The Power of the Audible

by | Jun 14, 2020 | Editorial | 0 comments

 

You can plan all you want…

But you can’t control how the market will move…

Which is why I always like to have an Audible Trade of the Day

Think of this sort of like the coach from the dugout of a baseball game.

It’s 2 outs and a runner on 3rd—so he calls out a pinch hitter. 

What might seem like a last minute decision is actually a well thought out plan.

And that’s exactly what happened on the SPY once the markets signaled it was time to buy puts instead of calls.

Now let me go through what I saw on the SPY and how it changed my viewpoint for the day.

 

The Audible

 

Friday was a difficult day to trade the markets.  

Throughout the entire pre-market trading session, the markets were showing overnight momentum we will have a trend higher.

Here’s a rundown of the momentum on the SPYs heading into the market open.

Pre Market rundown:

  • US markets are strong
  • European markets are strong
  • Asian markets mixed
  • Currency lineup pointing to upward trend
  • 20.4% GDP decline in UK – Largest on record
  • Fears of 2nd wave of Covid-19 as Southern States have increased cases

Every day I breakdown the pre market trading session so you don’t have to in order to get prepared for the trading day coming up.  

So what is the outcome of the pre market rundown?

Premarket momentum indicators were all pointing to a positive market but it’s too early to tell what the day will bring.  

Here’s what the SPY chart looked like going into the open.

 

Source: Thinkorswim

 

The pre market session showed:

  • Pre market fundamental and global outlook appear positive
  • Market is looking to open higher than prior close
  • Strong rally in the pre market session
  • Moving averages pointing higher in a bullish formation
  • Long and short term regression lines pointing to uptrend continuing 
  • TTM Squeeze broke with momentum pointing to the upside

Trade of the Day

 

To be honest, I’ve been worried about this market for quite some time now, but you can’t seem to win when you fight the fed.

So I’ll go with calls from everything I see about the pre market trading session.

And this is the announcement I gave to the community.

 

 

To avoid being caught on the wrong side of the trade it’s important to watch what could happen in the first 30 minutes of the trading day.

What does this mean?

That means it’s best to watch the 30 min range to pick a direction the market is going to head in.  

Let’s take a look at the 30 min breakout in the SPYs

 

Source: Thinkorswim

 

To find the 30-minute breakout levels, you want to take the trading range seen In the 30 minutes of the trading day.

And what was starting to unfold is not looking great.

This is what happened:

  • The 30 minute range was established and broken to the downside
  • The TTM squeeze was pointing to negative momentum after the short squeeze

So what does this mean?

It’s telling me it’s time to break out the audible trade.

 

 

And that was a perfect Audible…

Here’s how the trade played out.

 

Source:  Thinkorswim

 

In the chart above, you can see where the trade was executed at the break of the 30 minute range.  

And looking at the chart, the most logical place for the markets to bounce would be the lows from the day prior.

Just take a look at these potential profits you could have pulled down by buying those puts.

 

Source: Thinkorswim

 

Now that’s a wild chart!

If you were to enter at the break of the 30 minute range and exit at the target price, you could have had over a 200% ROI on your trade!

But wait… there’s more!

 

The Extra Trade

 

Think that’s all we had for the day?

Well not that fast.  Every now and then I double up my trades with an Extra Trade of the Day.

Based on the price action of the SPY today, I think we could see a gap down over the weekend. 

And this concern had me purchase additional puts going into the close of the market.

 

Wrapping up

 

So sometimes things just don’t go as planned…

Which is why I always like to have an Audible Trade of the Day.

And in some cases, I may end up with an Extra Trade of the Day, too!

Just by analyzing the pre market trading momentum and intraday momentum you can put yourself in a position to bring down over 200% returns on days like we just had.

Click here to stay up to date with all trades and learn more about Daily Deposits

 

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