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Big 3 Combo

There are 3 things that need to come together to match the criteria of my favorite options trading setup. Since taking trades with this strategy, I’ve been able to uphold an 80%+ win rate in a “messy” to say the least market environment. The alerts for these trades were sent to members of the Compounding Growth Mastery and/or the Simpler Central room.

As we walk through this simple 3-step checklist, we’ll review the tools and settings needed on your trading charts. There are a few simple tools that you will need to execute this strategy.

 

UPDATE: Big 3 Heat Map

I put together a “Big 3 Heat Map” that helps us confirm signals across multiple timeframes at a glance. While I can’t share the proprietary Big 3 Heat Map, I created a free “Moving Average Heat Map” for our subscribers that might not have the Big 3 indicators.

Here’s a flexible grid for the MA heat map: http://tos.mx/NDnDM3X

 

Daily 21 Exponential Moving Average (EMA) a.k.a. “Daily Mean”

The daily 21 exponential moving average (EMA) is vital as this will act as our entry point (and the first step of our checklist).

First we’ll need to review the concept of reversion to the mean: understanding that stocks generally make a move from the daily 21 EMA and typically make 2 average true range (ATR) moves away from there. As the stock approaches 2+ ATR, there is a growing probability that it will revert back to the 21 EMA.

Below you’ll find the settings for adding the 21 EMA:

 

Keltner Channels

We’ll need to add keltner channels to our charts to measure average true range moves above the 21 EMA. 

Note in the screenshot below that the grey lines are 1+/- ATR moves away from the 21 EMA, and the red lines are 2+/- ATR moves away from the mean.

 

Keep in mind that you can adjust the colors of the lines by clicking on the “Upper_Band’ and “Lower_Band” tabs.

 

 

Now that you have the 21 EMA and keltner channel extensions added to our charts, you can look at stocks and see how price will move from the daily 21 EMA, head toward 2+/- ATR, and revert back to the mean. 

Take a look at an example of this on NVDA below.

Our goal is to catch the push from the daily 21 EMA to 2+ ATR. Think of the daily 21 EMA as our “launching pad.”

 

Big 3 Indicator

The next tool you’ll need to execute this strategy is the Big 3 Buy and Sell Signals indicator. This innovative indicator combines a number of factors that measure trend, structure, and momentum to guage the path of least resistance. 

The Big 3 indicator helps signal when a setup is bullish or bearish, when and where to get long or short, and when to GTFO (Get The Funds Out). With the proper tools, we should be able to gauge whether a setup is worth our time (for longs or shorts) in a split second.

If we’re wanting to get long, we’ll look for Big 3 buy signals (a green arrow) on lower timeframes, whether that be a 15-min or 30-min chart, etc. We are finding the moment in time where trend, structure, and momentum come together to trigger a lower time frame Big 3 buy signal. This serves as our entry signal that takes us to +2 ATR on the daily chart.

For an even deeper dive on the Big 3 signals, check out my 4-hour+ training course breaking down how to pinpoint clean setups and avoid weaker trades. (And get a quarterly membership to the Compounding Growth Mastery when you sign up for the Elite package)

 

The Big 3 Squeeze

As a big fan of the squeeze, I modified the original squeeze with the Big 3 Signals and created my Big 3 Squeeze. The Big 3 Squeeze helps answer the common question with the squeeze, “Which direction is the squeeze going to fire?”. 

The Big 3 squeeze’s histogram labels show us when a setup is considered A+ for a possible entry. And with the help of the Bull and Bear score labels, we can see which direction the setup favors, the bears or the bulls.

You’ll see on the COP screenshot below how the Big 3 Squeeze works. The histogram will turn green for an A+ Setup, this means it’s hitting my criteria for what I think is an A+ trade. The bull score label is at 5, which is the best number, and the Big 3 is giving us a green buy arrow plus green arrows on the histogram. This makes for the perfect opportunity to go long.

