I laid out a plan for my Bullseye Trade of The Week —before the market opened on Monday.
I sent out the following email to Bullseye members:
Why am I bringing this trade up?
Because it’s chock-full of teachable moments.
In fact, if you look above, you’ll see that I laid out my analysis along with my plan on how to execute the trade, which included the entry, target, and stop. I even mentioned a level to add more, if need be.
And the results, well, they speak for themselves:
Now, congrats to them, and to anyone else who took the trade with me.
If you missed it, all I can tell you is my next Bullseye Alert is coming Monday.
However, until we wait, I want to give you a detailed breakdown of this WDAY trade. I love this setup, and it’s one that I scan for often.
It made a lot of Bullseye clients money, so I know it’s not hard to learn if you just give it some time.
Scanning through the stocks
Way too many traders try to look across every stock that’s out there. They hold this false belief that looking through every chart finds them the perfect/best setup.
In fact, it does the opposite. When you try to look across every stock you lose focus. Your ability to really understand a particular equity diminishes. It removes the artistic component of trading.
Excellent traders only look at a few different stocks. I keep an ongoing watchlist that I send out to Total Alpha members. Like myself, I want them to focus on getting to know a few stocks intimately.
I heard that one guy became so familiar with IBM, he could tell when the market maker went to lunch!
Nathan Bear wrote a great article on this subject a while back called Slim down your watchlist with this trick. He knows the importance of focusing on a small list of stocks, which for him are momentum stocks.
Nate loves trading ROKU so much he actually wrote an entire article on the company!
Look for your setups
When I look for potential trades, I have several different ‘setups’ that I’ve discovered. Over the years, I found the 13-period simple moving average, 30-period simple moving average, and the 200-period simple moving average as keys to determine a stock’s bias.
I start by looking for stocks that have a clear uptrend but pulled back and look like they might want to resume their trend.
Here you can see the daily chart uptrend in WDAY.
WDAY daily chart
Notice that there’s a clear bullish bias, even though the stock pulled back. In fact, the stock retraced right to a trendline that supported price the last few years.
That makes this a good zone to look for a reversal.
Then, I broke down the chart to the hourly time-frame to see what I could find.
WDAY hourly chart
In the hourly chart, I see that the stock continues to make a series of higher lows, while the highs remain about equal. This creates compression in price, which often leads to breakouts.
Next, I noted that price began to trade above all three moving averages and consolidate. This let me know that it had short-term strength. When stocks hover above the important moving averages, it means traders keep stepping in and buying.
So now that I found my stock and setup, I needed to structure the trade.
Picking my spots
Newer traders struggle to get into and out of trades. They don’t know the right spots and tend to come up with fuzzy targets.
That leads them down a path of blowing through their stops on losing trades.
Picking your entries and exits should be driven by the chart in front of you, nothing else.
Working with the hourly chart, I expected the trade to play out within a week. So, I went with options that lasted twice that long.
Next, I modeled what the price would be right around $164, or the 200-period simple moving average.
That gave me a price of $3.50 on the option strike for $165. If you don’t want to calculate the actual price you can just wait for the stock to hit $164 and shoot for the best price at that time.
Now, my trade relied on a chart pattern I saw. If that pattern broke, the trade was over. So, I set my stop down at a daily close at or below $160.
Lastly, I wanted to allow myself the chance to scale-in additional shares if needed. The chart showed additional support at $163, so I picked that level to add.
But I wasn’t the only one getting in on this action…
It’s really that easy
Trading doesn’t need to be complicated. It just takes practice. And there’s no better way than learning from the best.
That’s why I created Bullseye Trades. I wanted to share what I’ve learned that made me a multi-millionaire trader with my members. You learn exactly how I place my trades every day.
Not a member, and would like to sign up, then click here to get started.