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This week has been all about earnings and while a few stocks have made big moves after releasing their quarterly numbers, the indexes have “taken a breather” by consolidating nicely at their daily 8 Exponential Moving Average (EMA).

We like the idea of lower time frame squeezes (such as 1-hour and 4-hour) firing long off the 8 EMA to trigger the next move higher, but anytime heavily-weighted stocks such as the Facebook, Amazon, Apple, Netflix and Alphabet (FAANG) announce earnings, there can always be implications (good or bad) for the overall market. With this being said, we advise being patient over the next few days and letting things unfold before jumping on any moves.

Currently, NVDA, EPXE, and a few other solid squeezes are catching our attention, but they’ll need the overall market to continue its grind higher in order to be A+ opportunities (remember, our best trades will come when we have the “wind at our backs” with the indexes remaining strong).

GOOGL announced quarterly earnings this past Tuesday, and the numbers were met with a positive reaction as the stock opened up over $100 higher yesterday, before slightly fading into the close. You can’t ask for better results than GOOGL delivered, however the structure of the chart doesn’t make it the easiest to trade moving forward. It is well above 2+ Average True Range (ATR) on the daily chart, making an entry at these levels less than ideal. Remember, if QQQ can fire its weekly squeeze long, we should see almost all tech-related stocks grind higher. However, we still want to focus on the best structures and highest-probability entries we can get, and GOOGL just doesn’t offer that here at this extension.

On the other end, MSFT earnings weren’t met with as positive of a reaction as GOOGL. We saw the stock gap down by over $5 at the start of the session. On a positive note, the gap down did bring the stock back to its 21 EMA buy zone on the daily chart, and this is something we can work with. An entry at the buy-zone allows for “easier” upside should the Qs (QQQ) begin to heat-up again. We preach (and make a living) getting long at the buy zones and taking profits into 2+ ATR extensions. This is what makes MSFT a much more attractive entry than GOOGL at this point.

While GOOGL and MSFT kicked off earnings for Big-Tech, it was FB and AAPL who stepped to the batter’s box yesterday evening. Here’s how they’re behaving in the after-hours at the time of this writing:

• FB is up over $20+ after earnings, surpassing the $12 expected move
• AAPL is currently up $4+ in the after-hours, which was just about the expected move.

The initial reactions from both of these names bodes well for tech heading into today’s session.

AMZN announced earnings today (Thursday) after the close, and the results could certainly have an impact on tech along with the overall market. Should AMZN pull a move to the upside like GOOGL did, that could be all the QQQ needs to begin firing the weekly squeeze long. At the same time, should AMZN bomb earnings and sell off, that could “rain on our parade.”

We are still holding our 5/21 expiration 3,500/3,490 put credit spreads, and while our short strikes are not quite yet out of the money (OTM), it is turning out to be a profitable trade so far. Today, we have patiently observed how AMZN behaves heading into its earnings announcement. While the plan for this trade was to hold through earnings, a move into a new all-time-high above $3,550 may offer us an opportunity to take a good chunk of our max profits before the close. We’ll be patient and flexible, but should we have 60%+ of our max profit on the spread before the close, it may be wise to take some exposure off the table and lock in some gains.

 

As we discussed in the Simpler Trading Options Room yesterday, weeks like this are a good time to “take our foot off the gas,” and focus on refining our watch lists as opposed to forcing trades in the nasty chop. The markets are on standby here waiting for big earnings to pass, and since we need the wind of the markets behind us, we should have the same willingness to be on standby as well!

Stay tuned for our next newsletter on Friday, as we’re excited to update you on how our AMZN trade, as well as others, perform heading into the end of the week!

 

We have a wild week ahead with many big names set to report earnings. All three indexes are consolidating at an all-time high (ATH), so we need to be patient as we plan our moves. Our focus is on how “big money” reacts to the earning reports. If we have a good reaction, we should see a big move through highs.

