Trading with Technical Indicators

Hello and welcome to Trading with Technical Indicators. My name is James Boyd. We welcome you on June 30th, here, last day of June. Let's try to make it a green one, hence the green shirt. Len did also mention maybe it's going to be Pink Shirt Day. That was on Saturday. So anyway, a little fun there. Welcome to all. We also have Cameron May in the chat. We welcome him and we had Connie Hill for just a moment. She was maybe uh with us as well, but we'll have Cameron May with us and uh welcome him, uh he's a fellow instructor and he teaches throughout the week as well just real quick as we get started, remember you could follow Cameron or myself on X, we do post educational content there daily, uh I try to post a couple things throughout the day, check those out, uh not recommendations but uh interesting material now, remember with what we discussed here.

It's done for informational purposes only. Also understand that it's not an individualized recommendation or personalized investment advice. Some of the strategies we talk about are stocks. You might say those don't really interest me. That's okay. We try to show a blend of things. That way, we could actually kind of try to kind of show some variety a little bit. We know that people like to have different investing styles, and that's fine. We're all at different points in our life or what we like to do. Remember that also options carry a high level of risk, not suitable for all investors. Also remember that Schwab does not recommend the use of technical analysis as a sole means of research. It's a way, it's not the only way.

And also remember when we talk about the paper money, software application is provided for educational purposes only. Make sure you're getting used to using that. There's the software-based version, web-based, and mobile. So no matter where you are, there it is. And also remember, when we talk about investing, it involves risk, including loss of principal. Also remember that if you go to Schwab. com forward slash events, you can see the lineup throughout the end of the year for in-person events. We were in New York City over this last weekend, saw many of you there. Got some-if you go to Ben Watson's ex-page or Barbara's, you'll actually see those posted there. Some of the pictures from the recent event. We'll be back in New York on August 8th and 9th.

We'll be in Chicago on the 15th and 16th and Washington, D. C. the 12th and 13th. You do not have to-so first off, they're free. If you're a Schwab client, they're free. You can just sign up for them. And you don't have to live in the area. You can be traveling to that area, etc. And so check that out. Now, just real quick, I'd love to see you there. Also, want to give us a quick reminder that today we want to definitely talk about kind of where the markets are. One thing to talk about the markets, and it's another thing to paper trade those, paper trade the market and kind of check on performance, how positions are doing. We will be doing that here today.

And also what I want to do is I want to also talk about kind of some areas, some sectors to kind of watch. But the real focus that we're going to really be talking about today is buying or looking for a setup on a red candle, okay, after a breakout. Now, this goes into the teeth of just kind of something so backwards. We're going to be buying on a red candle day? Yeah, okay. And it's actually going against all the emotion, which is usually potentially a good sign, okay? Now, I'm sorry about that. I still actually, I'm still battling some sickness. Last week, for sure, it was the sickest I've been in 25 weeks. I have a rule of thumb. If I can talk, I'll teach. But it was, I'm hopefully on that tail end.

Hopefully that MACD divergence is coming here. But if I cough, I'll try to mute the recording. What I'm also going to do is we've got to talk about some past positions. We've got to talk about some stop adjustments if the price were to go down or if it were to go up to the target. And then we'll also talk about some current options positions as well. But our focus, again, is going to be trying to find new entries on recent breakouts on red candles. And we're going to try to buy a little bit closer support and try to time that bounce setup. Now, our title of today's class is going to be called 'You Do Not Need Tricks to Ride the Trend'.

A lot of times technicians can use a very simple moving average and just take an entry. Sometimes technicians tend to stack things on top to try to just belate what the first indicator was already telling them. And so today we want to kind of go down to the brass tacks and just use some things so simple and just follow it, okay? And be disciplined in that manner. Now what I want to do is I want to go to just real quick, if you don't mind, let's just go to the index list. And I want to kind of just take a look at where we are. Now I like to look from a list format. I think there's benefit actually looking at, let's say, the chart as well. So I'm going to show both.

