Stocks opened mixed this morning… which is somewhat surprising considering how much bad news came out over the weekend regarding trade talks and fears of a global economic slowdown.
It feels like the market is setting up for another leg down. However, it’s a great time to stay patient because many stocks are whipping around and reacting to trade and tech news.
Alphabet took tech down this morning, as regulatory concerns are pushing that and Facebook lower.
However, I did manage to get a solid base hit this morning
That said, today is probably a good day to review and sharpen up your trading skills.
The stock market is ultra-competitive… and despite my success of averaging over $1M in trading profits over the last four years… I still have to put in the work and the results are never guaranteed.
And that’s why I’m on the constant pursuit of learning and mastering new trading strategies. Because I know… the more tools I have in my arsenal… the better the chances I’ll be able to trade in any market condition.
Some of you probably don’t know this, but I didn’t start trading options until my third year of being in the markets.
However, it didn’t take long to create a system that works for me. And today I want to talk to you about it.
The system is called I.G.N.I.T.E. and it stands for:
- Insiders
- Growth
- News
- Institutions
- Technicals
- Earnings
And while it is rather detailed… it’s not hard to follow when you get the hang of it…
Heck, it was just a few months ago when clients crushed it on an I.G.N.I.T.E. trade in General Electric (GE)… yes good ol’ General Electric.
Feb 25, 9:32 AM
Ken S. : out GE + 2000
Feb 25, 9:32 AM
Josh L. : out 1/2 of the calls for 550%
Feb 25, 9:33 AM
Luz L. : Sold my GE calls plus 570%
Feb 25, 9:34 AM
Bryan A. : + 600% on GE wow
Feb 25, 9:36 AM
Jeffrey G. : +2900 GE calls
Feb 25, 9:37 AM
Justin C. : +$18k GE calls. biggest win of my career
Feb 25, 9:37 AM
Lisa S. : My GE runner up 817%
Feb 25, 9:38 AM
Marc P. : Took in 3K from 50 GE contract
Feb 25, 9:39 AM
Erick W. : I made around 800%+ !!!Thanks Kyle!
Feb 25, 9:39 AM
Mark M. : GE up 380% . in 200 Mar01 11calls at 0.09!
Feb 25, 9:39 AM
Jason H. : just a cool 36k
Feb 25, 9:39 AM
Mark M. : cool 12000
Feb 25, 9:39 AM
Gary D. : GE + 762%
Feb 25, 9:39 AM
Dennis U. : im up only 755% on GE calls
Feb 25, 9:39 AM
Dan S. : ge 710 %
Feb 25, 9:39 AM
Lisa S. : dang, 781% on runners
Feb 25, 9:41 AM
Lloyd A. : Up 788% GE calls!
Feb 25, 9:41 AM
Erick W. : $6,000 + on GE !!! And I’m at the gym!!!
Feb 25, 9:43 AM
Matthew K. : 8k on GE
Feb 25, 9:45 AM
James F. : +790% on GE
(Want in on this action? Then here you go)
And while the market is challenging now… and not all trades are going to workout in our favor… one thing that will keep us in the game is by sticking to a plan and a system that works.
That said, I created a detailed outline of the I.G.N.I.T.E system for you. Read on to learn more about it.
Contents
A Rules-Based Approach Makes Trading Easier
With all this volatility in the market, traders have been getting whamboozled.
Traders have been trying to figure out the direction of the market, whether they should be buying or selling… heck, the “buy the dip” traders are just randomly picking up shares thinking the market will reverse.
If you haven’t heard yet, the market broke below the Death Line… and we could be headed much lower. However, I’m not too worried about that.
Why?
When you have a rules-based approach, you could actually avoid all the trade war headlines… focusing on specific stocks that have nothing to do with the market.
For example, I’m focusing on company-specifics like:
- Insider buying and selling.
- Growth prospects.
- News and catalyst events that the market hasn’t priced in.
- Institutional buying.
- Technicals.
- Earnings.
That’s my I.G.N.I.T.E trading system.
When you focus on these factors… it makes things a lot easier. Now, I’ll be going over how I actually use this system after I explain it a bit.
Insiders
Now, you’ve probably heard about me mentioning insider buying before.
This is actually very important when you’re looking for stocks that can rise.
Why?
Well, there’s a wealth of information in Form 4 filings – an SEC filing that corporate insiders must fill out if there is a material change in their position.
