The other day, we made quick mention of an opportunity with Micron Technology (MU).

After a major routing for tech stocks, Micron appears to have bottomed out, finding support and pivoting higher from $40 a share.  From here, we’d like to see a potential bearish gap refill around $50.  While we’re looking for a double with this trade, trade safe.  Don’t risk the house.  And use good money management.

There are two ways to trade it here.

One, we can buy the stock at current market prices.  And, or two, we can buy to open the MU February 16, 2018 44 calls at market prices this morning.

Traders Daily Education

One of the best ways to find opportunity is by spotting excessive fear and greed.

But that’s easier said than done.  Or so we think.

While none of us have a crystal ball, or hold the Holy Grail to trading secrets, you can give yourself an edge by simply paying attention to what herd mentality is telling you.

Of the hundreds of technical setups we can use to gauge momentum, relative strength (RSI) is one of the most powerful tools to pay attention to when you want to find opportunity.  RSI is a momentum oscillator that measures the speed and change of price movements of a stock. The closer RSI gets to its 30-line, the more oversold the stock is considered to be. The closer RSI gets to its 70-line, the more overbought the stock is considered to be.

Take a look at Disney Co. (DIS) for example.

Notice what happens when RSI gets to or above the 70-line.  DIS begins to peak and turn lower.  Now, notice what happens when RSI gets to or below its 30-line.  DIS begins to find support and pivot higher. Of course, as we’ll often tell you, confirmation of potential trend change is always essential. Confirm with MACD, Williams’ %R and Bollinger Bands, too for example. Just don’t buy because RSI is at the 30-line.

Look at the excessive fear in DIS in late September 2017.

Who would touch that?  Only a fool, right?

As it turns out, it was one of the best times to buy.

RSI was deep under 30.  MACD pulled back too far too soon.  Williams’ %R was deep under 80, oversold.  Once we got positive confirmation in the days that followed with a build of momentum, it became a good time to buy.

Sure, you may say, “Any one can say that after the fact.”

And sure, we could do that.  But that’s not what we’re doing. Look at what happens each time DIS pulls back with confirming oversold indications. The reversal higher isn’t immediate. It takes a few days.  By being in the know, you can do well.

Again, though, confirmation is key.

Or, look at what happens to Disney when RSI moves to or above its 70-line with an overextension on MACD and Williams’ %R above 20.  The stock reverses, as it did at the start of August 2017 and the start of May 2017.

Even if you don’t subscribe to the idea that technical analysis works, history proves otherwise.

Open Positions:

Merck (MRK) stock -- $55.50

MRK January 18, 2019 57.50 call -- $3.25

MRK is up to $55.90 in pre-market trading today.  The trade remains on hold.

AT&T (T) stock -- $34.45

Hold the stock.  It’s now up to $36.73.  Hold.

AeroVironment Inc. (AVAV) stock -- $42.80 – exited half

The stock now trades at $55.66.  We may look to exit the second half shortly.

Pro Shares Ultra Short S&P 500 (SDS) -- $45.15

This remains a hedge against the long positions.

First Data (FDC) stock -- $17.80

We continue to hold with the stock now trading at $16.52.

Cypress Semiconductor (CY) -- $15.37

The stock is now up to $15.32 and is a hold.

Sturm Ruger (RGR) stock -- $52.50

American Outdoor Brands (AOBC) stock -- $15.70

AOBC January 19, 2018 17 calls – 75 cents – exited half

RGR was working out just fine before Friday, where it fell $4.45 a share.  Let’s exit all three of these positions today at a loss.  I’m exhausted with these.

Carnival (CCL) -- $66.50

We already exited half of the calls for a win of 67% in September 2017.  We exited the second half of the calls at a loss, but still hold the stock with a price target of $70.

Advanced Micro Devices (AMD) -- $13.30 entry

The stock last traded at $9.98 and remains on hold.

