And I DID make 72%, 79%, and 256% return on 3 trades in the last 3 days, ALL of them on the same ticker!
It’s funny really, because when things seem so complicated for everyone else, and I hear rumors of the coronavirus flying left and right, I’m just in the corner, quietly cashing in on my simple system.
“I need to let you know I listened to your advice and focused only with Nate Bear setups and studied his material with my under 1K account. The month of May I was green $425 or 17% with 7 winners and 2 losers. This was my first green month this year.” ~ Dan
Today, I want to take a closer look at the one that I’ve relied on the most in recent weeks…
Head and Shoulders: A Simple Pattern For Timing Bearish Trades
A head and shoulders (H&S) is a bullish-to-bearish reversal pattern, and it is my favorite setup for buying put options.
The head and shoulders is made up of three peaks, with the highest peak (the head) between two outside peaks (the shoulders), which are typically lower than the head.
The line connecting the first and second troughs is called the neckline. Once a security’s price breaks below that line, the pattern is considered triggered.
Source: Charles Schwab & Co.
As I said above, the head and shoulders is a reversal pattern — from a bullish trend to a bearish one. This means that it shows the power of changing hands from the bulls to the bears.
After the first peak in price (left shoulder), the security declines, which shows waning momentum for the bulls. Then, in a push to regain that momentum, the bulls drive the price higher and past the initial peak to a higher high (the head).
To complete the pattern, the bulls must attempt one more push higher that does not exceed the previous peak, but rather lands somewhere in the area of the left shoulder, thus forming the right shoulder. Because the bulls failed to make a new higher high, the bears are now in charge.
Once the price falls below that neckline, that is a good place for traders to look to buy put options.
For instance, in the chart below, I’ve highlighted a clear example of the pattern:
Below is another example of head and shoulders patterns. You can see the two initial pushes higher (green candles) followed by the right shoulder in red.
Now, keep in mind that technical analysis is really more of an art than a science. The two shoulders might not line up perfectly, for instance. You can see above that the left shoulder is higher than the right shoulder.
And in the first chart, it was the right shoulder that was higher. But the essence of the pattern is still there, and we can see the bears wrestling control away from the bulls in both instances.
But the more comfortable you get with the pattern — and the meaning of what the price action is telling you — the easier it will be to spot and trade it.
If you could use a little help in this department, I do the heavy lifting for you with my Trade Of The Day. Not only do I tell you what pattern to look for each day, I provide the exact strike and expiration of the option I think you can use to take advantage of it.
… it doesn’t matter how large (or small) your trading account starts out at…
… we will make progress together.
That said, while most of the general market is doing nothing today, bitcoin stocks are heating up. One day does not make a trend, but it’s worth putting a game plan together because these stocks can offer quick and dirty profits.
For example, check out my three-week, real-money results from trading bitcoin stock in Bitcoin Services (BTSC) a stock that trades now for about $0.03 :
(Building up a small trading account is one of the toughest challenges you’ll face early on, but it doesn’t have to be, click here to learn my system)
That said, if there is to be the next wave of Bitcoin stock mania, I want us to be ready.
Furthermore, I’ve compiled some notes on how to trade bitcoin stocks, putting together a watchlist, and a whole lot more… Read on to find out more.
Can Bitcoin Stocks Run Again?
Before you go out and buying all the Bitcoin stocks, or even Bitcoin itself… it makes sense to remain patient. You see, there are so many people out there still trying to value this cryptocurrency… and there will be euphoria. The last thing you want to do is buy a breakout… only for the price to pull back.
That said, I’m keeping a few Bitcoin stocks on the radar… and I’m watching these patterns closely.
I’m primarily focused on three Bitcoin stocks now:
Bitcoin Services (BTSC)
DPW Holdings (DPW)
MGT Capital Investments (MGTI)
The last time Bitcoin ran… these stocks followed suit. That’s why we’re focused on these for now.
If you can see in the chart above, BTSC broke out of its bull flag – or bull pennant – pattern. However, it doesn’t really make sense to chase the stock on a gap up like this.
So what do we do with a stock like this?
Well, we wait for a pullback.
For example, if you notice in the daily chart on BTSC… you’ll see some squiggly lines… these are known as simple moving averages (SMA). What I’m thinking is BTSC could pull back and fill this gap up… and if it reaches the blue line (the 20-day SMA) – around $0.02… we’ll look for an entry. Thereafter, we’ll look to take profits at the green line (the 200-day SMA), anywhere between $0.036 and $0.042.
Could the stock keep running, and not fill the gap?
Of course, but I’m not one to pay up and pay for stocks… I wait for a clear level, pattern, or indicator to signal when I should buy.
I’m keeping an eye on another Bitcoin stock – DPW.
DPW Stock Chart
DPW has become a cryptomining company… and with this move in Bitcoin… it could pull DPW higher.
Check out DPW on the daily chart below.
DPW is shaping up as a bottom bounce candidate. In other words, this stock has sold off pretty hard, but now it’s found some resistance. That means traders are willing to buy around this level. Not only that, the stock has a large gap that goes all the way up to 70 cents. That said, if Bitcoin continues this run… DPW has the potential to fill that gap.
MGTI Stock Chart
Here’s a look at a third Bitcoin stock.
