Jeff Bishop: How to Become a Successful Trader?

Jeff Bishop compiled a list of 10 different ways to become more consistent and profitable trader. Anyone could accomplish all ten of these…

Becoming a successful trader doesn’t just happen overnight.

But then again, it isn’t something that needs to take years either.

And look, I struggled for more than a decade before the light switch finally came on.

During that time, I compiled a list of 10 different ways I upped my game to become more consistent and profitable in my trading.

These aren’t difficult tasks that I’m going to lay out for you.

In fact, I can almost guarantee that anyone could accomplish all ten of these…

I say almost because there’s always going to be that one person…you know who I’m talking about…

Let’s begin with one of the easiest out there – trade small and often.

Trade small and often

Sometimes you win and sometimes you lose. That’s the nature of trading. It’s a giant exercise in probabilities.

Just the other day I had the best chart setup fall flat on me. Rather than fly into a rage, I accepted that it’s part of the game.

For as much as any one of us thinks we know about the market, there’s always some way it finds to humble us.

That’s why the best traders don’t try to swing for the fences in just a couple of trades. They earn their stripes over a lot of them.

By trading small and often, you reduce the variance in your trading, making the results converge on your average expectations.

That sounds like a mouthful, so let me unpack that.

Let’s say that I implement a strategy that wins only 10% of the time. I risk $1 each trade to make $20.

If I start with a $50 account, I know that I’m likely to lose 9 times before I win once. However, it’s also possible I could get a series of 20 losers in a row.

However, if I keep betting the same amount over and over, eventually, I will win over time.

If I bet too much on any one trade, it can wipe me out. That’s why I want to make sure that I keep my trades small enough that I can let the averages work in my favor.


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Decide between intraday or day to day trading

Kids can take up plenty of my attention during the day. It’s one of the joys and drawbacks of working from home.

I also learned long ago that I was better at swing trading than at day trading

Although now, I’ve become reasonably proficient at both.

However, as the CEO of Raging Bull, and an active Angel Investor, my time is somewhat limited.

That’s why I prefer to swing trade and play option spreads.

But that’s what fits with my lifestyle. You need to choose the whether it works for you or not.

I know some folks that crave the intraday action. Others can’t stand being in front of a computer for more than a few minutes.

The point is – pick something you are comfortable with that you can continue.

Choose one setup

There are as many ways to trade the markets as stars in the sky. Just type in trading into your Google search and you’ll see what I’m talking about.

However, you don’t need a lot of setups to become a great trader.

Nathan Bear turned a $38,000 account into over $2,000,000 in two years using his TPS setup.

Find one that you’re comfortable with and at least generate a modicum of success. You want something that will keep you interested.

Realize, it doesn’t have to generate tons of trades from the outset. In fact, you want the opposite.

Just a trade or two a day will be plenty to get you working hard to sharpen your skills.

Focus on making the right decisions

This psychological trick works wonders. As I mentioned before, trading is an exercise in probabilities. Sometimes, you can hit losing streaks or hit a hot one.

Money comes afterward. The first thing you need to do is make the right decisions.

If you have a good setup, solid risk management, and repeatability, then the money will come.

Create a 90-day plan

As I said before, becoming a successful trader doesn’t just happen overnight. Even when you do turn that corner, it’s a constant battle to keep it going.

That’s why I like to create 90-day plans to keep me on track.

These help me work on my fundamentals, learn new skills, develop and nurture habits and routines, as well as give me milestones to measure against.

When starting out, keep the plans simple. Never make them more complicated or onerous than you can handle. These should be realistic and achievable.

Honestly journal your trades

I can’t tell you how important it is to write down your trades.

Most traders start this in earnest. Eventually, they only write down the ones they like, skipping a few here and there. Soon, they can’t figure out why their account balance doesn’t match their journal.

Your trade journal should contain enough information for you to analyze and assess your weaknesses and opportunities. At a minimum, you should be able to calculate a win-rate and a general risk/reward ratio.

Tweak your risk/reward and win-rate

Speaking of risk/reward and win-rates, once you’ve established them, it’s time to start tweaking them ever so slightly.

You might assume that if you set wider stops or tighter targets that your win-rate will go up. Generally, that is true.

However, it isn’t always a 1 to 1 relationship.

That’s why you want to break it down and really understand where the sweet spot is. Sometimes, you can tighten up your stop loss without sacrificing win-rate.

To me, that’s something I want to know and incorporate immediately.

Fix one small piece at a time

Trading is a lot like sports. You can’t work on everything at once. Otherwise, you just flop.

Instead, take things piece by piece. When you find an area of weakness, break it down into the smallest components and work on those.

Not only is this proven in the business world and psychologically to work better for most people, but it can also give you a greater sense of accomplishment.

Create routines

Humans are creatures of habit. Routines help us stay on track and remain focused.

Every weekend and before each trading day, I go through the same steps to evaluate the markets, my current trades, and my plan.

