Active Trading Strategies | Ken Rose, CMT | 9-22-20 | Finding Strong Stocks in Weak Markets

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Active Trading Strategies | Ken Rose, CMT | 9-22-20 | Finding Strong Stocks in Weak Markets

well investors and welcome to active trading strategies my name is ken rose and it’s always great to be here to discuss investing in the stock market particularly in this active area where we’ve got a lot of different strategies that we can choose from which is which always is kind of interesting look at some of the different opportunities that the market presents and that’s what we’ll do is we’ll start by looking at the market before we do that let’s go ahead and get underway here so you want to welcome here to active trading strategies just a little heads up if you’d like to follow me on twitter my twitter handle is at krosc underscore tda i post things related to this area as well as other areas of investing i also want to thank who we got over there in the chat window helping us out here today oh yeah it looks like we got bar i want to thank barb armstrong over in the chat window she’s there to address your questions she’s very knowledgeable in this area as well so do feel free to shoot your questions over there to barb in the chat window and also barb is also available on twitter at the armstrong underscore tda wave disclosures here today just a reminder that in order to demonstrate the function out of the platform we need to use actual symbols however td ameritrade does not make recommendations or determine the suitability of any security or strategy for individual traders any investment decision you make in your self-driving account is solely your responsibility also keep in mind we use a paper paper trading software and here this application is for educational purposes only we want to keep in mind that successful trading during one time period does not guarantee successful investing of actual funds during a later time periods market conditions do change continuously there’s a picture myself been here for a little bit more a little bit less it’s probably a little bit more in 16 years it’s kind of a it was kind of an unusual in a way since i came here originally just to spend a little bit of extra extra summer time i had to to delve into this area but have enjoyed it it’s very interesting one of the things i love to do is i love to learn and if you’re into investing there are always opportunities to learn new stuff and so i’m always in learning mode i also enjoy trading in this area and of course i enjoy teaching in this area as well i’m a contributor on the td ameritrade network i’m a charter market technician and i use thinkscript to build indicators triggers as well as strategies here’s a little review of the greeks we’ll be talking about options here today most likely you want to keep those things in mind so with regards to our agenda here today we’ll start off with the review of the market just kind of see what the overall market is doing we’ll basically let the market dictate the strategy of choice here we will lean towards a little bit more active strategies in in the spirit of the of the nature of this of this particular webcast okay and then after identifying a strategy we’ll we’ll run some scans and use some other tools available to us to identify potential candidates and then before the session’s over we’ll look to paper trade possibly one or two candidates so with that in mind let’s go ahead and get underway here to do that i’m going to open up the thinkorswim platform right here and let’s start by taking a look at the market as represented by the s p 500 so something that kind of jumps out to you when i look at the market here is a potential change with regards to the overall trend if i come over here and i bring some lines up here we can see that we’re in this nice up trending channel right here and then we came down here and we broke out of the channel then we sort of moved sideways here going in a little bit of a sideways direction here perhaps i can draw that out we kind of went in this sideways range right here we broke out of that sideways range and we moved to the bottom the key aspect of this is as part of this downward movement did we create a lower low if we come back here let’s just zoom in a little bit on this little time period right here you’ll notice in the channel we come up here we come to the top you come down here to the bottom then we bounce up here at the top a little bit of a um sort of a a strong buying area a strong buying area here took us all the way out of the channel and we fell back in but i think a lot of technicians would be looking at the most recent low as being right here at this point that guy right there that arrow doesn’t really do much good for us does it let’s just circle it again right there i’m saying i think it’d be justified to look at that as the most recent low so if we’re looking at that as the most recent low before we came down and we moved into this sideways channel we could bring a horizontal line across that low right here and you can see that the bottom part of the channel right here is lower than this slow so the bottom part of the channel created a lower low then we move down here what was the high that we came down from well the height that we came down from could be let’s just use this little tool

