Trading PlanSince the beginning of October, I have been heating a warning of being careful and trading smaller.

October 1ST letter: “Overall is nothing that screams out, ”come to pick up the money.”

October 8TH letter:  “This will continue to make short-term trading opportunities more difficult to find.”

October 15th Letter:  ”Vertical drops like the ones seen over the last several days historically do not result in an immediate move back to the old highs.”

Last Tuesday, the Dow rose over 500 points from the prior day, which looked like the broader markets could move higher toward overhead resistance.

In the pre-market update — where I review the recent trading activity in the Green Room with subscribers and broadcast on YouTube — the title of that day’s update was, “Was That a Sucker Rally!”

It did turn out to be a sucker rally, and those that jumped on board paid dearly over the next several days.

By the end of the week, the majority of broader market indices did not move that far from the prior week’s close.

The majority of sector ETF’s were down on the week in the area of 1%. The worst performers were the interest rate sensitive ones:  construction and homebuilding.

The best performer up just over 4% and the prize for the craziest move of the year goes to the Consumer Staples ETF symbol XLP.

After a sideways move that lasted just over two months that was followed by a bearish wide range breakdown bar, XLP rallied back up to the top of that consolidation last week. Truly schizophrenic type of price action.

Interest rates, measured by the ETF symbol TBT, moved sideways, consolidating the recent gains. We expect those interest rates to continue to move higher based on the long-term charts.

Our internal market gauges signaled a short-term bottom the week before last. And while that was a low point, we're expecting — and hopeful — to see the broader markets move lower this week to test that low.

If that scenario plays out, there should be a reversal pattern in the area of that low. And even if it does make a slightly lower low, that would be even better.

 

Where Are the Markets Headed This Week?

Ideally, as mentioned, the markets will move lower to test the prior swing low.

Once a bullish reversal forms in that area, we will have more trading opportunities and recommendations than we will be able to use.

We had been extremely light on trading recommendations last week — and standing aside while the broader markets went through their gyrations that ended up in about the same place where they started the week — which was the right thing to do.

If by chance Mr. Schizophrenic (broader markets) should trade above last week’s high, rather than move lower first, we would then expect a shortable pattern to materialize.

Since there is always the possibility of some crazy move to occur, the third scenario would be that prices do not reverse after moving to the prior swing low.

Because there is a Void of support below that prior swing low, it opens up the possibility of a 1000-point move lower in the Dow.

At this time, even though that last scenario seems to be the least likely, we always consider the most remote.

 

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In different letters, we talk about our Advanced Money Management Strategies course. 

This course can change your trading tremendously and I’m going to offer to you — for FREE — with the purchase of the Swing Trading Strategies course.

Either of these courses can change your financial future. Take this no-brainer opportunity to take the two of them for the price of one!

Once you have purchased the Swing Trading Strategies course, email greg@mastertrader.com and you will be provided with access to the Position and Money Management course for FREE.

 

Dow Jones Industrials

 

Above is the chart of the Dow Jones Industrial Average that we review each week.

Last Monday, the Dow traded inside of the prior Friday’s range from top to bottom. After trading higher that day, it closed near the low of the day.

Tuesday’s gap above Monday’s closing price set up a shock to those that were short overnight, expecting lower prices.

That shock resulted in Tuesday’s more than 500-point move higher — and the sucker rally. Tuesday’s higher low created the Pivot Low (PL) marked above.

Wednesday was a whip up and down day that ended close to where it opened that trading day. A move above its high could have resulted in a move toward the moving averages above — but did not.

Thursday's prices sold off, taking out the sucker rally day’s low, and Friday was another inside day.

By the end of the week, the up-and-down gyrations ended about where they started with the Dow eking out a 4% gain for the week and a Pivot High (PH) above.

As you can see, I have the Void below the PL boldly marked off. While I move down to the next Major Support (MS) area below is the least likely move to occur, if prices don’t reverse in that area — which could be slightly below the prior PL — that big move lower becomes highly likely. Stay Tuned!

VIDEO REVIEW OF MARKETS AND INTERNALS

 

 

NEW STOCK TRADING IDEAS

 

Below is a daily chart of CF Industries Holdings, Inc. (CF).

 

 

Trade:  Under $50.60, consider shorting the stock.

Technical Setup:  Bearish consolidation in bottom half of a Bearish Wide Range (-WRB) Breakdown bar through multiple levels of support on the daily.