But the purpose of looking at an index list, and you don't I don't need to share this with the list with you, you can make so nothing up there as well. It's yours truly, the Dow Jones. Okay, so now, not a bad sign. If we said, 'Well, where's the SPX, the SPX is right there.' And you're going to kind of see that it's been quite solid as well. It's kind of lagged a little bit and it's moving on us a little bit. But where's the Russell? The Russell's down here, okay? And so a lot of people ask, why don't you talk about the Russell? Well, why would you talk about the weak brother or sister if the other ones have been so much stronger?

If there's only a finite amount of capital and the other ones are moving, then why would you talk about the tail when you could talk about the head of the dog, okay? The dog is actually, the head of the dog has been the NASDAQ. It's been the S&P. It's been the Dow Jones. That's been the mover. So the investor's trying to sometimes put that money to work where there's been stronger strength, a stronger trend, stronger momentum, okay? Now, kind of depends upon your style. Maybe you'd like to actually kind of find something that's underperforming and hope it tries to perform. Might not always work out though, okay? And it's not saying if you buy relative strength, it's always gonna work, but at least you have something that is trending currently, okay?

And now, if we talked about, let's say, anything else that's kind of standing out. The VIX is sitting here about 17 and change. Not a real factor. When you pull up the VIX on the chart, it is not diverging yet. Someone said, James, can you repeat that? So maybe the option gods hear us. Well, let's pull it up just to make sure, okay? If we take a look and say, is the VIX diverging yet? We're watching, okay? Don't see anything yet, okay? The MACD is turning up. There's not a divergence. It's kind of when it goes low, it reverts to the mean. We care about that because if the VIX actually goes up and starts a crossover like we did here, prices tend to pull back in the short term.

We don't see that yet. We're going to continue to watch that this week. Now, where we're seeing some differences, though, if we go just real quick to the sectors, and if we pull the sectors up, if I were to ask you a question like, which sectors are you seeing or watching this week to begin with, what would you say? Now, some of the sectors that Kevin and I talked about on Friday, but I want to point out, so one difference that we are seeing that I wanted to just point out first is transportation. The only stock in transportation that kind of seems to be a little bit more bullish is Uber. Uber actually kind of has like a U pattern to it, okay?

And I think the rest of the stocks, when you look at some of the bigger holdings in transportation, eh, I mean, not as strong as Uber. So the question is, could Uber break out and actually lead that sector to the upside? When we talk about, we talked about communications on Friday. Many investors might be underweight. If we talk about, communications sector, you're talking about really meta. Leading the way in that space and that hit a brand new high the other day, okay. Now the biggest also thing we would actually say with this is when you look at some of these top performing, you got industrials, you got financials, there's tech and socks, and there's discretionary; when you look at what these look like, okay.

Pull this up, brand new high just go look at Meta, that's all that's what you need to know, okay, just dragging that sector higher. Though if we pull up the industrials, that does not look like a bear flag. Does it? No. Okay, now we've been saying this for weeks now. If the industrials are actually going up, if they're breaking out, it's going to be pretty difficult to get a recession if these are going to the upside. Remember, we've seen Goldman Sachs, we've seen J. P. Morgan shooting to the upside. Dragging up with it the financials, okay? If anyone is still bearish in these areas, it's been ugly, okay? Hopefully they weren't, okay? But overall, if we go back to a weekly chart and say, what did these look like on the weekly?

Even on the weekly chart, those are actually getting a crossover, okay? Now, the one that I think we should also kind of keep an eye on that's lagged somewhat is discretionaryaries, but we hit pretty hard last week, kind of the discussion on Amazon. Boy, so many people upset about Jeff Bezos actually getting married in Venice. I mean, it was just amazing. Now, kind of makes you wonder who's paying for that wedding. Okay, anyway, so there's a little funny jokes on X over the weekend, okay? Prime users. Anyway, some of you saw that, and there was some commentary back and forth, lively engagement. Now, if we take a look at this, you're going to see that when we look at discretionaries, That's really kind of a sector that could that be in that bull flag that ended last week with a large candle.

