A tumultuous week in the markets, Dale recaps the VXX hourly MACD divergence and how the lower time frames provided clears signals of both exit points and reentry points or out of the money options. Plus the IWM divergence to upside later in the week.
Alaskan Air Soars
We were all watching ALK after Tuesday's class. The divergence was a classic setup on daily charts on September 21, 2017.
By September 25, 2017 things were moving and those OTM options were locking in great gains. The Options Hunter tweet again reiterating the strength in airlines.
It was September 27th and The Options Hunters tweet says it all
We’ve been watching the Weekly MACD Divergence on SPY setup for months. By mid-Feb the MACD was already signaling something was up. Then Mid-May SPY hit a new high, and where was the MACD? EVEN lower then the mid-Feb level. We played these divergences and we knew when the lower time frames started to diverged too, that the timing was right to make mega bucks in out of the money puts.
Intraday divergences that happen during the trading day yield even greater returns on Expiration Friday. Why?
Because there is no time premium left. Out of the money options can make significant gains intraday.
Take a look at what GDX did Tuesday, May 9, 2017. This 5-minute chart shows the MACD divergence that was in place during the day on GDX. You can see the MACD shows that the price of GDX should be HIGHER RIGHT?
5 minute divergences by the nature of the shorter time frame, only usually last a short time, and the effect on out of the money options can be magnified significantly when the divergence occurs on Expiration Friday.
Look at the GDX 21.5 calls that expire May 12. You can see the out of the money option gained around 60% in one hour of trading, and THAT’S NOT EVEN EXPIRATION DAY. Of course you probably noticed if you’d held this option into the following day you caould have gained 250% or more.
In this 90 minute video edited from a recent Options Hunter live webinar, Dale Wheatley takes us through a daily routine using mostly daily price charts.
He starts with major indices and ETFs then moves on to the Dow 30 stocks. When there are no patterns within the major markets or ETFs, there are often patterns in the Dow 30 stocks. These stocks represent a cross-section of industries and chart patterns can often set up in industries independent of the major markets.
He rejects charts that are not clearly distinguishable or have confusing patterns to focus in on clear patterns with divergences. Dale also provides an in-depth look at AAPL in June 2017 and potential trades that triggered.
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 Inter-Market analysis. Later,...
in a short video, we're going to do an anatomy of a divergence on IWM from the latter part of June 2017 and it's an intraday divergence on June 22nd at 10:00 a.m
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