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Active Swing Trade Management: A $1500+ Profit in CBI
In this special video, Nightly Game Plan Moderator Sami Abusaad walks you through a winning trade in Chicago Bridge & Iron (CBI). Like many infrastructure stocks, CBI was flying high after the President election, but it’s since come back down to Earth. But on August 22, Sami spotted an opportunity for a swing long with one of his favorte strategies: the Exhaustion Gap Fade As of the close on Thursday, August 24, the trade had returned $1,550 for Sami. (click here for a breakdown of our P&L calculations) In the video below, Sami’s going to walk you through the trade from start to finish so you can understand: Why Sami starts with the daily chart, and then drops down to the hourly How Sami identified the entry at $10.15, and how he managed his stops to minimize risk Risk-reward calculations What to do when a stock hits a target Trailing a stop for ongoing risk management How this trade fit into the 4 stages of stock movement Click here to learn about Sami’s Nightly Game Plan
Continue Reading -->How Sami Abusaad Spotted a Major Bottom in ENDP
In this special video, Sami Abusaad, Director of our Nightly Game Plan program walks you through a trade in fast-moving biotech stock Endo International (ENDP). ENDP dropped about 50% in 3 weeks, providing Sami with an opportunity to go long with his proprietary Climactic Buy Setup. This swing trade returned a profit of over $1,570 in under 3 days, giving you an important lesson: when everyone’s trying to get out, it may be time to get in. (click here for an explanation of how we calculate profits and losses) But that’s easier said than done. So Sami’s going to walk you through the trade step by step so you can understand exactly how he spotted a near-term bottom in this stock. Watch the video below and you’ll learn: How Sami used volume to spot capitulation Parameters for risk-reward and trade management Fear, greed, and how they helped Sami trigger the trade Why Sami went long at $7.93 How his targets of $8.75 and $9.50 were selected Here’s the video: Click here to learn more about Sami’s Nightly Game Plan.
Continue Reading -->Did Mr. Market Just Throw Another Sentiment Boomerang?
Last Friday, sentiment got pretty awful in the wake of North Korea’s threats of an attack on Guam. And then early this week, it went full-on psycho bullish after North Korea blinked and backed off. That was good for me since I’m speculating on a big decline in the VIX… and then it wasn’t so good. With traders fearing that President Trump will have trouble instituting pro-growth policies like tax and regulatory reforms, the VIX spiked as high as 15.77 on Wednesday, up 40% from Tuesday’s 11.25 low. So my nicely profitable trade is now a loser! Let’s take a fresh look at our 4 sentiment measures to see which way the crowd is leaning heading into the weekend. (click here for a primer on the sentiment indicators below) 1) VIX Spread – Bearish The VIX is at 14.82 this morning, well above the July 26 all-time low at 8.84, and also above trend for this year. The 3-month spread is at +0.2, which means the VIX curve is flat. Traders are pricing in quite a bit of short-term volatility, so once again, this reading is bearish. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bearish The Fear & Greed Index is at 19. The F&G Index operates on a 1-100 scale, and a reading of 19 qualifies as extremely fearful. 3) AAII Sentiment – Neutral The latest AAII Sentiment Survey shows that 34.2% of individual investors are bullish. This 34.2% reading isn’t terribly far off the 38.5% long-term average, and indicates that individual investors are basically neutral. I thought this would be lower, but the number is what it is. 4) CBOE Equity Put-Call – Bearish The CBOE Equity-Put Call ratio was at 0.78 Thursday, which is well above the long-term average of 0.66. The 3-day moving average is 0.69, which is slight above the long-term average. The 10-day moving average is 0.74, which is fairly high. These numbers indicate that traders are very bearish. Conclusion Out of 4 sentiment indicators, we have: 0 bullish 1 neutral 3 bearish The data indicate that sentiment boomeranged in a big way. Traders were pricing in the end of the world last Friday. Then they got happy on Monday and early Tuesday. And now they’re depressed again. You could say volatility is becoming more volatile. And I think this is a great thing because the market’s actually giving some real back and forth action. That means more opportunities for active traders, and action that’s actually interesting to watch. I don’t know about you, but I found June through late July to be agonizing to watch. Maybe the sudden spike in volatiilty means there’s trouble down the road… but at least we’ll be awake for it. Now I’m still speculating on a decline in the VIX. To be more specific, I am: -Long VXX puts -Short VXX call spreads Will the trade go profitable again? The ideal situation is a repeat of last Friday to Monday, when sentiment boomeranged from extreme fear to extreme greed in the blink of an eye. I guess I’m about to find out if that’s just wishful thinking…
