Better Trades Momentum Part 2

In Part I of this article, I taught you to trade momentum that occurs after an earnings announcement. In this article, I am going to go into some of the chart patterns we can use to trade momentum that is unrelated to earnings or news. And in Momentum Part III, I will show you how to combine news and chart patterns to trade momentum. But, before I get too far ahead of myself, let me recap what momentum is and why I trade it.

I love to trade options on stocks with a lot of momentum. What this means is that I want to trade those stocks, Exchange Traded Funds or Indexes that are moving fast and far. The way I see it, if I am going to put my money in the market, I want to place it where it will work as hard as possible for me. You may have attended my free webshop on Monster Momentum plays during which I introduced a couple of the technical tools that I use to find and trade this strategy, but let me show you today some other pieces to this strategy and how this can be a boost to your trading account.

The first step to trading momentum is that you need to find a stock that has the capability to move fast and far. These stocks generally have a dollar to two dollar average daily range during normal trading. Once the momentum picks up, they can trend twenty to thirty points or so in a matter of a few months. Sometimes this momentum is sparked by news announcements such as earnings or a new drug approval and sometimes it is just a stock that becomes heavily bought or sold by institutions. Whatever the case, once you learn to read technicals, you will be able to spot the building momentum in time to profit from the big move.

Many of my most profitable momentum trades took place not because of any news but just because the chart began to show signs of big buying pressure or big selling pressure. I look for things like breakouts, long candle bodies, and various candle patterns combined with the six indicators I use to signal a momentum trade. The best way I can teach you to trade momentum is to show you some of the patterns that I and others in my Traders’ Talks have recently traded.

The first thing to keep in mind with momentum is that once a stock has made a big momentum move, you know it has the ability to do it again in the future. It will probably take a breather for a while and it may not move in the same direction, but the momentum will almost always pick up once again.

Take Goldman Sachs (GS) for instance. This stock ran with a lot of momentum from $155 to about $205 before it started trading sideways.

If you had been to my Technically Speaking classes or in my Traders’ Talks you would have traded GS all the way up through that run. But at the end of the run, Goldman took a breather for almost a month while it traded in a sideways range between $198 and $203. During this sideways movement, I put my money in other stocks and ETF’s that were moving with more momentum. Don’t forget what I mentioned earlier, that stocks that have moved with momentum in the past will almost always move with momentum again. So when a momentum stock slows down make sure you are ready to trade it once it begins to move again.

I find momentum trades from my Momentum Scans (you can learn more about these in the Ultimate Scans free webshop), and on January 8th GS showed up on my Momentum Scan as the stock started moving toward that resistance level. By the time it had rallied through the $203 resistance level I had entered a bullish trade. There is no trade that is more fun than a momentum trade. When all the technicals are bullish and my momentum entry was hit, all I had to do was kick back and watch the buying pressure drive this stock up to almost $214 where it sits at the time I write this article. You can see how profitable these breakouts can be on momentum stocks. Goldman has run more than $11 in only five days!

Intercontinental Exchange (ICE) is another momentum stock that we traded in the past as it ran from $68 to $113. That move took nearly three months and then ICE began to slow down and consolidate. The stock was not attracting enough buying pressure to push it through $110. That resistance became an important price target for the stock. If buyers came back willing to pay higher prices for ICE the stock would rally above the $110 resistance and mark our next momentum entry.

You can see below that ICE broke out on January 3rd , prompting a bullish momentum entry. The stock then rallied to a high of $137 giving us a gain of 27 points in seven days.

ICE and GS are just two examples of the many momentum trades out there. I have shown you a couple important technicals pieces that need to be present to make this strategy work. Make sure the stock has the ability to move at least a dollar or two every day and then look at the price chart to see if the stock has moved with momentum before. Then wait for a breakout from a consolidation area to give you one of the safest, easiest and most profitable entries into the momentum trade. And remember, you may have missed these trades, but there are plenty more momentum trades to come. Learn to read momentum signals in a price chart with my six indicators adding confirmation and you will be prepared to catch the next big momentum trade

Hope to see you soon!

Markay Latimer with Better Trades

Better Trades Momentum Part 1

I love to trade options on stocks with a lot of momentum. What this means is that I want to trade those stocks, Exchange Traded Funds or Indexes, that are moving fast and far. The way I see it, if I am going to put my money in the market, I want to place it where it will work as hard as possible for me. You may have attended my free webshop on Monster Momentum plays during which I introduce a couple of the technical tools that I use to find and trade this strategy, but let me show you today some other pieces to this strategy, and how this can be a boost to your trading account.

The first step to trading momentum is that you need to find a stock that has the capability to move fast and far. These stocks generally have a dollar to two dollar average daily range during normal trading. Once the momentum picks up they can trend twenty to thirty points or so in a matter of a few months. Sometimes this momentum is sparked by news announcements such as earnings or a new drug approval, and sometimes it is just a stock that becomes heavily bought or sold by institutions. Whatever the case, once you learn to read technicals, you will be able to spot the building momentum in time to profit from the big move. As we are heading into the thick of earnings season, this article will show you some ways to trade the post earnings momentum. Watch for part II of this article to learn more about other technical momentum plays.