One of the best parts of routines is the efficiencies they create. By doing the same things over and over, you become better at looking through the charts and making decisions. That means less uncertainty when it’s time to act.

Find a mentor

Last, but certainly not least – find a mentor.

Learning from someone who’s already been through the wringer can cut your learning curve and save you both time and money.

You want to have someone that you connect with and helps you understand your trading and the markets. They should speak to strategies that resonate with you and help you improve.

That’s the entire goal behind Total Alpha.

I created a well-rounded service to not just educate traders, but provide them an array of trading styles and choices to suit their needs.

But before you jump into the ocean, why not test the waters?

Join me for my upcoming Options Masterclass where you’ll learn some of my favorite techniques for analyzing and trading stocks and options.

Click here to register.

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Options Masterclass: Is Gold About To Blow Up Like Oil?

Jeff Bishop shares his thoughts with Total Alpha members about gold. We don’t have enough gold on hand to cover if everyone decided to exercise their futures contracts and take delivery of physical gold. And that, could be a disaster in the making, said Bishop

Market pundits are still trying to wrap their brains around what happened in crude oil last week— but there’s already talk of the next freight train…

I’m talking about gold…and get this…Jerome Powell knew about this!

A few Total Alpha members emailed articles asking me for my thoughts on gold.

And after looking into it for the better part of the weekend, I feel obligated to share them with you, because there is a risk that isn’t being discussed.

We’ve already seen gold prices charge higher to challenge its 2012 highs.

GLD Monthly Chart

Apparently, the lessons from the Great Recession didn’t make their way to every corner of the market.

Why do I say that?

Because we don’t have enough gold on hand to cover if everyone decided to exercise their futures contracts and take delivery of physical gold .

And that, my friends, could be a disaster in the making.


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How gold trading works

Gold works much in the same way that crude oil does. Most of it trades in futures contracts. They trade with different expiration cycles.

Unlike option contracts, futures contracts require you to take delivery of the item if you hold it at expiration, rather than if you choose to.

You might have noticed that there are two types of oil in the market – west texas intermediate and brent. Those are based on where oil is settled (U.S. vs U.K.). The same thing occurs with gold.

Most gold futures settle as cash. That means they never take delivery of the gold itself.

But what if you wanted all that gold? Could you get it?

That’s an interesting question and the crux of our potential dilemma.

Gold costs

Unlike oil that requires specialized storage, gold can pretty much sit wherever you want it to. On the other hand, getting it to where you want is tricky.

With oil, we didn’t have enough storage to meet the supply. In this case, there isn’t enough potential gold or gold in the right places to meet demand.

Despite the disconnect in markets recently, people hoard gold during times of uncertainty. You’ll see people start buying up the physical asset when and where they can.

Except, right now, you can’t do that.

In fact, if you try to buy gold bullion online, not only will you be paying a huge premium over the spot market value, you’ll be lucky to find any.

That means someone’s got to ship it to your location and that costs money…lots of money that isn’t necessarily being factored into everyday traders’ decisions.

The transport dilemma

As I mentioned, you’d have a tough time getting gold here in the U.S. That seems a bit nutty, but it’s also a large part of why we don’t use the gold standard anymore.

In fact, Jerome Powell alluded to this in his testimony last year as to why we don’t want to go back to the gold standard. There simply isn’t enough gold to cover all the contracts in existence.

Recently, the Chicago Mercantile Exchange (COMEX) and London markets changed their rules to allow 400-ounce bars in London to be substituted for delivery of 100-ounce bars on U.S. contract that was divided up four ways.

Seems reasonable right?

Here’s where the rubber meets the road.

Every time Chicago markets fall short on supply they need to do two things.

  1. Melt down 400-ounce bars into four 100-ounce bars
  2. Ship that to Chicago (during a Pandemic no less)

That’s a large reason why the difference between gold futures and spot prices has been wildly diverging.

Gold Futures (top) vs Spot Gold (Bottom)

We could already be in crisis mode

Initial rumors suggested that some bullion banks that were supposed to make physical delivery in Chicago essentially went under. In theory, that’s what led to this new fractional futures contract from the COMEX.

Congressman Mooney of West Virginia caught wind of the entire matter and demanded answers as to the change. As he eloquently noted, if there are widespread defaults, you don’t have nearly enough gold on hand to cover delivery, which could create financial chaos.

On top of all this, the delivery problems between the U.S. and London may be only part of the issue. Back in London, there could be an issue with delivery between banks.

London trades what’s known as ‘unallocated gold’ or ‘gold credit’ which is issued by the bullion banks. When market makers don’t believe the other can fulfill their obligations, the markets start to freeze up. This might be why gold trading volumes in London have fallen while gold futures volumes have skyrocketed.

How that impacts the ETFs

Thankfully, the GLD ETF trust holds its gold bullion in London, so any transport issues shouldn’t become an issue with the ETF.

However, if there really is a liquidity issue between the market makers, then the ETF could be in for a world of hurt. It derives its prices from the London markets, not gold futures. If participants really are afraid to trade with one another, then share prices of the ETF may get thrown out of whack.

