Selected Trades & Market Commentary
Recent trades are highlighted in this section along with a brief description of entry and exit criteria.
S&P 500 Long Term View
A triangular wedge typically occurs at the end of a long and sustained move.
The S&P chart shows the last significant wedge was about seven years ago.
Especially bearish in the current structure is the 'throw-over' and return into the pattern.
Unless there's more manipulation to the up-side, the take away is the bulls have exhausted themselves after years of fomenting the market higher.
ATVI Put trade for 1,400% gain
10/21/18: Price action formed a wedge over several trading days after a significant thrust lower.
An 'inside day' indicated the potential that upward corrective moves were at completion.
No fundamentals or statistical data were used for trade entry other than what price action was saying about itself:
Probability for a move lower is high.
Chevron (CVX) Put nets over 1,700% gain
Wednesday’s price action in Chevron posted a reversal bar with a slightly higher close than the prior session.
Thursday morning saw the opening in CVX gap lower into the prior day’s range; a gap that was determined in real time to be too low.
That lower open put probabilities of a reversal failure on the table.
As price was struggling higher to close the opening gap, a short position was opened with CVX 9/7, 117.00 Put at 0.18.
The trade was executed just seventeen minutes after the open at 10:47 a.m. EST. Price action made its high just five minutes later. The prior day’s reversal bar began to fail.
Once price action broke below the prior session low, it began a relentless decline into the close.
A trading channel was observed on the hourly chart of CVX (not shown) and the decision was made prior to the open today, on Friday to exit the trade based on price action.
That exit occurred just two minutes after the open as price accelerated lower into the hourly channel.
Exit price on the 117.00 Put was posted at 3.32, representing over 1,700% gain in two trading days.
GM ... How it looked before a 1,000% gain.
With the earnings report out of the way, GM (along with the entire auto sector) can continue with its on-going implosion.
Note the “evidence of a struggle”, a move lower, earnings release on 4/26, which failed to have any material effect; GM is in position to move decisively lower.
The daily chart shows our entry.
No indicators, no moving averages: Just price-bar and volume (Wyckoff).
The exit is detailed in a separate update.
GM ... 1,000%
Trading options during the week of expiration, requires that probabilities are lined up for an immediate move.
GM performed very well in this regard.
The option that was entered at 0.11, on the 30th was exited today, just three days later at 1.39, yielding a 1,164% gain.
Real time tape reading, a measured move projection (not shown) were used to identify an exit near the session lows.
Identify a set-up that has probability for a move lasting several days or weeks.
Contrary to standard pablum about ‘money at work’ in the markets, the hard unvarnished truth is the exact opposite:
Minimizing time in the market was a tenet exercised by Gerald M. Loeb, the late Vice Chairman (and co-founder) of E.F. Hutton If you're old enough to remember these commercials, then you may know they were referring to Loeb. 'When Loeb talks, people listen.'
Our results show that markets can be timed effectively.
Mylan Provides Profit and Clues
The hourly chart of MYL details the put activity over the past two sessions. Entry was made on Thursday the 22nd and exited on Friday as price action neared support levels.
MYL continued on through support and closed near the low of the day. That price action now puts MYL in spring position (closing below support).
Monday the 26th, could see an attempt to move higher. The overall (monthly, weekly, and daily) trend remains to the downside. Rising price action in a downtrend may give us another opportunity to position short.
With the public thoroughly conditioned to buy every dip in gold, upside trades on bearish reactions have a high probability.
We typically do not trade calls as there is quicker action to the downside (puts). However, this time it worked out.
3/4/18: Biotech put in February nets over 1,000% gain
The IBB Put option trade is a good example of why downside action is preferred.
While option calls may net a few hundred percent gain as in the GLD trade… puts are a different story altogether.
Using our near-expiration method, it’s one day to expiration for the 2/9, IBB 104.00 Put. All hope is lost with a contract price near zero at: 0.20.
Understanding where one is in a price move is critical. On February 8th, the down move in IBB does not appear to be finished. Price action over the prior two sessions rebounded modestly and appears to be in a stall.
Action moved sharply lower during the 8th and the early part of the 9th. Real time tape reading was used to determine that we’re at an extreme and the trade was exited (with over 1,000% profit) mid-session as shown.
No more than a few minutes later, IBB began an upward move that ultimately culminated in a 105.67, close for the session.
Had the IBB put been held into the close, it would have expired worthless.
Trading options requires advanced market skill in three areas:
Get all three right, and the rewards are significant … get it wrong, and it can all (and sometimes does) go to zero.
Our option strategy is simple ... but not easy:
Trade high probability market set-ups using near expiration put (sometimes call) options.
At this point in time (post financial crisis 2008 - 2009) and in our view, this trading method is far superior to a fundamentals based or 'diversified' approach.
If one is 'diversified', then one has to admit they are ignorant of the markets and the technical (manipulative) forces behind market moves.
The above statement is harsh but true and taken as a paraphrase from Gerald M. Loeb in his book, The Battle For Investment Survival.
As Wyckoff stated over a century ago, fundamentals have essentially nothing to do with price movement.
Wall St. has deluded the public into thinking fundamentals matter; in so doing it has been able to promulgate the deception for over 150 years.
Livermore stated as much during an interview with Wyckoff in 1921. He specifically used that word to describe Wall St.: "Deception".
If one is asking the wrong question (fundamentals), then one is going to get the wrong answer and be at least two levels (wrong question, wrong answer) removed from market reality.
Some are so deep in the fallacy, they spend a lifetime trying to figure out what the market 'should' be doing.
Entire industries such as financial planning, money management, radio and television market reporting, have been (either knowingly or unknowingly) built on and in support of the Wall St. deception.
Of course, the trading professionals know that fundamentals don't matter.
They use market earnings or news releases as an 'excuse' to drive prices to specific levels where they can enter or exit at low risk. Don't think that's true? Take a look at this.
At this stage (late in a fomented bull market), there is significant downside risk and very little upside commitment. A market event of some type may be approaching from an unexpected source.
Therefore, the options method detailed on this site takes into account (and intends to profit from) the possibility of another market breakdown and "no bid" that can happen at any moment.
The open area of this site posts the results of selected option trades … and at times, other directional (ETF, futures, or equity) trades as well.
If you are one of the few that have taken the 'red pill' and have awakened to the truths presented on this site, you are fortunate indeed.
The concepts presented herein may resonate with your own trading approach no matter what market vehicles are used.
Suggested (required) Reading
The market approach, acumen and technical details presented on this site aren't much different than your senior or graduate level science courses in college. For you to get maximum benefit, you've got to know the material.
A good example of this was an experience I had years ago. I was an upper classmen engineering student at Texas A&M. I had made it through years of study and could just about see my way to graduation. That was until my Automatic Control Systems class.
It became clear at that point, I really didn't know much at all. There was still a long way to go. My visions of great accomplishment were dashed. All I had really managed to do, was survive the typical weed-out of lesser students.
Three Ten Trading, LLC is structured as a long-short fund implementing proprietary trading strategies. As such, we are not registered by the SEC, do not provide investment advice and do not engage in paid solicitation or advertising.
This site is for purpose of demonstrating the truth of market behavior; outlined by a market master: Richard D. Wyckoff in his text, Studies In Tape Reading, published 1910.
Charts produced by TC2000 which is a registered trademark of Worden Brothers, Inc., P.O. Box 1139 Wilmington, NC 28402.
Ph 800-776-4940 or 919-408-0542. www.Worden.com