We just didn’t think it would go THIS FAR

Mar 04, 2017

I know you’ve heard the story before, but I wanted to make sure everyone understands how the MACD divergence works. If you’re going to trade the lower time frames, you know the 1 minute, 5 minute, 15 minute etc, you’ve gotta be there to see the setups and you MUST trade quickly. These setups don’t last very long. They can be huge and if the higher time frames all line up it can be even more powerful.

So if you were watching the lower time frames on the SPY toward the end of the day on Tuesday 2/28/2017 you’d have noticed this MACD divergence setting up on the 5 minute charts. The slope of the MACD shows us prices should be higher.

 

Within 15 minutes out of the money calls on SPY expiring March 3, 2017 would have netted you a nice gain. You could have exited the trade just before the end of the day and walked away. But if you’d held these options overnight…….

The Trump effect? Probably. The out of the money options from the previous afternoon soared. from 0.65 at the divergence point to 1.8 and higher.

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