Nonetheless, because the ETF is backed by physical assets, any dislocations from price would be temporary. AKA – you could find some cheap buying opportunities on some crazy news!

When in doubt…

…leave the heavy lifting up to me. I’ve been through this a time or two and know how to weave my way through traffic. You join me and get exclusive access to my live portfolio. There, you’ll be able to see exactly how I make my trades in real-time along with text alerts.

Why put yourself through the headache of figuring out the gold markets?

Click here to register for my free options masterclass.

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop: This Chart Says Which Sectors Can Survive and Thrive

Real Estate Investment Trusts (or REITs) are publicly traded companies that own commercial real estate and generate massive amounts of cash flow from tenants. And they’ve crushed the market for decades.

I love real estate investment trusts for one reason.

They make gobs of money.

Now for those who don’t know…

Real Estate Investment Trusts (or REITs) are publicly traded companies that own commercial real estate and generate massive amounts of cash flow from tenants.

And they’ve crushed the market for decades.

Equity REITs were the top-performing asset class in the stock market dating from 1972 to year-end 2019.

NAREIT reports that equity REITs have returned 11.82% a year since the days of the Nixon administration.

Meanwhile, the S&P 500 has averaged 7.35% a year.

That’s nearly 50 years of outperformance.

It feels like a secret, doesn’t it?

Well, there’s a reason for that. Real estate doesn’t get a lot of attention because – let’s be honest – there’s nothing sexy about office space, storage buildings, or industrial centers.

But when you follow the money, you learn fast that this is where long-term investors build wealth.

NAREIT estimates that the value of the commercial real estate industry in 2018 sat between $14 TRILLION and $17 TRILLION.

And all of this property generates incredible amounts of money for investors from rents, tax benefits, and price appreciation.

But there’s one other benefit to REITs.

They can tell us what the markets think will thrive and what will survive in the COVID-19 crisis.

Check this out.

Ignore Earnings Season

“What companies will survive?”

That’s the question swirling across trading floors, media channels, and even Zoom cocktail parties.

The COVID-19 outbreak in the U.S. has peaked right at the start of the earnings season.

Over the next few weeks, we’re going to see some wild swings in stock prices. Companies will release earnings, offer mixed outlooks, and likely eliminate any forward guidance on financial expectations for 2020.

We’ll see dividends slashed. “At-home” stocks like Netflix (NASDAQ: NFLX) will likely rally.

But many GREAT retail and hospitality companies – which thrived before this outbreak – now face potential bankruptcies and defaults.

So, who does the market think will thrive during and after the coronavirus outbreak?

The answer is found inside this chart.

This chart highlights the performance of Real Estate Investment Trusts in March and since the beginning of 2020.

Now just to remind you, REITs own a variety of different types of properties that offer steady cash flow and provide steep appreciation upside. REITs also offer incredible tax benefits including pass-through income and the ability to deduct depreciation (you can write off about 3.6% of your property value every year against any income you’ve generated from property).

Now, some REITs own properties like warehouses or timberland.

And some own apartment buildings or office space.

Others like Tanger Factory Outlets (NYSE: SKT) own shopping centers, which are suffering due to social distancing guidelines and the shut down of the economy.

There are many different categories, and all of them offer a glimpse into real-time expectations for the economy, various industries, and their tenants.

Rising rent prices and occupancy rates suggest an expansion of a sector and expected success for companies in those industries.

Falling occupancy rates, rising delinquent rent payments, or lower rent prices suggest lower demand for products and services in a specific industry.

I track REITs to get a better sense of how big financial institutions – which own the lion’s share of these publicly traded stocks – feel about specific industries moving forward.

It also tells us who is surviving or even thriving.

For example, data centers – the companies that own storage facilities for technology companies, servers, and call centers – they were up more than 10% in March.

This makes sense.

The economy has shifted dramatically from large office space to work-from-home setups.

And more people have embraced e-commerce, a data intensive industry.

It’s honestly that simple. When you count companies like Amazon, Microsoft, and Google as customers, you have a sector that isn’t going to run out of demand.

That 10% gain for Data Center REITs indicates that Wall Street believes a lot of technology companies are safe right now.

Meanwhile, lodging REITs – which own hotels and conference centers – plunged. Retail REITs – particularly ones that own shopping malls – are trading at levels that suggest massive bankruptcies for their clients.

So, we will likely avoid hospitality companies and retailers until we start to see optimism about the real estate companies that count them as tenants.

Other sub-sectors that have held up well include industrial REITs – which are expected to see extraordinary demand as companies move their manufacturing back to the United States.

Also, we’ve seen higher demand from cannabis growers that use warehouses for cultivation to meet rising demand.

The market thinks a lot of deep-pocketed pharmaceutical stocks and supply chain companies are going to meet their rent agreements and rebound in the future.

Infrastructure REITs – which include cell towers – were also off just 1.7% in March. Shares have risen this month – as companies expect continued demand from their customers that include AT&T Corporation (NYSE: T) and Verizon Communications (NYSE: VZ).

