Options In Play – Home On The Range
Ranges hold until they don’t, so we try to respect them on QQQ and SPY. With indices pulling back, it is important to make sure you are focusing on quality levels for longs.
Continue Reading -->Trading Tesla: 7 Lessons from an Epic Bear Smash
Every once in a while, a stock comes along that defines the times. In 2019-2020, that stock was electric carmaker Tesla (TSLA). Tesla’s stock price went from under $40 to nearly $200 in 8 months, and dominated the news headlines along the way. Tesla was getting more attention than just any stock out there, aside from maybe Apple (AAPL).Some traders made fortunes. Others had their hearts broken. Two big things were happening:Bears ignored powerfully bullish technical signals Bulls pushed things beyond what seemed reasonable.And by studying this one stretch of Tesla’s price action, you can learn a lot about momentum, risk management, permabears, and the power of a cult of personality.I’ve distilled Tesla’s big run into 7 important lessons, which you’ll start learning right now.Scott Redler’s Positions as of 11/9/2021 at 3:34 p.m. ET.1. Understand That Some Stocks Are Just Plain DifferentSome stocks have such a powerful story that investors will routinely ignore short-term bumps in the road.Amazon (AMZN) is a great example. It’s missed on earnings plenty of times and had its fair share of bad news, but people have believed in the long-term story so much that every dip gets bought. Very few companies command that type of respect, so Amazon is basically in its own category.The long-term chart says it all:Tesla is also just plain different from the crowd in that it routinely goes from “left for dead” to “can’t be stopped.”Call it… the Elon Musk factor. Not many CEOs can get away with smoking pot with Joe Rogan. And that’s not the only trouble Tesla’s survived: there was the infamous ‘funding secured’ tweet, which attracted the attention of the SEC:Am considering taking Tesla private at $420. Funding secured.— Elon Musk (@elonmusk) August 7, 2018 What sets Tesla apart is its unique power to be forgiven for its misdeeds.There are core believers that are ready to juice the stock up at any given moment.These folks are 100% convinced in Tesla’s ability to succeed in electric cars, solar power, energy storage, and whatever Elon Musk comes up with next.And there are shorts that believe the company is just one step away from failure.So Tesla is a cornered animal.You can’t turn your back on it.Because every time Tesla seems like it’s on the verge of disaster, or that the stock’s just gone too far too fast, Elon Musk pulls a rabbit out of the hat.And just when it seems like it’s blue skies ahead, it stumbles. Tesla is a truly unpredictable stock — especially for a large cap.You never know what’s coming next.2. Price Action RulesIf you follow me on Twitter, you know that I follow the 8 & 21 day moving averages very, very closely. They’re my short-term momentum monitor. When stocks are trending above the 8 & 21 day exponential moving averages, I don’t fight them. The #1 reason traders lose on shorts is because they look at a chart and say “that’s gone too far. It has to go down.” But stocks like Tesla go too far all the time. It’s in their very nature. If a stock goes from $20 to $40 in the blink of an eye, you can’t count out $50. And if it gets to $50, you can’t count out $60, etc.Now, before you turn the page, look at the chart below. It is naked aside from two moving averages. What do you see? I see a lot of opportunities. Let’s break it down step by step.A) The Earnings Gap Holds On October 24, 2019, Tesla had a big pro earnings gap that woke it up. That was the moment we knew it was coming alive. And then it didn’t fill a single penny of the gap. That’s a sign of strength you can’t ignore, and should have been a wakeup call for the shorts.B) Cybertruck ConsolidationIn mid-Nov. to mid-December, Tesla had a healthy consolidation, with the 8 & 21 day refusing to break. As we’ll discuss later in more detail, this was during the Cybertruck launch drama, which was a pivotal time for the stock.C) Major Breakout LevelYou saw before how quick the short-term move was, but it’s also helpful to view things on a longer time frame because when historic levels get broken, they attract a lot of traders’ attention.And in this case, we’re talking about the Major Breakout Level at $76, which was a prior high for the stock.Turns out, what came next was even more explosive than I could have imagined!D) Accelerating Above the 8 DayThis was one of the most powerful moves I’ve ever seen. It was straight out of 1999.From December 5, 2019 to February 11, 2020, Tesla did not test the 21 day a single time.There was a quick test of the 8 day on February 6, but it was quickly reclaimed.E) The Parabolic MoveDo we really need to explain this? Tesla went absolutely wild, hitting $193.80.So what am I saying? Price action rules. Period!This trend demanded respect! And speaking of respect…3. Respect Stocks That Refuse to DieLet’s talk about the Cybertruck, which Elon Musk unveiled on November 21, 2019:Here are some headlines from the event:But how did the chart react to the Cybertruck launch, which included Elon Musk accidentally breaking a window? Let’s move in for a closer look: Tesla gapped down after the Cybertruck announcement.And then, on November 26, Elon Musk tweeted that preorders hit 250,000, which basically nullified all of the criticism.By refusing to break the 8 & 21 day, Tesla was telling you it wasn’t going down without a fight.And then when the Cybertruck announcement gap was filled with the 8 & 21 day being reclaimed, that was a sign sentiment was turning very positive.The lesson: if a stock refuses to die, show it some respect. 4. Be Careful When Hot Stocks Extend From the 8 DayI did very well with Tesla from the long side, especially with the call options and call spreads I bought in November.But I also sold call options to give me short exposure 4 separate times when it got super-extended from the 8
Continue Reading -->Options In Play – The Impact Of Earnings
Earnings reports are typically huge catalysts for stocks. But for some, earnings are not the major driver of action and are not worth playing.