And then there's the red candle. But notice it's still above the moving averages. Notice that we didn't give back more than half of that half of the move from last week. Clearly, we're only in the Monday. But that's something really to watch. So when we talk really about discretionaries. Again, the big hitter in that area is still Amazon, okay now we also talked about let's say discretionaries want to keep an eye on uh Disney, that actually hit a brand new high, we did also get some help from Nike the other day that also was quite helpful helpful as well speaking of discretionaries, okay so I'm just going to kind of point out let's kind of write down a couple things we said so far it's really still Nasdaq, actually leading SPX and DJX.

Okay, I'm going to write down here VIX no divergence yet. If we talk about for example sectors, so we can kind of follow along communications is actually still strong. IXI the industrials, I'll just write down the industrials. Okay, industrials, okay industrials financials and discretionary. Did I miss anything? Oh, asterisk transports when we actually said transports there's really a top-heavy stock. Okay, in that sector, top-heavy uh, top-heavy stock and you, you have to determine what that top-heavy stock is, okay? I gave it to you, but can you remember it now? What I want to do now is i want to kind of take a look at some of our positions, and so what we want to kind of think about is every day we do the market, it's not like every day is completely different.

When you went if you went to Chick-fil-A, you don't show up and say, geez, I wonder if they're going to cook pizzas today? No. Or seafood today? No. You're going for the chicken sandwich. In the world of investing, you want to kind of say, look, I know what I'm doing. I actually have some procedures that I'm doing. I'm just going to be disciplined to those procedures. Exactly what we're going to do. Now, what I want to do is just real quick, talk about some of these positions before we talk about some new potential examples. Now, what I'm going to do is I'm going to pull up the margin account for just a second. And I think we have some examples of what we could discuss.

So example number one that I'm going to bring up is Cisco. So when we talk about stop adjustments, we're really talking about in one of two ways. Number one, we're using days lows as a stop adjustment. Or the second way we do a stop adjustment is we also kind of have a target and we look at reward to risk. Those are the two methodologies that we use. And by the way, this could be for stocks or options, okay? Now, if you were to look at Cisco, and what you're now gonna notice is the stock was actually entered, let's say, and we're gonna look at two or three different ones, so don't worry about it. Just got in recently on June 18th, 65. 97. It's up to 69 and change.

When we are in trend three, you know, it tends to just be like, sometimes those higher highs and higher lows. Higher highs and higher lows. And that trend three, again, is just stating currently, check it for verification, that the price is above the 10-day exponential and the 30-day simple. So the eight-day low is, this is just telling us, if I pulled up the chart, where is the eight-day low? 65. 38. Where is the 10-day low? 64 . 85. So if I look at this and that mark price is above that, this is probably where, either of the stops is. Now, James, why do you show the 8 or the 10? Because we're different. Some of us like tighter stops, might use an 8-day low. Some of us actually might like a 10-day low, okay?

So now what I'm going to do is I just want to make sure we're disciplined to the process, okay? Now, this weekend, I actually heard someone say, it was awkward, be disciplined, but then don't be hard on yourself. And then I was like completely confused. It's okay to be disciplined and hard on yourself, okay? Be disciplined and be hard on yourself because you're holding yourself to the line, okay? Now, what I'm going to do is I'm going to pull this up and I'm just going to share with us this chart. So it's a question that gets asked quite a bit. Can you share this chart? Yeah, let me share this chart with you. And what I'm going to do is going to go to share grid and let me put this grid right in the chat, okay?

So now if you see in the, and by the way, I'll put this also in the description of the video as well. Remember when we're actually managing a, looking at like setting up a position, we have charts that we like to look at for different reasons. This is our basic chart. Okay. The second chart in really looks at days high. Okay. We'll come to that when we talk about new setups. The fourth chart in is really looking at days low. The white line, so we're the fourth chart in, okay? Right-click on that, you'll see it's an eight-day low. If I right-click actually on the red line, it's a 10-day low. If I right-click actually on the yellow line, it's a 20-day low.

And if we said, hey, on Cisco, what we're going to do, and by the way, we can do this fast. It doesn't need to take forever. We're just going to set the stop at $6,509, okay? So when you go back to actually that level, if you said you're moving up the stop, so in the last couple of days or yesterday, which would be Friday and today, you're gonna see that that line went up. If that line goes up and you're moving up stops based on an eight-day low, well, this right there was the entry, okay? 618, that wide line goes up and you're using stops off an eight-day low, we're gonna move it up. Now, the biggest thing what I wanna kind of look at here, 60, what is this?

