I had to go back and double check, but the target from that triangle breakout a couple of weeks ago should put the SP500 at 2950-3000. That's still about 10% above, but it is possible. I've noticed that the corrections since the April lows have narrowed. That first consolidation on the SP500 from Mid-April to end of April had a drop of -100pts. The second consolidation occurred in May and only had a drop of -50pts. I still feel like we should see another consolidation soon, but it shouldn't fall more than the 50 points from the last one. It's just a theory, but if it holds true, then buying the SP500 when it finally breaks above 2800 should give a low risk return. As for oil, it's bouncing nicely off that 100-day ma, but I read an article in one of the modern trader magazine where the author provided details of oil chart patterns. Oil tends to rally from Feb-May/June, and then sells off between July into October before consolidating and then rallying again. During bullish years, the rally is higher than the sell off, and during bearish years, the selloff is steeper than the rally back up. I was going off this pattern when I started buying oil stocks back in March and April. I only bought the stocks that broke out of patterns too. If you look at HES, COP, and PSX, they were all breaking out of bases when I jumped into those trades. There were a couple more smaller cap stocks, but with so many of the larger cap breaking out, I stayed with the most liquid stocks. I wouldn't be surprised if oil tested $73 again by July. In fact, if I remember correctly in 2007, oil rallied right through the Summer months. That might have been the only time in the past decade or so that oil rallied through the Summer months.
It depends on the pattern. If the base was a shallow base that took 6-8 weeks, then I'll go with about 1 month out on options. I'll look for 3-4 weeks of strong momentum before the stock fades. If the base was a bit deeper (I'd consider -15% or more to be deep) and took longer (more than 9 weeks), then I might look at options that are 2 months out. I'll also trade weeklies on some of the stocks I know well that are setting up for breakouts. I use weeklies a lot on NFLX, NVDA, and AMZN. I know that when these 3 breakout, their move tends to be strongest at the start of the breakout. I hope this gives you an idea of what I look for.
I totally agree with your buy high and sell higher mantra. Buy low sell high might workout when a stock is in Phase 1 of its cycle, accumulation, moving now to Phase 2 which is the mark up. Phase 3 being distribution and Phase 4 the mark down. That is for longer term investors and position traders. For swing traders, buy high, sell higher makes more sense!
Exactly, still I'm surprised I didn't read a lot more of buy high and sell higher comments on a lot of the threads on ET. They seem to be buy low and sell high methods only. For today, I've jumped onto ADBE Jun 260 calls. This is well ahead of its earning report on Thursday, I've had some nice gains on ADBE over the past 6 months, but they have been through ADBE's pre-announcements in between quarterly reports. Again, just a very small position of about 0.5% account only. I'm testing home run trades on this one. This time, I'm jumping ahead of the event, and using otm calls that I don't normally use. I should update on the other home run trades that are still open. THO struggled above $100 and has fallen back below that mark today. It looks like the momentum move has deflated. As for DOCU, it has traded from $59 on Friday to about $62 this morning. It seems like volatility has been steady too, so the options ares priced fairly high compared to where the underlying is at. The position on DOCU has jumped from $1.41 avg to $2.55, so not quite the home run I'm looking for but I've got 3 more days to see it through.
Looking at the ADBE stockchart. It looks pretty strong and could go higher from here. DOCU looks strong establishing new highs. THO might pullback before it heads higher. So far, looks good. Keep the good trades coming. I analyze your trades and try and learn from it.
That philosophy only works when you have follow through momentum, if momentum doesn't continue you bought yourself a high.
Would you mind posting your fill price and Date to expiry. Would be helpful to understand thought process thanks
That is true but, the Turtles method is also, based on the new highs, so with Nicolas Darvas. Relative strength is what it is. What happens at times is that it pullbacks for a couple of days then, resumes the uptrend afterwards. That is the tradeoff. On the plus side, a strongly trending stock could be running up for 7-10 days straight. If you are waiting for a pullback, you are waiting a long time and can end paying higher prices. I usually, wait for pullbacks but, will buy a breakout from narrow trading ranges. When you have momentum on your side, other buyers see it and pile on! You cannot have your cake and eat it too! One or the other!
Darvas' method was simple. Buy high and sell higher, along with volume confirmation. Every trade he mentioned, he also talked about how volume was highest just before he bought it. The turtles were more technical in terms of entry point though. There will be pullbacks, but I've adjusted to it buy initiating a smaller entry at the breakout, and then adding onto it over the next few days if the pullback occurs. If the pullback doesn't occur, then I'll leave it alone as a smaller position.