right here this looks to me to be the high that we came down from if we look at that high that high is lower than this high over here so we move down here and we created what’s called a lower high then we continue to move down here and moving down here we created a lower low and investors what is the definition of a downtrend when you think about it what is the definition of a downtrend what’s the thought of the chat window for any responses what do you guys think what is it what is the definition of a downtrend well typically the definition of a downtrend is lower highs and lower lows we may be a little bit early at this point okay because we only have let’s bring that back over here we only have one lower high you actually come down and created a a you know you there would be some justification pace possibly look at this as maybe two lower lows if we come down here but now we’re bouncing and moving up and if we look at today’s candlestick we don’t have a lot of energy to the upside right here do we this candlestick right here where we have that very small body right there got some shadows out the side that’s sometimes referred to as a doji where we’re sitting right now we’re sitting very very close to where we open so you have very little body right there considerably a doji represents indecision how about yesterday’s candle if we look at yesterday’s candle right here that’s that that’s a hammer that does suggest the change in direction of the upside we got our change of direction to the upside but not very impressive at this point so if we’re looking at the market from this standpoint what would we be looking for well something that kind of jumps out to you is this pullback right here and this bounce right here so possibly both so possibly flag patterns okay the flag pattern we’re looking at though with regards to pull back and bounce the upside that would be considered to be a bullish flag pattern but the trend of the market is somewhat bearish so we may see some bold flags we want to be sensitive to the trend of the underlying stock and keep in mind that this may not be an opportune time from a from a timing standpoint to look into looking at entering in longer term bullish trades some of these bounces could be short term particularly if the market continues to move to the downside right here okay we do have we do have something like this now also keep in mind that because we’re in a downtrend like this okay we’re getting a bounce like this right but this balance of scurrying right here this could actually be a bear flag just put bear right here this could actually be be a bear flag right here where this little part right here is the pole okay and this guy right here is the flag so we could see some bear flags out there but but maybe not too many bear flag completions this this would be considered a bull flag completion because we’re actually bouncing up right here a bear flag completion would occur when we start to head to the downside right here and we so there there may be some of these to look out for but but probably not not a whole lot of them now with regards to short-term trend again this is looking bearish right what technicians will do is i’ll look to see if the short-term trend agrees with the longer term trend and one one of the ways you can assess the longer term trend is just simply change the nature of your charts rather than having each candlestick represent a day change that around so that each candlestick represents a week and that automatically will take us into a longer time frame type of the chart so we’re looking at this chart right here where we’re looking at it from a longer term standpoint let’s clear our drawing set off of here let’s take it off right there now what have we got we have a bullish market still right we have a bullish market here’s a pull up here pull back there there’s a nice full flag there we pulled up right here we’re pulling back here we don’t have a bounce now but looking at the longer term or this candlestick now represents all the trading this week which is yesterday and today i actually have a bullish hammer so from a longer term standpoint we’re still we’re still looking at things bullish but there are some indications of weakness with regards to that bullish trend because when we break things down to a shorter term standpoint things are looking a little bit more bearish if we have both a longer term and a shorter term giving us various indication then we feel a little bit more comfortable going into primarily bearish trades now another aspect to look at in this market right here let’s change our chart back here to where we’re looking at let’s go with six months in the day that’ll help us out when we’re looking at some individual stocks what you want to look at is how what is this downturn done with regards to the psychology of the market you can identify that by

taking a look at the vix right here and here’s the vix and typically when the market goes down the vix tends to move to the upside you can see that you have this little pop up here to the upside all the investors are looking at the vix i’ll look at it from a longer term standpoint kind of get an idea of where we’re at in range so i’m going to move this back out to two years i’m going to move this back to weeks and just see where we’re at in relationship to the range and you can see here on the vix let’s take our drawing set off of here we’ll pair our drawing set right here and take that off here let’s draw until it looks like typically so we sort of have a somewhat i guess i guess you’d call it sort of a normal range here over the last couple of years that’s been pretty volatile but i think a fair number of technicians would look at this as sort of the normal range in other words kind of the range of the market was moving in as far as ups and downs and vicks of course when we go up like this it means there’s there’s a higher level of concern a higher level of fear when we come down like this it means that there’s more