Legendary Stock-Picker Predicts Best-Performing Stock of 2020

Jeff Bishop: Four Factors to be Considered when Making Investment Decisions this week

Understand these four factors, and you’ll be well on your way to navigating the market this week. Let’s discuss how I plan to apply them for the upcoming week.

20% Unemployment…

That’s not a headline from 1930…it’s the consensus estimate for non-farm payrolls in May.

Despite the ballooning unemployment figure… the stock market is closing in on all-time highs again.

It’s not that market participants don’t care…but more so…are concerned with the factors below:

  1. Whether the jobs come back
  2. Progress on the economic reopening
  3. Congressional appetite for further spending
  4. Expansion of the trade war

Understand these, and you’ll be well on your way to navigating the market this week.

Last week, I laid out my general bearish bias on the market.

I used it to leverage some quick trades on the Nasdaq 100 (QQQ) ETF for a nice day trade.

Your first question should be – Jeff, what about those massive losses in the S&P 500 (SPY) ETF below?

Excellent point!

You see, I’m using these large swings in the markets to rack up some short-term cash to pay for my long-term bearish bets, many of which go well into June and July.

Now, let’s discuss how I plan to apply the four themes above for the upcoming week.

As well as, rundown the earnings, and economic calendar.


— RECOMMENDED —

Millionaire Trader Reveals Top Trade Idea Each Week

RagingBull.com CEO, Jeff Bishop, shares his top pick for the week each Monday, straight to your inbox.

“My strategy aims to help you pull one winner out of the market each week, regardless of market conditions!” – Jeff Bishop

Click Here!


Will the jobs come back?

Optimists hope our recovery looks like a ‘V.’ Similar to natural disasters, they think that reflating the economy is just around the corner.

‘Not so fast ‘ say the pessimists. Without a vaccine and meaningful treatment that’s widely available, how can we get back to the way we were – the good old days from six months ago.

I tend to agree with the second camp. While we should see a rebound in jobs, we’re still likely end the year above 10%.

Consider the number of bankruptcies that already hit the street. Everything from JCrew to Diamond Drilling couldn’t remain solvent even with the Fed handing out money like candy.

Simply put – there are far too many headwinds to expect businesses to recover and take us anywhere close to the record unemployment we saw.

That’s why I have a tough time buying into any labor sensitive industries and sectors at the moment.

Progress on the economic reopening

Here’s something interesting. Georgia was one of the first states to loosen restrictions from lockdown. Yet, they haven’t seen the job growth or economic recovery they were hoping for.

Sweden never committed to any lockdown restrictions. Yet, they’re facing one of the worst economic declines in decades.

Unfortunately, while America reopens, consumers aren’t necessarily prepared.

Currently, the market has priced in perfection. News to the contrary won’t be taken well. However, the early stages of the reopening are fairly set in stone.

Unless we get word of a second wave, which so far has not appeared, I don’t expect this will act as a headwind. If anything, I think it might buoy some of the airlines and restaurant stocks more than banks and other financials.

Congressional appetite for further spending

What if I told you that Personal Income soared last month? Would it surprise you?

How did this happen amidst the lockdowns?

Two words – Stimulus Payments.

With many Americans getting direct payments from the government, the timing overlapped with residual income from their employers prior to furlough.

That will change as the benefits dry up.

And it’s not just individuals. States that relied on revenues face severe shortfalls to their coffers. That means spending projects will be suspended across the nation.

Without additional stimulus, this could be one of the most significant headwinds to full economic recovery. So far, this doesn’t look promising.

While there’s broad agreement to supplement states to fight COVID, may in Congress don’t want to supplement state revenues.

Depending on the shortfalls, this could lead to job loss in everything from construction to teaching.

That’s why I haven’t been big on any of the industrials at the moment. I don’t buy the total economic recovery story. Seeing stocks like Deere (DE) and Caterpillar (CAT) start rising, makes me question the conviction of current buyers.

Expansion of the trade war

In an effort to hold China accountable for Hong Kong and other issues, the Trump administration laid out a series of steps it planned to take on Friday.

