Anxiety is rising over the coronavirus and it is sending shockwaves across the global markets.
We are witnessing the worst weekly sell-off since 2008, and the Dow Jones suffering its largest single day drop in market history.
This drop has put the blue-chip average in correction territory now after declining over 10% from the highs and wiped out trillions of dollars from investors’ portfolios in days.
Some say we are in turmoil, and others think the markets are in a complete death spiral.
But that’s not the case over here at Daily Deposits scoring yet another monster win with our momentum indicators kicking into high gear.
Holding overnight positions in this market is scary, that’s why I like to start each day fresh. If you’d like to learn more about my system, then register for my live training event on Tuesday.
With all this uncertainty in the markets, we can rest easy having a trading system that is forecasts the market movements each and every day.
So as we look at the momentum indicators on the 5 minute, 10 minute, and 15 minute charts, they are all pointing lower.
Let’s take a look at how to utilize pre market momentum indicators to predict the direction of the markets that day.
Trading Momentum Indicators
So let’s look at how momentum indicators can help determine the direction of the markets.
Here’s an example of the SPY’s on the 3 main timeframes used to analyze momentum: the 5 min, 10 min and 15 min charts.
First step: it’s best to look at the 5 minute chart and understand what the markets are doing on a faster time frame. This will help decide if it’s going to be a quick scalping trade right at the open.
From the 5 minute chart above, you can see a significant downward slope in the pre markets. Additionally, the price is actively being rejected against the 20 SMA as it continued lower.
Next, let’s look at the 10 minute chart.
By looking at the 10 minute chart, you can start to notice that the moving averages are starting to get wider between the shorter term and longer term averages.
Additionally, the price action continues to sell off against the shorter term moving average indicating significant selling pressure.
Just like the 10 minute timeframe, the 15 minute time frame shows a similar story to the price action in the pre market trading session.
By combining all three time frames to build a “bigger picture” of the markets, you then can start to see what is unfolding without having tunnel vision.
What’s the trade?
Buying puts on at the market open to follow the momentum that has been building up for the open.
Getting A Boost From Volatility
Long put options are the best options to trade that allow a trader to take advantage of both aspects of their pricing.
When pricing an option, only long puts increase in price when the price drops and volatility rises.
This double bonus makes them ideal for trading the markets short.
Here is what volatility looks like on an intraday basis. It’s key to notice that volatility rises as price continues to drop throughout the day.
Ok, so now let’s see if we can find a put option to trade and take advantage of these markets.
Placing The Trade
Now that we understand the chart price action and see that momentum has been building in the premarket trading session it’s time to pick the options to trade.
One of the best approaches to placing a short trade using options is to use a monthly at-the-money put option.
This is an example on thinkorswim:
Looking at the above image, the highlighted box on the right is the put on the SPY’s and the transition between purple and black highlighted rows is the at-the-money contract.
Let’s see what was traded for the members in Daily Deposits
And this is the profit chart of this trade for the single day.
If a trader saw this alert and took 10 put options on the SPY’s from the above alert, they would have taken a $3,500 max loss and made over $10k!
That’s about a 300% return in a single day!
So now do you want to put the power of Daily Profit Machine to work for you?