Also, these REITs will see an explosion in demand from the widespread adoption of 5G technology.

Yet when I look at this chart – something really surprising stands out. I think that these big investors are overreacting with a 33% drop in March for one sector.

And that has created a unique long-term opportunity that might never return again.

Make Medical Real Estate a Long-Term Holding

While the REIT chart tells us a lot about equity REITs, it does reveal a somewhat surprising disconnect in a few different industries. I see some bottom-feeding opportunities right now.

Medical REITs – the firms that own hospitals – are still off sharply from their February highs.

Given that we are facing a health crisis, how exactly are hospitals going out of business or lacking the money they will need to pay rent? After all, the U.S. government has pledged unlimited funding to the hospital industry.

For example, Medical Properties Trust (NYSE: MPW), for example – owns acute care hospitals.

These are the same hospitals that are being overrun with patients. These hospitals are going to pay their rent and aren’t going out of business. Yet it’s trading about 29% lower than its 52-week high and pays a dividend of 6.2%. The dividend has effectively been guaranteed by the U.S. government over the next year thanks to funding efforts to keep hospitals running.

I’m going to dive into this opportunity tomorrow.

But more importantly, I’m going to show you how to make even more than 6.2% on that dividend and generate real money from a mispriced opportunity in the market.

If you’d like to learn more about my investment strategies then make sure you’re signed up for the Strategic Investors Summit. You’ll receive my brand new eBook, the 10X Portfolio Blueprint, hear interviews from industry experts. As well as, the main event when I go live April 21st at 8 PM ET. 

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Learn more about Jeff Bishop’s Strategic Investor Summit Here

Jeff Bishop Total Alpha: These Are The Stocks That Will Be Historic Buys

Jeff Bishop Total Alpha Strategy is starting to eyeball some stocks for his Total Alpha portfolio and even his personal retirement accounts.

Stocks are starting to get into rally mode—on the hopes the country has flattened out the curve.

And while we’ve seen a surge over the last two sessions.

There are still plenty of good companies which remain beaten up.

I’m starting to eyeball some stocks for my Total Alpha portfolio and even my personal retirement accounts.

Look, it can be difficult to buy these stocks when markets experience a freefall, and the global economy looks bleak.

But you have to stare fear in the eyes and just say: Not Today Pal. 

You see, this is when the savvy trader starts to load up.

However, some stocks won’t recover, while others will take a long time to.

Allow me to explain to you how I find value, and what compels me to buy a stock for the long haul.

The Three Keys To Survival

Do you know why most civilizations started near bodies of water? Location was the single most critical factor determining whether a society flourished. Large bodies of water provided a source of drinking water, food, and commerce.

So what is the equivalent to corporate bodies of water?

I see three main components that tell me whether a company will survive.

  1. Diversified Business Lines – For most of my life, I always looked at diversification as taking away focus from a company’s core capabilities. This epidemic is forcing me to rethink my ideas. Single-line businesses are the highest risk companies at the moment. Royal Caribbean isn’t likely to be around next year. However, Apple offsets hardware sales with music and content services, so at least they have some revenue generation right now.
  2. Minimal Operations – Many companies out there aren’t doing a lick of business. The Cheesecake Factory (CAKE) even said they wouldn’t pay rent this month on any of their locations. However, Wayfair (W) told the market that people stuck at home keep ordering furnishings. A fair amount of companies continue to operate at some level. That helps them retain both customers and talent, precious commodities in this market.
  3. Strong Balance Sheet – The U.S. government may have stepped up with loans to the business community. Yet, companies with large amounts of cash on hand will be able to fully take advantage of the same values we see as retail investors.

I understand that it may be tough to figure out who fits these criteria. That’s while I compiled a shortlist of some companies I want to own as they get cheaper.

Apple (AAPL)

Tim Cook faces a lot of obstacles at the moment. Supply chains have been disrupted. Customers may pull back spending. A huge portion of their workforce lives in Coronavirus hotspots.

Yet, the company has enormous amounts of cash to draw on. I’m talking $100b in cash and short-term investments. That’s more than the size of most major companies.

Regardless of the lockdowns, the company still ships orders to customers, and they continue to bring in money off their content services.

You can see how Apple’s services revenues have climbed over time to account for 20% of their total. Those revenues aren’t likely to disappear during this lockdown.

With such a strong balance sheet, I could easily see Apple picking up smaller startups for pennies that add to their long-term growth. They’ve got plenty of credit to pull on if they want to swing for the fences.

Southwest Airlines (LUV)

Airlines have been obliterated during this pandemic. Most states aren’t allowing for travel, while international flights have become virtually non-existent.

That’s why I like Southwest as they’re the best of the bunch. Southwest doesn’t have the international exposure that a lot of the other companies do. Their point to point business model seems much more likely to work as the patchwork of local economies start to reemerge.

I love the fact that they only have $1.85b in long-term debt, with over $4b in cash on hand. Compare that to Delta Airlines (DAL) with $2.8b in cash an$d 2.29b in long-term debt, and you can see why I like Southwest.