Markets breathed a sigh of relief as none of those appeared to derail any current trade agreements.

However, I wouldn’t put that out of the picture quite yet.

Given the turmoil and tension across the nation, we could easily see executive action against China as a means of political gain, rightly or wrongly.

Any whiff of that would put stocks like Bidu (BIDU), Alibaba (BABA), or JD (JD) in serious trouble.

So where am I playing this week?

Day to day, I’m taking opportunities in liquid stocks such as Apple (AAPL), Amazon (AMZN) and the like to sell option premium.

It’s one of the foundational trading strategies I use in Total Alpha.

If you’re not familiar with selling option premiums, then check out Ultimate Beginners Guide to Options Trading Video. Here you’ll learn the foundational elements to some of my favorite options trading strategies.

Click here to watch my Ultimate Beginner’s Guide to Options Trading.

Expected earnings dates listed in (…)

Stocks I want to bet against…

TLT (none)ZM (Jun 4), COST (Mar 5)TTD (May 14), ROKU (May 7), AMZN (Apr 30), TDOC (May 5), MTCH (May 5), NFLX (April 21), CMG (Apr 22)

Stocks I want to buy…

MJ (none), UNG (none), WDAY (May 26), TWLO (May 3), V (Apr 22), IRBT (Apr 28), DPZ (May 20),GOOGL (May 4), GDX (none), GRUB (May 6), RNG (May 6), DKNG (??),BA (Apr 29), ULTA (June 4), GS (July 21)

 

This Week’s Calendar

Monday, June 1st

  • 9:45 AM EST – Markit US Manufacturing May
  • 10:00 AM EST – Construction Spending April
  • 10:00 AM EST – ISM Manufacturing May
  • Major earnings: NGL Energy Partners LP (NGL), ProPetro Hldg Corp (PUMP)

Tuesday, June 2nd

  • 7:45 AM EST – ICSC Weekly Retail Sales
  • 4:30 PM EST – API Weekly Inventory Data
  • Major earnings: Dick’s Sporting Goods (DKS), Ambarella Inc (AMBA), Digital Turbine Inc (APPS), CrowdStrike Holdings Inc (CRWD), Everi Hldgs Inc (EVRI), HealthEquity Inc (HQY), Medallia Inc (MDLA), Zoom Video Communications (ZM)

Wednesday, June 3rd

  • 7:00 AM EST – MBA Mortgage Applications Data
  • 8:15 AM EST – ADP Employment May
  • 9:45 AM EST – Markit US Services & Composite PMI May
  • 10:00 AM EST – Factory Orders April
  • 10:00 AM EST – ISM Non-Manufacturing Index May
  • 10:00 AM EST – Durable Goods Orders May
  • 10:30 AM EST – Weekly DOE Inventory Data
  • Major earnings: American Eagle Outfitters Inc (AEO), Cinemark Hldg Inc (CNK), Campbell Soup (CPB), Express Inc (EXPR), Change Healthcare Inc (CHNG), Cloudera Inc (CLDR), Elastic NV (ESTC), Guidewire Software Inc (GWRE), Smartsheet Inc (SMAR), Zuora Inc (ZUO)

Thursday, June 4th

  • 8:30 AM EST – Weekly Jobless & Continuing Claims
  • 8:30 AM EST – Nonfarm Productivity & Unit Labor Costs Q1
  • 10:30 AM EST – EIA Natural Gas Inventory Data
  • Major earnings: Ciena Corp (CIEN), Kirkland’s Inc (KIRK), The Michaels Companies Inc (MIK), Sportsman’s Warehouse Hldg (SPWH), United Natural Foods (UNFI), Broadcom Inc (AVGO), DocuSign Inc (DOCU), Domo Inc (DOMO), Gap Inc (GPS), MongoDB Inc (MDB), Pagerduty Inc (PD), Slack Tech Inc (WORK), Yext Inc (YEXT)

Friday, June 5th

  • 8:30 AM EST – NonFarm Payrolls & Unemployment May (AKA the Jobs Number)
  • 1:00 PM EST – Baker Hughes Rig Count
  • Major earnings: StitchFix (SFIX)

America’s #1 Stock Picker Reveals Next 1,000% Winner (free)

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Portfolio Accelerator Review (I Bought It!)