 

This is another example of a trade I took with my Compounding Growth Mastery members on AMD.

I bought a put debit spread looking for the daily bear squeeze to fire shortly into $104ish. In this example, the Bear Score label showed a 5, which is the highest number for the histogram, meaning a good short could happen. It also had multiple squeeze labels red on multiple time frames, indicating a possible move lower. On top of everything else, the Big 3 Squeeze A+ Setup label being red and red arrows on the histogram, this was the perfect setup to head lower on AMD.

New Big 3 Squeeze Indicator & Setups

Other Tips to help you out:

Step 1: Find a stock trading right above the daily 21 EMA.

Step 2: Find Big 3 buy signals on lower time frames. 

Step 3: Match those lower time frame buy signals with lower time frame squeezes.

 

Tips before you go:

• Do not get long below the Daily 21 EMA. 
• Look for lower timeframes to change from neutral to bullish Big 3 signals (yellow to green).
• The goal is to get an entry as early as possible once the signals pop up.
• The same principles apply to the downside, just flipped.

 

I hope you’ve enjoyed this break down of how to apply the Big 3 indicator to one of our favorite options trading strategies. If you have any questions, reach out to our awesome support staff at [email protected] or 512-266-8659.

Stay Focused,

Focused Trades

 

Certain trading events happen every quarter. As traders, it is our job to understand what these events are, how they impact the market, and how we as traders (especially shorter-term traders) need to change our game plan, mindset, and execution based on these events. 

To find these major events in the market and when they happen, here is the 2022 Nasdaq Trading Calendar. 

One major event is Options Expiration (OPEX). During OPEX weeks, option-open interest reduces as near-term options approach expiration and then expire. OPEX is one week before options are set to expire, the Friday before every third Saturday each month. OPEX weeks are usually extremely volatile. Expect options premium to get crushed, so choose strikes wisely.

Our next major event is SPX Roll. Find the dates of this event on the CME Group website. SPX Roll occurs every quarter. Big money has to roll out to further expiration because the options futures contracts and the context they are playing are set to expire. This creates large pops and drops in price action in the market.

Another event is Quad Witching, which happens on the third Friday of March, June, September, and December. Quad Witching is when market index futures, market index options, and stock options expire once every quarter. Quad Witching can create false signals, traps, and premium crushing on options. In turn, this leads the market to liquidity.

The last event we will cover is Rebalancing. This is when large funds readjust their portfolio to match their risk tolerance and stick to their investment plans. Rebalancing includes the buying and selling of portfolio assets to help balance risk. This creates large pops and drops in the market, leading to more trade opportunities.

Trade live with me in the Day Trading Room and take advantage of potential opportunities when the market is making large moves.

Stay Focused!

 

 

We’re waiting for Big 3 sell signals to appear on the S&P 500 (SPY) as it has a negative moving average crossover, with the daily 21 exponential moving average (EMA) below the 50 simple moving average (SMA).

The Russel ETF (IWM) has a negative MA cross but was able to hold support on Friday.

The semiconductor sector (SMH) has both a negative moving average crossover and daily Big 3 sell signals, taking out recent support last week. This points toward the market gearing up for a move toward the June lows.

HYG has negative Big 3 sell signals, indicating the market will likely head lower. The DXY has a daily squeeze looking poised for a breakout, which would ultimately send the market lower as well.

Keep in mind on Wednesday we have the FOMC statement, where Federal Reserve Chairman Jerome Powell will give a Fed update.

The market will likely head toward the June lows, but we could see a bounce.

Price on the SPY daily chart is at -3 average true range (ATR) moves and is very oversold on the SPY hourly chart. This means there is a potential for an oversold bounce. Ultimately, if SPY can’t find support at the $390 level, the market will roll over to the June lows.

In the video above, we’ll review potential trade ideas we’ll look to enter in the coming weeks, the conditions on various sectors, and our recently closed positions and bigger-picture account growth in the Compounding Growth Mastery.

