GE: The Surprising A+ Trade My AI Uncovered This Week Nate Bear, Lead Technical Tactician, Monument Traders Alliance Market volatility is like fire to me. While most people run away from it, I run towards it. You can't let markets scare you away, or you'll miss simple setups. That's how I found B. Riley (RILY) last week for my Profit Surge Trader pick, which, if you had read this week's headlines, would have made you think I was crazy. If you don't know this company, Google their name. Sure, I may be more selective in my setups and adjust how I play them, but I still take the trades. That's how I stay consistent. Consistency is key in trading, especially when markets are unpredictable. It's about finding opportunities in any environment. I know that might sound counterintuitive. So, let me explain why I will trade in almost any environment and how that led to my Profit Surge Trader pick for this week, General Electric. It begins with a crucial element of my trading strategy that allows me to stay in the game during volatile times: options. Why I Prefer Options Some setups involve more risk and reward. I never know which trades are going to be winners or losers. However, that means I need to take enough modest-sized trades to ensure that no series of losses wipes me out and that the good trades outweigh the bad. Most people look at leverage as a way to quickly make and lose money. I look at it as a way to take more trades AND manage risk, Option leverage allows me to profit on stock moves using far less money than if I had to buy or short an equivalent number of shares. General Electric is a great example. This used to be a very cheap stock. But, after its breakup, the new GE trades at around $165 per share. One at-the-money call contract is equivalent to holding 50 shares of the stock. The call options I bought expire weeks down the road and cost me $355 per contract. If I had bought an equivalent number of shares, I would have needed to lay out $8,500. Three contracts would cost me $1,065. An equivalent number of shares would cost me $25,500. Option leverage lets me take multiple trades, whether it's on the same symbol or different ones, giving me more diversification. To illustrate how I apply these principles in real-world trading, let's break down my recent trade on General Electric, a perfect example of finding opportunity in a volatile market. Breaking Down General Electric We have two major volatility catalysts this week: CPI due out tomorrow and options expiration on Friday, which increases the risk of large stock moves. That's why I chose to go out for several weeks with my GE call options. First, my setup is based on the daily chart. A lot of traders forget to match their option expirations to the chart timeframes. As a simple rule, I give myself 2x-3x the amount of time I expect the trade will need to work. In this case, the daily chart could lead to expirations out 3-6 weeks. Second, going out further in time for my expiration limits the impact of the near-term volatility while also giving the stock a chance to recover or settle out afterward. So, what made me go with General Electric? For starters, it follows a TPS setup. This includes a clear upward TREND, a noticeable consolidation PATTERN, and a SQUEEZE, which occurs when the Bollinger Bands move inside the Keltner Chanel. In the chart above, we can see GE moved higher for the first four months of 2024. Then, it began to trade in a tight range between $160-$170. That range has narrowed, creating the squeeze as indicated by the red dots at the bottom of the screen. Taken together, this is a high-quality setup that I like. Plus, there's something else to give it a little extra kick. My AI Powered Scanner highlighted an A+ setup on this stock. An A+ setup occurs when I have a TPS in addition to the 8, 21, and 55-period Exponential Moving Averages (EMAs) stacked on top of one another. These are my highest quality setups and the ones I like to focus on when volatility increases. | 
No comments:
Post a Comment