Total Alpha Trading – How Far Can The Market Run?

Everybody and their brother wants to know when the market will make the next major turn.

Pick tops and bottoms is the holy grail of trading that no one seems to know ahead of time, but everyone claims they knew in hindsight.

I found a few techniques over the years that identify possible tops in both stocks and indexes.

When you combine them with other indicators and analysis, they do a darn good job of highlighting resistance levels.

In fact, one of them came up with the exact level that the SPY stopped at!

Look, trying to pick off-market tops is a fool’s errand.

Yes, when you time it correctly, there is a windfall of cash to be made quickly. But, you’re more likely to get swallowed up in the perpetual grind then walk away from a winner.

However, every piece of information that supplements your trading increases profitability.

Today I’m going to teach how to apply key support and resistance levels to improve your entries and exits.



Total Alpha Trading


Market Symmetry

One of the most popular methods to find resistance in stocks and indexes is through market symmetry. While everyone uses this technique slightly differently, I’m going to explain how I use them.

Market symmetry uses pattern movements to project where the final stop would be on a current move. At its core, you’re taking a previous move and adding it on to a current move.

Let me draw it out for you. Assume for a moment you have a stock that pushes higher, then makes a pullback.

The first, long line is the expansion move. After that, the short line is the pullback. Symmetry would say that when you take that first line and then add it onto the end of the second leg, you find where the stock’s price would end.

Here’s an example using the SPY.

SPY Weekly Chart

Let’s break down the price movements here. The first move went from $233.76 – $294.95. That’s a distance of $61.19. SPY then pulled back to $273.09. If you add on $61.19 to $273.09, you get $334.28.

The top for the market came in right around $334. Pretty crazy, right?

I draw these several different ways to see which ones make sense. When you get several of them that all point to the same area, you know you’ve found something.

Now, let’s consider the next step to this analysis.

Fibonacci Extensions

Fibonacci extensions use common Fibonacci percentages to find additional levels beyond symmetry.

Essentially, symmetry is a 100% extension of the Fibonacci. However, you can add in other common percentages such as the 23.6%, 38.2%, 50%, 61.8%, and 78.6% levels. You can also add these beyond the 100% level to get levels as well such as 161.8% level.

Here’s how you might use it on the TLT bond ETF chart.

TLT Daily Chart

What’s neat is that these tools work on any type of chart and any product. Sometimes these levels only act as resistance intraday. Other times they work for weeks. Unfortunately, you don’t really know which it will be without considering other pieces of your analysis.

Bollinger Bands

One of the coolest tools out there has to be Bollinger Bands. They provide a range that says, ‘based on historical closes, there is a 95% statistical chance that the stock closes within this range.’

It’s a great indicator to look for charts that are overbought or oversold. This indicator works based on the timeframe you’re looking at. So, if you use an hourly chart, you’ll find hourly resistance.

Here’s a great example with the QQQs.

QQQ Weekly Chart

Check out how the upper Bollinger Band (pink line) really kept a cap on the QQQs. It takes a lot for an entire index to push up past that level.

Now, it’s worth noting that when a stock starts closing regularly above or below a Bollinger Band on any timeframe, it’s usually best to wait for it to move back inside the bands.

Think about what it means for a moment when a stock starts trading consistently outside the bands. That means it’s getting bought or sold more than the closing price would dictate 95% of the time. In layman’s terms, there’s a lot of pressure being applied.


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Put these together to make a powerful trading strategy

When you add all of these together, you get  a well-rounded trading strategy that gives you an idea of when and where stocks should find support and resistance. That tells you ahead of time where there’s potential entries and exits.

I use these techniques to help me identify key spots that work well for option credit spreads. It’s a strategy I love employing because it has such an exceptionally high win-rate. That’s why I set my 2020 Total Alpha goal of consistent income.

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One biotech stock could be best bet in the race for curing coronavirus

Gilead Sciences could be the best positioned biotech stock here.

That’s according to Mark Newton, founder of Newton Advisors, who says the biotech company looks technically attractive as it works toward a cure for the new coronavirus.



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“Gilead broke out last week. Gilead Sciences is up to new six-week highs on an explosion of volume last week. We saw the call open interest jump over 88%,” Newton said Monday on CNBC’s “Trading Nation.”

“This stock had been going down and had been cut in half really since 2015 then moving sideways,” said Newton. “This little breakout last week is very interesting to me technically from a risk-reward standpoint.”

Newton said the shares could see an additional boost given the company is at the forefront of coronavirus treatment testing. China began a clinical trial of Gilead’s antiviral treatment remdesivir in the country last week.

“I like Gilead and I would own it and look to buy any weakness,” said Newton.

In the same interview, Joule Financial President Quint Tatro said the fundamentals back up the bull case for Gilead.

“I was really surprised when I started digging into Gilead just today — surprised so much that I had to pick up some shares for our firm today,” Tatro said. “The stock is trading 11 times forward [earnings] and has very impressive earnings growth, and most importantly … is generating over $6 a share in free cash flow with a 4% dividend.”

While Gilead trades at nearly 11 times forward earnings, the IBB biotechnology ETF trades at a far higher 89 times forward multiple.

“From a valuation standpoint, we like this stock quite a bit, started a position, and will be digging in to the [fundamentals] further,” said Tatro.

Disclosure: Tatro and Joule Financial hold a position in Gilead.