65, 6503. Gonna go back to this, right click on that. And what I'm gonna do is say, create closing order, sell. And by the way, I could get the exact, okay? But what I'm now gonna do is I'm gonna look and see where is that stop? The stop that we had on initially is at $6,174. I'm gonna right-click on that, answer replace order. Let me just cancel that. And what I'm going to do is, right, put that stop back on it. And what would we say that price was? If I put my cursor right on it, $6,503, put it right at $6,503, okay? Data GTC. Now, how long does that really take? Not very long, okay? Not very long.

The nice thing about seeing the day's lows on the chart is it's a visual way to adjust stops. Now, here's the deal. If I had, if I do that, now remember that's a stop. That's a trigger to sell the stock if it goes to that price or less. Send the order. And if I pull this actually up on the chart, just right in the paper money account, I'm going to go to that and we should be able to see when I pull up this stock chart, that's where the stop is. So we could also just visually drag this up as well. We're not dragging down. Because if you drag down, that actually means that literally you are lowering the stop. Now, the one that we're going to talk about getting out of is MO.

MO, what you're going to notice is right here on MO, it's up a couple bucks. That's not the point. The point is when you look at MO, if you have a limited amount of capital. So in this portfolio, what you're going to notice is we have $33,190. And the situation becomes, after like two, three weeks, two, three months, if that position is just still sitting there and there's so many other things that might be stronger, you might say, James, this is, we're within a stone's throw of actually getting stomped out. There's a stop on it. And what you're now going to notice is we almost came down to it today, but I would like to go use the capital for something else. Does everyone know what I mean by that?

You ever had positions that aren't moving, but everything else is? Well, what we're going to do is we're going to come into this. We're going to move it up right there. And I'm going to say send. The goal is we're going to allow this to get stopped out here and try to use the capital for something else. Now, what I can also do is I can move up the price a little bit higher than where we are. And what that should do is it should trigger it out, okay? Now, what I'm also gonna do is you're gonna see it's gonna cancel the order and it's gonna go out. And if that price is trading below that, there it is, it sells, okay? So we can move up those orders right on the stock.

So here's what would be scary for me. If I came to a class and every time I came to a class that it's like completely different in terms of management of positions, I'd be nervous, okay? And so when we talk about stop adjustments, okay, let's go back. Let's write this down to be crystal clear, okay? We're talking about stop adjustments. We're talking about on stocks or options. We're talking about using 8, 10-day lows. If you used a 20-day low, we don't normally talk about that. We isolate on a little bit shorter term, 20-day lows, or using the reward-to-risk methodology. The reward-to-risk methodology, that is really when the price is nearing the target resistance area, okay? So why are we talking about the 8, 10-day low?

Well, we're talking about the 8 or 10-day low if we're not at the target yet. But if we're nearing the target or resistance area, yeah, absolutely. We can be talking about that, okay? Now, what I want to do is also bring up any other stocks that are kind of standing out before we talk about some new positions. Yes. Well, here's the worst part about investing, okay? When we look down at verticals and we say, 'my goodness gracious, trend,' what do we have here? Trend three. Now, who came up with this stuff? It was me that actually; when I would teach people and I would ask them about different types of trends, everyone would give a lot of different answers.

And a lot of times I found that technicians would say definitions, but then when you look at the trades that they did, it was counter to what they said. So really the trends are based upon criteria. And the paper money account is putting on trades that match the trend and not smearing the chart. Technically dangerous. That's why we always say, be careful who you listen to. Because a lot of times people talk about the market going up, just can't keep going up higher and higher. And you'll actually hear people say, 'Hey, do what's comfortable,' but then be careful being emotional. You know, be careful, okay? We can smear the charts. We could say it's upward trending, but then we'll talk about doing a bearish trade or something like that.

