Ideas and the market - 26 Feb

We are in a time of high volatility yet there are opportunities in the market. Over the past few days our MA tool, Options signal and Squeeze Tool have generated strong signals to keep you on the right side of the trade. We can see when our baseline trend colour shifted we received a confluence of signals from several tools that pointed to direction and savvy traders looked to trade the on the long side successfully. The question of developing consistent trading results should not come down to a single strategy. Our tools backtest every set up to determine the probability and amplitude of moves and the trader, will then make the decision on expiration date, strike and potential duration of hold for the trade. For now the short term trend and momentum is to the upside on the SPY.

In the medium term (a few days...) we could see a push towards 450. A break below 432.45 on the 15 min chart will change the intraday trend to red and trigger an exit of calls and accumulation of puts. For now, the momentum appears to be on the long side. With the Fed Chairman talking this week and with the continued geopolitical tension in Europe we could see some short term catalysts to the upside if things become "less bad".

Our favourite stocks and sectors:

ERX - longer term energy play. Our subscribers are long ERX in a risk free stock position and we have been in this since Dec 2021 when the inflation story came to life. HOLD.
CVX - in our opinion the best energy company out there. Accumulate on dips.
XLE - Accumulate on dips.

**Look to sell income trades against the married puts (ie: long collars) to further reduce the carry cost of the trade

Speculative - BULLISH (tactical approach could be to look at call debit spreads, put credit spreads or long calls or married puts)
DFEN
CF
KO
M
NUAN
GD

Speculative - BEARISH (tactical approach to look at long puts, married calls, call credit spreads or bear put spreads)
XLC - set up forming
MU - short below 87
TWTR - potentially could go either way. need to see how it handles the 21 SMA.


Day trading approach

The short times of the 1,3 and 5 min charts are very choppy and often in highly volatile times you will get conflicting signals from various indicators that can chop up positions. I personally have found the the 15 min chart to be more reliable when combined with the Squeeze tool Stochastic and the Options 2.1 signal and then using the Vix momentum as a confirmation. Daily VWAP has also been critical as confirmed breaks both above and below the level have been reliable triggers for trades. Selecting strikes and expirations for trades has been a challenge for most day traders. The general rule of thumb is Monday - Wednesday trading the same week expiration option either the 60-50 delta call or put or the 30 delta call or put depending on the confluence of the signals (the stronger or more confluent the signal the lower the delta you can buy as the option will reprice quicker through vega expansion). For Thursday and Friday I prefer to trade the next week expiration option. No positions held overnight.

The most critical element to day trading in my opinion is the use of the Volatility bands which are included in the MA planning tool. A break of the colour from green to grey is a critical indicator for a shift in trend which prohibits the trading of a bullish signal while in a grey band and vice versa.

For traders - you must stay disciplined and not get sucked into the spin cycle of the market. Always trade a plan and focus on following the indicators and signals. Its difficult in volatile times to remains unemotional in your strategy. Remember - your goal as a trader is to be profitable, not right.

Safe trading to all
The Coach