Continue Reading -->Sami Abusaad’s Trade of the Week: BUFF
In this special video, T3 Live Black Room Moderator Sami Abusaad walks you through a trade in fast-moving momentum name Blue Buffalo Pet Products (BUFF). On August 9, BUFF exploded higher on earnings, which opened the door for Sami to step in and take a day trade using a proprietary 60-minute Buy Setup. This trade returned $2,288 in profit in 90 minutes, or about half of his total trading profit for the day — pretty nice! In the video below, Sami’s going to walk you through the trade from start to finish so you can understand: Why a pro gap opened the door for the trade How Sami identified where buying interest could come in The entry off the 15-minute chart The power of simple bar-by-bar trade management The moving averages Sami used to place his 2 targets Here’s the video: Click here to learn about the Black Room
Continue Reading -->Is the Big VIX Move Over?
Fear is here, courtesy of North Korea. Just a couple weeks after the VIX hit an all-time low, volatility is exploding as traders start to price in a potential conflict with North Korea. This morning, the plot thickened after China said it won’t help North Korea if it launches missles at the US. However, it would not stand for the US attacking first. Way back in July, I used options to make a leveraged bet on the VIX, and the huge spike in the VIX put the trade in the green. I took off part of the position yesterday just before the equity market close, and will likely close out the rest this morning. At the end of this piece, I’ll outline why I may soon speculate on a VIX collapse. That makes now a great time to go through our 4 sentiment indicators to see if the crowd also sees sunshine ahead for equities. (click here for a primer on the 4 sentiment indicators below) 1) VIX Spread – Bearish The VIX is at 16.57, which means it’s nearly doubled the July 26 all-time low at 8.84. The 3-month spread is at -1.05, which means the curve is inverted and short-term fear is very, very high. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bearish The Fear & Greed Index is at 31. The F&G Index operates on a 1-100 scale, and a reading of 31 qualifies as Fearful. 3) AAII Sentiment – Neutral The latest AAII Sentiment Survey shows that 33.7% of individual investors are bullish. This 33.7% reading isn’t terribly far off the 38.5% long-term average, and indicates that individual investors are basically neutral. 4) CBOE Equity Put-Call – Bearish The CBOE Equity-Put Call ratio was at 0.88 Thursday, which is well above the long-term average of 0.66. The 3-day moving average is 0.79, which is also well above the long-term average. These numbers indicate that traders are very bearish. Conclusion But of 4 sentiment indicators, we have: 0 bullish (down from 2 last week) 1 neutral (flat) 3 bearish (up from 1 last week In July, the crowd was absolutely nutty. But as we’ve seen many times this year, at the first sign of trouble, fear is getting priced in awfully quickly. The action is quite reminiscent of the April 13 volatility spike when the US dropped a 22,000 bomb on ISIS forces in Afghanistan. North Korea and Syria were also in the news. On that day, the CBOE equity put-call jumped to a whopping 0.96 with a 3-day moving average at 0.81. And as of yesterday, the CBOE equity put-call jumped to 0.88 with a 3-day moving average of 0.77.That dip was very short liveed, and the SPX soon spiked 60 points. This chart shows the SPX vs. the VIX (VIX is the purple line, with the April volatility spike highlighted: So I’m looking to close out the rest of my VIX position, and actually speculate on a VIX decline, likely through VXX put options. (UPDATE at 9:45 a.m. ET: I am now short VXX call spreads, and long VXX puts) To make a very long story short, the term structure of VIX futures puts a downward force on VXX over the long run. Shorting volatility has been the best trade of 2017. But the recent volatility spike likely had traders being forced to do 3 things: 1) Close outright short volatility bets on VIX/VXX puts cover shorts 2) Buy SPX/SPY/QQQ puts and VIX/VXX calls to hedge their short volatility exposure And now we’re looking at an inverted VIX curve and traders likely overpaying for VIX options. Meanwhile, China’s posture indicates that they want no part of a North Korea offensive. Saying they won’t tolerate a US aggression allows them to save face, and seems like a happy medium. If the fear gets ratcheted down, I suspect the VIX will be back in the 10-12 range in fairly short order. I’ll provide an update if I actually make a trade.
