Level Two Scalping Method | Black Room Lessons
In today’s lesson Sami Abusaad reviews an old-school trading style known as “level two” trading. This method was the primary trading strategy for most prior to stocks changing to decimals.Does this “scalping” method still work? Sami says YES, and he shows you how to use it.
Continue Reading -->Trader’s Digest: The 10 Stories We’re Reading Right Now
Wonder what traders are talking about today?We’re here with the top 10 stories we’re sharing with colleagues today, covering topics like:Trading the VXX Explosion with Options in PlayIs Somebody Rigging the VIX?Today’s Hot Inflation Report, and What It Could Mean for the FedAnd more!So check out these links right now and get up to speed: 1) Trading the VXX Explosion with Options in Play (T3 Live)In this options trading video lesson, Daniel Darrow explains why the VXX explosion should not be a surprise. Watch the Video -> 2) What If Somebody Really Is Gaming the VIX? (Bloomberg)The claim sounds dubious: the VIX, that index at the center of the stock market’s wild gyrations over the past week, is somehow being manipulated. Read the Article -> 3) U.S. inflation firms broadly in January, puts spotlight on Fed (Reuters)U.S. consumer prices rose more than expected in January, with a measure of underlying inflation posting its biggest gain in a year, strengthening expectations the Federal Reserve will have to quicken the pace of interest rate increases this year. Read the Article -> 4) Boeing and these other Dow stocks outperform when inflation is running hotter (CNBC)Boeing and Apple are among the top performing components of the Dow Jones Industrial Average one week after inflation readings come in greater than expected, history shows. Read the Article -> 5) Jeff Cooper’s SPX Momentum Targets (T3 Live)Jeff gives us profit targets on recent SPX momentum trades on the long side. Read the Article -> 6) Coincheck Exchange Sees $373 Million Withdrawn in One Day (Coindesk)Japan’s Coincheck exchange reinstated Japanese yen withdrawals yesterday and investors are already flocking to take out their funds following the firm’s recent hack. Read the Article -> 7) How I Called the Friday Market Bottom (T3 Live)Learn why this top trader called the bottom last Friday, and how to know if it will stick. Read the Article -> 8) If you’re under 40 you should be hoping for another stock plunge, says pundit Josh Brown (LA Times) It’s normal in that pretty much 5% and 10% corrections are an annual event if you look back through history. What’s abnormal was the speed with which this one happened. Read the Article -> 9) Google’s Chrome ad blocking arrives tomorrow and this is how it works (The Verge)Google is enabling its built-in ad blocker for Chrome tomorrow (February 15th). Chrome’s ad filtering is designed to weed out some of the web’s most annoying ads, and push website owners to stop using them. Read the Article -> 10) How Elon Musk Improves His Odds of SuccessLearn why Elon Musk doesn’t believe in wishful thinking.
Continue Reading -->Sentiment Report: The Fear Factor
It took a while, but the bulls were finally brought down to earth after 13 months of straight-up action. And sentiment was remarkably positive from December 2017 until last Friday when volatility exploded, leading to the VIX spiking over 50 on Tuesday morning. It’s common for the market to top out when sentiment gets to extreme levels. But it actually took 2 whole months for that to happen during this once-in-a-life-time stretch of happiness! Now, let’s take a look at how the mood has changed using our handy dandy sentiment indicators. (click here for a primer on the sentiment indicators below) 1) VIX Spread – Bearish As of Friday morning, the VIX was hovering right around 30. It was actually under 10 in early January, so this is a major change. And the 50.30 spike high matched the 53.29 high set in the August 2015 mini-crash. The 3-month VIX spread is completely blown out at around -10. This means traders are very bearish and expect a lot of volatility. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bearish The Fear & Greed Index is at 8, down from 59 last week. This index operates on a 0-100 scale, and a reading of 8 means traders are very fearful (or bearish). This is a shocking change. Fear & Greed was at 76 just a month ago. 3) AAII Sentiment – Neutral The American Association of Individual Investors’ Sentiment Survey shows that 37% of those surveyed are bullish. This is down from 44.7 last week. The long-term average is 38.4%, so this is basically neutral. Interestingly, this indicator was mostly neutral in 2017, and only turned bullish in January 2018 — implying that individual investors were a bit late to the party. 