Visa (V)

Let’s be honest – we’re all shopping from home right now. If you haven’t bought something in the past week, you’re probably an outlier.

No one is working with cash right now for two reasons. First, most transactions are moving online. Second, no one wants to touch cash since it could carry the Coronavirus.

Visa is a great company that continues to work at reasonably full capacity. Yes, transactions are down overall, but they aren’t getting cut out like other businesses. We all need to buy groceries, even if that’s our one outing for the week.

Selecting My Entry

With any of these stocks, I don’t have a particular price in mind. Rather, I plan to scale into these trades throughout the next several months.

In the meantime, they’ll be plenty of plays along the way. One of the best ways to get on board is with my Bullseye Trade of the week. This is my highest conviction trade, where I aim to get 100%+ return on the trade.

Click here to learn more.

Total Alpha Program | Jeff Bishop’s Midweek Market Update

The Fed came and went like a whisper no one heard. They confirmed low-rates and a commitment to higher inflation leading to a muted market response. It’s almost like we knew what they were going to say…

Back on planet Earth, the rest of us were trading the markets in front of us. Stocks took a face plant into the close as investors shrugged off the Fed’s support.

The markets sit at a key inflection point. Let’s take a look at areas you need to pay attention to, and where you can make some healthy green.


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Key Stocks I’m Trading Right Now

Every day, I update my list of stocks that I’m watching for setups. While I normally reserve this for paid members, I’ll give you a look at what I’ve got my eye on.

Expected earnings dates listed in (…)

Stocks I want to bet against…

NFLX (April 21), AMZN (Jan 30), AAPL (Jan 28), FB (Jan 29), CRM (Mar 2), AMD (Jan 28), HUBS (Feb 12), TWLO (Feb 5), NOW (Jan 29), SPCE (Feb 25), TLT (none)

Stocks I want to buy..

CMG (Feb 4), DIS (Feb 4), MJ (none), CVNA (Feb 26), PLNT (Jan 29), UVXY (none), STZ (April 2), UNG (none), TSN (Feb 6), BYND (Jan 27), XLE (none), WMT (Feb 18), BA (Jan 29), WDAY (Feb 27), LK (??), PTON (Feb 5), KL (Feb 20), BUD (Feb 27), BKNG (Feb 26), HON (Jan 31), WORK (Mar 4), TTD (Feb 20)

Amazon already paid me well over $40,000 in the past month. I’m already in trades with AAPL, FB, WDAY…well let’s just say I’ve got a few on the books…most of which are at a profit.

One of The Best Days To Trade

The day after the Fed is one of my favorite days to put on new trades. That’s why I’m hosting a live event today. Best of all, I’ll be trading for the whole world to see. Find out how to apply all the techniques and skills to real trades.

You can watch by clicking this link.

This is going to be awesome. Not only does the timing line up here, but with yesterday’s close, the markets display a lot of volatility. That creates plenty of opportunities for some juicy trades if you know where to look.

Earnings Deluge

You might have noticed that I’ve got a lot of plays that go through earnings. We’re seeing a lot of stocks trade inside the expected move priced by the options.

The question remains whether the Coronavirus takes a huge chunk out of the Chinese economy. Estimates already suggest shaving off 2% from the already paltry 6% GDP.

That’s what made Apple’s earnings remarkable given their supply chain in China. It’s also why I sold a call spread on the company this week that’s already looking to be a nice trade.

The Strength of Gold

Gold continues to show a ton of strength and is one of the markets I’m pretty bullish on. With equities primed to stall out and uncertainty creeping back in, gold benefits as the defacto ‘safety trade.’

Image

This is what I’m holding after I already took some sick profits

Even if the precious metal pulled back to the 200-period moving average on the hourly chart, it would still be bullish. That’s why I’m taking dips as opportunities to load up.

Image

GLD Hourly Chart

Possible Bottom In Energy

Crude oil, and especially natural gas, have been searching for a bottom for quite some time now. If natural gas gets much cheaper, they’ll be giving it out with packs of baseball cards.

The record production within the U.S. could be slowing as rig counts continue to decline.

Image

The bottom in rigs in 2016 led to a decent rally in energy stocks through the remainder of the year, as well as the commodities themselves. While we probably have a but more to go given the stockpiles, we also have much higher global demand than we did then.

High Profits

I have to admit that I really like the cannabis industry at the moment. Times continue to change, with many states now legalizing medical marijuana if not recreational use. We’re already seeing presidential candidates talk about the issue, which could bring about change as soon as next year.

In particular, I like the ETF MJ that invests in the sector. It’s got a great risk/reward here as it’s very close to its all-time lows. Plus, it yields over 7% (though that’s likely unsustainable).

Image

MJ Daily Chart

Check out the recent pop that broke the sustained downtrend. With a nice retracement, this ETF looks prime for the picking. This is one of those trades that could pay out for months to come.