You see, corporate insiders include officers, shareholders with 10% or more ownership, and directors. Now, corporate insiders are privy to information that we’re not…
… and if we can spot insider buying, that’s a good sign. Generally, if corporate insiders are buying stock… that could be an indication that there’s a positive catalyst coming.
Chances are these insiders aren’t going to be buying shares unless they’re confident that the company could continue to rise and grow.
Well, that brings us to the next part of my system… Growth.
Growth
In the next step of the system, I analyze the growth prospects of the company.
If the company has earnings… I’ll look to see whether we’re on the cusp of an earnings beat.
Why do we care about this?
Well, if a company has strong growth prospects, chances are if the stock beats on earnings and forecasts stronger growth in revenues and earnings per share (EPS)… it’s going to run higher.
However, we don’t want to react to this news… I want to conduct my analysis ahead of time and not try to chase the stock after the fact.
But what happens if the company has no earnings… in other words, it’s not turning a profit yet?
If a company doesn’t have earnings, I’ll analyze the technology and see if its disrupting the market.
Moving on. Growth ties into the next step of the system… News.
News
If you don’t know yet, some stocks actually don’t react to market headlines. Rather, they react to company-specific headlines… and that’s why I like to focus on news and catalysts.
News, or catalysts, is what moves stocks. Basically, I want to analyze past news… as well as potential catalysts that the market hasn’t priced in yet.
For example, if a company reports strong earnings… and its industry growing… that’s good news. With my system, I actually give these factors a rating, which I send out to clients. I’ll talk more about the ratings shortly.
Sometimes, the market actually doesn’t price in these positive news events and undervalues the stock… and that’s when we want to strike.
Next, I like to see what the institutions are thinking about the stock.
Institutions
Institutions are often thought to be the smart money… and they’re the ones who actually move the market.
You see, there are funds out there that know a lot more than I do about a company. They have a heck of a lot more resources than I do to spend on research… so if funds are buying a stock, what does that tell you?
Well, just by tracking their moves, I can lay the foundation for trades with incredible upside potential… with limited risk.
Now, there are free tools out there for you to use to track this information. For example, you can see whether institutions are buying on Finviz…
… or you can look at Whale Whisdom.
Next, I’ll look to my charts.
Technicals
Now, it’s great that we know all the fundamentals in a company. However, let’s say we’ve conducted all this analysis and think a stock could run up…
… do we know where we should buy the stock?
Not at all.
That’s why I like to look to the charts.
Basically, I’m looking for the perfect entry point based on my chart patterns… an area where the stock allows us to take limited risk, while maximizing profits.
For example, one chart pattern I like to use is the cup and handle.
Check out this daily chart in Take-Two Interactive (TTWO).
Well, if you don’t know yet, the cup and handle pattern is a bullish pattern… and there are some levels to keep on the radar when you’re using this pattern.
What we’re looking for here is the stock to break out above that level and continue higher.
So once we’ve got the chart… we look to earnings.
Earnings
Next, we want to analyze the earnings…
If you go to any company website, they’ll have their earnings report. Basically, what we’re looking for here are forecasts and how the company has performed.
If the company reports EPS and revenue above the consensus estimates (you’ll usually see these numbers on headlines from CNBC, Bloomberg or other news outlets)… that’s bullish news.
Now, what’s more bullish is when the company raises its expected guidance for the next quarter and fiscal year.
Once I’ve analyzed all these factors, I give it a rating.
How I Use the I.G.N.I.T.E. System
Here’s a look at a stock I used the IGNITE system with.
This report goes out to my clients… and it simplifies trading for them. They don’t have to conduct research for ours, they just get the skinny on the trade.
Now, if they’re interested in the details of the trade… I actually do a detailed write-up and send that out to clients too.
This is just one of the many plays I’ve taken using I.G.N.I.T.E.
When you follow a rules-based approach… it could reduce your chances or being chopped up by the market. You see, with the I.G.N.I.T.E. system…
… I’m able to find plays regardless of market conditions because I’m focused on what the company itself is doing, not the overall market (which has been getting sold).
Now, if you’re interested in learning more about the I.G.N.I.T.E. system, click here to learn more.
[Ed.note: Kyle Dennis runs BiotechBreakouts.com. He is an event-based trader, who prefers low-priced and small-cap biotech stocks.Source: BiotechBreakouts.com | Original Link