4) CBOE Equity Put-Call – Bearish The long-term average of the CBOE equity put-call ratio is 0.654. And from December 7, 2016 to February 1, there wasn’t a single day above that long-term average, which means there was an above-average level of call buying. The trend changed on Friday, February 2. Since then, the CBOE equity put-call has averaged 0.736, which means a sudden increase in demand for put options. A single-day reading around 1 would indicate extreme fear, and we’re not even close to that yet. In the past 5 days of volatility, the highest reading was 0.77. So options traders are bearish, but only moderately so. Conclusion Out of 4 sentiment indicators, we have: 0 bullish (down from 4 last week) 1 neutral (up from 0 last week) 3 bearish (up from 0 last week) On October 6, I made the following melodramatic declaration: Let’s not mince words: the bulls are clearly insane. They think they’re destined to ride into the sunset on a magic carpet made of cold hard cash. I can see both sides of the coin here. The bulls may be insane… but they may also be right. Timing market turns based on sentiment indicators is awfully tricky. And remember, the trend can go on a lot longer than may seem reasonable. I threw in that sentence “Timing market turns based on sentiment indicators is awfully tricky” for a very good reason. These indicators are for color. They are only one part of the investment process, not signals on their own. Turns out that sentiment indicators were not very helpful in calling the 2018 top, because they’ve been very bullish since early December. So unfortunately, they may not be helpful in calling the bottom either!
Continue Reading -->Bitcoin’s Fall From Grace, and Where It’s Going Now
In this video, Kurt Capra takes a look at bitcoin and its fall from grace plus where he thinks it is headed. You will learn: Where the power of the 200ma comes from If bitcoin can get back to $10,000 How to see support and resistance using price points If a test of $6,000 is in the cards https://www.facebook.com/T3Live/videos/10155834921686758/
Continue Reading -->Volatility Is Picking Up but Nobody Cares
Sentiment has been remarkably bullish since December 2017. It’s common for the market to top out when sentiment gets to extreme levels, but as we’ve learned in this once-in-a-life-time stretch of happiness, there’s no guarantee. And indeed, even though volatility reared its head this week, the bulls stayed pretty dang happy. So let’s dig into our sentiment indicators to see if traders are still feeling happy. (click here for a primer on the sentiment indicators below) 1) VIX Spread – Bullish Three weeks ago, the VIX made several intraday lows around 9, indicating that traders expect almost no volatility. The VIX hit a 6-month high of 15.42 this week, but it came down to around 13. Now, on the surface, that may imply that traders are slightly more cautious. However, the curve of the VIX futures term structure is very, very flat. This again means that traders expect near-zero volatility for the next few months. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bullish The Fear & Greed Index is at 59, down from 72 last week. This index operates on a 0-100 scale, and a reading of 59 means traders are moderately greedy (or bullish). So no real change here. 3) AAII Sentiment – Bullish The AAII Sentiment Survey shows that 44.8% of survey respondents are bullish, which is well above the long-term average of 38.3%. It’s slightly down from last week’s 45.5% level, but still bullish overall. We did see an uptick in investors calling themselves bearish, but it’s nothing dramatic. 4) CBOE Equity Put-Call – Bullish The CBOE Equity-Put Call ratio’s latest reading is 0.59. This is slightly below the 0.654 long-term average. The 10-day moving average is 0.558, which is extremely low on a historical basis. So it’s the same old story: traders are buying up call options like they’re hotcakes, and they’re not buying many puts. Of course, that’s worked out beautifully for bulls because the market hit a string of new all-time highs in January! Conclusion Out of 4 sentiment indicators, we have: 4 bullish (flat from last week) 0 neutral 0 bearish On October 6, I made the following melodramatic declaration: Let’s not mince words: the bulls are clearly insane. They think they’re destined to ride into the sunset on a magic carpet made of cold hard cash. I can see both sides of the coin here. The bulls may be insane… but they may also be right. Timing market turns based on sentiment indicators is awfully tricky. And remember, the trend can go on a lot longer than may seem reasonable. And I’ll repeat what I’ve been saying for the last 3 weeks: Well, the trend has gone on a lot longer than seemed reasonable! Now, no one knows how this is going to end, or when. It’s very fashionable to point out that eventually, the market’s going to blow up in the bulls’ faces… but people have been saying that for years. So let’s take things one step at a time. The bears will eventually have their day in the sun, but we just don’t know when. One thing’s for sure though: volatility is starting to pick up, so stay on guard. The bears have been fooled time and time again, but sooner or later, they are going to bite.