confidence in the market then we have kind of then we have a an event like this we could call that the the the covet rise okay how often does an event like light light cove would occur maybe once in a lifetime hopefully hopefully not more often than that maybe that but that took that took up some historic high so where are we at from a more of a normalized standpoint we’re actually at the up the upper end right here so there is still a fair amount of fear in the market okay and also this would be worthy to know with regards to potential options trading when the implied volatility overall is relatively high it tends to lead itself to option strategies that include selling options you know that could be long verticals that could be short verticals it could be iron condors and other types of option strategies where we’re selling options this could be this could create some potentially attractive returns in relationship to that look at that then let’s let’s take a look a little bit deeper in the market i’m going to shift gears and come over here to another chart this is a relative strength chart those of you that maybe you’ve seen me in some of my other sessions are familiar with this chart this is just giving us a an idea of how different sectors are performing over a certain time frame the time frame that this chart is set up for it’s set up for let’s shift this back over to spx right here and let’s come back over here to daily chart again we’ll come back over here to our six months and we’ll come down here today and there we are right here so right here is where the market hit a peak here on september 2nd since then we come down we move sideways and we pop back down again this chart right here is looking at relative strength of these sectors going back to september 2nd and coming all the way forward here to today this may give us a little bit of insight as far as some sectors as the market’s moving up today some sectors that may be having may are perhaps having having some strength relative to other sectors these lines all they do is they represent percentage movement by the way um this chart a link to this chart is available to you what i’ll do is i’ll go ahead and pop it up here we’ll be looking at a lot of custom things here today okay so if if if if you have them great okay if you don’t have them what you can do is you you can get you can contact me on twitter and i can not only provide you with links so that you’ll have them but also some little videos attached to those links that kind of go into some detail on usage of them okay right here one one that’s kind of interesting right here is this one right here notice we came down here and we’ve crossed one two other sectors and we’re moving up nicely here today this is kind of interesting here today just because of the slope of this that’s that’s got a very tight slope and i can tell by the color right here that that’s consumer discretionary down here another nice slope if i roll over this one i can i can tell by the color of that that that’s staples it looks to me that’s kind of interesting to have consumer discretionary consumer staples was showing some strength to the reason for that is usually they don’t show strength at the same time relative to the overall market one interesting characteristics is these tend to be larger cap companies so perhaps larger cap companies are where investors are feeling a little bit more comfortable moving into at this point we just want to double check this by doing a right click and rot loading over here that’s 30 that’s consumer staples and then if we come down here we look at this one do right click on that i just want to double check the color that’s 25 and that’s consumer discretionary again a little bit unusual to see those two showing some nice strength relative to the market at the same time okay but that that may be something that we we might want to be sensitive to let me do this real quick those of you that are here today i’m just going to share this link with you and also put it up here on the chart for those of you that are catching this via an archived recording and let me make this a little bit bigger we’ll edit our properties and

jack it up here to the 60 turn that off and here’s the link that you can use the whole link but really you only need the last seven digits less seven digits or lowercase r the numeral two seven uppercase b uppercase c lowercase h and uppercase u and let me also i’ll send that over in the chat with just reminders i’m sending this over in the chat window as it this is not guaranteed with regards to accuracy or time and it’s also not recommended all right but so i just want to under underline that okay hopefully i can send this over the chat window let’s see there we go right there and again if you’d like if you like this link as well some other ones we’ll be looking at here today again you can call you you can get a hold of me on twitter just contact me on twitter hey ken i saw the i attended the session i caught the archive can you send me the link for the relative strength chart and also and also you may may also want to include some other ones we’ll be looking at here today okay so taking those things in mind then there’s a couple of approaches we can take one is we can pull up a list of the s p 500 stocks and we can look at consumer staple companies we can look at consumer discretionary companies and we can look at look for some potential bullish entry signals now before before we take that step though i do want to underline one thing here with regards to this link those of you some there may be some of you here that are not familiar with using these links this is the way that you do it