Continue Reading -->T3’s Take 3: Nuclear Summer
1) Fear Returns Traders were on edge again today on fears of a conflict with North Korea. Japan and South Korea warned that they would not tolerate aggressions from North Korea, including a missile launch at Guam. News reports indicate that Japan moved a PAC-3 Patriot missile system to Tokyo to shoot down North Korean missiles. Sentiment has been rapidly declining. The CBOE equity put-call ratio hit 0.83 yesterday, which is the highest reading since April 13, 2017. And what happened on April 13, 2017? The US military dropped that giant 22,000 bomb on ISIS forces on Afghanistan, which coincided with escalating tensions with North Korea. And a week prior, the US attacked Syria. As of yesterday’s close, the 3-day moving average for the equity put-call is now 0.76, which indicates negative short-term sentiment. And tomorrow morning, it should be much, much higher, since traders often buy lots of put options when the market drops quickly. Stocks immediately sold off at the open, and volatility expectations went into overdrive. the VIX rose as high as 16.17. putting it 82% above the July 26 record low at 8.84. That put my long VIX options trade nicely in the green. I used the pop to exit a big part of my position. I’ll look to get out of the rest tomorrow, and depending upon what I see tomorrow, I may end up getting short the VIX heading into the weekend. 2) Ugly Action The market did nothing in June, but judging by today’s big move in the VIX, August may be another story altogether. The SPX fell as low as 2444.91 this morning before bouncing, and then driving lower into the close to at 2438.21, down -1.5%. We saw relative weakness in key areas of the market like large-cap technology, biotechnology, and small caps. Traders watch these groups to judge the market composure. High-yield, regional banks, and materials ETF’s also took big hits. This implies that traders are fearful of the overnight news flow. Meanwhile, “risk off” instruments like US Treasuries, silver, gold, and utilities stocks performed well, with the Vaneck Vectors Gold Miners ETF (GDX) rising 1.6%. In early June, my colleague Jeff Cooper delivered compelling analysis on gold, saying the folowing: The breakout above $1280 is confirmed by trade over $1295, which issues significantly higher projections which we will detail before the weekend. At the same time, a close in gold above $1285 and especially $1295 on the important Friday weekly closing basis validates the idea of a new leg higher. Gold is now flirting with $1295, so keep an eye on it. If Jeff is correct, we could see a major rally. 3) Scott Redler’s Take: 75% Chance of Stormy Weather This afternoon, Scott Redler appeared on CNBC’s Futures Now Show to discuss the market’s recent breakdown. He estimated that there was a 75% chance that we’d see more trouble ahead. In terms of specific market levels to watch, Scott said it was important to see how the SPX and QQQ handled their respective 50 day moving averages at 2455 and $141.35. Both levels were lost today, so it’s clear that the bears have scored their first real victory in quite some time. Click here to watch Scott’s segment
Continue Reading -->The Bull Market Can Continue Forever. Really?
