Trader’s Report June 26th

Good Day Traders,

Overview & Highlights:   I look for this week to markets around the world attempting to digest and perhaps react to the Brexit vote.  It remains to be seen if this will be a large enough catalyst for more severe downside pressure.  We do not have to be in a hurry, just watch the charts and wait for the set ups.

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, July 1st

 Register Here:  https://attendee.gotowebinar.com/register/2631082222793603843
New Time—11:00 a.m. PDT
 Next Training Webinar:  June 29th

For Premium Members our Wednesday evening training is developing some fantastic traders!
Mid-Week Market Sanity Check Topic:  The Power of Keltner & Moving Average Envelopes


Managing Existing Trades:   Positions open for 3 strategies.

Strategy I Portfolio Building:  

Position 1: Long 100 shares of TZA 
Bought 200 shares of TZA at 41.60
T1 =  5% -10% to close 100 Shares

T2 = Hold at least until July 1st
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:

Weekly Profit
GLD closed ¼ of 12 contract spread:  Profit of $303
TZA closed 24Jun 38.5C for profit of $75

Trade 1:  GLD 19Aug 122/127C Debit Spread bought for $1.49 as a seasonal trade on Gold
Sold ¼ of 12 positions at $250 for a profit of $303.  Sell next 1.4 at $3.00 and the last ½ at between $4.5 and $4.90. 
GLD moved to far too quickly so first target of $3.00 had to be adjusted down because underlying price objective was achieved.

Trade 2:  TZA Trade:  Sold 1 contracts of TZA 1Jul 40C at 1.18
Thus far $181 has been cleared to reduce cost basis of the TZA position. 

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:  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%.

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 6/24:
SPY:  Profit +$460
TSLA:  Profit +$52

Trade 1:  Foundation Position is 4 contracts of SPY Jan17 205C and 4 contracts of SPY Jan17 200P Current Trade—Currently Up 22.29%; Premium Collected since opening trade on 1/4/16 = $5350
Sold 3 contracts of SPY 1Jul 203P at 2.68—Potential Profit $804

Trade 2:  Long TSLA Jan17 250C & Long Jan17 220 + New Positions Jan17 210C and 220P: Current Position Total Invested $14,900

Currently Up 56.46%: Premium Collected since opening trade on 9/28/15 = $12,347 + New Positions at $1,356 = Total Collected $13,755
Sold 2 contracts of TSLA 1Jul 192.5P at 5.13—Potential Profit $102

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:  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  


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:  Many stocks will be searching for support this week.  A bounce from Friday’s selloff is expected but from what level?  It’s good to have a couple of upside candidates and downside candidates given the current market environment.  Those who trade options notice that as Volatility increases it becomes a better market for selling premium or doing spreads rather than buying directional options with jacked up premium.  I’ll be looking for some stability to return mid-week and be looking for solid directional candidates to act on by Wednesday. 

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, COR & LGIH

Downside:  Some very strong weak candidates for this week if the Indexes continue to weaken.  These include: NFLX, TSLA (prime candidate), AMZN, AVGO, ANET, WYNN, 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. 

An 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. 


General Market Observation:   Ok, what next?  The prognosticators will be spending a lot of time trying to figure out an answer to this question.  Do we really need to or can we just trade the charts?  This past week I heard a very wise statement for technical traders.  “If you wait until you understand the “why” it will be too late!”  How true this is, while we do wait for proper set ups we know that the setups and the follow-on move will tell us that something is up even if we don’t know the “WHY”.  In the market there are no guarantees just probabilities. So trade the patterns.

If you were watching Friday’s pre-market you knew it was going to be ugly but not exactly how ugly.  The BREXIT non-event turned out to be more of an event than expected.  Friday’s action was set up by Thursday’s buying.  The pro’s were convinced that the Brit’s would reject the notion of leaving the EU.  Surprise, surprise—a vote for national sovereignty won the day.  Now what?  It will take time for this exit to work its way out.  Some say up to two years.  This could lead to a market driven by news and emotional responses which can be very volatile.  Good for short term trading not so good for portfolio building. 

The SPX came to rest a short distance from strong support at 2025.91 which has been tested a couple of time.  If it holds this may lead to at least a reaction rebound to around the 50 day EMA.  If it fails straight away, then the measured move is down to 1931.  After an event like Friday maintain some perspective.  A drop to this level would only be about 10% off last year’s highs and still above this year’s lows.  The critical thing is to identify what to do at specific levels of support or resistance.  Do we trade a bounce off of 2025 or wait for a reaction pullback into between the 2065 – 2075 levels.  Right now both Momentum and TSI are overextended so no chasing to the downside at this level.  Wait for a proper downside entry setup.

SPX 6-24

Both the NDX and RUT need a reaction move back towards resistance.  If they then show weakness it would be time to take a downside trade or trade one of the inverse Index ETFs.

On all the Indexes we are getting close to the end of the first thrust down, now a reactive is necessary to work off the oversold conditions.  The first part of this week will mostly be waiting for the start of this reaction.  We must also be prepared because if the market is favoring the downside often these reactions happen quickly. 

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 ShowNote time change.  This change will allow a full hour after the webinar to adjust trades.  Free Webinar every Friday at 11:00 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, July 1st
 Register Here:  https://attendee.gotowebinar.com/register/2631082222793603843
New Time—11:00 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/c/MarketTechTalk

 

–   The Active Trend Trader Referral Affiliate Program is ready.  For more information or to become an Affiliate please register here:  http://activetrendtrading.com/affiliates-sign-up-and-login/


Index Returns YTD 2016

Index YTD 6-24

ATTS Returns for 2016 through June 24, 2016

ATTS YTD 6-24

Percent invested initial $100K account:  Strategies I & II invested at 7.7%; Strategy III invested at 25.98%.

ATTS YTD 6-24a

Current Strategy Performance YTD (Closed Trades)
Strategy I:  Down -1535.05 or -2.19%
Strategy II:  Up $2063 or +20.63%
Strategy III:  Up $16023 or +61.6%
Cumulative YTD:  16.5%

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.  The next update July.


Outs & Ins:   BEAT and LOCK make their debut on the IBD 50 this weekend.  BEAT has recently experienced a failed breakout attempt.  LOCK just reached a past swing high and may need to consolidate with a pullback to the moving averages before the next thrust attempt.  Very good volume profile on LOCK.

With the second quarter quickly coming to an end, earnings will be on the agenda very soon.  Given current market conditions this earnings season could be extremely volatile.  Should be interesting!  Stocks off the list that held up well with Friday’s debacle include both COR and LGIH.  NVDA also looks to be consolidating. 

Several stocks look like promising downside candidates. 
These include:
DY: Potential double top
GIMO
WBMD
USCR
BSFT
EA
CTXS
HAS

In-Out 6-24

 

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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