So, that trend, it's not guaranteeing that it's going to go up indefinitely. It's just saying at the current state, this is where it is. Could it continue to go up? No one ever knows what's going to happen on that right edge. Now, one of the trades that we need to discuss just briefly is these three. And I'm just going to just ask the question of exit the position or roll the position, okay? Now, if I looked at Dash, these are ones that are kind of at this 57, 71, 81%. Now, good thing we didn't listen to Jamie Dimon talking about the recession in the U. S. because the stock hit a brand new high. Good thing we traded the chart technically and didn't smear the chart with our feelings.

I mean, does that matter? Feelings? What does that even mean? My feelings can be wrong, right? Can your feelings be wrong? Sure. Now, Goldman Sachs, what am I going to do on this? If I looked at Dash first, if I said, hey, what do we got on Dash? Well, when I take a look at, let's say, Dash, you're going to see this stock has gone vertical, okay? Now, if I looked at this and said, okay, do we think this stock can keep going up? Where's the top, if you will? Well, if I went back to this chart, one of the areas that we're kind of watching to see, could it be at a point of consolidation? This chart really broke out right about right there.

And what might give an investor some pause is that they think it might be nearing that 161, 200% extension and so on, okay? So we talked about DoorDash, how if you've ever been to a recent restaurant, you'll kind of notice that, man, there's a lot of people going in there, showing their phone and saying, this is a DoorDash store, I'm here to pick up the order. Well, so what we're going to do on this is we're going to try to actually say, look, we're going to try to sell into the strength on Dash. And not roll the position. Now, James, on this position, could we say, look, I think it could go up a little bit more? Yeah, you could. But the problem is you're within probably 1% of that target.

So you could do like a conditional order. You could say, look, if we go up to $248. 70 or so, exit it. However, if we go down two and a half bucks or so, sell the position. Does that make sense? So if I looked at this to the upside, and I want to make sure we all understand, if we're at $244. 00 and change, and we're trying to go to 248, it's like 1% up, $2.50. But the risk is, if your stop is down here at 230, you're risking a lot more than what you're trying to make. And so that's where some investors say, I'm not going to do that. So how do we do a conditional order with an option? Well, let's do it, okay?

So what I'm going to do is I'm going to hold the shift key down, click, create closing order, sell. Now, what I'm going to do is I'm going to say sell if it goes up to 248 or if it goes down to 241 and change. So how do we do this? Limit, market, data GTC. Now, click on the gear, conditional order. Symbol, dash, method, at or above. Now, we know where that target was. That's the easy part. Hey, if it goes to 248, try to sell right in that Fibonacci extension. Great. That'd be the best case scenario. But what if it doesn't? Well, we're going to also say, look, if dash goes at or below that 241 . 50-ish level, because remember, we're trying to get the last $2 .

50 if it goes up. But I don't want to give back any more than what we're trying to make. Welcome to our one-to-one reward risk methodology. And now what we're gonna do is say, look, if it goes up to 248, sell, should have potentially higher profit. If it doesn't go to 248 and it drops down, sell it. Do we know what it's gonna sell for? Don't know yet. James, if we come up closer and closer to the target, could I move up that bottom order? Sure you could, okay? Now, you'd have to see it fulfills. Check the liquidity. Save the order. Confirm send. Now what you're going to see is it's a conditional order. And it's worked until filled. So are there probably examples right now where there's probably a number of stocks going up to targets?

You better believe it. Now, for time's sake, what I'm going to do so we can put on some trades, Goldman Sachs is kind of in that same area. I'm going to exit that position. JP, at least in that margin account. And then JP Morgan, you're going to see that it's also gone, well, pretty bullish as well. How do we close that position out with 18 days remaining? We're going to right-click on it, create closing order, sell the position. Okay, confirm send. Now, by the way, it's $185. It's about, that's moving that portfolio about a half a percent, even though it's only one contract. If I actually, that fills. We actually also go back to, let's say, the JP Morgan. That's $292. $292 on about a $33,000 account.

