Will today lead to a 2nd red day? FOMC minutes and CPI tomorrow. Trade ideas for Tuesday Oct 8, 2024
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Good morning traders!
Yesterday we dipped a little more than I planned in the afternoon. I was waiting all day for a dip and rip off SPY 568 but that broke and we dipped sub 567! I was able to scalp the action but it was hard to plan and postion for in the heat of the moment. It’s not the kind of action I “enjoy” trading though we caught fast 100-200% gains on.
I didn’t perform well on SPX trades imho in the sense that i anticipated 568 but didn’t monitor put contracts to get that goal. It’s a shame, because the SPX 5700p did 14x while my goal on it would have been 5x. When I first had the idea I think they were $5-6 and I didn’t think they would get so cheap and I got enamored with shorting PDD via 145puts and getting long on SMCI.
What’s amazing is that even being wrong about the reversal off 568, by planning at key levels to take action I was able to scoop SPX 5720c for $1.20. (I was trying to fill for $1) and then seconds if not a minute later it popped over $3 for fast profits! I unfortunately only sold 70% over $2.5 and meanwhile flipped into 5690 puts as 568 started to break for $3 and selling for $9 minutes later again. The contracts ran to 14 or 15 I think, but it was unplanned, and I was worried about a failed breakdown reversal coming so I took the fast gains.
Let’s go over the action…
Monday’s Price Action
The day essentially started out slow. we gapped down and were able push back over 572. This made me think that 569.50 would be tested and in an ideal world we get a dump into 568 and then a reclaim over 569.50 for a close around 570-571.
After reviewing the chart Monday night, I realized I failed to recognize the coiling short pattern that was developing all morning. I did however realizing we were coiling and decided to wait for 2pm to open any SPY related trades. While coming back to trade at 2pm was profitable, if I planned better it would have been wildly profitable (I get pissy and annoyed with myself when I miss a plannable 5-10x trade)
So overall on Friday we had a hangman candle formed and yesterday we got a bearish follow through. The question today is will we continue with another red day? Will SPY test or break 565 today?
The challenging part on yesterdays actions was that bips were strong and running most of the day/morning. SMCI is setup to clear 50 today. Chips usually lead but meanwhile, META, AAPL, and MSFT were all dumping. We had some divergence in behavior. Overall the action implies volatility ahead as can be seen by the spike in UVXY and VIX.
PDD I took 145p for $2.35, it dipped to 2.05 and while grinding higher continued to hold the bid. which was strange considering the 160c had gone from $2 to $3+ by the close.
Tuesday Premarket Action
SPY tested 566 in after hours and 567 in premarket and is testing 570 as I’m writing this blog. We now have a 2 level gap up, if 570.50 tests and fails, I like puts for a 2nd red day.
PDD and other china names sold off overnight. Explains why the 145p held their value. Also. remember how I said 150-152 was a possible short spot on PDD? I thought they invalidated the idea, but it came back alive after the upgrades. (many times upgrades can be take profit signals) and one needs to wait for a reset to get long. PDD tested as low as 132 overnight and now at 140-141.
NVDA and SMCI rallies were the stars of yesterday action imo. Especially SMCI. watch for 52-54 as possible target if the 50+ break out is real. Currently over 50!
Thank you RJ for your call out on SMCI.
These were 0.24 at the time of the alert and ran to 1.65. I ended up chasing at 0.40-0.55 and selling for 1.20+
Let’s review the trade signals in SPY and go over ideas for today.
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Two Hour Trading is 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 set up. Key benefits include:
High-quality trades with excellent reward vs. risk
Avoiding overtrading and losses from it
Trading to win vs. trading not to lose
Stacking the deck in your favor
2024 Q4 Alert Leaderboard
Here's a look at some of the potential gains achieved through our entry alerts:
Oct 07 - SPX 5720c $1 (dipped 1.20) → $3.30 ($1200 —> $3300 potential)
Oct 07 - SPX 5690p $1.50 (dipped 1.55) → $10.50 ($1550 —> $10500 potential)
Oct 07 - PDD 145p $2.35 (swing) → $?
Oct 04 - SPX 5700p $5 → $15.50 ($5000 —> $15500 potential)
Oct 04 - SPX 5730c $6 → $23.90 ($6000 —> $23900 potential)
Oct 04 - SPX 5740c $1.50 → $14 ($1500 —> $14000 potential)
Oct 04 - SPX 5750c $1 → $5 ($1000 —> $5000 potential)
Oct 04 - OXY 55c $0.35 → $0.80 ($3500 —> $8000 potential)
Oct 04 - META 595c $0.12 → 1.90 ($1200 —> $19000 potential)
Oct 03 - SPX 5655p $1 → $5 ($1000 —> $5000 potential)
Oct 03 - SPX 5690c $2 → $14.20($2000 → $14200 potential)
Oct 03 - SPX 5695c $1-2 → $9.80 ($1500 → $9800 potential)
Oct 03 - NVDA 125c $0.55 (swing)
Oct 03 - XOM 123c $0.22 (swing)
Oct 03 - OXY 55c $0.33 (swing)
Oct 03 - PDD 155c $1.20 (swing)
Oct 03 - SPX 5720/25 bear calls $2 —> 0 (risk $500 to collect $2000 premium)
Oct 02 - SPX 5700p $2.50 → $8.50 ($2500 —> $8500 potential)
Oct 02 - SPX 5720/25 bear calls $2.50 —> 0 (risk $500 to collect $2500 premium)
Oct 01 - SPX 5720p $3 → $12 ($3000 —> $12000 potential)
**Past Performance is not indicative of future results
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Trade Recap for Monday Oct 07
GOLD BOLD ITALIC = price action signal
GOLD REGULAR = action to take/taken
GREEN REGULAR = trades I should have taken
SPY / SPX
Be sure to review the Price Action Signals above and the actions taken. Notice that due to coming back late from lunch I was ill prepared to go short at great prices. that 2nd Green Short spot, was where 5700p could have been loaded for cheap! for 10x gains.
Also notice that I stuck to plan to get long as soon as the fast drop into 568 happened and there was an equal fast pop in the same candle which the led to more selling. I missed the 1.50/1.55 short entry on 5690, but once I recognized we could flush, just into 56903 for $3. Again that was rewarded with a fast big move to $9. And that was mostly good enough for me. I end up overtrading for small gains and losses into the close.
The big take away from the chart and what I could have done better is taken 5720p for $4-5 and sat on it all day. or SPX 5740/45 bear calls. which were $1 and went to 0.10 by lunchtime.
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Education - How to Join a Strong Trend
The process I typically follow for joining a strong trend are as follows:
All day grinder: join on dips to 20ma
Multi-day grinder:
Join either on support test of morning lows/failed breakdown reversal
Join at vwap mid day or end of day
Keep it simple. Don’t chase, wait for support levels for great risk/reward entries!
Education - Systematic Profit Taking
How do I take profits? I keep it relatively simple. Depending on the entry and range to the next levels I typically with take profits 50-100% of my profits at 3-10R and then raise stops to above entry with a goal of letting runners take me to the next level or 2 and to then reload if I believe we are consolidating before the next leg.
I then repeat the same process on the reload.
Let me know in the comments if you have questions or would like to see examples, I’ll share them.
Trade Ideas - Plan for Tuesday Oct 08
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.
Ideas
Watching SPY, PDD, SMCI today!
Overall was thinking if we open near 566 I want long, but here at 570 I’m leaning bearish.
Let’s go over the ideas…