Continue Reading -->Shake-Out Or Correction?
They say the trend is your friend, but is the trend bending? How can one determine the trend? First you have to define trend. Trend is different for every trader. It depends on the time frame they are trading. Then you must know that there are trends running concurrently like a double helix. There are many methods and strategies that market participants use to determine when a pullback is a buying opportunity or a pullback is something more than a pullback. The 3 Day Chart and the 3 Week Chart are two of the best tools I know of to determine the near term trend and the intermediate trend. The 3 Day Chart turns down anytime there are 3 consecutive lower daily lows OR a prior circled 3 Day low is violated (a prior swing low which marked a trough). The 3 Day Chart turns up with 3 consecutive higher highs or on trade above a prior circled 3 Day Chart high. The 3 Week Chart turns down anytime an item shows 3 consecutive lower weekly lows—or on trade below a prior circled 3 week circled high. The 3 Week Chart turns up anytime an item shows 3 consecutive higher weekly highs —or a prior 3 week circled high is cleared. Let’s take a look at an SPX daily from the last major swing low on August 21st. The last time the 3 Week Chart turned down was on the week of August 21. The index set a low at 2417 on an undercut of its 50 day line. The last time the 3 Day Chart turned down was on November 15th. Notice that there was roughly 90 days/degrees between the August low and the November low. The natural 90/180/270 and 360 day/degree divisions of the year are integral to Gann analysis. The November 15th turndown of the 3 Day Chart also was a test of the 50 day moving average. Today the SPX is poised for a possible turndown of its 3 Day Chart if it trades below yesterday’s low. This will trace out 3 consecutive lower daily lows. Importantly, this is occurring as the index satisfies a 90 degree price pullback. From last Friday’s record 2872 high, 90 degrees down is 2818. Notice that despite the selling pressure of the last two days the SPX has held 2818 on a closing basis. It slipped under 2818 yesterday to a low of 2813 but recovered to close at 2823. Importantly, January 31, yesterday, is 90 degrees square the number 2813 on my Square of 9 Wheel. So we have so to speak, a double square-out on the table: The SPX has satisfied a 90 degree price pullback. Yesterday was a possible time/price square-out with 2813 being 90 degrees square of January 31st. It’s still a bull market so these square-outs must be respected. That said the 3 Day Chart has not turned down yet. It could do so today. Trade below Wednesday’s low that that sets a low and turns up either today or Friday suggests a low of some degree. However there are a few caveats that suggests this time is different that November. First of all the index is dealing with a Break Away gap directly off an all time high. It looks like a Gallows Hangman pattern. This suggests last Friday’s rip was a Buying Climax…at least in the short run. Additionally, the SPX is stretched well above its 50 day moving average—a conspicuous difference between the August and November lows. The presumption is that if the SPX turns down its 3 Day Chart and it does not define a low, it’s going lower. The indication is that if 2818 and 2813 fail to act as support, the SPX is headed lower. The conclusion would be that we have a change in character and that rather than a shakeout, a more meaningful correction is playing out. So let’s do the geometry. A 180 degree decline from high is 2766. 360 degrees down is 2662. This would be one full cycle in price down from the 2872 record high. There is some good symmetry to the idea of a decline to around 2662. It represents a 50% retrace of the last leg up (from the August low). It marks a little burst of volatility in early December which was the mid-point of the rally. 