That's like almost 1% on one contract, okay? So a 1% movement on one contract. I don't know. You could tell me if that's good or not, but one trade moving the account 1%, or in other words, on one contract. That's a pretty decent move, okay? Now, what we're now gonna do is spend the rest of the time talking about new positions, but I wanna stress something, okay? I want you as a homework assignment so far to practice the stop adjustments using the eight or 10-day low. Could you do that? Could you also practice using the reward-to-risk methodology? In other words, where's the stock at now to the target? How much reward is remaining to that target? And then take that and actually how much would you give it if it were to drop?

Now, we'll do some of the quick math in just a moment. But just we talked about that before. But that's really kind of like we're using the eight or ten day lows if we're not near the target yet. But if you're saying, James, just like we saw in the previous example, Dash, if we're coming up near the target, then the investor is just adjusting the stops tighter and tighter, okay? Now, what I want to do is just so we can kind of be on point, let's kind of bring up an example. The example we actually had was Dash, right? Let's say the highest stock price was, okay? And I'm going to do this fast. Let's say, hypothetically, it was 255, okay? The target price, let's say, was 258, hypothetically, okay?

And we don't even need to use a symbol, but this is going to be the math behind it if we actually said for example our stop or our support or well we could even say the support level is okay or or the stop okay and I'll just even use the support level. Let's say our support level was 250, and you said James, my stop is you're going to see, let's say we said it was 250 less, let's say three, 2%. Well, the problem now becomes is your reward. You're going from 255 to 258. You're trying to remake, you're trying to make that difference. And that difference is not a lot. It's only three bucks. But if you're at the highest stock price is 255 and your stop is at 245, then really the problem was you're giving back 10.

So when you look at those numbers, it's a three over 10 reward risk ratio. And that's why some people that have experience who created this, I did, I was like, no one explained it to me. I was like, everyone starts a trade-off and they want the reward risk ratio to be favorable, but nobody talks what happens near the end. And so we talk about just a quick one-to-one, okay? One, one-to-one. or a one to one and a half. Nobody talks about this, okay? So just quick math. This is not something new. We did it over 20 years ago. At that highest, the highest price, it doesn't matter when you saw it. It was the highest price. The highest price was 255, and you're trying to get the 258.

Well, what you're really doing, and that reward is $3, then what you're doing is you're saying, 'Look, I am trying; I'm not going to give back uh more than what I'm trying to make. I'm trying to make three more dollars, then my stop is gonna be down three dollars from the highest price if I said the same idea. If I said the highest price was 255, okay let's see if I can get that and it's going to be really less four and a half why four and a half well let me actually do that quick math there we go. Now, by the way, I can't have this set up every time because I have to, every time I talk about it, I have to do it on the spot.

Some of you could actually probably create a nice little sheet. We've done one before. And that if we did the one to one and a half, it'd be 250 and a half. Notice it's not a huge difference though. So the investor is using reward-to-risk methodology on a stock and option position when they're close to their target. When you say close to the target, what does that mean? Within 2% to 3% of the target when you're extended off your support levels, okay? When do you use the 8 or 10-day lows? When you're not within 2% to 3% of the target or resistance levels. Does this make sense? So when we talk about the positions in the paper money portfolio, it's not the idea of the day, okay?

These are the two ways we really talk about in managing the positions. Now, when we also go back to kind of talk, are there any questions? All right. Now, and I don't see any right now. I'll actually go back and double-check. I also want to kind of talk about some new examples. Now, the examples what I want to talk about is I'm going to go back to just Amazon for just a moment. Okay. Now, remember we talked about last week momentum. Oh, boy. Was that a learning lesson last week? And we talked about, for example, looking for stocks that have broken out of resistance and then there's red candles. Now, a person that's more brand new, they'll see a red candle and they'll just be scared.

Now, the same person says, well, I like to buy closer to support. Well, how do you get closer to support? I'll give you a hint. It ain't a green candle. Because Friday, when you take a look at that green candle from Friday, you're going to say, dadgummit, I missed it. That's what people say. Well, how do you get closer to that support? Well, you get closer to support when you get the little red candle. The red candle is not a big deal as long as it's still above the old breakout level, which could potentially act like a new support level. Now, we've said this hundreds of times, hundreds, but it doesn't mean it sank in once, okay? We talk about the same pattern where when you get a breakout, it tends to be the second day where you get a red candle.

