faster than the other two Indexes.
SPX: Downside Market Short the SPY, SPY Puts or SPXU.
Preferred Long ETF’s: SPY, UPRO and SPXL
NDX: Downside Market Short the QQQ, QQQ Puts or SQQQ.
Preferred Long ETF’s: QQQ and TQQQ
RUT: Downside Market Short the IWM, IWM Puts or TZA.
Preferred Long ETF’s: IWM and TNA
The How to Make Money Trading Stock Show—Free Webinar every Friday at 11:30 a.m. PDT. I’m looking for the best time to offer this webinar. I want to try closer to the close on Friday to see how that works out for potential trades going into the close. 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, June 24th
Register Here: https://attendee.gotowebinar.com/register/9221871578880388612
11:30 a.m. PDT
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
- The Active Trend Trader Referral Affiliate Program is ready. For more information or to become an Affiliate please register here: https://activetrendtrading.com/affiliates-sign-up-and-login/
Index Returns YTD 2016
ATTS Returns for 2016 through June 17, 2016
Percent invested initial $100K account: Strategies I & II invested at 19%; Strategy III invested at 25.98%.
Current Strategy Performance YTD (Closed Trades)
Strategy I: Down -1535.05 or -2.19%
Strategy II: Up $1734 or +17.55%
Strategy III: Up $15511 or +59.7%
Cumulative YTD: 15.7%
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: https://activetrendtrading.com/current-positions/
Updated first full week of each month. The next update July.
Outs & Ins: COMM makes it 2016 debut to the IBD 50 list. COMM has made several appearances on the List over the years. The stock enters this week’s list after recovering from a 40%+ selloff that started last September. Of course it is close to overhead resistance at last September’s highs.
Upside potential for the list include: GIMO, BSFT & HAS. Downside candidates include USCR, EW, NTES & CTXS. On the Radar candidates include: PAYC & ELLI.
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.