Stay Focused!

 

 

The S&P 500 (SPY) gapped down below a key level of support at $390. Now, we’re looking for the market to take out the June and July lows.

The Nasdaq (QQQ) took out the $290 level and is heading toward the June lows.

This gap lower dragged big names lower like AMZN, GOOGL, AAPL, and TSLA, which is important as these names have a large weight in the overall market.

We’re seeing negative moving average crosses that we’ve been discussing as of late. This occurs when the 21 exponential moving average (EMA) crosses below the 50 simple moving average (SMA).

For example, the QQQ daily chart is showing a negative moving average crossover with bearish Big 3 sell signals from the daily chart down to the 5-min chart.

The SPY daily chart doesn’t have a Big 3 sell signal yet, but there is a fresh negative moving average cross.

What appears unlikely at this point is if the market can save itself from here.

The market is oversold so there could be a bounce toward previous support, but we highly doubt it’ll be followed by a bullish trend to the upside. Most likely, any bounce will be a short squeeze.

Want to trade my A+ setups together? Join the Compounding Growth Mastery where I send real-time trade alerts, deliver daily market updates, and host live trading sessions. Start out with a 30-day trial and see what it’s all about!

Stay Focused!

 

This stacked week of catalysts isn’t over yet. There were multiple reports released this week including the Consumer Price Index (CPI) report on Tuesday, the Producer Price Index (PPI) report on Wednesday, and Initial Jobless claims on Thursday.

Heading into Friday, we are still dealing with market events from earlier this week. SPX Roll, SPX rebalancing, and Triple Witching end on Friday.

The S&P 500 (/ES) hit the top of the zone at $4,167 on Tuesday. After the CPI report, /ES had a major drop to $3,930. With /ES at a major structure and market events to end the week, we want to be cautious on Friday.

If /ES stays under $3,930, my first target is $3,900. My second target is $3,878. Although I’m not currently bullish, we want to stay open-minded. If /ES gets above $3,930 and breaks structure, my next target will be $3,955.

My main focus this week is trading SPX. Watch the video above to see which key levels and structure I’m noting /ES.

Join me live in the Simpler Day Trading room and try a one-week trial. Tune in to trade even more of my setups, as well as look for more potential opportunities in the market.

Stay Focused!

 

We have a week stacked with catalysts. Two major events to keep in mind are SPX Rebalancing and Triple Witching on Friday. 

There are multiple reports being released this week, all at 8:30a.m. Eastern. The reports were focused on are the Consumer Price Index (CPI) report on Tuesday, the Producer Price Index (PPI) report on Wednesday, and the Initial Jobless claims on Thursday.

The S&P 500 (/ES) bounced at its support structure at $3,900 and rallied. See if /ES pulls back to $4,081 and pops toward the top of the zone at $4,101. If /ES breaks $4,101 my next target is the next zone at $4,153.

With /ES gapping into Monday’s session, it could fill the gap to the downside toward $4,074. If /ES fills the gap at $4,074 and doesn’t hold $4,059, my first target is $4,042, the 50-day simple moving average (SMA). My second target is at $4,013.

The first setup on our focus list is SHOP. After announcing news of executive changes, it reversed through its downside structure at $31 and rallied toward $35, the 50-day simple moving average (SMA). See if SHOP pulls back toward the daily 21 exponential moving average (EMA) at $33 and holds. If SHOP pops and breaks through $35, my next target is $37.

The next setup I’m focusing on is NVDA. NVDA ended Friday at the $143 gap fill. See if it pulls back to the low of year at $140 and bounces toward $143. If NVDA breaks $143, see if it pushes through $147 and finishes the gap fill at $149. 

Join me live in the Simpler Day Trading room and try a one-week trial. Tune in to trade these and even more of my setups, as well as look for more potential opportunities in the market.

 

Stay Focused!

