|TW: What is your background? |
Dale: I was a Telephone Contractor for many years, but needed an investment vehicle that could travel with me, one that was not too complex. I studied all about different investments such as real estate, buying discount mortgages, tax certificates, etc as well as the stock market, but none of those things seemed simple enough for me to control myself without a great investment of time and money. I simply did not have much time to devote to those things since I worked 100 hour weeks and moved around the country doing storm reconstruction for telephone companies, etc. I accidentally happened across options in the mid-1980’s and I immediately saw the advantage of the limited risk-vs-potential returns.
TW: How did you get started in trading options?
Dale: I began trading options in the mid-1980’s. I read every book I could find about options and derivatives, as well as John Murphy’s books on...
Can't really miss these divergences on the hourly charts of CVX and XOM and picking up the out of the money option before the close on 9/15/20 was perfect timing.
Entry in the last 30 minutes of the trading day as the stocks just started turning up was ideal. The XOM September 18, 37.5 calls could have been had for 11 or 12 c. The next day they were as high as 83c. An alert trader could have taken 500% gain, and with over 2500- 3000 contracts trading a day the spread was reasonable.
The CVX September 18, 79 calls could have been had at a similar time to XOM in last 30 minutes of the trading day for 12c or so. By the next day they traded as high as 1.06. Spread wasn't as nice as XOM as volume was 300 - 500 contracts but again 500% gain was easy to make.
I hope you are still understanding the “path of least resistance” in the markets is up & VXX down! Nothing new here, but, difficult to locate new entry patterns for calls. It helps to own good stocks that lead the markets like ADBE, FB, AAL, MSFT, etc while we wait!
In spite of the bad news on retailers, I see many with strong monthly chart divergences: BBBY, which I showed weeks ago in class & also LB, BGFV & many others. How can YOU find these before they begin their strong up moves? By doing exactly as I teach!
With all of the major components like AAPL, MSFT, AMZN down, it must be putting pressure on the indexes that they are a part of & how about Volatility(VXX)? Is is showing any clear upside patterns? What about the short indexes like SPXS & QID? Do we get “confirmation” from these?
VXX 30 minute MACD divergence 7-23-20
SPXS 30 minute MACD divergence 7-23-20
QID 30 minute MACD divergence 7-23-20
At 1:45pm eastern on June 12 the 5 minute chart on VXX made its way to the high it had reached 2 3/4 hours earlier, but we were concentrating on the MACD indicator. The MACD had a clear divergence indicating that the price action on VXX shouldn't be at $45 but more like $40 or lower based on the slope of the MACD peaks
As predicted the price dropped to below $40. this powerful move down is often reflected with a reverse MACD divergence up on the SPY. In this instance as the chart below clearly shows, there was not one in the offering. So we went back and looked at the VXX puts for big gains on the near term OTM options.
So, I'm sure there are many option traders, who are now at home and working, maybe even have a full house of family members. My commitments used to disqualify me from doing intraday options trading, not any more, now I'm trading on intraday charts looking for MACD divergences and double tops and bottoms like the Options Hunter does.
I'm no Dale Wheatley, I'm still learning and cautious with my trades but I can tell you for a fact that this strategy works for me, it really does.The daily chart of BA had a strong MACD up that really gave the confirmation of the 5 minute divergence Dale looks for.
This is a daily chart with a clearly defined UPSIDE DIVERGENCE on VXX, the Fear Index. The time between the first price bottom to the second one, when the divergence occurred, was approximately one month, from late Jan through late Feb 2020.
That suggested the up move in VXX and down moves in the major markets and component stocks should last approximately 1 month before the MACD begins to stabilize. Around March 18-20, 2020.
The lower time frames on VXX started showing MACD rolling over and some Downside Divergences, the SPY, QQQ, IWM, XLE, SMH, XLF and most major component stocks then began showing UPSIDE divergences
producing huge returns on OTM calls.
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