The Weekend Shift – Episode 22
The Price Action
Most of the week was inside bar, this made trading difficult unless you went to where there were natural buyers and sellers. After news from the Fed, and news from current events in Ukraine we finally got our 2-2 reversal on the week, more downside.
Is this the move?
I see everyone in the chat is doing very well at listening to Rob. I know it is hard to not trade when things are moving around on your charts. If you were patient you were able to wait until the LG moves to the downside in the afternoons. It can be very frustrating to wait for the simultaneous breaks, but if you just hold on Rob will put where you need to be period.
The broader averages and the Weekend winners
This week in the SPY, most of the market was inside week. Remember that we are still inside month. This is why trading is so hard. We really needed it the market to pick a direction. We started inside day on the 7th, and then went 3-2 up on Tuesday and Wednesday. On Thursday we went 2-2 reversal down, and closed as a shooter. Friday came in and did nothing for the first couple hours and we got news about Ukraine, and the daily shooter went in force all the way down to $439. This was a great week for the bears. You don’t know where to go you could have stayed in XLE. The energies stayed strong in the mess of the rest of the market. A big surprise for the week was AFRM. It was a steady climb into the earnings all day long on the 60s. Then at 3pm, someone accidentally leaked the earnings. So the company decided to go ahead and release the earnings report during market hours. This created a very sharp 2-2 reversal down on the 60s that continued 3-2 down for the rest of the week. During the week there were people still trying to buy the dip on Facebook.
The 60s proved that this is not a buy. After the 3-1-2 reversal to the downside on 10 Feb the rest of the 60s followed suit down to $219.59. This took Facebook back down into full time frame continuity to the downside, reconfirming the 2-2 reversal on the yearly charts.
With the Fed raising hikes, and the political situation in Ukraine, we need to stay on our toes and trade what is actually happening right now. The earning season is not over we need to ensure that we don’t make silly mistakes. Listen to Rob he’ll show you where to go.
The top winners from last week’s Weekend Vid from Rob Smith were:watchlist
No list last week due the earning reports, FED report, and high volatility. What was the top winner for you?
Tell us on Twitter at @SepiaGroup
The Spread
The spread is the difference between the Bid and the Ask. When trading common this is usually close together. When trading option this can be a totally different story.
Most options traders do not take options with spreads that are more than 10-20 cents. Anything more than that, and you are asking for trouble. If you take an option that has a 50 cent spread if you have to cut it, you have no choice but to take a 50 cent loss on top of being wrong in the direction of price. Now imagine having a winning trade on an option with a dollar spread. You decide to take your profit. You may still be selling for a loss, because the spread is so large. In the future pay attention to the options spread. It could be the difference between winning, and losing even before you start.
Macro Moves With Options
Special guest Fico Jordan
Trading options on the macro charts
Talking with Fico Jordan was very easy. A fellow indicator hater like myself, Fico trades the Strat and nothing but the Strat. He uses tradingview as his main charting platform. This setup is a little different than mine because he is looking at macro charts as his main point of entry. The quarterly chart is always up, and then he uses the daily weekly with the four hour to gauge what is happening as the price unfolds. In his words, “We use the back half of the time frame to see if its going to fall out.” For him price is the most important thing, and he doesn’t use a lot of indicators. He does use a Deviation channel, and a Volume profile. Both are found in TradingView. His go too is Multi-timeframe analysis.
Fico has a really interesting analogy for seeing this combinations. He calls it seeing a, “stacked deck.” Where the 5 min, triggers the 15 min, and finally triggers the 30 min. He also calls this, “Falling dominos.” I teach to find the buyers on the larger time frames first, and then using the larger time frames to enter. Though Fico is trading Macro charts, he is also using these smaller times frames to take advantage of daily action. The Alpha Pack is always mindful of where the price is, in the broadening formation.
“We are always looking at the back half of the time frame."
The Alpha Pack are apart of the Tank Division. Which you know I loved. They are focusing on working Quarterly and Yearly signals. “Daily reversals are just icing on the cake,” says Jordan. Him and his group have been working XLE and OIH for at least three months. Fico asked people to tell me how long they have been working Energies, and the chat lit up like a Christmas tree. He also talked about trading Ford on the hammer in force on the year last year. We had a really good time laughing about Ford. No one else was talking about Ford until the end of the year. Guess what, they were all late.
We all see the Tech stocks just falling down the stairs. What the people on the Stocks tv shows want you to do is buy into the falling price. The average trader is consistently conditioned to trade Tech stocks, and stocks where the price is consolidating. “Straters know where the money resides, “ says Fico. People are surprised when they start trading with AlphaPack, and see they are trading Kroger, Campbell’s soup, and Tyson Chicken. We go where the buyers are. We do not take losers.
Jordan continued to show what he does. He uses a volume profile on the side of his charts to identify where there is an order vacuum. The volume profile seemed to be very consistent when looking at it on intraday charts, and with the macro charts. Another tool that he uses is a divergence channel tool. This is used to identify a trend within the broadening formation. It can be a good tool to help identify the Strat reversals, and where the magnitude.
We laughed about trading “Chicken and Oil.” We also laughed about a wild term they use called, “Slapping the Ask.” It was used to describe how traders will show up after the move is done, not Alpha Pack. What they do it work the strongest sectors, and work stocks in those sectors, “where the party is at.” He continued to demonstrate how they use the back half of the timeframes to determine if the price is going to reverse on them.
EYE ON IT
Possible 2-2 week.
Watch what is going on in the Spy this week. There is another Fed report on inflation on Monday. We are looking for a 2-2 continuation down on SPY, and QQQ. We are looking for a 2-2 reversal down on DIA.
Software
Weekly Tips
In TradingView, you can use the Divergence Channel tool to identify trends in the broadening formation. It seems very simple, and easy to turn on and off. Check it out.
We both agree on a lot of things. What really stood out for me what how honest Fico Jordan was with trading, and how he teaches. You can tell he is not selling you anything. He is not working hard to convince you of anything. He is simply showing The Strat, and trading it. Then if you want to join him, he will show you how he does it. He teaches you how to do it for yourself. Fico and his team have come a long way from being a group of a “nonprofit organization,” to a very consistent, and profitable team that continue to push the limits. What is up next for Fico and the AlphaPack? Only time will time. One thing I do know, they trade what they know to be true. If they continue to do that, they will be unstoppable.
In summary, Fico Jordan trades options using the Macro charts. He starts his day looking for the strongest sectors, and looks for actionable signals in those stocks. He uses a volume profile, and a divergence channel at times as further confirmation of what he is seeing in the broadening formation. He takes entries on weekly charts, and manages those trades on the 4 hour charts. The back half of the time frame is what he is always checking. If you want to win, take a look at those pointers, and see if they fit in your trading style.
This Week’s Strat Q&A Tips
Q: Why is it so hard to see The Strat play out Live, but easy to see hindsight?
A: Until you get used to seeing things our way, it seem like that. That’s why we preach tight stops. Looking back and identifying reversals is a great exercise. Repetition is the mother of skill. Back testing is important. Then when you have the confident to work it during the day, set your buy order, and set your stops. You do not have to get in with a lot. Start with a small position. Then you will get to the point you can add. Move your stops up so it doesn’t become a loser.
You can also paper trade. That works to get the mechanics of trading down. You will get to a point that you will have to start trading real money after awhile. There is an emotional hurdle that you
have to negotiate that paper
trading doesn’t simulate. So
start small, and learn what it means to create winning
positions. You can do it.
Get with anyone here a Sepia
we will help.
