Early movers this morning show where interest is focused. Wait for white Marubozu candles during the “Opening Range” followed by short duration flags to the candidates up trending 9/20ema. A breakout of the flag on volume confirms a bullish scalp condition.
As of this writing, we should see opportunities in:
AAPL AKS AMD AMZN BABA CELG CLF FB FSLR GOOGL GPRO IBB XBI GS JPM MS NFLX NVDA STLD TSLA X
FSLR is a recent income trade. Consider buying to close the 39C for a profit at some point in the short term and keep your shares. Theta will kick in soon. We will sell more covered calls in the short term, thereby reducing our cost basis (currently 36.67) even further.
In three short trading sessions, we’re able to keep our shares and pocket nearly (+0.70_ in premium. The difference for what we sold at 1.16 and the cost to buy them back to close at a conservative (0.50 +/-). We may be able to close them at a lower price (< 0.50) initially.
FSLR pulled back to the 9ema. We will look for the next bounce to repeat the trade. Note the wide Bollinger Bands could start retreating toward price. With a contraction in Bollinger Bands, volatility will collapse and we capture Vega at its highest, so we win as sellers.
“Bollinger Bands can help a trader identify an opportunity based on volatility. One factor in an option contract’s premium is the implied volatility, also defined by vega. Vega reflects how much an option contract’s price moves in response to a 1% move in the underlying stock’s price. When the underlying security experiences higher volatility, vega for the option contracts associated with the security also increases. As trend traders and technical analysts know, Bollinger Bands are useful in identifying volatility changes. As the distance between the upper and lower band relative to the middle band, known as bandwidth, narrows, it indicates lowering volatility. History has shown that periods of low volatility are followed by periods of high volatility, meaning that a narrowing of Bollinger Bands indicates high volatility is coming. When the narrowness hits a six-month low, it is known as a Squeeze.” – Credit Investopedia
Another way of looking at FSLR. We may see an opportunity to scalp it. If the candidate does what we are thinking, the stock will bounce. Look for similar action as we see in the 15min chart below, on February 17, 21 and 23. We are looking for a push higher, followed by flags, followed by continuation.
The Trade of the Day setup is a scalp technique, as we alluded to at the top of this post. My charts are all green this morning, so we will be presented with numerous opportunities, most likely too numerous to catch in total. That’s ok, as we only need a few to make our week. Watch your 5 minute charts and look for:
- An opening gap or white Marubozu candle
- 9/20ema SOTEMA should be greater than 45 degrees
- Price should be above the 9/20ema
- A quick flag should form
- Place a stop under the flag (initially) and buy the breakout
- The breakout should be on bullish candles (obviously)
- Trail your stop and close the position once we close below the 9ema
Good luck today. As usual, I will be LIVE pre-market for 15-20 minutes.
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