2662 also ties to a test/undercut of the 50 day line. Additionally, a decline that flushes the 50 day satisfies a test of a trendline connecting the August low and the November low. The January low is 2682.36. Trade by one tick below that level in February would also satisfy a turn down in the Monthly Swing Chart. If that occurs, bull or bear, the strong likelihood would be for a continuation of the bull or a reaction higher even if a bear market is on the table. The last time the Monthly Swing Chart turned down was in November 2016. It’s stretched. The probabilities are that it will turn down. If it does not do so in February…180 degrees/days from the August low, it may do so in March on trade below whatever the February SPX low is…going into the NINTH anniversary of the March 2009 low. Whenever it turns down, it will be a significant inflection point. Be that as it may, the price action here going into the weekend will tell the tale as to whether we’re in just a short-term shakeout or a more meaningful correction is on the table. Because 2 X the 455 point range of the leg up from August is the range of the 910 point bear market from Oct ’07 to March ’09, the symmetry suggests that the 2872 high (a square-out as January 26 is 180 degrees opposite 2872) may have marked the end of a significant Buying Climax—one which should at least see the deepest correction in the last 14 months. Interestingly, 455 is opposite the date of March 6th…the low
Continue Reading -->Trader’s Digest: The 10 Stories We’re Reading Right Now
Wonder what traders are talking about today?We’re here with the top 10 stories we’re sharing with colleagues today, covering topics like:How to Go Long on a Bearish DayWhat the Fed said at Janet Yellen’s Final MeetingApple’s Highly Anticipated Earnings ReportAnd more!So check out these links right now and get up to speed: 1) How to Go Long on a Bearish Day (T3 Live)The market took a big hit on Tuesday. Rob Smith explains why the 60-minute chart meant it was time to get long. Watch the Video -> 2) Fed leaves rates unchanged, sees inflation rising this year (Reuters)Citing solid gains in employment, household spending and capital investment, the Fed said it expected the economy to expand at a moderate pace and the labor market to remain strong in 2018. Read the Article -> 3) Apple could be the best of the bunch in this tech earnings avalanche (CNBC)Treasury Secretary Steven Mnuchin said the U.S. is open for business and welcomed a weaker dollar, saying that it would benefit the country. Read the Article -> 4) Earnings Season’s Good News Comes From the Top (Bloomberg)Forget the profit noise. A surprising strength in revenue growth is raising expectations. Read the Article -> 5) Profitably Trading Earnings Season with Sami Abusaad (T3 Live)See how Sami Abusaad cleared $78K+ in profits in 4 weeks of trading earnings. Read the Article -> 6) Davos Elites Still Don’t Get Blockchain (Coindesk)What was truly remarkable, at least for anyone who has been interested in blockchain technology since its relative obscurity only a few years ago, was the degree to which it became one of the uber-themes of #WEF2018. Read the Article -> 7) Turning a Day Trade Into a Swing Trade (T3 Live)Learn the thought process required for turning a day trade into a swing trade. Read the Article -> 8) An ambitious project to measure the wealth of nations shows how GDP is a deceptive gauge of progress (Quartz)Is gross domestic product a sufficient measure of an economy’s health? Many argue that GDP, which counts the sum of the goods and services produced by a nation, fails to reflect a population’s wellbeing, because it accounts for neither distribution of income nor extractive effects such as pollution. Read the Article -> 9) Reforestation Drones Can Plant 100K Trees In An Hour (Geek.com)Sure, it’ll be great when a drone can drop off your Amazon Prime goodies or 7-Eleven snacks just minutes after you order them… but it’ll be even better when they help regrow millions of trees. Read the Article -> 10) Jack Ma on What It Takes to SucceedAlibaba founder Jack Ma tells you about what it really takes to get to the top.