Looking for Jeff Bishop’s Portfolio Accelerator Review? I’ve researched it to find out more and put together an honest Jeff Bishop’s Portfolio Accelerator Review sharing all the details.

Jeff Bishop’s Portfolio Accelerator Review – What is All About?

Jeff Bishop’s Portfolio Accelerator is a brand new service by Jeff Bishop (RagingBull). Jeff Bishop’s Portfolio Accelerator service is to teach you how to actively manage a portfolio. That’s why Jeff Bishop wants to give you access to his personal portfolio.

When it comes to the stock market, having a plan for your portfolio over the next 2, 5, even 10 years will likely be the difference maker between steady growth and losing money.

That’s why Jeff Bishop wants to give you access to his personal portfolio.

And he’s NOT just “buying and holding” something. This is an active portfolio that he’s giving you access to. 1 key indicator tells him when to continue to hold something vs letting it go when signs tell him it’s going to drop in price for a bit.

You want to learn how to be a smart investor and see growth for years to come?

Jeff Bishop’s Portfolio Accelerator service is to teach you how to actively manage a portfolio. Sure, you might want to own a high-growth tech stock like Zscaler for years and years to come. Maybe you love the potential of that company. BUT, when Jeff’s indicator tells him that it’s changing direction, he’s not going to just sit there and do nothing.

No, he’s going to TEMPORARILY get out of the trade before it goes south.

He protects his profits and look to scale back in at a lower price once a drop happens. Is it as active as day trading or getting in and out of stocks within a few days?

OF COURSE IT’S NOT!

But that’s not the point of Jeff Bishop’s Portfolio Accelerator.

The point of it is to have a risk-controlled way to grow your wealth over time. You put money in a retirement account, right? Maybe you have a 401k? Well, think of this as being able to actively manage what’s going on in those accounts and doing what YOU see is the best thing.

Even if you gave your money to someone else to manage for you, they aren’t going to do this!

They are likely going to sit there and do the bare minimum, bragging about their measly returns for you, because they make us believe 5% in a year is good.

But if you’re invested in your future, you’ll see how valuable this is.

And Jeff amplify his portfolio with options. He will teach you the risk controlled way to add additional monthly income to your account and boost your return.


— RECOMMENDED —

Millionaire Trader Reveals Top Trade Idea Each Week

RagingBull.com CEO, Jeff Bishop, shares his top pick for the week each Monday, straight to your inbox.

“My strategy aims to help you pull one winner out of the market each week, regardless of market conditions!” – Jeff Bishop

Click Here!


Options Accelerator in a Long-Term Portfolio

If you’re not using this strategy in your portfolio, you’re missing out on money the market WANTS to pay you.

Here’s 1 example.

Apply Options to a Portfolio to Amplify Your Returns.

Say AAPL is trading at $280 and we own that stock long-term. We can get PAID for owning that stock. What we do is we pick a price we would be happy selling AAPL in a month.

How about $300? That’s pretty awesome right? We’d make $20 a share if that happens. That’s a big move in a month!

But, Jeff wants more. The market will PAY US for saying we’ll sell.

So, what he does is he finds an option contract at $300, example here.

You want to sell that option to someone else, basically saying you are happy to sell AAPL at $300 if it’s above it at the end of day May 22nd.

Selling options is no different than buying them in terms of execution, but it’s the smartest play and low risk.

For every 1 contract we sell would be $500 in this case. ($5*100 because 1 contract = 100 shares).

Now, there are 3 scenarios for what happens next.

End of day on May 22nd, AAPL could be between $280 and $300. If it is, you collect $500 for every contract you own. That’d be $5000 for 10 contracts!

Jeff calls that rent. Basically renting out stocks you own. Then, you do it again next month!

Now, what if AAPL trades above $300?

Well, you said you would sell it at that price, so you end up making $20 per share you own + $500 for every contract. Pretty sweet right?!