on your thinkorswim platform come up here to where it says setup click on setup come down here to where it says open shared item click on open shared item you’ll paste the link in here click on preview click on import in this case what will happen is a little chart will come up when the chart comes up it’ll look just like this when it comes up come up here to style click on style come down here and choose save style give the chart a name put a check mark in here give the chart a name put a check mark in here i’m going to click click cancel because i don’t need to do this you give the chart a name click here click on save then after you save it when you want to bring up that chart come up here to style come down here to load style you’ll be able to find it by the name that you gave it and bring it up that way you only want to bring it up once using the link if you bring it up each time using a link these studies and the the custom stuff on here is going to get duplicated duplicated and it can crowd your system once is not a problem but you just want to bring it up once and again save it as a style okay so as i was saying we can bring up a list of the s p 500 stocks and sort it by sector and then look at consumer staples and consumer discretionary and look for some stocks in there but maybe giving us some technical signals possibly a bull flag possibly a breakout some some technical signals okay so let’s come over here then we’ll take a look at an example of this we’ll pull this open right here so here i have this is a public watch list of the s p 500 it’s all it is nothing special if you if you come over here and you have a gadget you can just you could bring up a watch this like this just have you have your have a watch this gadget up here click on it come down here to public and under public use s p 500 i’m not going to reload this okay but that’s how that comes up and then what i have here is is these are custom columns i have a custom column to identify breakouts i also have a custom column to identify potential bull flags these aren’t these aren’t perfect okay but they but but they tend to be fairly effective in getting us to some potential possibilities a little bit a little bit sooner rather than later all right but you want to keep in mind that that these these may miss some potential bull flags so there’s nothing wrong with finding a sector and going through and looking at individual charts as well okay um there are there are links available here as well rather than doing this copy and copy copy and paste here each time look at some of these custom things i’ll refer you once again to twitter you can contact me on twitter and say hey ken could you send me the breakout column and the and the and the bull flag column okay and and and and and and then and then i’d be happy to not only get it out to you but also provide you with a link and video exactly as far as how to use those so we have our s p 500 here once you have this up here just come over here click on symbol click on customize and over here under available items start typing in sector click on sector add the item that’s how we got sector over here here’s our two custom columns these are these are built using think script okay so you’ve got those okay so we have then sort by sector we have a sort of bisector let’s start by taking a look at those two sectors consumer discretionary okay which is this one right here okay and why are we looking at this one this one appears to me to have the steepest angle of recovery today i mean all the several

of these have have a nice angle to recover some of them are continuing to go down you’re like financials are continuing to go down today waiting the market if we look at things bullish we may look at that okay this one right here is really that one’s continuing to move down as well that one’s kind of faded out that’s this one right here hard to see but that is energy by the way you can change the background color here if you want to if you want to increase some of the contrast you might just want to go with white or something something along those lines okay well let’s come down here then and let’s find some consumer discretionary consumer staples see what we have here infotech here’s communication services here’s real estate all right did i miss something because i wanted to see consumer go right past it financials healthcare here’s our consumer staples area and here’s our consumer discretionary looks like a little bit more action here in the consumer discretionary which is not unusual because of the steepness of the link here but now we’re going to want to look at these on an individual chart so i’m going to come up here notice i’ve been bouncing between two charts what i’m using here on the thinkorswim platform is a chart matrix in other words i set this up so i have two charts and i can move back and forth between them by clicking on these arrows right here one of them right here is set at this relative strength one right here and this one over here is just looking for individual stocks to use this look at the s p 500 let me activate that drawing so that’s still up there if you’d like to take a peek at that okay so what are we looking for we’re looking for some potential bull flags on consumer discretionary when we’re looking for a bull flag what are we looking for well it’s a bullish signal right so there’s a couple things we’ll be looking at first of all you want to keep in mind these aren’t perfect they tend to do a fairly good job but they’re not perfect but notice this moving average line right here notice the s p 500 is below it would want to be above it okay so we’d like to have our bull flag occur above that