Stop Loss:  $52.82.  Note:  Earnings 10/30 after market so exit before then.

 

Because of the volatility markets now and different scenarios for them unfolding in the coming days, instead of giving a lot of new trade recommendations, we are providing this big watch list.  We will be watching these – and others – throughout the week for more confident setups and entries.  Stay tuned.

BULLISH WATCH LIST: 

NIHD, MKC, WMT, DIS, QCOM, AXP, NOMD, GORO, PG, SAVE, TNP.F, SYF, EEFT, GNTX, IPG, LITE, DAR

BEARISH WATCH LIST: 

HFC, RDC, YUMC, FET, ABMD, MIME

 

NEW OPTION TRADING IDEAS

 

Below is a daily chart of Euronet Worldwide, Inc. (EEFT).

 

 

Trade:  Over $117.86, consider shorting Nov (11/16) $105/95 bull put credit spread (26 DTE) for mid-point but limit of $.60/share (closed at $.65/share).

Technical Setup:  Bullish engulfing at Major Support and r20-MA after Pro Gap and bullish trading range consolidation on the daily.

Option Strategy:   Bull Put Credit Spread (BPCS).

Stop Loss:  $109.38.

 

VIDEO ON OPEN AND CLOSED TRADES

 

 

 

 

Thank you for being a loyal subscriber and feel to email us with any questions or comments on anything.

 

Please read the information on Money Management below

 

Learn how Master Trader Technical Strategies – MTS and MTS with Options Strategies can make consistent money.

 

Click Here – to Access the Options Credit Spread Program that puts you on the Master Trader Income Path.

 

Click Here to Learn The Master Trader Swing Trading Strategies to profits over a few days to weeks.

 

CLICK HERE For a free 3-day complimentary access to the Master Trader Green Room

 

In the Master Trader Green Room, we trade stocks, options, and ETFs in real-time.

Learn how we scan pre-market compelling Gap Trades and discuss a “plan of attack” to profit.

 

 

Because your success is vital to you – and us.

 

Before selling options or credit spreads, we urge you to review the valuable and detailed information that we have provided for you in your Member’s Area.

 

You will find it by scrolling to the bottom of the page to Master Trader Subscriber Resources.

 

The link is Money Management Considerations When Selling Option Credit Spreads for Income.

 

It explains Master Trader Money Management, Trade Management, understanding the use of Contingent Orders, and much more.

 

If You’re in a Rush to Start

 

A quick simplified approach to calculating contract size is to simply base your contract size based on the number of shares permitted in your Trading Plan as if you were trading the stock or ETF.

 

Simple Share Sizing = $ Risk / Stop Loss

 

The amount of money that you are willing to risk – divided by – the stop loss amount. For example, $100 / .20 = 500 shares.

 

Credit Spread example, if your Trading Plan allowed you to trade 543 shares of AAPL based on the stop loss, then simply round down to the nearest hundred and short an equivalent number of contracts of the option.

 

Since 1 contract represents 100 shares of the underlying, this would be five (5) contracts.

 

 

Master Trader and You Building Your Financial Future Together!

Happy trading!  If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com

 

All the best,

 

Greg Capra
Managing Director of Master Trader
Trading the Pristine Method — Origin and End

 

Dan Gibby
Chief Options Strategist

 

Follow Greg on Twitter, YouTube, and StockTwits

 

Twitter: @GregCapra
Stocktwits: Greg_Capra    

 youtube.com/c/mastertrader

 

NOTE:  Master Trader will show opening and closing prices of all stock and options trades.  We recommend that all traders and investors use proper share sizing for positions and money management. However, we cannot recommend what that is for your particular trading style, risk tolerance, or account balance.

We urge you to calculate your own share/position size based on your individualized risk parameters, Trading Plan, and familiarity with the proposed trade strategy and risk. Advanced Management Strategies (AMS) covers in detail foundational and advanced position and money management.

 

NOTE:  Master Trader and its representatives may have existing positions in actual or other trade recommendations before or after suggested herein.  Additionally, we may manage them differently for internal purposes based on different risk parameters than noted herein.

All trade ideas and content are for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, option or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds.  Investment or trading information provided may not be appropriate for all investors, and is provided without respect to individual financial sophistication, financial situation, investing time horizon or risk tolerance. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request.  Master Trader Consulting, Inc. is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardize Options and the Risk Disclosure for Futures and Options found here:  CLICK HERE.