Here is our focus list for the week:

SQ – This one is based at the daily mean. We are watching for a 4-hour squeeze to push through 255 and move toward 263/270

AMZN – There are rumors going around that Amazon will split its shares, so we need to keep an eye on how this might affect the stock. We are watching for continued push into earnings through 3,434 up toward 3,500

NVDA – We’re watching the 4-hour squeeze. If it breaks 620, then we’ll be looking for a push toward 630 or higher

ROKU – We’re watching the 4-hour squeeze on this one also to see if it makes a push toward 380 or higher

 

 

The markets are looking poised for another big run to go higher, after having taken a breather and modestly pulling back to the 8 Exponential Moving Average (EMA). This significant push could start sooner than expected, as evidenced by the squeezes on the weekly charts and the lower time frame squeezes forming at the 8 EMA or as we call it “the buy zone.”

As mentioned in last Sunday’s newsletter, our main focus has been on AMZN due to its beautiful weekly squeeze, which has a higher probability of firing long, because of the accompanying squeeze in QQQ.

This week, we opened the 5/21 3500/3490 put credit spread on AMZN that we discussed in that newsletter. I sold 38 contracts of this spread a $6.75, resulting in a max potential loss of $12,000 for a max potential gain of $25,000. In order for this trade to work, AMZN will have to be trading above $3,500 come expiration time, which is entirely possible if the weekly squeezes begin to fire long.

Please note that unlike our typical put credit spreads, we have shifted the risk-reward in our favor on this trade by selling In The Money (ITM) strikes as opposed to Out of The Money (OTM) strikes.

One thing to keep in mind is that AMZN is set to announce earnings this coming Wednesday, so open application through earnings is of course a potential risk. With that being said, as much as we love the setup, we are approaching this trade with a “set it and forget it” mentality, fully accepting 100% of the risk on the table.

 

Happy Friday Traders!

 

Another week is in the books, and we hope that you all got a little bit better in your trading this week. After a few weeks of strong upside momentum in the market, the indexes “took a breather” this week, pulling back to and consolidating on top of the daily 8 Exponential Moving Average (EMA).

Typically, after a 2-3+ Average True Range (ATR) move to the upside, the market and leading stocks will tend to revert down to the daily 21 EMA. However, with the recent strength we’ve seen, and the giant weekly squeezes behind us, it may be possible that the modest dip to the 8 EMA is all we’re going to get here.

Should the markets fall to the mean, we would view this as an awesome buying opportunity. Vice-versa, if we race to new highs off the 8 EMA, we’ve got a few positions open that should thrive. As always, we’ll be prepared for whatever the market throws our way next week, and with that being said, let’s jump into our review of open and closed trades from this week.

NDX Call Credit Spread

After a big-time push to new highs, QQQ started showing signs of exhaustion, accompanied with lower time frame squeezes firing short early in the week. As a hedge for our long positions, and as a play for a reversion to the mean, we sold this call credit spread on NDX in the Options Room this past Monday.

As has been the theme, the markets proved their resiliency with a quick bounce back above the 8 EMA on Thursday. We don’t like going against “the path of least resistance,” and decided to buy back the spread for modest gains, and then reallocated that capital into AMZN.

· 4/19 SOLD -10 VERTICAL NDX 100 (Weekly) 30 APR 21 14100/14120C @ 8.25
· 4/20 BOT +10 VERTICAL NDX 100 (Weekly) 30 APR 21 14100/14120C @ 6.85
· NET P&L = +$1,400

 

 

SPX Iron Condor

Once a daily squeeze has fired and begins to show signs of exhaustion (represented by dark blue bars on the histogram, below), this can be a great time to open iron condors, as the markets can tend to chop back and forth for a bit before gearing up for their next directional move. That wasn’t the case this time around, as the markets are quickly running back toward the all-time-high (ATH) this (Friday) afternoon. In an effort to not be on the wrong side of the market, We decided to buy back the iron condor for a very modest gain, which is always better than taking a loss. We do not want to fight this market’s momentum, and closing the iron condor was an easy decision as that capital can be used much more efficiently on directional plays.

