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In today’s video, we’ll lay out a road map and analyze what could occur in the week ahead. Last week the Federal Reserve event caused a decent selloff and began this drop in the S&P 500 (ES). Regardless of the news, we want to lay out inflection points to guide us on which direction we should be focusing on. 

Our biggest focus this week is on the daily Ichimoku Cloud. It’s printing a Cloud top near the $4,600 range for the next two weeks. If the ES continues to trade near these ranges, we could see it rally back up, similar to the last time the ES bounced off the daily Ichimoku Cloud.

There are two catalysts that could impact the overall market this week – Federal Reserve Chairman Jerome Powell will be speaking Tuesday morning and the Core CPI numbers will be released Wednesday morning.

In today’s video, we’ll dive into our major focal points for the overall market that will help gauge the market’s next moves. 

Stay Focused!

Last week we saw cash rotating out of big technology, specifically the QQQ, into energy, the industrials, and the financials. This little bit of rotation has left the QQQ trading at key support, with a daily squeeze that could potentially fire to the downside. 

On the weekly chart, the 21 exponential moving average (EMA) has been the key level of support throughout this entire push, and last week the QQQ closed below it… 

If the QQQ loses this level of support at the weekly 21 EMA, we could see a nasty drop. 

Keep in mind that we don’t need to trade big technology and big semiconductors, unless of course the structure is there. Instead, let’s see what names do well with rises in interest rates.

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What an “interesting” week here for Wall Street. The Federal Reserve minutes released on Wednesday caused nasty panic selling across the board, with technology taking the brunt of it.

The weekly QQQ chart has spent the last six weeks trading in a wide, volatile range. It pushed down to the bottom-end, and as soon as it looked like the bears had control, the QQQ ripped right back to the upside.

At the close on Friday, the QQQ held support at the bottom of the range, which points toward the potential of yet another violent (for bears) bounce back to the upside. We won’t know more until Monday, but make sure to not “marry your ideas” here. If that big level of support ends up breaking, it could certainly see technology, and the market, trading lower.

Our major focus at the moment is on managing open positions as opposed to aggressively looking for new exposure. There continues to be solid structure within the semiconductors (SMH). As far as big technology goes, AAPL remains king-of-the-hill in terms of trend, structure, and momentum properties.

As goes the market, goes the stocks. Tech stocks are so heavily weighted in our market indexes that a break of support for that group could lead to downside in other groups. Our suggestion for now is to respect the importance of the QQQ and patiently wait for confirmation of its next move before jumping into new long positions. 

We’ll cover a handful of interesting setups and charts in Sunday’s video and see if our scan results can offer any clues as to where the next round of opportunity could be.

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You’ve probably heard about scalping before, but what exactly is it? 

Scalping allows you to take advantage of quick, explosive, high-percent return moves that happen every single day in the market, regardless of overall conditions. It can help a trader survive and even thrive during choppy, volatile times. Scalping can be used to hedge and manage your overall account, or can be a stand-alone strategy. 

One of my favorite aspects of scalping is it allows you to trade the market without having overnight risk or being at the screens all day. Show up, attack, enjoy life. 

Today, I want to share my go-to rules and tips when it comes to trading one of my specialties, scalping.

When is it best to scalp? 

The best times to scalp are generally in the first two hours and the last two hours of each trading session, as more volume occurs during that time. However, a great setup can unfold at any time, just be picky if there is a lack of overall volume.

How do I choose my strike selection?

When scalping options, I focus on using the same week contract expirations, as they provide the most volatility and movement in value. For strike selection, I focus on playing slightly out-the-money (OTM) and at-the-money (ATM) contracts.

What mindset do we need as scalpers?

We want to focus on percentage gains and hitting price targets rather than on dollar gains and emotions. One of the most overlooked aspects of trading is emotions, but this can also be the most threatening to your account.

Some key tips I like to remember when scalping: 

• Always respect your rules and trading plan. 
• Do not scalp in chop. 
• Wait for key inflection points and zones to raise your probability and edge.

If you’re interested in learning more about scalping, check out my Options Scalping Secrets class where I deep dive into my go-to scalping setups including how to prep for each trading session, how to find key levels and zones on charts, and how to use all my favorite scalping indicators together.

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After a choppy week to end 2021, the S&P 500 (ES) is starting the new year attempting to fire its two-day squeeze. As of now, momentum is rising but we are continuing to see compression. 

The market had a pop to start the week, but we won’t see much change in price action until we break our major inflection points. 

The ES has to break $4,800 for the market to break higher and will need to drop below $4,743 to head significantly lower. Until we break either of these points, the chop fest will likely continue.

Here is our focused list:

TSLA —  After crushing their delivery numbers on Sunday, this catalyst led TSLA to break $1,200 on Monday. We’re looking for a continuation to $1,250.

NVDA — Last week we saw a pullback to the daily Ichimoku Cloud, but NVDA held its 50-day simple moving average (SMA). It broke the 50-day SMA on Monday with the spike of volume. Look for NVDA to break above the Ichimoku Cloud top at $300 for a move to $310 and $315.

GOOGL — GOOGL is trading in daily, weekly, and two-day squeezes. On Monday, GOOGL traded below the top of the daily Ichimoku at $2,900. If GOOGL can reverse and pop through its wedge, we could see a rally to highs. Once it trades above $2,900, it will start the journey to $2,950.

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With the new year right around the corner, we want to review our goals heading into 2022. There are two aspects to working the numbers as a trader. Our goal is to maximize our win rate as much as possible while maintaining a good risk:reward (R:R) ratio.