 

 

The market finished the week with a rally on Friday. Now the question is… bulls or bears? In the video above, we’ll create a scorecard that outlines the bigger picture structure we’re seeing and what this means going forward.

The bulls took charge last week, and the lower timeframes made serious improvements. The SPX closed above the daily 21 exponential moving average (EMA) on Friday, and the hourly chart traded at 3+ average true ranges (ATR) above the mean.

As for the bears, DXY has a daily Big 3 buy signal and is holding support at the daily 21 EMA. If DXY starts moving toward the highs near 109 and 110, there’s a strong chance that this may be the end of the rally for the market. If instead DXY drops toward the 50 simple moving average (SMA), there’s an opportunity for the market to keep trading higher.

While we have seen a 3-day rally in HYG, it has a bearish structure trading below the daily 50 SMA and printing daily Big 3 sell signals.

These rallies can be tough to sit through, but if the structure doesn’t change, it’s just a shortable bounce. Take SMH for example. We’re seeing a negative moving average crossover and four daily Big 3 sell signals. At first glance, it looks like SMH is making a big move higher but it’s just a short squeeze, for now.

In the video above, we’ll rank our “Bulls vs. Bears” scorecard for the week, analyze the different sectors, and review other names on our focus list including our new position on ENPH.

Stay Focused!

 

 

We had a nice pop in the market on Friday with signs that the lower timeframes are overbought.

We’ll review our open SPX 4100/4125 call credit spread for October expiration and our game plan moving forward in the Compounding Growth Mastery.

The S&P 500 (SPX) has a 5-min Big 3 buy signal with the hourly 21 exponential moving average (EMA) above the 50 simple moving average (SMA), a bullish moving average crossover. From the ground up, the lower time frames have improved. Keep in mind, though, this is all taking place where the market could get rejected and roll over.

When the market is oversold, we see fast and furious short squeezes. Things have improved so quickly that these lower timeframes are slightly overbought. The SPX is approaching resistance as it is trading at 3+ average true range (ATR) above the hourly 21 EMA.

Next week, we’ll see if this was just a rally to the daily 21 EMA or if there’s more upside momentum left in the tank.

Let’s see if the lower timeframes flush and hold support, letting the bulls take the market higher. If instead we see a flush and the lower timeframes further break down, see if the bears bring the market back toward the lows.

In the video above, we’ll also review the QQQ (Nasdaq) as there are two daily Big 3 sell signals printing with a negative moving average crossover.

Keep an eye on your inbox for the Sunday newsletter where we’ll put together a scorecard of the big picture for next week along with review our newest trade on ENPH.

Stay Focused!

 

 

With one more trading day ahead this short week, let’s make it a good one.

On Thursday, Federal Reserve Chairman Jerome Powell held a conference with little news to affect the S&P 500 (/ES).  Keep in mind last week’s negative news of Russia’s Nord Stream Oil production cut, although there hasn’t been much development.

After making its way toward structure at $3,900, /ES stayed above $3,980 and hit the top of the zone at $4,013. With major levels ahead, see if /ES can continue to stay above $3,980. 

If /ES stays above $3,980 my first target is the top of the zone at $4,013, and my second target is $4,023, the 50-day simple moving average (SMA). This would lead /ES to the bigger picture structure above. Let’s see where the market guides us.

With technology lagging behind, see if the Nasdaq (/NQ) continues to hold the Point of Control (POC) at $12,007. 

My favorite focus list setup this week has been NVDA. See if it continues to head toward the low of the year at $140 and fails toward $134. If it can get through $140, NVDA has the gap fill above from $143 to $149. 

The next setup I’m focusing on is SHOP. With SHOP announcing news of executive changes, it broke above structure at $31. See how this affects the stock this upcoming week. If it continues to hold $31, see if it heads toward $33, the daily 21 exponential moving average (EMA). 

Join me live in the Simpler Day Trading room and try a one-week trial. Tune in to trade these and even more of my setups, as well as look for more potential opportunities in the market.

Stay Focused!