Holding a directional trade over earnings can be risky, but after the release the uncertainty of what direction the stock will move is gone. I like to trade after earnings because we often have an unusually large amount of trading activity that moves many stocks faster and further than they would normally go. It may be that earnings numbers were a big surprise, (they might be much stronger or weaker than expected) or it may be that traders were waiting to see what the quarter was like before they put more money into or took money out of the stock. It truly does not matter what the actual number are, mind you, because we are not trading the numbers, we are trading the reaction to the numbers. Checking a chart the evening after a company announces will show us if we have tradable momentum. If there is a great amount of buying pressure, I trade it up and if I see a lot of selling pressure, I trade it down.

One of my more favorite post earnings plays is Goldman Sachs (GS). In fact, this trade has worked out extremely well on Goldman a couple times already this year. HINT: this is a stock to watch the next time they release earnings!

Goldman Sachs announced earnings in September and gapped up above resistance. In my Technically Speaking workshops, I will show you how to use an intraday chart to trade on the first day after news is released, but for the purposes of this article I would like to teach you how to make money on this strategy even if you do not have the time to watch the intraday chart. To do this, you need to recognize momentum as it develops on a daily chart. Many momentum plays begin like GS did, as a breakout. Goldman formed a bullish Opening Marubozu candle September 19th after the earnings release. The stock closed that day above a previous $155 resistance level. A close above resistance should be viewed as a strong signal for the stock. After such a signal, I confirm with my indicators (for more information on the technicals I use, join me in one of my live Technically Speaking workshops or watch the class on DVD). I am trying to find any excuse to stay out of the trade. Any bearish indicator or bearish price pattern will prevent me from entering the trade. But, if all technicals confirm a bullish trade I enter the following day. One note of caution here: news may only have enough influence to move the stock for one day. Because of this, I prefer to enter my trades above the high (or the low if it dropped) of the day the news is announced.

Using this technique, Goldman got us into a post earnings momentum trade around $159.75. The price graph and the indicators I teach you to use were all bullish so we had the OK to enter a trade that day. Once our entry in this type of trade is triggered, you want to stay in as long as there is continued buying pressure. Often the buying pressure and momentum will move a stock for only three to five days. In the case of Goldman, the stock had post earnings momentum for three days but it barely took a breather on days four thru six before gapping up and taking off once again. The technicals have remained strong enough to keep providing bullish trades for the past couple months for a run from $159.75 to $186 where the stock is currently trading at the time this article was written. These momentum plays can be traded as one trade that you will stay in as long as you have enough time in your option or as something you can position in and out of to pull profits out along the trend.

The entry on this type of trade can feel risky because of the gap. The danger with gaps is that all the trade may be taken in the gap and there may not be enough buying or selling pressure to move the stock further. For example, when the Chicago Mercantile Exchange (CME) announced they were buying CBOT Holdings (BOT), the CME gapped to an all time high. The opening price was over ten points above the long day candle you see earlier that month.

After the open, no one was willing to pay a higher price for the CME and the stock dropped like a rock. When a stock gaps beyond a price at which it was comfortable trading, you can rest assured that much of that play was taken in the gap and the safest way to trade it may be to trade the retracement. One thing you can do to make trading a gap on news more safe is to avoid the trade unless the gap puts the stock near its recent trading range. In the case of CME, the stock was so far above where traders were comfortable buying it that people took profits out very quickly. With Goldman, just the opposite was true. Because it gapped to $155, a price that people had paid for the stock many times in August, traders were much more comfortable piling in at that price after earnings. All the buyers willing to pay $155 or more for GS helped push it much higher.

A news announcement such as earnings can present wonderful trades. The momentum associated with the news may create a lot of buzz around the stock and draw more buyers into the stock, or motivate people to sell the stock in droves. Either way we can trade it. Check the technicals first to make sure everything is bullish before buying calls or that everything is bearish before buying puts. And remember that as long as the stock gaps to a price that is has traded recently, there may be plenty of room left for the stock to move. Enter the trade and manage your risk by placing your stop. This is one easy way to build your account up trading momentum during earnings season.

Hope to see you soon!

by Markay Latimer with Better Trades

"If it ain't broke, don't fix it"

I like maxims and quips. Little phrases that tell a big story. I like the parables in the Bible because a child can say "I get it," and an aged student can say "Oh… now I get it." The principle of keeping it simple is a good one for most of life's situations including trading. And while trading skills are not easy to master, they involve simple principles.

Mastery in most areas of life includes learning to conserve extraneous movement and effort. When it is done right it looks simple and onlookers often say "Well, I could do that." But the "wanna be" soon finds that it is not as easy as it seems. Trading can be frustrating and discouraging, but when the market seems to get you down and you feel like you will never get it, remember Sean Connery's famous line, "Impossible, but doable."

Too often, traders experience real highs and real lows. While the give and take is normal and expected, big swings are usually the result of changing stride or technique inappropriately. Finding your stride or niche can really make the trading life a lot more consistent and smooth and therefore, profitable. Getting to know a few terrific trading stocks rather than collecting all the potential candidates from recommendations and scans begins to overwhelm a trader and changes the rifle shot accuracy to a shotgun splatter.

