February 23, 2019
This was an interesting week. A lot of great opportunities to be had. Our bullish return to the market is quite shocking. The Dow has now just set a record for the most consecutive winning weeks. Absolutely insane after how the end of 2018 went down. As an MFI trader it’s hard to continue buying the trend when we’re touching these insane levels again. A part of me is still holding on to the bear market and I am beginning to believe this is holding me back. I can see this by looking back at some of my trades this week - especially PFE which I alerted in our chat room on Friday. I’ll break this one down below:
I’ll begin by saying the market was especially bullish Friday morning. Many stocks re-tested their 52 week high’s and even toppled them. Looking at you PG and MRK.
PFE is a staple option stock. The greeks are fantastic and usually only a small move is required in order to profit. This is what I was hoping for when I screened PFE. On the chart it was very overbought. Here’s what I was seeing when I first alerted:
As shown above the 15 minute MFI was very overbought. When situations like this occur I like to wait for the signal candle which is shown here as well. I decided to enter a position right after this candle just before 10AM CST. Unfortunately, as the chart shows we got a lot of sideways trading after this.
Now, when we entered into the trade the price of PFE was $43.04. Our option price was $0.68. Immediately, after I entered into a position our reversal broke and we were down about 4%. Shortly after we touched high of day. Now, at the high of day our option was down 17%.
A new strategy that Brad and myself are keeping to is to limit our big losses. From now on we’ll be cutting at 20%. We feel that most of the trades that we’ve taken a loss on beyond 20% have rarely recovered in time for us to profit. So at max we’ll try and only take 20%.
As you can imagine when I was down 17% on this and the price only increased 9 cents I was pretty pissed…but the set up was still there so I let it ride. Thankfully, this was the worst of the day for our trade. From there we ate a lot of our option up by the sideways trading. What I mean by that is when our option came back down to our entry of $43.04 our option was still down 7%. So now unfortunately we were going to need a break of $42.90 to hit our price target of 10%.
What should have been a quick in and out (I had planned on this trade lasting about 20mins) we ended up riding all day. I don’t like when situations like this happen. Normally, I’ll cut at break-even when we get back too because most of the time the trade will be wrecked. By the time we broke $43.00 our MFI was getting low. Because of this I decided to adjust my PT to $0.73 cents and I exited at 8% instead of 10%. This ended up being the prime spot to exit as the price slightly recovered on PFE and never came back down.
Now, what’s funny is in our chat room I posted that the market was strong and I didn’t want to go against the trend:
Knowing this I was hesitant to play puts but everything was so overbought that I just couldn’t comprehend getting into calls. Unfortunately, SPY went up about a buck and crossed into $279’s and of course everything along with it. Had I entered PFE calls I would have hit 10% within 20 minutes easily.
Lesson learned here: Need to look at other indicators outside of MFI when market direction is so strong.
Next week’s goal: I’m thinking about going back to my older trading style that I used in the summer by combining Heiken-Ashi Candlesticks with the DMI and MFI. I look forward to sharing some progress on this but at least one of the trade alerts I make will be based off of this strategy.
Hope you enjoyed the read. I’m looking forward to next week! Good luck and happy trading!