It’s foolish to read too much into any one anecdote, especially when it comes to soundbites and one-liners. But this statement from Leuthold Chief Investment Strategist Jim Paulsen on CNBC really caught my eye: “We’ve got a fully employed economy, rising real wages. We restarted the corporate earnings cycle. We’ve got strong confidence among business and consumers,” he said on “Squawk Box.” “The kick is we can do all of this without aggravating inflation and interest rates,” he said. “If that’s going to continue, I think the bull market could continue to forever.” To be fair, Mr. Paulsen tempered his statement with by saying “if that’s going to continue.” Nonetheless, it seems a little overboard to even imply a bull market can go on forever. That makes now a great time to go through our 5 sentiment indicators to see if the crowd also sees sunshine ahead for equities. (click here for a primer on the 5 sentiment indicators below) 1) VIX Spread – Bullish The VIX is at 9.82, which puts it within range of generational lows. That puts the 3-month spread at 3.97, which means that traders are fairly bullish. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bullish The Fear & Greed Index is at 63. The F&G Index operates on a 1-100 scale, and a reading of 63 qualifies as mildly greedy. 3) AAII Sentiment – Neutral The latest AAII Sentiment Survey shows that 36.1% of individual investors are bullish. This 36.1% reading is roughly in-line with the 38.5% long-term average, and indicates that individual investors are basically neutral, even though the major indices are still near all-time highs. 4) CBOE Equity Put-Call – Bearish The CBOE Equity-Put Call ratio was at 0.71 Friday, which is above the long-term average. The 3-day moving average is 0.70, which is above the long-term average. These numbers indicate that traders are moderately bearish. 5) ISE Sentiment – SUSPENDED! For months, I’ve been pondering kicking out this sentiment indicator since it has seemingly lost predictive value. However, ISE has announced it has suspended the index, so now I’m being forced to eliminate it. I’ll likely replace it with the CBOE Skew index (SKEW), which uses options prices to determine whether traders are pricing in extreme risks. Conclusion Out of 4 sentiment indicators, we have: 2 bullish 1 neutral 1 bearish So it looks the crowd is in a more neutral state of mind after getting nutty a couple weeks ago. They definitely don’t believe in a “this bull market can last forever” scenario. That’s been pretty common this year. We’ve seen a few stretches with hyper-bullish sentiment, but they’ve never lasted. That’s been very frustrating for the bears, because these rapid pullbacks in sentiment seem to prevent the market from topping out. At the late 2007 market top, sentiment was incredibly bullish, but we’re seeing nothing of the like in 2017. So I’ll ask a question: can the market top without the bulls buying in emotionally? I really don’t know the answer.
Continue Reading -->How Sami Abusaad Made $1,800 In Less Than an Hour with ZYNE
In this special video, T3 Live Black Room Moderator Sami Abusaad takes you through a trade in red-hot biotechnology name Zynerba Pharmaceuticals (ZYNE). This trade, which used the proprietary Climactic Daily Buy Setup, returned $1,800 in less than 50 minutes. You’ll learn about: The daily chart pattern that gave Sami the setup for this killer day trade How Sami entered the trade Sami’s management method for momentum plays A key signal that tells you when there’s panic in the air The ‘beautiful reversal signal’ that told Sami to take profits Where Sami placed his stop, and why Click here to learn about the Black Room
Continue Reading -->Are the Bulls Still Crazy?
