Stocks cooled midweek following their recent run-up, which saw the S&P 500 spike more than 5% in five trading days. Investors appear to be weighing trade policy against monetary policy, which is creating a game of tug of war between the bulls and bears.
And while the market rallied Thursday, led by energy stocks, the attack on two oil tankers in the Gulf of Oman presents another geopolitical risk traders may have to grapple with.
In an uncertain market — in any market really, but especially in an uncertain one — it pays to have a number of reliable indicators you can use to profit.
Today, I want to go over one of my favorites, and one I believe every single trader needs to know. It’s not fancy, but it is powerful. More often than not, those are the ones that make you the most money day in and day out.
It’s the exponential moving average (EMA) line crossover, and it’s particularly useful in choppy markets like we’re seeing now.
In short, I use two exponential moving average lines on my intraday charts when I’m trading: the 10-day exponential moving average and the 20-day exponential moving average.
When the 10 EMA crosses above the 20 EMA on shorter-term charts (1- and 5-minute), you can usually expect a bullish move, meaning it may be a great time to purchase call options. Inversely, if the 10 crosses the 20 to the downside, you can expect a drop, making put options the way to go.
To illustrate this indicator, I want to revisit a recent Trade of the Day.
Each day, I isolate one high-probability option trade on SPY, the ETF that tracks the S&P 500. I deliver that trade 30 minutes before the market opens in my Trade of the Day alert.
I wake up at 3 a.m. every trading day. While some people are just hitting their REM cycle, I’m homing in on overseas trading action, which provides me with a fantastic forecast of what is likely to happen in U.S. markets.
Here’s what I sent members in my Trade of the Day alert on Wednesday:
“I’ve looked at every chart and index around the world that I can this morning. What I’m seeing is a possible pop at or near the open (extended hours for SPY charts turned on is important). These pops are not uncommon on red mornings. In fact, they’re pretty frequent. What I’ll be doing is using that to apply an exponential moving average line crossover to the downside using a 5-minute chart as my primary and looking to buy to open put options while letting that crossover come to me, not forcing it.
“A sustained exponential moving average line crossover to the downside after a potential pop would be awesome. That could lead to an easy put option trade, which is what I’m looking for. Buy to open, sell to close. Cash in the chips. This is the single best approach in my experience to apply in ‘choppy markets’ on a day-by-day basis.”
In the alert, I also pointed to $288 as critical support to watch and $290 as an overhead resistance level. And, as I do each day, I told them exactly what option to buy.
The trade worked out perfectly.
The EMA crossover (blue arrow) took a little while to happen, but once it was triggered, it only took another 10 minutes for SPY to hit $288 support, at which point, traders could have exited with a 47% profit — in 10 minutes!
Check out what one satisfied trader had to say:
Brian basically walked away with a check for more than $600 for a few minutes of work.
I call these trades “Daily Deposits” because they literally allow traders to deposit money in their account day after day. My goal is to recommend one simple trade that a person can make and then exit quickly for a large profit, typically within a few hours of the opening bell.
I go into much greater depth on my Daily Deposits strategy — including all the tips, tricks and indicators I use to uncover the best option to trade each day — in an exclusive interview. You can watch a replay here, but my guess is that you’ve already watched it.
If that’s the case, there’s only one thing for you to do, sign up to get my Daily Deposit alert TODAY. Why wouldn’t you put an extra $632, or even $6,320, in your pocket today?
America’s #1 Premarket Trader,