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Dow set to rise 100 points as Wall Street shrugs off coronavirus fears

U.S. stock index futures pointed to a higher open on Tuesday as Wall Street shrugged off concerns over the economic impact of the coronavirus outbreak.

Around 7:45 a.m. ET, Dow Jones Industrial Average futures were up 87 points, indicating a gain of 100 points at the open. S&P 500 and Nasdaq 100 futures traded higher as well.


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China’s National Health Commission on Monday night said the death toll had risen to 1,016 people with 42,638 confirmed cases. However, the number of new confirmed cases was its lowest since late January, increasing optimism around the country’s efforts to contain the outbreak.

Fears over the economic fallout from the outbreak have also been offset by positive economic indicators. Jobs data released last week easily beat analyst expectations while U.S. manufacturing and services activity show signs of improvement.

Both the S&P 500 and Nasdaq Composite closed at fresh highs on Monday, while the Dow jumped more than 170 points. However, companies such as Under Armour have noted they will take a hit from the outbreak. Under Armour warned Tuesday the outbreak could lower sales by $50 million to $60 million.

“While the stock market assumes no impact from the virus as we continue to chug higher, expect much more of this kind of talk as companies figure out the full effect,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.  “For many companies, these sales will not be made up.”


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Under Armour shares dropped more than 11% in the premarket.

On the data front, January National Federation of Independent Business optimism figures are expected at 6 a.m. ET and JOLTS job openings for December are due out at 10 a.m. ET.

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Tesla’s wild trading continues as stock climbs 7%

Don’t look now but Tesla is jumping again.


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Shares of Tesla climbed more than 7% in trading on Monday, back above the $800 level it hit amid last week’s wild swing. Part of the reason appears to be positive news from China, after the Shanghai municipal government said it would help companies like Tesla trying to deal with the coronavirus outbreak “resume production as soon as possible,” according to Reuters. Tesla’s Shanghai factory has been closed as the Chinese government looks to contain the epidemic that has killed more than 900 people.

The stock looks likely to continue its wild speculative trading. The Shanghai announcement came out Friday evening but shares gained steam Monday.

Overall stock market futures pared their losses after Chinese President Xi Jinping said he would adopt more decisive measures to curb the spread of the coronavirus.

Tesla had a crazy week last week, jumping double digits on Monday and Tuesday and then falling 17% on Wednesday.

Tesla Shanghai factory in focus

Tesla’s China vice president, Tao Lin, announced online last week that car deliveries to customers would be delayed due to the spread of the coronavirus. Lin said the early February deliveries would be delayed, since the company “will catch up the production line once the outbreak situation gets better.” According to Reuters, Lin also said Tesla’s Shanghai factory would restart production on Monday.

Tesla also temporarily closed its stores in mainland China – a key market for the company. Tesla warned during its quarterly conference call in January that coronavirus issues would dent the next quarter’s profitability slightly, although Barclays is skeptical of that explanation.

“We wonder to what extent the company will use the disruption as an opportunity to set up a better 2Q print,” Barclays said in a note to investors on Monday.

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Stocks are little changed as coronavirus fears worry markets

Stocks were little changed on Monday as investors assessed the economic impact of the coronavirus outbreak in China.

The Dow Jones Industrial Average traded just 7 points lower, or less than 0.1%, shortly after sliding more than 100 points. The S&P 500 and Nasdaq Composite hovered around the flatline.


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As of Sunday night, China said a total of 40,171 cases of coronavirus had been confirmed and 908 people had died, while 14 Americans have tested positive for the virus aboard a cruise ship quarantined in Japan. The death toll from the coronavirus has also overtaken that of the SARS outbreak in the early 2000s.

Chinese President Xi Jinping said China would speed up development of drugs aimed at treating pneumonia-like viruses. Xi also said China will win the fight against the coronavirus. He noted, however, the situation remains dire.

“The duration of this virus will determine how long businesses will be sidelined and what the effect will be on China and the global economy” said Bruce Bittles, chief investment strategist at Baird.

Apple shares fell more than 1% amid concerns the outbreak will hurt production of the tech giant’s best-selling product, the iPhone. Foxconn, one of Apple’s biggest suppliers, got approval to resume production at a key manufacturing plant but only 10% of its workforce has returned, Reuters reported.

The major averages are coming off their first loss in five sessions, with the Dow falling more than 200 points on Friday. Mounting concerns over how China’s economy, the second-largest in the world, pressured stocks.

Despite Friday’s losses, however, Wall Street logged in its biggest weekly gain since June as the S&P 500 jumped 3.2%. Strong economic data along with solid corporate earnings reports fueled the market’s weekly surge.

“Stock market investors are torn between fear that the coronavirus might continue to spread, weighing on global economic growth, and optimism given that the latest batch of global economic indicators is showing rebounding global growth,” said Ed Yardeni, president and chief investment strategist at Yardeni Research, in a note.

Monthly U.S. employment data released Friday showed more than 200,000 jobs were created in January. The Institute for Supply Management said last week manufacturing activity rebounded in the U.S. last month while growth in the services sector picked up.

In corporate news, Xerox raised its offer to buy HP Inc to $24 per share, or about $34 billion. That’s up from a $22 per share offer made by Xerox in November. Xerox shares dipped 0.8% while HP Inc traded more than 4% higher.

Meanwhile, L Brands is closing in on a sale of its Victoria’s Secret brand to Sycamore Partners, sources told CNBC. L Brands shares jumped more than 3%.

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