MGTI is coming off a double bottom pattern at $0.05. That means the stock found a bottom at $0.05… hit some resistance around $0.08… only to pull back into the $0.05 level. However, buyers stepped in, and held the stock above $0.05.
Once there was a positive catalyst (Bitcoin prices breaking above $5K again)… MGTI spiked. Again, I’m not going to chase this stock… I’m going to wait for a pullback because I only think it can run to previous highs at $0.12 and $0.14 for now.
Some other stocks I’ll be keeping an eye on are RIOT and MARA. Although these aren’t necessarily tied to Bitcoin… they are blockchain stocks, and they could run with Bitcoin. I don’t have a clear idea of what I’m going to do with these two names yet… but I’ll let you know if and when I do. If you’re still looking for Bitcoin stocks to trade, you can check out some of the competitors – or even scan for stocks to trade -on Finviz.
Stocks got roasted on Friday, as all major indices took a dump. However, if you are new to trading penny stocks, I have a secret to share with you.
Penny stocks generally don’t correlate with the overall market.
What does that mean?
It means penny stocks trade on their own island… and can experience volatility on days where the overall market is seeing none at all. In other words, there is always action and opportunity when trading penny stocks.
Now, if you are trading a small account, you’ve got to be tactical. You see, if you have a trading account that is under $25K in value… there are restrictions on the number of day trades you can make.
A day trade is any type of trade you make that is entered and exited the same day. Penny stocks are volatile, creating opportunities for traders to make quick profits and day trade.
However, if you make too many day trades when your account is under $25K, your broker will penalize you… More on this later.
That said, I’ve figured out a way to “hack” this trading rule known as the Pattern Day Trader Rule.
(While most traders struggle with the Pattern Day Trader Rule, I’ve figured out a way to navigate around it with great success. If you want significant gains from a small account, click here)
If you have an account under $25K and you want to be active in the markets then read on. It’s the best way I’ve found to stay active without getting penalized by my broker for violating the PDT Rule.
Penny Pro Explains Pattern Day Trader (PDT) Rule
Now, when you’re first starting to learn how to trade penny stocks, there are rules to learn. One rule that could freeze your account, if you break it, is the “Pattern Day Trader” rule.
According to the U.S Financial Industry Regulatory Authority, a pattern day trader is anyone who executes four or more day trades within five trading days. Now, the number of day traders must also represent over 6% of the trader’s total trades in their margin account for those five trading days.
Now, if you want to make sure you don’t break this rule, you can contact your brokerage firm. Your broker could also designate a trader as a “pattern day trader” if they have reason to believe the trader will start to day trade.
Under FINRA’s rules, if you’re considered a pattern day trader, you must have at least $25K in your trading account… and you can only trade in margin accounts.
You’re probably wondering, “Well, how can I trade without having $25K in my account?”
Basically, if you buy and sell a stock within the same day… more than four times within five trading days (according to FINRA)… you’re a day trader. But make sure to check with your broker to see if they use three or four-day trades per five business days to determine if you’re a PDT.
So if you think about it… if you buy a stock one day, and sell it the next… that’s not a day trade.
Let me walk you through it.
Penny Pro Penny Stock Trades
I know, this pesky rule might scare you at first… but my strategy allows you to work around it.
If you buy a stock any time during a trading day (9:30 AM EST and 4:00 PM EST), and sell it within that same day… that’s a day trade. For example, if you buy a stock at 10:00 AM and sell it at 3:00 PM… that’s a day trade.
Well, I have a work around.
You see, my patterns allow me to spot momentum trades… and typically, the day after I get in, they run higher. I scan for trades started around 2:30 PM, which I stream live, and find potential buys. Thereafter, I’ll buy the stock… and hold onto it until the next day.
There’s likely nothing more consistent than the Daily Profit Machine Trade of The Day on the entire internet. The gains I’ve seen are life changing. 100%, 118%, or 131% – in one trade. And while it’s still on the table, you can get a sneak peak on how I create easy to execute trade plans in only one page.Take an inside look.
Here are a few stocks I’ll be watching this week for potential future upside…
Last week I talked about a drop for one of the largest companies in the world. That was because it takes time to deconstruct the most likely scenarios and determine the path forward. News over the weekend revealed that the black box data shows similarities between the October and February crashes. That has pushed the stock down significantly, about $50. But I wouldn’t be surprised to see it hit $400 per share again. There is upside in this stock for the intermediate to long term. But traders and investors may have to live through more volatility when picking an entry point. Members will want to stay tuned for my real time option entry and exit alerts, and that alert is coming very soon.
What makes these two times create winning streaks?
Earnings #1: Micron (MU) reports on Tuesday after the close. Last week we looked at Broadcom (AVGO) as one of the “haves” (vs. the “have nots”) – in the beaten down semiconductor stocks. Its stock price jumped 11% on a strong earnings report, and MU will be looking to follow in their footsteps. MU was once the sweetheart of the memory sector. All eyes will be on their guidance for future earnings to see if the company expects the slowdown to continue or reverse. That guidance might not affect MU’s stock but could impact other names in the memory space like Seagate (STX) and Western Digital (WDC). Now I don’t hold through earnings, but I tend to do well trading the options on semiconductor stock, such as MU. Keep an eye out for my upcoming member alerts.