You And The Captain Can Make It Happen

The party boat sets sail today. Join me for this special event. All the techniques and tricks will be on display. Watch me trade live!

Click here to join this live event…

Jeff Bishop’s Total Alpha Program | Making $43,000 in AMZN The Easy Way

Yesterday may have been a rough day for some traders, as the S&P 500 declined by 52 points, -1.58%, on fears that the coronavirus could weigh down the global economy.

But it didn’t have to be. In fact, I actually made over $24,389 from trading options.

Image

And while yesterday was the first volatile trading day of the year. I am ready for anything… whether it’s a bounce or continued sell-off.

I’ll be alerting Total Alpha subscribers on my game plan and trades throughout the day.

While the market tries to figure itself out, I want to take this time to talk to about an options trade I had on Amazon a few days ago.

But this time, we won’t be talking about options at all.

Instead, I want to discuss something called the Life Cycles of a Stock.

Study it, and you’ll be on your way to adding more 0’s to your bank account.

Breaking Down The AMZN Trade

Iron condors combine a put credit spread and a call credit spread. This creates the ‘wings’ of the trade.

Here’s a quick example.

  • Stock ABC trades at $100
  • You sell the $110 call contract and buy the $115 call contract
  • Then you sell the $90 put contract and buy the $85 put contract.
  • You will receive a credit for this transaction

The goal is to get the stock to land between the closest strikes at expiration, in this case, $90 and $110.

Now, I bring this up because I want to explain a little trick here. You don’t have to execute this trade all at once. Instead, it’s perfectly acceptable to start with a call credit spread and then add the put credit spread later on or visa versa.

You’re probably asking – why would I do this?

Well, the closer you are to the strikes, the more you get paid for that portion of the trade. If you have a range bound stock, you can start with one side of the trade, and add the other one when it gets closer to the other end.

Let’s use the Amazon trade as an example. The hourly chart highlights an area where the stock traded in a narrow range for the last month.

Image

AMZN Hourly Chart

Imagine you were just trading the stock. If you saw a stock stuck in the range, you would sell at the highs and buy at the lows.

That’s basically what we’re doing here but with credit spreads. When Amazon made its first drive higher up to $1900, I took that opportunity to sell a call credit spread. That paid me a good chunk of change since I was so close to the strikes.

When the stock dropped down to $1832, I sold the put credit spread. After that, I simply waited the trade out.

Because I used the swings in price to get fatter payouts on the credit spreads, I not only reduced my overall risk but increased my earnings. This is how you combine timing and chart analysis with credit spreads.

But the real secret is leveraging a stock’s life cycle.

Using Life Cycle Analysis

I recently did a live event where I explained the three stages of a stock’s life cycle. These are the churns it goes through as it wiggles its way higher.

First, stocks go through a reversal. This doesn’t break the longer-term trend. Instead, it creates a short-term turn. I use these to time when I sell the put or call spreads at the tops and bottoms of the ranges. You can actually see this in action on the AMZN chart in mid-January. The crossover of the 13-period moving average below the 30-period moving average signaled a reversal move lower.

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AMZN Hourly Chart

Second, we have the reset areas. After a significant run, stocks like to pull back below their 200-period moving average. These make great places to sell put spreads underneath to eat up the clock. You can see that type of move from November through December in AMZN.

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AMZN Hourly Chart

Lastly, there’s the launchpad. This happens when that same stock breaks out above the 200-period moving average and gets ready to take off. This shows up on the AMZN chart in late December.

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AMZN Hourly Chart

Knowing these three phases to the stock’s movement is essential for timing your trades.

You can check out some more examples of the lifecycle in my video replay.

Click here to watch.

Total Alpha Trading Program | Intermarket Analysis

Hold on to your knickers cause the markets are about to take us for a wild ride. With futures pointed to a massive decline at the open, we need to look at what’s in store for the indexes

The Federal Reserve delivers its first announcement of the year on Wednesday. Hamstrung by a fragile market and jawboning politicians, they’re widely expected to leave rates unchanged. The open question – will they soothe scared investors?

Jerome Powell already upended economists by allowing for U.S. inflation to rise above its 2% mandate – a statement that probably has Adam Smith turning in his grave.

Interestingly, we’ve managed to stay below historical levels, with the one exception being the period from the late ‘50s to the late ‘60s.

This leads me into the bond market as our first stop this week…a place that could rise further than we’ve seen already.

Bright Bond Outlook

Normally, I stick with the hourly chart when I look for setups that fit my money-pattern. However, the weekly chart for the bond market looks fascinating.

TLT Weekly Chart

Last week the bond market closed above the upper trendline that connected the high points of the candles since August. That signals bonds want to break higher out of this consolidation range.

Supported by an easy Fed, bond demand remains strong. With zero and negative interest rates around the globe, it’s an easy choice for investors. Plus, when the market finally pulls back, its inverse relationship with bonds will give it an extra push.

Markets Fired a Warning Shot

Friday’s close was different than the ones we’ve seen over the last month or so. Stocks traded weakly all day, closing in poor fashion.