So, a while back in a Trader Talk Live training a student wrote "- the past 7 days of trading have been absolutely fantastic. I have confirmed again the value of following just a few stocks and getting to learn (as much as possible) their behavior. PD is one of my all time favorites". She was referring to a principle that is trained in the Trader's Forge two day trading camp that I conduct once a month. I advise students to build a stable of good trading stocks and get to know them. Pick your favorite 6-10 and back trade them repeatedly. Learn to recognize the patterns of behavior. Does it behave in similar ways around earnings? Does it make clean or sloppy turns? Does it have a tendency to throw certain chart patterns? In doing so, you get a feel for the traders who influence the stock and improve your chances to repeatedly tap that stock for pattern trades.

The patterns we observe are the behavior of people. Key Traders are interacting with various levels of traders, brokers, fund managers and the public. This cast of players is unique in each stock or group of stocks, bonds, commodities etc. Hence, unique patterns develop and that is the key. Instead of flitting around like a butterfly from bush to bush looking for a new flower, you can find certain flowers that keep producing on a regular cycle. You develop a routine and learn the cycle so that you can just stick around and harvest over and over again.

I have a friend who taught me this principle in a dramatic way. He had a very narrow group of stocks that he got to know and not only did he learn the patterns, but he also studied the company's behavior. He knew how they acted around earnings, what products they were releasing, and how their stock responded to economic news and events. One year alone, he made over $750,000 trading one company. It was interesting to note that others seeing his success always wanted to know, "What's it going to do next?" Like the children's story of the Little Red Hen, most fellow traders wanted to cash in on his valuable insight and very few asked him to teach them how to trade like he traded. It was folly to think that if he gave them the information, they would also gain the skill it took to glean the information. That, however, is human nature.

It is the nature of most folks to want to find the easiest way. Most want to find a secret or a magic strategy. A good deal of the GDP of this country is based on selling the sizzle, not the steak. We search for the fountain of youth, the short cut, and the edge so to speak, but in the end one universal constant remains. Working smart is better than working hard. And in the end, the magic is usually finding the key or core of the matter and developing some simple and specialized skills.

If you can find a piece of good ground that can be cultivated and harvested over and over again, you find one of the jewels of trading. The secret of most millionaires is finding a stream of residual income. Patterns are there because people are creatures of habit and the market is just people. With six to ten good pattern trading stocks in the price range you like, there will always be something ready to trade. When you run across a great stock, you can replace the weakest one in your stable and place it on the bench until it warrants taking a position on the starting lineup.


The problems come when a trader chases the latest hot stock or lets their field of vision widen too far. When you find an account size and a group of stocks and a few strategies that work, stick with it!!! And don't mess with it and Dance with what 'brung ya'.

I would love to have you spend a couple days with me in the Trader's Forge. As a trading coach, that is where I can do the most good for you. I train folks in the Trader Talk Live mentoring workshops each week but that training is most beneficial to the folks who have been to the two day training of the Forge. Last week was a terrific training in Tampa. This month is Denver and then on to Detroit.

I hope to see you in the online web training classes held throughout the week and soon in a two day FORGE Trading workshop.


Ryan with Better Trade

Why Should You Get Life Insurance?

Everything in life is uncertain that people should prepare for any eventuality. In fact, the only things certain in life are taxes and death. One or both of these things are bound to happen at some point in a person’s life. While taxes will always be present in every society, death can come like a thief in the night.

Sickness and death are frightening as it is. They become all the more frightening when a person has not prepared for such an eventuality. This is the reason why every person should get a life insurance.

People should always plan their finances and getting a life insurance is one way of planning their finances. Getting a life insurance is just like saving up for the future because there are life insurance policies that provide for a cash value in the event that the insurance is not used up by the person insured. Under this provision, the insured can withdraw or borrow from his insurance policy. It also means preparing for the future of the people you love in case something happens to you.

A life insurance can come a long way in helping dependents who experience the death of a loved one. When the bread winner dies, these dependents have no one to turn to but if the bread winner has a life insurance, then he is assured that he will leave his dependents with something to hang on until such time when they are already capable of fending for themselves.

Any person who has an income should get a life insurance not only to serve as a lifeline for their dependents. A life insurance can also take of the death-related expenses of the deceased including expenses for the funeral and even for probate of his will.

Some people are not as lucky as others and they will not be able to leave mansions and lands to their dependents. With a life insurance policy, a parent can now leave even a meager inheritance to his dependents or beneficiaries.

Getting a life insurance policy is very important especially for people who have dependents, particularly very young children who are not yet able to work and fend for themselves. The amount of life insurance a person should get should be based on the number of dependents he has and also on his paying capacity.

A person interested in getting a life insurance policy can choose from several kinds of insurance---the term insurance and the whole life insurance are examples. A term insurance is paid out by the insurer after the death of the insured. A whole life insurance is much more complicated and involves a lot of provisions and benefits.

No matter what kind of insurance you want to get, every person should look at the possibility of getting a life insurance. This will assure them that their loved ones would be taken care of in the event that they are no longer there to support them.