If you remember, for much of March the iron condors were the “perfect trade.” They were only “perfect” because that is what the market had to offer. As of right now, what the market has to offer is some serious momentum, and the iron condor is designed for just the opposite. The markets can change quickly, and this is a good example of why we must remain flexible in our ideas.

· 4/21 SOLD -6 IRON CONDOR SPX 100 (Weekly) 30 APR 21 4250/4260/4030/4020 @1.95
· 4/23 BOT -6 IRON CONDOR SPX 100 (Weekly) 30 APR 21 4250/4260/4030/4020 @1.55
· NET P&L = +$240

 

 

SPY Iron Condor

For smaller accounts, we opened up an iron condor (see chart below) on the SPY with a similar structure to our SPX condor. For the reasons mentioned above, we canned this iron condor early Friday morning for break-even, which again, is always better than letting a trade turn into an unnecessary loser.

· 4/21 SOLD -3 IRON CONDOR SPY 100 (Weekly) 30 APR 421/423/403/401 @ 0.54
· 4/23 SOLD -3 IRON CONDOR SPY 100 (Weekly) 30 APR 421/423/403/401 @ .55
· NET P&L = $0

 

 

APPS Put Credit Spread

Good old APPS! We decided to take the loss on this trade (see chart below) early this week, as we reached the point where the setup was clearly not “working.” Though it was a losing trade, we will swing at this kind of setup 10 times out of 10. It’s so important to remember that the results of one single trade are meaningless, and it’s the net result of 50 or 100 trades that we should grade ourselves on.

This time around, the setup did not work in our favor… but we are firm believers that if you take 100 trades with the same structure that APPS offered when we got long, then you will come out on top.

One good lesson we’ve taken from this trade is: before you trade a stock for the first time, take a moment to familiarize yourself with the natural “ebbs and flows” of that specific stock.

When it comes to APPS, in hindsight, it behaved as it typically behaves, making a nasty flush to -1 ATR. It was an ugly move to sit through, but in all reality it was a completely normal move for the stock that shook us up. A good example of how a losing trade can offer lessons that will make us more profitable down the road.

· 4/08 SOLD -30 VERTICAL APPS 100 (Weekly) 30 APR 21 82/80 PUT @.66
· 4/19 BOT +30 VERTICAL APPS 100 (Weekly) 30 APR 21 82/80p @ 1.65
· NET P&L = -$2,970

 

 

AMZN Put Credit Spread

· 4/22 SOLD -38 VERTICAL AMZN 100 21 MAY 21 3500/3490 @ 6.75
· This trade is still open

For AMZN, the weekly squeeze (as discussed in last Sunday’s newsletter) is our favorite setup in the market right now. After a nice dip to the 8 EMA, AMZN has started to form some solid lower time frame squeezes, and this was enough for us to initiate our position (see below).

 

 

There’s a lot we have discussed about this trade/setup, but we’ll save that for Sunday’s newsletter, so be sure to keep an eye on your inbox.

 

 

The market made our expected pullback, breaking the 1-hour Ichimoku Cloud indicator and signaling a trip down toward the 4-hour Cloud and key zone of 4113. This unfolded perfectly and started a nice rally toward the highs, until negative tax news hit the media. The market dropped right back down to the 4-hour Cloud and that 4113 zone. The biggest thing we need to watch now is the possibility of traders panicking and selling into the weekend for a full reversion to the mean, or the possibility of this becoming another great “dip buy.”

We will continue to take each session day-by-day with the “if this, then that” mentality. Stalking names like SQ and NVDA as they near their daily mean with the overall market.

Stay Focused!

 

 

With the market super strong, but also very technically extended, we need to take it day-by-day. Right now we are focusing on the 1-hour cloud to start a reversal, and the 4-hour cloud is our first target. If we start to break below that, we could see a full Reversion to The Mean (RTM). Day-by-day and ready to buy the dip and short the move down! We always try to plan ahead by thinking in an “if this, then that” manner.