We can maintain a “good” win rate around 70% to 75% as long as we focus on clean setups, squeezes, and trends. We then use a proper R:R of 1:1 or 1:2 to maximize these setups.

Here are a few focal points to drive home:

• Let’s say we take 100 trades per year over a 10-year span. We have a 5% position size on each trade with a 70% win rate. Over the course of 10 years and one thousand trades, the compounding annual growth rate is 150%+ per year with a maximum drawdown of -15%. Working a 1:1 ratio, we could see serious yearly growth without much drawdown.
• Instead, let’s take this with the same 70% win rate and 5% position size, but using a 1:2 risk reward ratio. Over 1,000 trades the 10-year compounding annual growth rate is 250%+ with a maximum drawdown of -6%.
• As you can see, if you can work a 1:2 R:R, we can work the numbers for serious annual growth.
• Of course at times we will have trades at breakeven, with a small profit or small loss. The major thing to drive home is regardless of position size, at a bare minimum working a 70% win rate, a 1:2 R:R ratio can compound to strong yearly gains.

We are on the right path if we maintain a good win rate, focus on the best setups possible, and aim for a 1:1 or 1:2 ratio. The key after that is to work the numbers to enter the most setups possible.

Don’t build bad habits. Focus on taking one good trade after another. For serious growth, we want to work the scans, dial in our criteria for a good setup, and work those setups to maintain a strong win rate and risk reward ratio.

When taking trades, have an exit plan in place. In the Compounding Growth Mastery, I’ll be alerting exit plans with every new trade we take to ensure we keep our optimal R:R.

Remember, work a 1:1 or 1:2 risk reward ratio and sustain a good win rate near 70% to rock and roll into 2022 with serious account growth potential.

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We’re dealing with a sideways market as we head into Friday and 2022. We’ll lay out key areas to watch that will likely translate into the new year and determine when we break out of this chop fest. 

The market ripped hard to start the week as the S&P 500 (ES) broke its previous high to create a new all-time high (ATH) at $4,784. We’ll be watching two levels to determine where the market could head next. 

Until the ES reaches $4,800 or drops to $4,766, we will likely continue to chop.

If the ES breaks below $4,766, we could see a healthy pullback and retest the ATH. If it doesn’t break below $4,766, the market will likely continue to move sideways. 

In today’s video, we’ll define inflection points and setups on our focused list as we head into the new year with a tight 2-hour squeeze and a developing 4-hour squeeze. 

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Let’s discuss squeeze setups we’re watching and prep for the last week of the year before 2022. The market chopped into the holidays due to the market events over the last few weeks. 

We’ve been focusing on the 2-day squeeze, and on Monday the market put in a reversal for a strong green day. 

Regardless of how you trade, we want to focus on the big picture and focus on the best setups to trade in the market.

Here is our focused list:

GOOGL — Printing stacked squeezes on the daily, 2-day, and weekly charts. GOOGL could revert back to the $2,904 or $2,925 levels. Once it squeezes, it could push to $2,982, $3,000, and potentially to the all-time high at $3,019. 

NVDA — Ripped through the trendline near $296 on Monday. If NVDA can squeeze and break through $313, look for the $320 to $325 range. NVDA could drop to $305 or to the trendline near $296 for a great potential pullback..

SHOP — Look for a pullback to its 200-day simple moving average at $1,380. SHOP will break above the Ichimoku Cloud if it can push through $1,400. If it can hold the $1,380 to $1,370 range, we’ll look for a dip buy toward its previous highs and potentially to $1,520. 

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Merry Christmas Eve, traders! 

This holiday season we’re grateful for your endless support, dedication to trading, and loyalty to Focused Trades. We hope to keep teaching, collaborating, and trading alongside you for many years to come. 

As a special Christmas treat, we wanted to share Taylor’s simple checklist for his credit spreads strategy.

• Focus on mid/large cap stocks
• Stock is in clean uptrend
• Must be in a weekly, 3-day, or daily squeeze
• Must be trading just above its 21 period exponential moving average (EMA)
• EMA’s must be stacked positively
• Positive momentum on Squeeze Histogram

We want you and the team here to spend the holidays with friends and family away from the charts, so we will not be sending a newsletter on Sunday, Dec. 26. 

We will post a Sunday Prep video and be back on Monday with live premarket prep as always on the Focused Trades YouTube channel to prep for the year’s end. 

Stay Focused!

The market is closed on Dec. 24 for Christmas, so it’s a shortened trading week. The market has been more difficult to trade the last few weeks as recent events have caused more volatility and chop. Because of this, we’ll want to take shorter, quicker trades this week as premiums will be taking a beating. 

Trade small, trade smart, and enjoy the week with family and friends. 

We’ll finish off the rest of the year strong and approach the market in an appropriate manner heading into the new year.

Here is our focused list:

GOOGL — On Monday, GOOGL fell below the daily Ichimoku Cloud but finished the day inside of it. As long as it holds above the Ichimoku Cloud, it’ll be inside of a weekly squeeze. Let’s see if GOOGL can hold the $2,820 to $2,823 zone and reach Point of Control (POC) at $2,863. From there, we could potentially see a boost to $2,900. If GOOGL heads lower, we could see a lot of chop. If we break $2,788, things could start to get ugly.

NVDA — NVDA traded at the Ichimoku Cloud and the $271 key level, filled the gap, and started to pop on Monday. Let’s see if NVDA will hit POC at $283.60. If NVDA can keep holding the Ichimoku Cloud, look for a push through POC and a reversion to the mean at the $296 to $300 range. We could see a nice dip buy opportunity with NVDA.

Stay Focused!