You always collect your rent.

And if AAPL closes BELOW $280, well, you still collect your “rent” and then you just own AAPL at a lower price, which is fine, because it’s a long-term play!

This is the beauty when it comes to options in a portfolio.

It’s the best supplement to a long-term portfolio, because it gives you the ability to make money every month and accelerates your growth.

How you can COLLECT INCOME ON STOCKS YOU DON’T OWN.

This is normally what leaves people speechless!

How can you make money on something you don’t actually own?

Say AAPL is trading at $280 right now. You don’t like that price! BUT, you’d like to own it at $250 a month from now if it was at that price.

So, you look for a put option contract with a $250 strike price that you want to sell. 

Here’s an example.

Again, the execution for selling an option is just like buying, but it’s the smarter way to go, especially in this case. All you’re saying when you sell this $250 put is that “I think AAPL will be above $250 by end of day May 22nd”…

There are now 2 scenarios for you to look at the end of day May 22nd .

If AAPL is ABOVE $250, you collect your “rent” just for saying that you would buy it at $250.

For every 1 CONTRACT you own, that’s $500 worth of rent! Each month you can do this. 5 contracts…$2500 worth of “rent” is paid to you! Let’s do it again!

Now, if AAPL is BELOW $250, you still collect that “rent”, but you also get to OWN THE STOCK at that price.

Remember, in this example, just a month ago AAPL was at $280. Now, you’re able to get it at about a 10% DISCOUNT!

What’s not to like about this?

Jeff Bishop’s Portfolio Accelerator 3 Examples: When to Buy, Hold, and DITCH!

Let’s run through some examples, because I need you to see the issue that arises from just buying and holding. Newsflash…that’s a mistake!

Take a look at Google.

See those red and blue lines. When those cross, it signals a buying or selling opportunity. Following this simple indicator, from start to finish in this chart, could have made 27% on this stock. If you chose NOT to follow this and “Buy and Hold” the entire time, you’re looking at a 2.4% LOSS. That’s about a 30% swing in the RED that you could have avoided. And it works time and time again.

Beyond Meat example:

Notice when the blue and red lines cross. You could have avoided a loss, made a 40% gain in the first 2 months, seen the crossover happen, got out while the stock dropped 11% and then came back in when it crossed over again!

It’s very simple to understand, right?

Here is one more, because everyone is talking about Royal Caribbean.

You see the crossovers? If you bought at that first one, you could’ve made 21% in that first green zone. You see them cross over again, get out, and then the stock drops 70%!

This is how you protect yourself, and this is what Jeff Bishop is here to show you how to do!

You’ll have access to Jeff Bishop’s portfolio. You’ll see what stocks he’s holding. You’ll see what stocks he’s interested in.

You’ll also get access to his options trades on these stocks to help ramp up returns!

What Do You Get With Jeff Bishop’s Portfolio Accelerator?

Everything That’s Included:

  1. Actual Portfolio of Stocks – See all stocks in Jeff’s Family Portfolio Account

  2. Stock Report for New Additions to Portfolio – Any new addition? Jeff will send you a report on why he likes it!

  3. Buy/Sell Alerts via Email & SMS for Portfolio Moves – Know when Jeff makes a move!

  4. Weekly Portfolio Update on Current Positions & Changes

  5. Weekly Option Accelerator Trade Alerts – Accelerate your portfolio with Options! Get Jeff Bishops’ trade alerts included FREE!

  6. Monthly Video Chats with Jeff – This is when you can pick his brain, ask about other stocks YOU like and what his plan is.

  7. RagingBull Investor Eletter

  8. 10X Portfolio Blueprint

  9. The Traders Black Book

  10. Founding Member Pricing

How much does Jeff Bishop’s Portfolio Accelerator membership cost?

You have two options:

Annual Subscription-A year of Jeff’s Portfolio Accelerator for $997

Unlimited Subscription – Join Jeff for One-Time Payment of $1,799

Final Words

You can learn some of Jeff’s options trading secrets in his new eBook, The Trader’s Black Book – FREE DOWNLOAD HERE!

