Profit Taking ahead of FOMC with added selling after AMD and SMCI reports.
How will markets react to FOMC today
Good morning traders!
Yesterday I said I wouldn’t be surprised if we got profit taking and I want to walk through the process of planning that trade which leds to 10-20x+ gains at the close.
Overnight we had AMD, SMCI, and AMZN report with the first 2 flushing and AMZN so far holding up pretty well.
Many of the names that have sold off have reported beats but lower guidance than expected so what is go on with all the selling. IMHO, the market is technically setting up to flush. With inflation fears back and risk-free interests rates back near highs why not take profits off? At least that appears to be the theme and story now developing.
Last week’s bounce was into th 508-510 area that I mentioned was where I wanted to restart my short swings after the initial drop.
Let’s get into yesterday’s acton and some ideas for today.
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What is Two Hour Trading?
It’s my system for finding and executing trades while spending less than two hours a day trading. My goal is to earn 100-300% on the capital I risk while waiting for 1000%+ gain trades to setup. Key benefits:
High Quality trades with great reward vs risk
Avoid Overtrading and losses from it
Trading to Win vs Trading to Not Lose
Stacking the deck in your favor
2024 Alert Leaderboard
(I’ve decided to include a leaderboard so you can see what potential the 2 Hour Trading System has)
The following is based on entry alerts.
Apr 30 - SPX 5080p $3 —> ($3000 → $45000 potential)
Apr 23 - SPX 5060/5055 bull puts - Entry $1.75 ($1750 premium potential) drawdown < $200
Apr 22 - SPX 5050c swing - $5.50 → ($5500 → $42000 potential)
Apr 22 - SPX 5000c - $3.20 → ($3200 → $39000 potential)
Apr 22 - SPX 5020c - $0.20 alert, dipped to 0.55, fill at $0.70 → ($700 → $20000 potential)
Apr 19 - SMCI 750p - $1.50 → ($1500 → $38k+ potential)
Apr 19 - NVDA 800p - Entry $0.5 ($500→$40k potential)
Apr 18 - SPX 5050c - Entry $6 ($6000→$16000 potential)
Apr 18 - SPX 5020p - Entry $4 ($5000→$20000 potential)
Apr 16 - SPX 5140/5135 bull puts - Entry $2.50 ($2500 premium potential) drawdown < $300
Apr 12 - SPX 5100p $1. (dipped to 1.30) - Entry $2 ($2500 premium potential)
Apr 11 - SPX 5180/5185 bear calls - Entry $2.50 ($2500 premium potential)
Apr 10 - SPX 5180/5185 bear calls - Entry $2.50 ($2500 premium potential)
Apr 10 - SPX 5170c - Entry 0.50 ($500 → $5000 potential)
Apr 9 - SPX 5185/5180 bull puts - Entry $3 ($3000 premium potential)
Apr 9 - SPX 5205c - Entry $0.50 ($500→ $6000 potential)
Apr 8 - SPX 5225/5230 bear calls - Entry $1.20 ($1200 premium potential)
Apr 8 - SPX 5200/5195 bear puts - Entry $0.10 ($1000→ $8000 potential)
Apr 4 - SPX 5250p - Entry $4 ($4000→ $100k potential)
Apr 4 - SPX 5180p - Entry $1.30 ($1300 > $32k potential)
Apr 3 - SPX 5175/5170 bull put - Entry $1.50 ($1500 premium potential)
Apr 2 - SPX 5175/5170 bull put - Entry $1.50 ($1500 premium potential)
Apr 2 - SPX 5205/5200 bull put - Entry $1.50 ($1500 premium potential)
**Past Performance is not indicative of future results
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Tuesday’s Price Action (Education)
You don't try to make $100,000 ...You don’t start by saying, I’m going to make the biggest most profitable trade and turn $1000 into $100,000 and fix all my bad trades before.
You say, I’m going to plan and execute 1 trade as perfectly as I can today. You do that every single day, and soon you'll have a $100,000 and likely much more!
SPY/SPX
Waiting for the first hour worked well again. We saw triple tops in first hour got short on vwap break, there was then the rip back over vwap triggering a stop. no problem. on the break back below vwap we try again because that pop was a lower high and we add on the break of the peachline. Our entry at 3 ran to 16 and I was out majority with solid gains working about an hour. :)
In the afternoon we could see how if selling continued we should flush in to 502. The next level below and that is exactly what happened.
The equivalent level in SPX was 5035. I tried to get SPX 5060p for 0.20-0.50 but ended up chasing it at $3. These ran to $30+ and 5050p went from 0.20 to $12!
So how does one plan these? For the afternoon the key is to ask yourself, which level is it going to next and what is a good risk/reward price to enter if it get/there. that simple. As long as SPY didn’t reclaim vwap, we want to plan downside.
So for 5060p, if we got vwap test I would have got my 0.20-0.50 fill, but it’s ok to enter anywhere under 2.50 and I stretched it to 3. Why 2.50? That gives me a 10R trade if right! if taking end of day yolo I want a minimum of 5-10R.
TSLA
I was looking for this to hold up and took swings, that got demolished. I broke my 50% loss rule and paid for it. Given the recent rally, with clear eye the short was the way to go and wait for 170-175 for a trade to setup again instead expecting a day 2 move. Sorry folks.
SMCI
Yesterday the scanner picked up on a $3m 850p bet. I found that interesting.
So after the report came out I watched the price action.
You can see how 2 levels above tested, rejected, we then flushed into 800 and then popped back on 850-855. I alerted to members I’m taking commons short at 855 with a target of 760. You can see we not only got to 760 but we flushed right to the 737 level. Guys, use the levels I provide as a guide to plan trades! Don’t need to guess about what to do where.
Step 1. Plan the Trade
Step 2. Look for price action to confirm thesis and enter
Step 3. Take profits as each level is met and raise stops.
That’s it. No guessing, no trying to be a hero. Just be systematic.
Trade Ideas - Plan for Wed May 1
Stick to process. The process and trade setups I teach works. Rinse and repeat over and over again. There will be losses. Any good system will have them. Being systematic also means the gains will repeat and come again too. If you keep changing your system/process trying in an effort to never lose a trade, you will never get to where you want to go.
Going to be a busy day, but I will likely take morning off and wait for FOMC and trade after 2:30pm.
My focus today: SPY, SMCI, TSLA, COIN
Overall, I don’t have any idea how today will play out. If we stick to process. Given the gap down, my preference would be to look for gap down reversal trade setups, however if supports break deeper selling can come.
With FOMC today, contracts will be juiced and unless IV is under 15-16% on SPX contracts Currently 26% I will avoid trading. Experience has taught me I can be directionally right but with high IV, I have more risk and the gain is limited.