On July 21, I went long VIX calls based on what I saw as: A) Bullish sentiment gone truly out of control B) My expectation that volatility was due for a reversion to the mean. And subsequently, the VIX hit a record low of 8.84, leaving me feeling like a dope. It’s since pushed back above 10, so let’s take a fresh look at sentiment to see just how confident the crowd is. (click here for a primer on the 5 sentiment indicators below) 1) VIX Spread – Bullish The VIX is sitting around 10.50 this morning. That puts the 3-month spread at 3.29, which means that traders are moderately bullish. However, this is a major downshift from the recent readings around 5. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bullish The Fear & Greed Index is at 72. The F&G Index operates on a 1-100 scale, and a reading of 72 qualifies as moderately greedy. This indicator has been subdued for most of 2017, but it has been more bullish than usual lately. 3) AAII Sentiment – Neutral The latest AAII Sentiment Survey shows that 34.5% of individual investors are bullish. This 34.5% reading is roughly in-line with the 38.5% long-term average, and indicates that individual investors are basically neutral, even though the major indices are still near all-time highs. 4) CBOE Equity Put-Call – Bearish The CBOE Equity-Put Call ratio was at 0.63 Friday, which is in-line with the long-term average. The 3-day moving average is 0.66, which is actually above the long-term average. These numbers indicate that traders are moderately bearish. 5) ISE Sentiment – Neutral The ISE Sentiment Index is at 76 (meaning 76 calls bought for every 100 puts. The 10-day moving average is 93.4 (93 calls for every 100 puts) A 10-day moving average of 93.4 does indicate more demand for puts than calls, but relative to recent history, it’s actually a bit high. So I’ll call it neutral. Conclusion Out of 5 sentiment indicators, we have: 2 bullish (down from 4 last week) 2 neutral (up from 1) 1 bearish (up from 0) So it looks the crowd is getting back to a more neutral state of mind after getting a little nutty last week. That’s been pretty common this year. We’ve been getting occasional stretches of hyper-bullish sentiment, but they tend to die pretty quickly.
Continue Reading -->Why I Am Betting on a Big Spike in the VIX
Traders are too bullish. Seriously. I typically start this report by saying that “permabears always say everyone’s bullish.” They’re wrong 99% of the time. Today is that 1% of the time when they’re right. Let’s go through our 5 sentiment indicators so you can see the numbers behind my reasoning. (click here for a primer on the 5 sentiment indicators below) 1) VIX Spread – Bullish The VIX hit 9.39 early Friday, putting it awfully close to the 9.37 generational low set back on June 9. That puts the 3-month spread up to 4.57, which means traders have very little fear of volatility. This is up from last week’s 4.0 reading, and qualifies as extremely bullish. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bullish The Fear & Greed Index is at 76, up from 51 last week. The F&G Index operates on a 1-100 scale, and a reading of 76 qualifies as fairly greedy. This indicator has been subdued as of late, so I was a bit surprised to see it this high. 3) AAII Sentiment – Bullish The latest AAII Sentiment Survey shows that 35.5% of individual investors are bullish, up substantially from 28.2% last week. This 35.5% reading is basically inline with the 38.5% long-term average, and indicates that individual investors are basically neutral. This has been the case all year, even though the major indices have been hitting new all-time highs fairly regularly. 4) CBOE Equity Put-Call – Bullish The CBOE Equity-Put Call ratio was at 0.53 yesterday, which is a very bullish reading The 3-day moving average is 0.57, which is well below the long-term average. These numbers indicate that traders are very, very bullish. 5) ISE Sentiment – Bullish The ISE Sentiment Index is at 138 (meaning 138 calls bought for every 100 puts. The 10 day moving average is 105 (105 calls for every 100 puts) Now that 10-day moving average of 105 is technically neutral, I’ll count it as bullish because it’s been subdued for so long. The year-to-date average is just 87, so a 10-day moving average of 105 is a big change in trend. Conclusion Out of 5 sentiment indicators, we have: 4 bullish (up from 1 last week) 1 neutral (down from 3 0 bearish (down from 1) I troll the bears constantly for spreading the outright lie that everyone’s too bullish. But again, today, the bears are 100% correct. It’s not 1999 all over again, but still — traders are extraordinarily bullish, which can sometimes (but not always) mark a top. Remember, using sentiment indicators to time the market is often a fool’s game. But it’s not often that we see so many sentiment indicators pointing in the exact same direction. There is almost no fear and no volatility out there… which means we could be about to see a spike in fear and volatility. Now, let’s be clear: I am talking my book, and I freely admit that my positioning could impact my viewpoint. Earlier this week, I went long VIX call and I own VIX bull put spreads. I am speculating on a market decline that would spike the VIX, preferably over 17 within the next few weeks. And I may even add some SPY or QQQ puts. As we all know, the theme this year has been: Equities steadily grinding higher Volatility near zero Sentiment leaning mostly neutral I think things are about to change.
Continue Reading -->