Jeff’s Trader’s Black Book is a great place to start and you can probably apply a lot of what he teaches in it by yourself.

Or you can join his much lower cost service which often generates returns of 100% per trade! It is called Bullseye Trades and you can learn more about it in this FREE WEBINAR.

Total Alpha Trading – Check Out This High Yielding Sector

Want a great deal? You can drop your money into a 10-year treasury bond that pays you less than 1%!

When you say it out loud, it sounds ridiculous. Except, that’s where people are hiding their money.

For the life of me I can’t understand why

There’s tons of exceptional trading (and now investing) opportunities and you don’t need to look far.

Today, I’m going to walk you through some I believe are ripening up.

Some will appear obvious, others, not so much.

Quality Dividend Plays

Throw a stone and you ’ll hit a financial advisor that talks about good balance sheets and growing dividends. That advice only works at the right time…and now is starting to look good.

Let’s face it. Power companies aren’t about to go out of business anytime soon. True, demand will slow as businesses shutter for the season. However, the economy will restart. When it does, demand will pop back for them.

So, when I see dividend yields in stocks like American Electric Power and Duke Energy arching over 5%, I start to look harder. I’m not expecting these guys to grow gangbusters by any stretch. All I need is bonds to throw off garbage yields, and these stocks will start to attract investors.

You might be inclined to go with the safe play XLU ETF. The problem is that only yields around 3% at the moment. That ’s why you should do your research on the individual companies, and look for ones with strong cash flows and a balance sheet that can weather this pandemic.

Stay Clear of Bad Debt

One place I wouldn’t go fishing is in the junk bond market. The recent selloff leads me to believe that we’re likely to see a lot more bankruptcies in companies.

Image

HYG Monthly Chart

This isn’t a place you want to go dumpster diving. Many of these companies need to be swept out. Besides, what would you rather own, a basket of junk bonds who could disappear tomorrow or a handful of robust utility and telecommunication companies that will be here for your kids?

Key SPY Support

So far, I’ve kept some insights to members of Total Alpha. However, I decided that I want to let some of it out to make sure that you all know where to start looking for a bottom.

I’ve drawn a zone of support on the SPY chart here.

Image

SPY Monthly Chart

This area represents a range from the 2015-2016 highs to the lows of those years. It also encompasses the 200-month moving average.

Here’s an extra secret I’m going to share. ~$203 in the SPY is the midpoint between the all-time highs and the lows made in 2009.

You get this many items converging in one spot and you have to pay attention Does the market have to stop there? No. It just makes it a high probability area.

Watch The VIX for Clues

So far, we’ve had no signs of volatility contracting. In fact, this is the longest we’ve ever gone with the VIX climb without any meaningful pullback.

Image

VIX Monthly Chart

At the moment, we’re at levels we haven’t seen since the depths of the financial crisis. However, there may be some silver lining. Even with the decline in the market to end last week, take a look at the VIX hourly chart.

Image

VIX Hourly Chart

Oddly enough, the VIX ended Friday lower. This may have been a function of options expiration. However, it’s interesting that it created a money-pattern crossover. That could mean we’re near a short-term low.

Silver Lining

Typically, I don’t ever get involved with silver. But when I look at this selloff, I’m starting to wonder if this isn’t a decent area to start building a position.

Image

SLV Monthly Chart

Again, we’re down to levels we haven’t seen since 2009. Silver has more industrial applications than gold, which is often why it correlates more to the stock market. However, this isn’t a commodity that will go to zero.

This isn’t something that will make tons of money in months. But, if this starts getting below $10, it’s going to be hard not to want to pick up a little bit in my retirement account.

Do I jump in right now?

Right now, the risk is still to the downside. We don’t have any timelines not just about getting through this current phase, but a pathway back to normalcy.

That doesn’t mean there aren’t fantastic opportunities out there right now. I still work every week to deliver my top pick in my Bullseye Trade of the Week. Last week hit big, with some members more doubling their entry.

Rather than let the market beat you up, fight back. Take what’s yours. My Bullseye Trade is my best option trade idea, aiming for a 100% return.