It just kind of tends to see, not always, but a lot of the times if you said, 'I wonder if this second day is going to be the red candle.' You just tend to see that pattern a lot, okay? Now, we're going to kind of speculate and kind of wonder, could that be the case again? Could the investor try to trade that pattern well, now let's say the investor said, 'Look, I want to come in here and I want to sell a foot spread, okay 220 stock or so, why a put spread? Well maybe they want to trade probabilities, maybe they want to actually receive a credit and actually have the stock still allowed to actually go down a little bit and still be let's say above break even.

Now what I'm going to do is we're going to go to Pay Money account; we're going to look to try to actually do both. Now if we look at, let's say, in the margin account, we actually have a position. We're going to try to add to that. It's up about 26% in about a week or so. We're going to add to the position. We're going to go to the August expiration; that's July. We're going to go to the August expiration, and we're going to try to sell a little bit higher strike slash delta. Can anyone actually tell us why the paper money account is selling a strike with a higher delta? Does anybody know why? Why would someone do that? Now, a lot of times people think that which strike is perfect.

What you're going to really find out a lot of times is sometimes the strikes are so close together, we think there's really a big material difference one versus the other. A lot of times there's not a huge material difference if we're talking about trading from day to day, okay, if you really track them, okay? If we take a look at this, if the investor says, I'm going to sell the 215, They're really saying, look, I'm more comfortable in actually buying the stock at the strike price, at that price level from now to expiration. But the second thing is, they also might be having a stronger forecast on what the stock might also do. Now, by selling the strike, the put strike, closer to the current price, they're really saying, hey, look, I think the bounce is right here.

Could they be wrong? Sure. Surely could be wrong, okay? Could be right, too, okay? Now, if we take a look at this, it's a $5 watch spread, $1. 80 credit, confirmed send, and now what you're going to see is $1. 80. Now, here's what the funny thing is, okay? It doesn't matter what your technical analysis is. It really, because it could be right, it could be completely wrong. At the end of the day, the brass tacks is the math. Is the investor willing to take the risk? Okay, now. If we take a look at this, if we said, well, what's the potential reward? 180. If we said, what's the potential risk? 320, given a vertical. If we look at the ROR, it's 56%.

Higher the ROR, why is it, if it's higher than 30, it's a little bit richer. Why is this a little bit richer? Because the volatility is a little higher. Also, it's because it's a little bit farther out in time. Okay? Now. Again, at the end of the day, it really comes down to the math, okay? Now, if we looked at this, if someone does Amazon, what do they think the market is going to do? They think the market's going to go up? Probably drag this up as well. What do they think discretion is going to do? They think probably discretion is going to do pretty well. That's why would they be in Amazon, okay? So when you get into a stock, you're not in isolation.

I call it your buying a boat on the ocean of the sector. You're buying a boat on the ocean of the market. And what we're going to do here is we're going to send that trade, notice the commission, and we're going to send it. Now, the other trade that we're actually going to go back to, and we're going to try to look and see if we can't get a bounce trade on Nike. Now, if we go back and look at Nike for just a second, a lot of investors really; if you take a look at that, the estimate was 10 cents. The actual is 14 cents. So not as bad as feared. Investors jumped on that as it actually was not as bad as feared, and then it gapped.

Now, do you think institutional investors shot all of their capital in one day and bought on that gap? Do you think that's all the money they had? Do you think they put everything they had on Friday morning? It's highly unlikely. Just like retail investors actually buy in waves, so do institutional investors, okay? Now, if we take a look at this, kind of the interesting thing about Nike is it actually kind of gapped up inside this old consolidation area. Now, what I'm going to do is, this is a lower-dollar stock. Now, I say lower dollar, $70. If someone sold a put on it by itself, be like seven thousand dollars worth of stock for

many investors they're saying it's not huge okay it's not 700 and let's say the investor said you know james if we go up to the top of the channel i'm going to try to exit out of that short put so the short put by itself is really saying look i think the price could stay above x so if the investor says you know james i think the investor says the stock could stay up above 70 They might be more aggressive and sell the 70 Or James I think actually the price could stay above 67. 5. Now this class is called trading technical indicators. What's the indicator we're talking about? Price. Okay? Price, price, price, price, price, and more price. Why do you think the price graph is so big?