Closed trades:

  • Exited half of Zillow Group (Z) for 8% gain on August 8, 2017
  • Exited half of Zillow Group (Z) November 45 calls for 44% gain on Aug 8, 2017
  • Exited half of CELG October 2017 130 calls for 150% on August 31, 2017
  • Exited second half of CELG October 130 calls for 143% on Sept 1, 2017
  • Exited GOLD Sept 92.50 put and 95 put for a full loss
  • Exited half of LOW September 2017 75 calls for 71% on Sept 7, 2017
  • Exited VNDA stock for 8% on September 8, 2017
  • Exited VNDA October 2017 16 calls for 35% on September 8, 2017
  • Exited second half of LOW October 2017 75 call for 92% on Sept. 8, 2017
  • Exited LOW stock for 4% on September 8, 2017
  • Exited half of FEYE stock for 13% gain on September 12, 2017
  • Exited half of FEYE Dec. 14 calls for 68% gain on September 12, 2017
  • Exited half of FEYE Dec. 15 calls for 63% gain on September 12, 2017
  • Exited half of CCL October 2017 67.50 calls for 67% on September 13, 2017
  • Exited VIX October 2017 15 put for 18% on September 13, 2017
  • Exited VIX October 2017 14 put for 17% on September 13, 2017
  • Exited ZIV stock for 2% on September 13, 2017
  • Exited SVXY stock for 9% on September 13, 2017
  • Exited AMD September 2017 13 calls for a full loss, expired worthless
  • Exited second half of FEYE stock for 16% gain on September 14, 2017
  • Exited second half of FEYE Dec. 14 calls for 100% gain on September 14, 2017
  • Exited second half of FEYE Dec. 15 calls for 89% gain on September 14, 2017
  • Exited CRUS stock for a loss of 7% on September 22, 2017
  • Exited CRUS October 2017 60 calls for a full loss on September 22, 2017
  • Exited half of AJRD November 2017 30 calls for a gain of 200% on Sept 22, 2017
  • Exited half of AJRD November 2017 30 calls for a gain of 168% on Sept 22, 2017
  • Exited AJRD stock for a gain of 13% on September 22, 2017
  • Exited half of AOBC January 2018 17 calls for a gain of 47% on Oct. 4, 2017
  • Exited half of EXPE October 145 calls for 22% gain on October 6, 2017
  • Exited CCL October 2017 67.50 calls for a loss of -37% on October 17, 2017
  • Exited half of Shopify Inc. stock for a gain of 10% on October 25, 2017
  • Exited half of SHOP November 105 call for a gain of 79% on Oct 25, 2017
  • Exited TRUE stock for a loss on November 7, 2017
  • Exited TRUE January 2018 16 calls for a loss on November 7, 2017
  • Exited half of DIS December 15, 2017 100 calls for 44% on Nov. 8, 2017
  • Exited SHOP stock for a -10% loss on Nov. 9, 2017
  • Exited SHOP November 105 calls for a full loss on Nov. 9, 2017
  • Exited DIS stock for a gain of 5% on November 13, 2017
  • Exited second half of DIS Dec 2017 100 calls for a gain of 86% on Nov 13, 2017
  • Exited half of DIS Jan. 19, 2018 105 call for 100% gain on November 30, 2017
  • Exited half of AT&T January 19, 2018 34 call for a 55% gain on Nov 30, 2017
  • Exited half of AT&T February 16, 2018 34 call for a 97% gain on Nov 30, 2017
  • Exited half of DIS Jan. 19, 2018 105 call for 404% gain on Dec 4, 2017
  • Exited half of AT&T January 19, 2018 34 call for a 177% gain on Dec 4, 2017
  • Exited half of AT&T February 16, 2018 34 call for a 139% gain on Dec 4, 2017
  • Exited half of BBY stock for an 11% gain on December 5, 2017
  • Exited half of BBY Dec 15, 2017 57.50 calls for a 102% win on Dec 5, 2017
  • Exited half of AVAV stock for a 34% win on December 6, 2017

Ian L. Cooper

Traders Daily