moving average line looking for movement to the upside a pull back and a bounce now this this this looks plain and simple to see right when we’re when we’re looking at them in real life sometimes you’ll see both flags like this but it’s rare so we don’t want to we don’t want to expect perfection but we would like to be either above the moving average or below the moving average and have is having a series of higher highs and higher low so we’re moving up towards it that’s what we’re looking at with regards to these bull flags so looking for hbi here then let’s pull this one up and notice on my watch list right here right here this is usually unlinked like this i have this linked to red and that’s linked to red and over here on my chart this is usually unlinked if i set my chart to the same color link to red when i click on a stock over here then the stock will come up over here so let’s take a look at hbi here then there’s hpi and yeah you know if we come in here we can see here’s our move to the upside here’s our pullback right here and here’s our bounds so possibly but you know i just moved to the downside we actually came down and we revisited these lows we’d like to be coming off of a higher low not an equal low or a lower low we’re also not above the moving average line on certain market conditions we may not find what we want and we want to keep that in mind okay but we can still look okay let’s come down here and take a look at nike right here this is a consumer discretionary spot let’s zoom in on nike here this one’s looking a little bit better isn’t it let’s come over here and we’ll choose two let me just want to remove that drawing so this would we’re above the moving average line if we look at our movement to the upside here we are here there’s our flag here moving up here moving down here and now we’re getting a bounce so this is a nice bull flag formation there’s a challenge here though what is it it’s this guy right here that’s an earnings announcement what a party spoiler right there that is a party spoiler now that earnings announcement came out before the market opened then it wouldn’t be a party spoiler but i suspect that it’s probably going to come out after the market closes we can come over here in our watch list and notice where we have a symbol for nike you come right here notice this tells us that we have an earnings announcement i’m going to click on that little icon right here 9 22 after the market because of all the volatility that can occur during an earnings announcement we may want to hold off on this one right okay there are there are there are some earning trades that we could consider okay they really wouldn’t be in in the vein of what we’re talking about here as far as looking for strain looking looking for technicals and those types of things so nice setup party spoiler down here on

the earnings announcement so let’s come over here then and we’ll see what else we’ve got here consumer discretionary cmg zoom in here we’re getting a bounce with this candlestick has gone red we’re also not above the moving average line dri let’s zoom in here oh another earnings announcement here we may have some time on this one though let’s remove our drawing here so so we can we’ve come down here we’re getting a bounce but notice on this one we came down we created a lower low yesterday now because yesterday was such a huge sell-off we may take that into consideration maybe not be quite so strict this candlestick right here we could call that gutless why okay we’re bouncing up but it is a doji representing indecision right again we we may or may not find something here we’ll keep we’ll keep looking now this one’s below the moving average line here’s target this is giving us a breakout we can also consider a breakout right here let’s zoom in here and take a peek what we got going on here this is another technical signal let’s clear our drawing set you sure you want to remove all drawings from the setup i don’t know if i want to do all that stuff i just want to clear the drawing set okay there we go okay so here’s target came up here moving down here going sideways here right and we’re breaking out of that sideways movement with with a relatively healthy healthy candle right here looks like the volume is isn’t too bad for this time of the day i’m just going to make a note here for target we may come back to target and use and use that as potential trade but let’s take a look at a few more of these lb not seen anything there that really jumps out full flag i’m going to change our time frame here just so we can see these bull flags a little bit better let’s go one month that’ll really zero us in on our both flags here those pull up here pull up here bounce that um a little bit further out here for three months you know that’s that isn’t too bad a nice little bounce there got some volume maybe we’ll come back to lowe’s that one is now we’re coming down here to consumer staples so let’s take a look at some consumer staples here look at that stars we came up here pull back this candlestick is nice and strong okay yeah we have some sight we have we have some sideways moving here to be honest with ourselves this sideways moving from a technical standpoint this would be the flagpole this would be the pullback so we came back here and created a lower low part of the reason for that was yesterday selloff but now we are getting a strong bounds we do have a target up here let’s do this folks in the interest of time okay let’s go ahead and look at look at entering a trade on this and look at look at targets related to it okay oops we have an earnings announcement here that earnings announcement is on that’s our date