Because it's the thing that matters the most. Now, the one thing I also want to kind of make sure you're clear on is also how to have confidence of what you're seeing in the price but also protection as well defining risk so what I'm going to do on this when we talk about and I'm going to go into the IRA here and what I'm going to do is I'm going to go the trade tab type in Nike so I'm in an IRA now and now what you're going to see with the IRA is we're going to sell the August 70 put. Now, when we sell the put, we know the danger with selling the put is whether if I sell the put and the stock actually goes down.

Well, we could actually go to the online course. We could read the online course and we could actually say, well, I could actually apply what was actually taught in the book. I could just buy a put out of the money. I don't think it's ever going to become worth something, but maybe, and just define the risk that way. Now, what I'm going to do is we're going to come down to like buying a put down at, let's say, 55. So really, when you sell the put, it's the obligation to buy. And really, when you think about buying the put, it's really the right to sell. Now, statistically, delta-wise, what do we think the chances are of that being in the money? As of right now, if we can read that, the 3% chance the stock will be below the strike.

Not a high percent chance. That's why it's so inexpensive. That's why it doesn't mean it's nothing, but it just doesn't have a high probability as of right now. That delta also showing kind of the change in the option price over the change in the stock price, given a $1 move. So if we unwind out the strikes like that, that is really saying we're doing a cash secured put, but we're also trying to make it where the max loss is not down to zero, okay? And also it's going to tie up less capital. This is very important because many investors, they like the cash secured puts, but they also, the one thing that we're not saying, but we need to say, when the investor also buys the put, it is also reducing some of the negative vega or risk to implied volatility rising.

So sometimes buying that put can also be a nice little added feature there as well. But it does cost something and it does take away some from the credit. The other thing it also does is it adds another 65 cents to the commission. But when you compare that to what it would be if you didn't, the investors kind of say, what are the pros and cons? Would that be something they would consider for themselves? We're going to go ahead and send that order. And there it goes. Now, I also just want to kind of say in closing here, a couple of stocks that we're going to keep an eye on this week. So we did the Amazon trade. We did the Nike trade. I want you to practice, okay, an example trade on Boeing.

That is, it's not a recommendation, but notice it's kind of after a big pop to the upside, here it is faded back right in the middle of the green candle. Could that be a bounce? If you are someone who likes to buy close to support, after a breakout, a couple of these stocks are getting a little retest intraday. Could they bounce? We're also going to be kind of keeping an eye on a stock, Meta, which also, for example, did hit a brand new high. When you go back and look at Meta, brand new high. Is this just a big V pattern continuation? Notice you don't have to dig very deep to really actually see some stocks that are breaking out to the upside.

And also, last but not least, keep an eye on a couple of these stocks like Visa and MasterCard. Which are really showing your classic V patterns here as well. And it's happening on, and by the way, they're kind of right at that area of resistance. Keep an eye on those, okay? There's a lot of tilted up W patterns currently in the marketplace, okay? So the goal of what we're trying to really teach here is how do you read the price? The indicators on the outside are really the reflection of what's happening on the price graph, okay? Now, I'm out of my time here today. Remember, you can actually also follow us right on X. I do post educational content there. So does Cameron.

You could also, for example, you can go to our playlist as well and actually see different classes that we actually taught. And also, you could also subscribe right on our Trader Talks page as well. Now, quick reminder that coming up next, you're actually going to see if we went to the live webcast and virtual workshops. We said what's coming up next is cover calls and short puts, and it is going to be Cameron May. So, stay tuned for Cameron May coming up next. I want to say thank you so much for your comments and your participation. There was also a survey in the chat, so thank you for that. And I also want to give us a quick reminder with what we discussed. It was done, for example, in illustrative purposes only. With that said, I want to wish you a great day. That's weird. It's doing that. Try to come back. It's weird. Okay, there we go. Okay, sorry about that. It got lost there. With what we discussed, all investing has risk. And again, thank you, Cameron, and stay tuned for Cameron May coming up next. Take care. Bye-bye.