The Stock Report is a weekly report delivered to PRO members of Tackle Trading. In this report, you’ll receive information, guidance, education, and content that will help you develop as a trader, and learn how to use options to protect, cash flow and speculate in the market. This week, Brad May a stock and options trading veteran discusses what he looks for in a stock chart.
So as Tyler explained in the option report, all this volatility buildup during the week is great for option sellers who want to take on new positions due to inflated option pricing, but is volatility good if we are just trading stock?
The answer is, it depends…
If you are a shorter-term trader, it can bring plenty of opportunity due to larger, quicker moves. (That can also be a double-edged sword if you are not position sizing correctly. 😉)
If you are a longer-term stock trader who wets his pants every time the S&P 500 drops 1%, then it’s probably not good for you.
The way I see it right now, in the short-term, there is potential for further downside… But if all this talk about nuclear ward breaking out is just that – talk… Then say hello to more upside when the fear mongering is over.
Bull Watchlist: TAP, MSFT, ATVI, FSLR, AA, RICE
Bear Watchlist: BAX, APC, UNP, FAST, DY, CNI
This week in my video I want to continue the discussion on the “character” of a security.
When I look for opportunities in the market, I look for two things in a chart.
The first is symmetry or sameness. Meaning is this stock acting the same way it typically has recently. For example, does it keep pulling back into the 20-day Moving Average and then bouncing higher? If so, I am comfortable trading the bullish retracement setup.
The second is the exact opposite. Is the stock breaking “character?” i.e. if the stock has been retracing into the 50-day Moving Average consistently and then moving to higher highs, but now it is starting to close under the 50MA… we may have an opportunity to make money there as well.
Honestly, anything in between is usually thrown out with the bath water and I shout, “NEXT.” Maybe not out loud, but for sure in my head… 😊
Trade safe, my friends. Cya in the clubhouse!
Position size and allocation is HUGE. Refer to the calculator below if you haven’t mastered your position size.
Position sizing template for stock & option trading. This helps give you an idea of the max size to trade depending on risk tolerance. I usually do less than the calculator equates to factor in commissions, slippage, and time decay for options. Position sizing is your first defense in your trade. You can download this with the link at the bottom of the pic. Just plug in the Risk tolerance level at top, then the rest of the excel fields. There is a tab for both bulls & bears. Hope this tool helps.
Brad May started his trading journey in 2012 as a Rich Dad student and is currently generating weekly Scouting Reports for Tackle Trading. The core of Brad’s trading style consists of option strategies along with technical and analytical analysis. His knack for programming has enabled him to code several unique indicators, primarily focused on Vega trading around earnings events, using the Think or Swim trading platform.
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