SPY Hourly Chart

I first noticed the bearish money pattern crossover Friday where the 13-period moving average crossed below the 30-period moving average. Then, the market proceeded to fill the gap, and not only close at that level, but below the past couple of days. This is known as an ‘engulfing’ candle. When it happens like this at highs, it’s a bearish reversal.

The Nasdaq didn’t look as bad. But, it’s dangerously close to making a bearish crossover as well.

QQQ Hourly Chart

Now you may ask, why would this bearish crossover be any different than the light pullback we got at the end of December?

The difference is how it occurred. December’s ranged didn’t extend as far as this decline in a single day. The entire move in December was 1% from top to bottom over two days. Friday’s was 1.55% in a single day.

But let’s look at the other evidence out there.

A Significant Rise In The VIX

Back in December, the VIX hardly budged as the market rolled over. Compare that with what Friday’s move looked like in the VIX.

VIX Daily Chart

The strength behind this move was more powerful than December’s. The only saving grace was that it didn’t close above the 200-period daily moving average Friday. But I think that is only a matter of time.

Another point in favor of this decline comes from the VVIX. The VVIX, which measures demand on the VIX, actually declined on the rise in the VIX at the end of December. Friday the VVIX climbed alongside the VIX as markets fell.

VVIX Daily Chart

This is more indicative of a sustainable pullback. It would make sense given how in 2018, markets ran straight up for a month before pulling back. We’re pretty close to that timing now.

Gold Looks Glorious

I added call options in the GLD last week to my Total Alpha portfolio. Gold’s chart depicts a bullish market ready to break higher.

When I look at the hourly GLD chart, I see a bullish crossover as well as a consolidation pattern near the upper end of the trading range.

GLD Hourly Chart

GLD came close to touching the hold highs Friday. The longer it hovers here, the more likely it breaks through to much higher levels. A downdraft in the markets would certainly help this along.

Crude Looking For a Bottom

I’ll admit I’m surprised at how far crude has fallen. However, that aligns with why I would expect a pullback in stocks.

At this point, crude oil will want to test its previous lows. In the USO that coincides with $10.50-$11.00. Breaking those levels would require a lot more selling pressure than we’ve seen so far.

USO Daily Chart

Part of why I’m looking for a bottom in crude oil is its volatility. Like the S&P 500, crude oil has its own volatility measure. Right now the OVIX is at pretty high levels.

OVIX Daily Chart

That’s not to say that oil volatility is at record levels. Rather, it’s at relatively high levels. So it certainly can go lower. But, the OVIX is mean-reverting and is overextended in the short-term.

Betting Against China

Before the Coronavirus hit the wires, I already had an option bet against Chinese stocks. This paid me over 100%, and I still have part of the position.

You can learn how the same secrets to find trades like this.

Click here to learn more.

Source: TotalAlphaTrading.com | Original Link

Jeff Bishop’s Total Alpha Strategy | View Inside!

Netflix, IBM, Procter & Gamble, Southwest Airlines are just a few of the companies reporting earnings this week.

A jam-packed, despite it being a shortened week of trading.

That means there are plenty of opportunities to profit, and I don’t want you to miss anything.

So let’s get started with The Jump on the Week…


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My oh My That Lovey SPY

Last week I made a case for why I see a top in the markets within the next couple of weeks. Probabilities sit in my corner, so if I lose, it wasn’t because I made the wrong decision.

Markets closed again at their highs without showing signs of a reversal in the indexes themselves. Even though we’ve seen some major market leaders rollover, the laggards picked right up where the others left off.

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SPY Weekly Chart

I fully expect that the deluge of earnings gives investors a lot to consider. We’ll probably see laggards like Netflix make a recovery, while runners like Intel and Skyworks receive a cooler response.

The index to watch this week is the Russell 2000 (IWM). It’s within a breath of breaking its all-time highs. How it reacts afterward will tell me the expectations for the overall market.

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IWM Weekly Chart

Pay Attention to Volatility

I cannot stress enough the importance of watching volatility. The VIX, which measures trader expectations for volatility, is at extreme lows. Because this index is mean reverting, the further it gets away from the average, between $15-$18, the more likely it is to snap back. Typically, this coincides with the drop and stock prices.

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VIX Weekly Chart

Also, I watch the VVIX, which measures demand on VIX options. The higher the demand, the more traders are betting on a pop in the VIX – or at least hedging their positions.

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VVIX Weekly Chart

Political Considerations

With the trade deal signed, all attention turns to the impeachment process in the U.S. While it’s unlikely to see the president removed, any revelations seen as impactful to the president or his opponents’ chances in the November elections could move markets.

I’m a bit more interested in how China proceeds with its corporate bankruptcy fallout. Politicians seem content to let a fair amount of underwater companies go out of business, hoping that normalized risk pricing mechanisms take over. Although their growth slowed to the lowest in over a decade, they’ll likely see some boost this year from the trade deal.