here 10-1 so so we do have a little bit of time here now if we wanted to do a trade on here just buying a stock lawn what we could do is first of all i would want to identify support so where support well we can come all the way down here that would be a possibility we’re going to go with the close right here because yesterday was a little bit of an unusual day we’ll play the part of the investor that’s looking at it from that standpoint also it’s interesting isn’t that area right there it’s a little bit more of a significant area it was resistance here for three days it ended up being a resistance level yesterday but also sort of a support level and now we’re bouncing and moving up so what would be our first target it looks like this peak right here that would be our first target here and then our peak up here that would be our secondary target right there where would we set our stop loss well we could look at our average true range here and look at our level support right here and let’s put our pricing on the left here our support is at it’s a little bit hard to see but it’s 185.61 now with regards to setting a stop loss but keep in mind the stop losses don’t guarantee you’ll get out of the trade but rather than use an arbitrary figure you can use a percentage of the average true range what we’ll do is we’ll use 80 of the average true range here okay let’s grab a calculator and we’ve got a calculator right here we’re here and what’s our average free range our average true range is four dollars and 42 cents i’m going to take point eight times 4.42 equals 356. i want to set that below our

support level of 185.62 i believe is what i’m seeing there so let me put our stop loss then at 182 182.08 okay it would be our stop we want to make a decision do we want to be in this trade over earnings okay if we don’t then we can set up our order to take us out before that earnings okay and when is that earnings that we still have a little bit of time here that earnings is 10-1 before the market 10 1 before markets it looks like we got what about about eight nine calendar days a few trading days in there as well we are so we’ll be looking at this as an active trade in other words a bounce trade limited time but we want to look at possibly taking advantage of some momentum here some people some investors may call this like a scalping trade this is our first target right here well the question becomes now do we want to let’s for the purposes of this let’s just go ahead and look at purchasing the stock so what’s what’s going to be our potential risk per share well if we’re getting in at approximately looking at entering in at approximately 187.85 and our stop loss is at 180 208 plus 187.85 a risk per share is approximately five dollars and 76 cents a share let’s just say on this trade of nature but we don’t want to risk more than a thousand dollars so we’ll take a thousand well let’s let’s make a little bit more a little bit more interesting than that i guess you could say let’s go 2500 let’s say 2500 then divided by our risk which was five dollars i believe was 5.76 if i remember right that puts us in at 434 shares we’ll get 400 shares we want to keep in mind how much of an investment from our account are we going to be making at 400 shares because we also want to keep that in mind well if we get 400 shares and we’re paying 185 oops that’s our stop loss actually we’re getting 400 shares we delete that 400 shares at more like 188 making a 75 000 investment are we okay with that that’d be something i want to keep in mind now depending on the size of your portfolio that may be 10 or that may be 50 but we want to keep in mind our total investment here because we may want to hold some capital back for diversification we’ll play the part of the investor that’s okay with a total investment of about of about 75 200. so how would how would we put our ordering then well we can do a right click here we can choose by custom without we want to underline the stops don’t guarantee that we’ll get out at the stock price and we’ll go 400 shares here and we’ll just put this in as a market order to get filled today because we are getting a bounce our stop order is going to be good till cancelled and i’m actually rather than do first triggers all here well actually i’m going to leave that at first triggers all because we’re going to want to have a second exit order here and i’ll explain that momentarily so we let’s put our stop loss in here then and our stop loss was at 182 dollars and eight cents that’s our stop loss we’ll have that good till cancel but i’m going to create another opposite order it says first trigger is also going to create another opposite order create opposite order oh really that wasn’t very nice let’s do let’s change to first triggers let’s let’s start over here folks i wasn’t expecting that this won’t take this long though do right click here and choose by custom i’m going to choose first triggers buy custom with oco bracket yeah we’ll use oco bracket right here okay i wanted to buy order then i wanted two sellers we’ll leave the buy here this one here will be a stop order okay that’s going to be a stop order right here and that stop price again is going to be at 182.08 and that’s going to be good till canceled the second order is going to be good till cancel and this is going to be a let me do a market order sometimes it gets a little antsy when you do that market order must have day time and force okay so we’re going to have to work with this one a little bit what we want to do is we want to get out of this trade um before this earnings announcements