Here is my focus list for the week:

AAPL – We are watching intraday squeezes and for a hold above 130. If it breaks 136, it can potentially rally toward 138

NVDA – We are watching to see if it will hold 605, if it does, we start looking for a push up toward 650 with the weekly squeeze momentum

FB – We are watching for a RTM dip buy, which is right around 300. If it holds we would like to see a push up toward Point of Control (POC), which is sitting at 312.4

GOOGL – This ticker is looking very strong, we are watching intraday squeezes to break and push through 2300 for a move toward 2330/2350

SQ – We are watching for a RTM dip buy near the daily cloud and we’re also looking for move back up toward POC at 263

Stay Focused!

 

As a new week approaches, I am certainly excited that quarterly expiration week is done and over with. Like it tends to be, last week was nothing but chop, and the iron condor we opened on Monday was perfect for taking advantage of the messy price action.

While I would personally love to see the market show signs of momentum this coming week, please keep in mind that just because quarterly expiration is over it doesn’t mean the market can’t continue to chop. So while there is the potential that we see the markets get back to business and grinding higher on momentum, there is also the potential for a repeat of last week’s sideways action. With this being said, I plan to hold on tight to our current open long positions, and would actually like to sell another iron condor on SPX to take advantage of any potential chop.

WEEKLY IRON CONDOR TRADE

Just like last week, I will look to sell an $SPX iron condor for this coming Friday’s expiration and would like to obtain a 4-1 risk:reward ratio or better. As for a strike selection, ideally I would like to have our short strikes on the put side under the 50 SMA, and on the call side I would like our short strikes above the previous all-time high and above the psychological level of $4000.

Based on the structure of the market and the pullback that we’ve seen from $VIX, I don’t think the market will roll over this week, though of course it is always possible. On the flipside, should the market rally to a brand new all-time high by Friday, we may end up taking a loss on the iron condor, but that should be more than offset by the positive gains our long positions would bring in. I love opening iron condor‘s with this mindset. If we do nothing but chop, we will bring in some nice weekly income. If the market explodes higher, our long positions should be thriving and moving our equity curve higher.

As for the management of the iron condor, a reminder from my experience last week; take the 70% of max profit and run!!!

 Keep in mind, we have a lot of Fed-Talk this week, and that typically can result in a choppy environment. Just like last week, chasing intraday directional moves may prove to be difficult, and the Iron Condor might once again be the go-to trade!

Quarterly expiration week is finally over! As it tends to, this week was nothing but a total chop fest of ups and downs that ultimately brought the market nowhere. For those unwilling to resist the temptation to chase directional trades, this was likely a difficult week. For the flexible traders looking to take with the market has to offer, our iron condor turned out to be the perfect trade for the week, just as we planned.

Early this morning we were able to buy back our iron condor for a little more than 70% of its max profit. Though it can be easy on a Friday to “call it a week” after closing a profitable trade, the week isn’t officially over until we do our trade review, and cover what we did well and what we did wrong. 

From my perspective here are a few key takeaways from this week.

THE GOOD

As for what I did well this week, I took what I believed was the trade that offered the best chance of profiting during the quarterly expiration, which was the iron condor. We took what the market had to offer, avoided chasing the back-and-forth chop, and were able to get a profitable trade under our belts. We created a game plan, we executed on that game plan, and we were rewarded by “taking what the defense gave us” as opposed to chasing meaningless price action.

THE BAD

On the other hand, a little bit of greed led to me having to sit through a complete drawdown on our iron condor, and if it weren’t for a nice bounce Friday afternoon it would have turned into a losing trade. The frustration never comes from a trade not working, as that is simply part of the game. What is always incredibly frustrating is when a position is sitting at about 70% of max profit, and I decide to hold on for just a little bit more. The little bit of extra profit is somewhat meaningless in terms of growing the account, and all I do is rob myself a peace of mind when winning trades potentially turn into losers.