Normally, I’d drop oil into its own bucket. However, I think it’s worth noting its political implications. Countries from Saudi Arabia and Iran to Russia rely heavily on the price of fossil fuel. The increase in oil prices came on the backs of growing demand and lower production, led by Saudi Arabia.

These countries hope to boost their coffers through these actions. Given the other challenges they face, I expect them to keep production curtailed for the foreseeable future.

Natural gas is its own worst enemy. With record production in the U.S., the country still faces challenges finding willing buyers. This is causing a lot of banks to reconsider project funding.

The problems for both commodities here are twofold, neither of which portends well for either industry. First, fracking technology changed the production landscape over the last decade. The U.S. became much more self-reliant in its energy production. That means the OPEC members have to contend with these free-market cowboys.

Secondly, and much more serious for the industry – climate change…or should I say the business of climate change. Increased focus around the world led to massive investments. That’s dropped the costs of lithium-ion batteries by 70% in the last decade, as well as massive cost reductions in solar panels.

This trend isn’t slowing down. The international drive to move towards renewable energy consumption isn’t limited to the west anymore. China will likely spend more than any other country in 2020 to expand its renewable energy infrastructure. Corporations now include environmental sustainability as a core value.

All this leads to slow growth in fossil fuel consumption worldwide. Short-term, we’ll see oversold bounces. Long-term, the entire face of energy will change as we know it.

Data I’ll Be Watching

The biggest data pieces come from earnings. We get a lot of financials along with the start if tech with Netflix and Intel. I want to see how consumer demand fairs, along with whether semiconductors are at the beginning or end of the commodity cycle.

Market data will provide some clues to the state of the consumer. We also get housing numbers, that should confirm a strong spot in our economy.

Stocks on watch…

Call spreads

NFLX, AMZN, AAPL, FB, CRM, AMD, HUBS, TEAM, AYX, WDAY, TWLO, NOW

Put spreads

TPX, BIIB, CMG, DIS, MJ, TLT, CVNA, PLNT, UVXY, BA, STZ, STLD, UNG, TSN, BYND, XLE, WMT

Want even more trade ideas?

Check out how I generate weekly income with Total Alpha.

This Week’s Calendar

Monday, January 20th 

  • Markets Closed for Dr. Martin Luther King Remembrance Day

Tuesday, January 21st

  • 7:45 AM EST – ICSC Weekly Retail Sales
  • Major earnings: Haliburton (HAL), FNB Corp (FNB), Comerica (CMA), Old National Bancorp (ONB), Capital One Financial (COF), Fulton Financial Corp (FULT), Interactive Broker (IBKR), International Business Machine (IBM), Navient (NAVI), Netflix (NFLX), United Airlines (UAL), Zions Bancorp (ZION)

Wednesday, January 22nd

  • 7:00 AM EST – MBA Mortgage Applications Data
  • 8:30 AM EST – Chicago Fed National Activity Index For December
  • 10:00 AM EST – Existing Home Sales December
  • 4:30 PM EST – API Weekly Inventory Data
  • Major earnings: Abbott Labs (ABT), Ally Financial (ALLY), Amphenol Corp (APH), Baker Hughes (BKR), Fifth Third Bank (FITB), Johnson & Johnson (JNJ), Nothern Trust (NTRS), Prologis (PLD), Citrix (CTXS), Kinder Morgan Energy (KMI), Raymond James Financial (RJF), SLM Corp (SLM), Steel Dynamics (STLD), Sterling Bank (STL), Teradyne (TER), Texas Instruments (TXN)

Thursday, January 23rd 

  • 8:30 AM EST – Weekly Jobless & Continuing Claims
  • 10:30 AM EST – EIA Natural Gas Inventory Data
  • 11:00 AM EST – Weekly DOE Inventory Data
  • 11:00 AM EST – Kansas City Fed Manufacturing Activity December
  • Major earnings: American Airlines (AAL), Bank United (BKU), Cadence Bank (CADE), Comcast (CMCSA), Freeport MacMoRan (FCX), Huntington Bank (HBAN), Jet Blue Airlines (JBLU), Key Bank (KEY), Kimberly Clark  (KMB), Southwest Airlines (LUV), M&T Bank (MTB), Old-Republic (ORI), Proctor & Gamble (PG), Travelers Insurance (TRV), United Pacific Rail (UNP), VF Corpo (VFC), Associated Bank (ASB), Discover Financial (DFS), E-Trade (ETFC), Intel (INTC), Intuitive Surgical (ISRG), Skyworks (SWKS)

Friday, January 24th

  • 9:30 AM EST – Markit U.S. Services & Composite January
  • 1:00 PM EST – Baker Hughes Weekly Rig Count
  • Major earnings: Air Products & Chemicals (APD), American Express (AXP), Nextra Energy (NEE), Synovus Financial (SNV), Synchrony Financial (SYF)

My next Options Masterclass is tonight. If you missed the first one I recorded it for you. If you were not among the 5K in attendance last night, and still want to register for the event—I’ve decided to open enrollment for a limited time.

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