Trading Beaten-Down Travel Stocks on Bad News Using MTS
Trading high-probability Setups are the same for stocks, bonds, Index and Sector ETFs, commodities, or currencies — on any time frame!
We trade using technical analysis as the charts “don’t lie” as we say, and reflect the current supply-demand relationship. Fundamentals don’t.
News only directs us to the charts of interest; Price is King. We trade with or against the News – charts determine the actual trades.
Master Trader teaches many price patterns for trading stocks and options.
Using Bar-by-Bar Analysis, you will know what any price pattern signals — even one that can tell you to do nothing.
It’s no surprise that travel-related and re-opening stocks have been underperforming the broader markets because of the ongoing Corona-19 cases and fears.
In this Trade Review we are going to show you the patterns of a few stocks we recommended to our subscribers despite the poor fundamentals and news at the time entered.
News moves stocks daily – some in the anticipated direction, some not. But why? The media talking heads often naively mask actual price movements with “some explanation.”
It is traders’ Perceptions to the News that is important, NOT the news itself. Master Trader is ONLY interested if News ignites GREED or FEAR.
On the day CCL was recommended as a long, CCL gapped down (and other cruise ship, airline and hotel stocks) on the following bearish news reported by Royal Caribbean Cruises Ltd. (RCL):
Below is a daily chart Carnival Corporation & plc (CCL):
We bought the stock on 12/20, stating “Bullish retest pattern at 20-MA, -Gap negated.”
M & W Reversal Patterns display a confirmation of support/demand and often set up fantastic trading opportunities – particularly if after taking out prior lows or highs.
They are powerful setups which can be traded on any instrument or time frame. Here are three different flavors of each.
You need a momentum move (creates a Price Void), then shallow retracement (less than 1/3 the distance), then a bullish retest as shown.
Recently in the markets, there have been a plethora of these Setups, which our subscribers have been profiting on handsomely.
Remember that CCL triggered the morning that RCL announced the bearish news on Coronavirus on its cruise, sending shock waves to the re-opening industry.
That’s what got our attention, as discussed in real-time in the Master Trader Green Trading Room. We said, “It if still triggers after the bearish Gap, it’s good to go!”
Demand overwhelmed supply, driving CCL higher to not only negate the bearish gap but to trade over the prior day’s high, which was our trigger on the W-Bottom.
With all Setups, we need a Price Void (insignificant resistance to the left for longs), as you will see here. W-Reversals have this “Price Void” by definition.
It is still an open trade. Subscribers can see in the Open Trade Spreadsheet that we sold 1/3 of the position into strength and are trailing the balance.
For our Weekly Options Trader, we also gave a bull put credit spread on the same bullish pattern, booking an 8.8% return-on-capital (ROC) in three days for predicting the bullish short-term bottom.
We had a 100% success rate in the Weekly Options Trader using similar patterns and strategies.
The analysis is explained in nightly letter videos for subscribers.
Below is a daily chart of Hyatt Hotels Corporation (H):
Although not a W-Bottom (see above diagram), H was making a bullish “turn” above the 200-MA after breaking out and retracing.
The Advisory Swing and Options letter focus is long or short stocks using Master Trader Strategies (MTS). Call or put options are also used for when the options are liquid.
We purchase options and spreads as Directional trades to profit from our directional bias with a higher probability of profit and less capital requirement.
We also sell options and spreads as Income trades where we profit through time decay. We prefer selling short-term expiring options to collect our money more quickly and avoid gap risk.
To learn our 7-step process for trading gaps of anything that moves, please see Master Trader Advanced Gap Strategies
H met our criteria for selling puts under bullish Support and we recommended selling the $80 puts for a credit of $1.55/share.
Since one options contract represents 100 shares of the underlying, selling 10 contracts would generate $1,550 of premium being immediately deposited into your brokerage account.
That premium is pure profit if H expires worthless above the short $80 strike at expiration – a good bet using MTS (although we still close at pennies to avoid any post-market assignment risk, something taught in our option seminars).
H is still an open position but we are in trail mode to protect the nice open gains.
Below is a daily chart of U.S. Global Jets ETF (JETS):
The “turn” (retest of the W-Bottom pattern) happens in different ways and we don’t know until after that it actually makes a turn.
Remember, before the “turn,” it’s still in a downtrend.
It was not until the day shown where we entered did we have confidence of the “turn” – particularly because of the bullish price action in light of the bearish RCL news shocking the entire travel and leisure industry.
Once in a trade, we are in trade management mode.
JETS is still an open long in our ETF Trader, so we use larger stops to capture larger gains, as long as it is not near its target or extended.
Management updates are sent intra-day by text message to subscribers.
Nice trade!
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