Continue Reading -->Profitably Trading Earnings Season | Sami Abusaad
Black Room LessonsSami Abusaad$78,059.89 in net profits In this special video, Sami walks you through his “favorite breakdown of all time” in semiconductor play Macom Technology Solutions (MTSI).Just before Tuesday close, MTSI showed signs of breaking down as it based on prior support above a “tradeable void.”Sami went short at $36.62.The stock cratered, and he covered at $30.02 for a gain of $4,506.27 in one day.But Sami’s no one hit wonder. Watch the video and you’ll see Sami’s actual account statements that show $78,059.89 in net profits last quarter. Join Sami in the Black Room + The Nightly Game Plan Bonus 30 Days of the Nightly Game Plan Sami Abusaad Black RoomP.S. Earnings Season is still going strong. Be sure to check out this FREE Earnings Season resource: The Ultimate Guide to Trading Earnings Season
Continue Reading -->Climactic Top and $5569.18 in Profits | Sami Abusaad
Black Room LessonsSami Abusaad** 2 Video Lessons! Video #1: Sami shows you his favorite reversal bar of all-time. He calls it the “battle bar,” and why he looks for a large range and increased volume to set up the best trades. Next he walks you through how to use the battle bar with other signals such as a gap and a bullish setup to execute a high percentage trade.Video #2:In this lesson Sami shows you his P&L of $5,569.18 and screen shots from the Black Room. He shows you exactly what time he called the trade and how he trailed the profits.This video focuses on how to spot a true climatic top using a “COG” bar, a narrow body bar, and volume. Then Sami shows you how to switch time frames to find the entry with the lowest risk. Join Sami in the Black Room Just $7 for Your First 30 Days Watch today’s lessons then join the Black Room for 30 daysSami Abusaad Black Room
Continue Reading -->Sentiment Report: 100% Happy Traders
Sentiment has been incredibly bullish since early December. It’s common for the market to top out when sentiment gets to extreme levels, but timing trades off sentiment indicators is largely a fool’s game – something made quite clear with the market’s nonstop string of record highs. Stocks just won’t break down, and the dip buyers get rewarded every time. So let’s dig into our sentiment indicators to see if traders are still feeling happy. (click here for a primer on the sentiment indicators below) 1) VIX Spread – Bullish Three weeks ago, the VIX made several intraday lows around 9, indicating that traders expect almost no volatility. The VIX has since bounced around the 11-12 level. Now, on the surface, that may imply that traders are slightly more cautious. However, the curve of the VIX futures term structure is very, very flat. This again means that traders expect near-zero volatiltiy for the next few months. But that’s no surprise since we haven’t had a 3% pullback in about a decade! (okay, it’s not a decade, but it has been more than a year) So it’s no surprise that traders expect more of the same. (click here for a primer on the VIX spread) 2) CNN Fear & Greed Index – Bullish The Fear & Greed Index is at 78, up from 72 last week. This index operates on a 0-100 scale, and a reading of 78 means traders are greedy (or bullish). 3) AAII Sentiment – Bullish Now this is where things get nutty. The AAII Sentiment Survey shows that 45.5% of survey respondents are bullish, down from last week’s 54.1% reading. However, this number has ben elevated since December 14, indicating that individual investors have been getting more bullish over the past couple of months. 4) CBOE Equity Put-Call – Bullish The CBOE Equity-Put Call ratio’s latest reading is 0.56. This is well below the 0.654 long-term average. The 10-day moving average is 0.526, which is extraordinarily low on a historical basis. And the 3-day moving average, which I use to measure very short-term bullishness, is just 0.537. So it’s the same old story I’ve been telling for the past month and a half: traders are buying up call options like they’re hotcakes, and they’re not buying many puts. Of course, that’s been a great strategy because stocks have been so strong. Conclusion Out of 4 sentiment indicators, we have: 4 bullish (flat from last week) 0 neutral 0 bearish On October 6, I made the following melodramatic declaration: Let’s not mince words: the bulls are clearly insane. They think they’re destined to ride into the sunset on a magic carpet made of cold hard cash. I can see both sides of the coin here. The bulls may be insane… but they may also be right. Timing market turns based on sentiment indicators is awfully tricky. And remember, the trend can go on a lot longer than may seem reasonable. And I’ll repeat what I’ve been saying for the last 3 weeks: Well, the trend has gone on a lot longer than seemed reasonable! I can’t remember traders ever being so positive for so long without a single hiccup. When it ends, no one knows.
Continue Reading -->