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Separate Yourself From the Pack

Hey, traders Raghee here. 

In this episode of Countdown Trader, we’re going to do a deep dive into the type of watch­list building that makes the difference, especially in choppy markets. What are those winning strategies for choppy markets?

I’ll also show a couple of interesting examples that you can model in order to build the kind of watchlist that doesn’t require that the S&P, the NASDAQ, or the DOW, go straight up to higher, highs consistently. You’ll be able to identify those pockets of the market, either at the sector level or the stock level, that allows you to take advantage of plenty of the trends that are out there, just like we’re doing in the Sector Secrets Mastery. 

So let’s get into it…

Today, we’re gonna start off with X­L­Y. 

Now, a lot of people aren’t looking at XLY because when you take a look at the chop here, you can see there’s not a lot of confidence. You can see that it’s being expressed in price in terms of the direction of the consumer discretionary sector. That’s okay, we wanna go below the surface, maybe there’s something else waiting there.

The easiest way to do this is start to look at the stocks that aren’t necessarily the heaviest weighted. They’re the ones that are likely influencing the chop… 

Take a look, for example, at the chart of Amazon or Tesla. You’ll notice that those two stocks which are heavily weighted within the XLY, look quite choppy if not quite bearish. Going down the list a little bit more, you’ll see that there are some lower weighted names like GM and Ford.

So not only have I taken a sort of a niche, the automotive within the XLY, but I grabbed two of the biggest names that have two of the best uptrends. In this case, now that I’ve dug a little bit deeper, we call this a sub market.

This is Sub Market Sonar…

We’re pining away at opportunities that may not seem obvious to the market at large, because they’re looking at the index level, the sector level, maybe not a few stocks below the heavily weighted headline catching names within an ETF. 

That’s where we emerge with GM and Ford, again, taking advantage of a niche. 

Here in this case, we bought Ford on a pullback, for $1.­45 per option for the June 11 calls. So $145 or 1.45 points. On the 12th, this was worth $2.80, almost a 2X move. 

I think we’re gonna have another opportunity to do this trade all over again. So then, what about the counterpart here, GM? 

As a reminder it’s so important to capitalize on the secret of options trading, which is to use momentum to your advantage. Never pay for it, but you can collect on it. That’s not the conversation we’re having here but make sure you’re not paying for that momentum. 

So, on a pullback, we bought GM for $5.35, $535 for the 18, June, 50 calls. 

Then on the 12th, that 50 call that we paid $535 for was worth $1140 (that’s the same day that we were looking at Ford).. That was, again, almost a double, and then just a couple of days later, you saw it surge.

I’m not even grabbing this high on the 18th, but we’re talking about the 17th where we had a nice bullish momentum. 

Learn to capitalize on momentum…

So, if there’s anything that we do differently, you’re seeing two of these factors at play right now. Again, most traders are looking at the same symbols, we’re looking at the same trends.

What’s the difference between a trader who can take a $5.35 option and take it to $11.40 and $12.70? One, in fact, might be paying more and not being able to take advantage of liquidating into that momentum? Timing gang, it’s timing.

When you get your watchlist, focus on trends, and then you can capitalize on timing. You’re putting those two factors together and that will separate you from the pack because most traders are doing the exact opposite. 

I hope this helps. I’ll see in the next update.

1 thought on “Separate Yourself From the Pack”

  1. Nice layout there. Again you show the same hammer (grabbing a pullback) hitting a different nail. In this case the sub prime members of a major sector fund, so plenty of interest, good volume and moving nicely while the rest of the market and even the prime weighted stocks are caught up in the chop festival.

    The logic and consistency of your advise can only come from a long term survivor of the game and it is a Zero hype no bs key to success.
    Thanks again for all your doing to hammer these lessons home.
    AircondGypsy

    Reply

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