First Swing Trade of the year netting us a massive +95 % return
This was a great start to the new year! We took a 6-day Swing trade on $GOOG calls and netted a 95% return. This was a very predictable and low risk trading setup. We swing traded $GOOG stock option contracts. Throughout this blog post we will explain our trading setup and Market sentiment. Please let us know if you like this blog and would like more!
Lets break down the trade
We were watching $GOOG for many days for a trend reverse. You could see $GOOG sold for 8 days straight but the selling was not panic selling, more of a controlled healthy pullback into a significant support level. This is also most known as a bull flag pattern.
Our 3-points of interest
First let’s talk about risk-management, referring to our go to 3-points of interest system!
On this specific trade setup here were our 3 points of interest:
1.) Our Entry:
Our Green line / entry was at $1,050.61, at this level we expect the stock to breakout and make a move to our expected profit target.
2.) Our Expected profit target:
Our White line / expected profit target was located at $1,079.01. This is where we expected the stock to run into resistance and possibly pullback.
3.) Our Stop Loss:
Our yellow line / Stop loss was placed at $1,044.46 as this is where we were holding support for multiple days, we knew long positions were being built at this level, so if we did not hold this level further we knew the trend would not be in play.
We risked approximately $6 to potentially make $19 +.
Finding correlation in the market
$GOOG sold for 10 days straight, you can easily tell they were healthy sells, not panic. At this time, we had to evaluate the overall market and find correlation. Because of the upcoming holiday season, we knew the market would trade light volume. The market was trading light volume and non-direction. We call this time for $SPY a resting period. Bulls are holding the market up but are not heavily re-investing, but consolidating to make a bigger move.
You can see that ½ was the day both $SPY and $GOOG made there moves. $SPY broke its $268 resistance level, allowing the market to go from a consolidation sentiment to a directional and powerful bullish sentiment. Understanding $SPY needs to move first, then $GOOG we knew we had both working together, causing a massive directional bullish breakout to occur. At this time with our 3-points of interest in-tune, it was time to take advance of the stock market’s volatility, breakout, and direction move!
Every time there is a multi-day consolidation it is very exciting as we know the market is resting and getting ready for a big move. During this market sentiment we knew that volume was light, bulls were resting, and bearish traders were nowhere to be found in the market. With that you always know once the bullish traders wake up you can expect a multi-day breakout!!!
We have now re-invested these 95% ROI profits into another swing trade, a little longer-term setup but when it works the trade will provide HUGE returns. Can you guess where we placed our profits!?!?! If a swing trading member you will see our new open position via the open positions tab!
Let's find the next low-risk, high-return swing trade!
This post first appeared on Why Should I Invest In The Stock Market?, please read the originial post: here