Continue Reading -->Options In Play – Day Trading News
Breaking intra-headlines can create nice opportunities for short-term options trades. I love to play headlines, and I follow a process for buying/selling.
Continue Reading -->Scott Redler’s Dog Bytes: Did Cannabis Stocks Bottom?
SPX hit a high of 4718 on Friday. It’s a bit extended and might need a few days to catch its breath. Listen up for whether Powell gets the nod because that can move the market a bit. I’d think the market would like Powell instead of Brainard. We’ll see if 4681 holds, or if they shake the tree down towards the 8 day.Now let’s dig into some of the individual names I’m watching. TSLA was great to us from $800 all the way to $1200+ with lots of setups for cash flow. I’m short some calls from Friday so I don’t mind this down open. Elon tweeted about the possibility of him selling 10% of his stock. This morning it was as low as $1130 and it’s off that. I’ll wait for some price discovery before I trade it. The 8 day is $1152. The cannabis sector has been battered and bruised all year. Most are selling for tax losses and PM’s trying to get them off the books and MSOS has been very broken. Maybe Friday’s news changes all of that. It did go 10% on Friday so take care chasing today. But I’d think $33.80 can happen. $30ish is Resistance #1. I started to position for the January effect, so this move can help my options. I grabbed some GRWG as US Cannabis names woke up Friday. I did trim some and I’ll hold some in case this starts a new active sequence.Positions Disclosure as of 11/8/2021 at 8:11 a.m. ET
Continue Reading -->Options In Play – Earnings On The Radar Week Of 11/12/21
We are through the heart of earnings season but there are still big names left on the calendar. Expect another busy week for Tech, with a few recent momentum stocks due to report.
Continue Reading -->Pullback on the Horizon
Friday ended with a reversal bar in the market, and Sami’s expecting a pullback this week. How has this affected his open positions? And which moves does he anticipate are on the horizon? In this video, Sami explains: – How to find a reversal bar after a runup – His general rule for placing a stop – What would make him like CMRX as a long-term play – The two possible stop prices for DNN – How he’d trade a stock like MARA
Continue Reading -->Exclusive: Tesla Sentiment Collapses After Elon Musk Tweets
What’s the #1 insight from this week’s T3 Sentiment Survey?Traders are turning against Tesla (TSLA). Normally, we begin this weekly report with the SPX, but this Tesla data is so shocking we have to start with that. Tesla Sentiment COLLAPSES! Bullish sentiment on Tesla (TSLA) dropped BIG. Just 35% of surveyed traders believe Tesla will rise in the next 30 days:That’s down from 63% last week. Why is this happening? Over the weekend, Tesla CEO Elon Musk floated the idea of selling 20% of his stock.Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.Do you support this?— Lorde Edge (@elonmusk) November 6, 2021 Plus, Tesla stock ripped from $851 to $1250 after earnings and traders likely started thinking “this is too much, too fast.” Look at this chart:Combine that with the Musk Tweets, and traders really turned on the stock. As we’re writing this early Monday morning, Tesla is down about $50. But stay tuned… this latest twist in the Elon Musk saga is only starting… Trader Grow More Wary of Stocks Bullish sentiment on stocks backed off a bit from last week as traders content with a tricky earnings season and ongoing concerns over the supply chain crunch, inflation, and high energy prices. Bitcoin Bulls Are BACK! Bitcoin bullishness has been rising since the October 21 Flash Crash on Binance.us. And we’re not surprised at this latest surge – Bitcoin is up over $5,000 from Saturday’s low. Traders Still Like Apple Traders still like Apple (AAPL), even though the company’s earnings report was less than stellar. However, Apple seems to have more of a supply demand than a demand problem, so the company’s prospects appear strong. Gold Still Gets No love Now this is kind of hilarious: Ttraders like gold more than Tesla… at least according to this week’s survey. Still, gold remains out of favor overall, and that’s no big surprise. Here are the major metals ETFs performance year-to-date:GLD: -4.8%GDX: +3.2%SLV: -9.0%Meanwhile, the SPY is up 25.3% and QQQ is up 27.0%. Oil Bulls Back Off Oil prices slipped over the past weeks, and so the oil bulls are backing off a bit. However, Saudi Aramco raised the official selling price of its crude oil, so we’ll see if prices surge again.Make Your Voice HeardWant to make your voice heard in our weekly surveys? Click here to join our panel. We’ll also email you survey results early on Monday mornings. Within the next few weeks, we’ll introduce a historical database so you can do your own analysis! Thanks for reading!
Continue Reading -->Options In Play – Patiently Playing IWM
The IWM has not had a very eventful 2021, but that doesn’t mean there haven’t been good trade opportunities. The recent breakout is getting more attention, but the setup was also good for a volatility strategy.
Continue Reading -->Options In Play – Extended Patterns
A stock running higher can be great for your option position. But when is a big run too much, and when do you know when to be more aggressive booking gains?
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