we want to get out of this trade on like 9 30 or 9 31 let’s work with this one a little bit on our exit right here i’m going to come over here let’s set our quantity of 400 and we’ll come over here and click on this guy so we’re going to submit this order 930 right okay but i’m going to take that limit price um let’s see cell limit i want to set the limit price at something a little bit different good till cancel you know maybe this isn’t going to let me do this what i want to do here it is limit link two so we have limit and limit link two i’m going to say the ask so this in effect sets the limit order to the ask price at this time it’s kind of a roundabout way to to get around that issue if you if you can’t do market orders with with the date with you have to use daytime enforcement regards to market orders so this order gets triggered it’s going to trigger a limit order but that limit order is going to be set at the ask which is the same as a market order okay and then i’m also going to say a limit offset here is i’m willing i’m willing to take a dollar off of that which means i’m willing to sell it at the ask minus a buck okay so we should be able to get this this should feel very similar to this should feel like a market order however you want to test this you want you want to test it in a paper trading account also be do be careful in live trading account just to make sure this methodology works as anticipated let’s go ahead and say save here now we don’t get that error message we have this date set we have this set and we have this going in i’m just going to take the padlock off this so that gets filled i want to come over here check our date that’s going to be submitted at 9 30 so i’m okay with that and this is a stop loss and that stop loss notice our stock price changed or doesn’t it sometimes that happens usually a good idea to set your stop loss price last 182 08 okay let’s set that and let’s do a confirm and send i actually don’t want to send in that account let’s put it into about holding center okay let’s send that so we bought it and then we have our two contingency accents why are we doing that okay we wanted to do here is we just wanted to go through an example there could be other ones here that could be could be giving us better setups there may be some in here that the algorithm missed out on that were that were both flags i’m not seeing anything here but that’s definitely a possibility as well okay but we basically went through a process of incorporating what we were seeing here with regards to the overall market and then bringing up stocks and sorting by sectors and then looking for technical signals there’s another way to approach this particularly if you’re looking at being a little bit more active trade with regards to options and that is to simply start off with a watch list that has been built with options in mind just just to help improve that we have liquidity one of the biggest issues a lot of traders have with regards to trading options is they’ll find a stock that possibly has a setup then they’ll look at the underlying options and liquidity on the options either there aren’t options available or the liquidity is horrible so you can start by building an options watch list this odds this watch list that we’ve that has been built here i’ll show you quickly okay sort of the methodology here first of all we set up a stock hacker scan the stock hacker scan we set up a minimum price for the stock which was 15 we set up a market cap in millions of 38 38 i guess that’s going to be 38 billion 835 million if i’m reading this right then we set up an average volume 30-day average volume of a million shares or more so we have an intersection between stocks that provide weekly options stocks are recorded in penny increments those two have to intersect and then meet these now you can change these to whatever you want you’re still going to get a list this is a list of 105 slides that seems to be a little bit onerous but once you have your listing you can save it as a watch list you can come over here bring it up as a watch list you come over here what i do what you could do just come over here to the one at the bottom click on it bring up an option chain okay bring up an option chain we don’t need that and you don’t need to look at all of this maybe go out about eight strike prices go out you know 20 days or so and then look at the slippage between the bid and the ask price in relationship to the price of stock if the slippage seems onerous hit your delete key then hit then hit your up arrow key and work your way through this

you know you can get through 100 150 of these and do it usually in less than 30 minutes it just usually goes really quickly okay so that’s kind of the nature of this watches i frequently get asked ken can you share the watch this i’m not actually able to do that and i think i’m part of the reason of that is is it is thought to be somewhat of a recommendation for these stocks we don’t make recommendations okay i’m just showing you the process do keep in mind that you can work with that process so that the stocks that come back a little bit more centered with regards to your interest so here we have a chart now i’ve got columns here i have a breakout column i actually have a breakdown column here for potential bearishness right here i have a falling knife call these are stocks that have moved up and are moving down sometimes that can be interesting from a from us from an option trader’s perspective let’s clear these guys off because you could have where we’re going to have to we we may not have to have time to put a trade on here but we’ll kind of go over some of this stuff you know with regards to a falling knife a falling knife is a stock that’s in an