Click here to learn more about Bullseye Trades.

Source: TotalAlphaTrading.com | Original Link

Total Alpha Trading Strategy | Jeff Bishop’s Stocks He Wants To Bet Against/Stocks He Wants To Buy

The Fed came and went like a whisper no one heard. They confirmed low-rates and a commitment to higher inflation leading to a muted market response. It’s almost like we knew what they were going to say…

Back on planet Earth, the rest of us were trading the markets in front of us. Stocks took a face plant into the close as investors shrugged off the Fed’s support.

The markets sit at a key inflection point. Let’s take a look at areas you need to pay attention to, and where you can make some healthy green.


— RECOMMENDED —

THE WINNING STRATEGY THAT WALL STREET HAS BEEN HIDING FROM EVERYONE…

Total Alpha Trading

FULL DETAILS HERE


Key Stocks I’m Trading Right Now

Every day, I update my list of stocks that I’m watching for setups. While I normally reserve this for paid members, I’ll give you a look at what I’ve got my eye on.

Expected earnings dates listed in (…)

Stocks I want to bet against…

NFLX (April 21), AMZN (Jan 30), AAPL (Jan 28), FB (Jan 29), CRM (Mar 2), AMD (Jan 28), HUBS (Feb 12), TWLO (Feb 5), NOW (Jan 29), SPCE (Feb 25), TLT (none)

Stocks I want to buy..

CMG (Feb 4), DIS (Feb 4), MJ (none), CVNA (Feb 26), PLNT (Jan 29), UVXY (none), STZ (April 2), UNG (none), TSN (Feb 6), BYND (Jan 27), XLE (none), WMT (Feb 18), BA (Jan 29), WDAY (Feb 27), LK (??), PTON (Feb 5), KL (Feb 20), BUD (Feb 27), BKNG (Feb 26), HON (Jan 31), WORK (Mar 4), TTD (Feb 20)

Amazon already paid me well over $40,000 in the past month. I’m already in trades with AAPL, FB, WDAY…well let’s just say I’ve got a few on the books…most of which are at a profit.

One of The Best Days To Trade

The day after the Fed is one of my favorite days to put on new trades. That’s why I’m hosting a live event today. Best of all, I’ll be trading for the whole world to see. Find out how to apply all the techniques and skills to real trades.

You can watch by clicking this link.

This is going to be awesome. Not only does the timing line up here, but with yesterday’s close, the markets display a lot of volatility. That creates plenty of opportunities for some juicy trades if you know where to look.

Earnings Deluge

You might have noticed that I’ve got a lot of plays that go through earnings. We’re seeing a lot of stocks trade inside the expected move priced by the options.

The question remains whether the Coronavirus takes a huge chunk out of the Chinese economy. Estimates already suggest shaving off 2% from the already paltry 6% GDP.

That’s what made Apple’s earnings remarkable given their supply chain in China. It’s also why I sold a call spread on the company this week that’s already looking to be a nice trade.

The Strength of Gold

Gold continues to show a ton of strength and is one of the markets I’m pretty bullish on. With equities primed to stall out and uncertainty creeping back in, gold benefits as the defacto ‘safety trade.’

Image

This is what I’m holding after I already took some sick profits

Even if the precious metal pulled back to the 200-period moving average on the hourly chart, it would still be bullish. That’s why I’m taking dips as opportunities to load up.

Image

GLD Hourly Chart

Possible Bottom In Energy

Crude oil, and especially natural gas, have been searching for a bottom for quite some time now. If natural gas gets much cheaper, they’ll be giving it out with packs of baseball cards.

The record production within the U.S. could be slowing as rig counts continue to decline.

Image

The bottom in rigs in 2016 led to a decent rally in energy stocks through the remainder of the year, as well as the commodities themselves. While we probably have a but more to go given the stockpiles, we also have much higher global demand than we did then.

High Profits

I have to admit that I really like the cannabis industry at the moment. Times continue to change, with many states now legalizing medical marijuana if not recreational use. We’re already seeing presidential candidates talk about the issue, which could bring about change as soon as next year.