Buying back the condor for 80% of max profit sounds better than buying it back for 70% of max profit on paper, but truthfully the extra 10% is not worth the potential risk of the markets turning against you and that trade turning into a loser. I’m thankful for the bounce and I’m thankful that ultimately the condor turned out to be a profitable trade, but the foolish decision to hang on for a little bit of extra profit, when we could have closed it on Thursday, is a recurring mistake I am making this year. I’ve done it twice on both Amazon and Nvidia, refusing to take the 70-75% profit and ultimately had to sit through weeks of drawdown. Again, they turned out to be profitable trades, but having to sit through those uncomfortable pullbacks is a sacrifice of peace of mind that isn’t worth the extra reward of a little more profit.

All in all, a profitable week is always a good thing. We played what the market had to offer perfectly and took our low-hanging fruit. For me personally, I am going to start placing GTC orders to buy back spreads at 70% of max profit, and will NOT change those orders no matter how good the setup looks!

To say this week has felt like watching paint dry would be an understatement! As we covered in Sunday’s newsletter, quarterly expiration week tends to be a choppy one, and this week isn’t turning out to be any different. 

 In Sunday’s letter we talked about being a flexible trader, and utilizing the strategies and set ups that will best benefit from what the market is currently offering (or in other words, taking what the defense is giving us). While the $SPX iron condor we opened on Monday Is certainly shaping out to be the perfect trade for this boring week, it’s times like this where your discipline and patience can really get tested. 

 When you love trading, it can be incredibly hard to accept that the best thing to do is to not trade at all. However, what can often be much harder is forgiving yourself for forcing trades in an environment that isn’t ideal. 

  The irony in this for me is that so often, folks tell me that they are pursuing trading to obtain more freedom. They want more time to spend with family, more time to travel and experience the things they enjoy, and more overall control of their day-to-day life. Yet, for many of those same traders, stepping away from the markets can be near impossible. 

 I myself often struggle with the same thing. Even after all the years of experiencing how boring and choppy quarterly expiration week can be, I still find it challenging to toss on the iron condor and step away from the screens for a few days. I know this is best for my P&L, and best for my peace of mind as a few days off can be a much-needed recharge. Even still, I find myself constantly checking the quotes, constantly checking in on “the action” (SPOILER ALERT: there is no action this week!). 

For some it may be due to FOMO, and for some may be due to greed. For me, walking away from the charts can be difficult because I simply love this game. I love watching how things unfold, I love the camaraderie in our chat room and interacting with other traders, I love it all. However, the one thing that has proven to remain true over all my years of trading is at the market isn’t going away. It will be here when quarterly expiration is done, and there is such a bigger likelihood of time spent at the charts paying off once it’s over.

 I’ve learned the hard way that forcing the issue during witching week can lead to trouble, so fighting the urge to place trades this week isn’t all that difficult. It’s tuning out for a few days to allow myself the opportunity to re-charge that isn’t as easy as one would think. As it tends to, thinking about the “big picture” and the long run certainly helps put this all into its proper perspective. Personally I hope to have 40 or 50+ years of trading ahead of me. In all reality, stepping back for a few days isn’t going to kill me or stop me from reaching my long-term goals.

 Remember, while hours can feel like minutes while we’re trading, time continues to go by quickly. Many of us dedicate so much of ourselves and our time to the markets, that we forget life keeps movin’ on around us. Not just during quarterly expiration, but in general, we as traders need to strive for a healthy balance of laser focus and dedication when the market is ideal, and the fortitude to step back for a bit when it is not.

 Accept the environment, take what the market has to offer, and detach when it’s time to detach. Let’s be real, throwing on an iron condor and getting paid by a choppy market while we step away and spend time with loves one’s/doing things we enjoy is a pretty sweet ordeal. Though the game can be tough, never forget how good we have it as traders! 

 As for our $SPX iron condor, we’re in great shape here as the market chops into oblivion. The market offered a chop-fest, and we utilized the best tool to take advantage of just that. We have working orders set to buy back the iron condor for 80% of max profit, so there’s even less of a need to waste time staring at the screens over the next two days!

We’re off to a great start to the month of March, team. Let’s keep it rolling!