uptrend and it’s pulling back like this but it hasn’t bounced yet but it’s moving towards a theoretical support level the reason this could be a potential of interest is if you set up a a bullish option trade down here for example if you set up a short put vertical and you put it as a stock is falling here call the falling knife because sometimes these trades can and will cut you okay but as it’s moving down like that implied volatility is moving up like this so if you decide to put the trade here anticipating you’ll find support here this short foot vertical could possibly be set up and we’re just talking figuratively with your short strike price down here if you wait for the bounce to occur which is okay that makes it a more a more conservative possibly safer trade wait for the bounce to occur you can still set up your short vertical but it may be a little bit closer to the bounce occurs here so you’re a little bit closer to where the potential danger the stock comes down and breaks below that so that’s kind of the thinking behind this this falling knife over here let’s just look at some of these again that doesn’t look like we’re going to have time to put on some trays but we’ll take a look at some of these so here’s our watch list come down here here’s oh by the way once you get it set up the way i talk to you you also you also may want to add some stocks that are frequently in the news i’ve got tesla here i’ve got apple here i’ve got the fang stocks here as well as some others that are frequently in the news okay so you may want to add those as well just just so you have them in here let’s look at kgc here though here’s your falling knife notice we came up here we’re pulling back we haven’t bounced yet we’re approaching this potential level support right here looking for a bounce that stock’s only nine dollars though may be good for maybe long options but not so good with regards to potential vertical or where or where you’re selling options we discussed earlier the implied volatility relatively high we might want to look at something more along the lines where we’re selling an option in addition to buying an option you come here to cvx see we got there there’s a pullback right here 76 so we can look at this and say okay cvx is here’s our we’ve we pulled down here to this support level right here right we haven’t bounced off yet okay but we are pausing you can see that implied volatility’s moved up it’s actually moved down here just a little bit today we may be able to get something significantly further down here below the support level where we’re at where we’re kind of testing the support level rather than wait for bounds and we could do that we can look at some other just kind of show you here on cvx let’s just look at an example here real quick going out 24 days look at a short put vertical with a delta that provides us with a 70 probability of success or higher that would mean we’d want to have a delta that’s at 30 or lower okay maybe right here at 74 i’ll do right click here let’s choose sale here choose vertical that’s 20 cents that’s you know that’s that’s just that’s that’s not super that’s you know we’ll play the part of the investor that’s just not not quite enough okay but in other words implied volatility isn’t high enough to give us to give us the premium that we would like to get okay um if we went up to 75 to 75 74 we can take a peek at this right there at 26 we played for the best of perhaps 26 would be okay but it’s 75 low enough below the support level right here which is a 77 well it may be let’s duplicate this and move this down and let’s see where that 75 would be and we’ll go ahead and wrap up with this folks because we have gone a little bit over time here haven’t we okay so there’s would be so that that that’s a fair margin of safety for for some investors not necessarily all right folks let’s go ahead and wrap things up here for today it’s been nice here filling in here today so what do we talk about well we did an overview of the overall market right there’s an overview of the market we selected a strategy we’re looking at

things along the lines of both flags potentially breakouts we identified a candidate and we did a paper trade on that candidate we looked at identifying candidates in different ways okay just a reminder you know i want to thank barb over there in the chatwood i’m sure she’s had a lot of questions if i if i was going along and then hit the wrong key or made a mistake here barbara barb’s great at covering those hopefully those have been addressed for you on that um begin i got a little note here that i’m going a little bit faster i you know in trying to cover information i do that do keep in mind that this this session will be archived okay so it will be archived it will be recorded so you’ll be able to pick it up and listen to it multiple times multiple times if you’d like to okay remind you follow me on twitter at krosc underscore pda as well as barb as well everybody just reminded then that to keep in mind that in order to demonstrate the functionality platform we need to use actually similar td ameritrade does not make recommendations or determine the suitability of any security or strategy for individual traders any investment decision you make in your self-directed account is solely your responsibility well thanks everybody again for joining us here for active trading strategies i hope you have a a great rest of your week best of success for investing just a reminder to be careful out there be careful keep keep things safe and let’s get on the other side of this whole culver thing that’s happy and healthy investors bye everybody thanks again we’ll catch you later you