In particular, I like the ETF MJ that invests in the sector. It’s got a great risk/reward here as it’s very close to its all-time lows. Plus, it yields over 7% (though that’s likely unsustainable).

Image

MJ Daily Chart

Check out the recent pop that broke the sustained downtrend. With a nice retracement, this ETF looks prime for the picking. This is one of those trades that could pay out for months to come.

You And The Captain Can Make It Happen

The party boat sets sail today. Join me for this special event. All the techniques and tricks will be on display. Watch me trade live!

Click here to join this live event…

Jeff Bishop’s Total Alpha Trading | Making $43,000 in AMZN The Easy Way

Yesterday may have been a rough day for some traders, as the S&P 500 declined by 52 points, -1.58%, on fears that the coronavirus could weigh down the global economy.

But it didn’t have to be. In fact, I actually made over $24,389 from trading options.

Image

And while yesterday was the first volatile trading day of the year. I am ready for anything… whether it’s a bounce or continued sell-off.

I’ll be alerting Total Alpha subscribers on my game plan and trades throughout the day.

While the market tries to figure itself out, I want to take this time to talk to about an options trade I had on Amazon a few days ago.

But this time, we won’t be talking about options at all.

Instead, I want to discuss something called the Life Cycles of a Stock.

Study it, and you’ll be on your way to adding more 0’s to your bank account.

Breaking Down The AMZN Trade

Iron condors combine a put credit spread and a call credit spread. This creates the ‘wings’ of the trade.

Here’s a quick example.

  • Stock ABC trades at $100
  • You sell the $110 call contract and buy the $115 call contract
  • Then you sell the $90 put contract and buy the $85 put contract.
  • You will receive a credit for this transaction

The goal is to get the stock to land between the closest strikes at expiration, in this case, $90 and $110.

Now, I bring this up because I want to explain a little trick here. You don’t have to execute this trade all at once. Instead, it’s perfectly acceptable to start with a call credit spread and then add the put credit spread later on or visa versa.

You’re probably asking – why would I do this?

Well, the closer you are to the strikes, the more you get paid for that portion of the trade. If you have a range bound stock, you can start with one side of the trade, and add the other one when it gets closer to the other end.

Let’s use the Amazon trade as an example. The hourly chart highlights an area where the stock traded in a narrow range for the last month.

Image

AMZN Hourly Chart

Imagine you were just trading the stock. If you saw a stock stuck in the range, you would sell at the highs and buy at the lows.

That’s basically what we’re doing here but with credit spreads. When Amazon made its first drive higher up to $1900, I took that opportunity to sell a call credit spread. That paid me a good chunk of change since I was so close to the strikes.

When the stock dropped down to $1832, I sold the put credit spread. After that, I simply waited the trade out.

Because I used the swings in price to get fatter payouts on the credit spreads, I not only reduced my overall risk but increased my earnings. This is how you combine timing and chart analysis with credit spreads.

But the real secret is leveraging a stock’s life cycle.

Using Life Cycle Analysis

I recently did a live event where I explained the three stages of a stock’s life cycle. These are the churns it goes through as it wiggles its way higher.

First, stocks go through a reversal. This doesn’t break the longer-term trend. Instead, it creates a short-term turn. I use these to time when I sell the put or call spreads at the tops and bottoms of the ranges. You can actually see this in action on the AMZN chart in mid-January. The crossover of the 13-period moving average below the 30-period moving average signaled a reversal move lower.

Image

AMZN Hourly Chart

Second, we have the reset areas. After a significant run, stocks like to pull back below their 200-period moving average. These make great places to sell put spreads underneath to eat up the clock. You can see that type of move from November through December in AMZN.

Image

AMZN Hourly Chart

Lastly, there’s the launchpad. This happens when that same stock breaks out above the 200-period moving average and gets ready to take off. This shows up on the AMZN chart in late December.

Image

AMZN Hourly Chart

Knowing these three phases to the stock’s movement is essential for timing your trades.

You can check out some more examples of the lifecycle in my video replay.

Click here to watch.