The New Age of Technical Analysis

Table of contents :
DISCLAIMER
Acknowledgments
Introduction
Chapter 1: Options Trading
Chapter 2: The Greeks
Chapter 3: Candlesticks
Chapter 4: Understanding Stock Trend
Chapter 5: Support and Resistance
Chapter 6: Fibonacci Extensions & Retracement
Chapter 7: Trendlines
Chapter 8: Exponential Moving Averages
Chapter 9: Simple Moving Averages
Chapter 10: Combining All Moving Averages to Trade
Chapter 11: Stochastics
Chapter 12: TTM Squeeze
Chapter 13: On Balance Volume
Chapter 14: Chart Patterns
Chapter 15: Swing Trading
Chapter 16: Day Trading
Chapter 17: Futures
Chapter 18: Risk Management
Chapter 19: Emotional Trading
Chapter 20: Winning Mindset
Chapter 21: Outside Resources
Chapter 22: Use Short-Term Gains to Generate Long-Term Wealth
Conclusion

Citation preview

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The New Age of Technical Analysis

Brandon Rosewag

© Brandon Rosewag

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[email protected] Published in 2022 Copyright © Brandon Rosewag 2021 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means without the prior written permission of the publisher, nor be otherwise circulated in any form of binding or cover other than that in which it is published and without a similar condition being imposed on the subsequent purchaser.

Rosewag, Brandon The New Age of Technical Analysis

Cover design by Jake Chambers

Copyrighted with the Library of Congress

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TABLE OF CONTENTS DISCLAIMER ............................................................................................................................... 5 Acknowledgments ..................................................................................................................... 6 Introduction ............................................................................................................................... 7 Chapter 1: Options Trading........................................................................................................ 9 Chapter 2: The Greeks ............................................................................................................. 12 Chapter 3: Candlesticks ........................................................................................................... 20 Chapter 4: Understanding Stock Trend ................................................................................... 34 Chapter 5: Support and Resistance ......................................................................................... 46 Chapter 6: Fibonacci Extensions & Retracement .................................................................... 81 Chapter 7: Trendlines ............................................................................................................ 107 Chapter 8: Exponential Moving Averages ............................................................................. 118 Chapter 9: Simple Moving Averages ...................................................................................... 182 Chapter 10: Combining All Moving Averages to Trade ......................................................... 201 Chapter 11: Stochastics ......................................................................................................... 209 Chapter 12: TTM Squeeze ...................................................................................................... 225 Chapter 13: On Balance Volume ............................................................................................ 258 Chapter 14: Chart Patterns .................................................................................................... 267 Chapter 15: Swing Trading ..................................................................................................... 347 Chapter 16: Day Trading ........................................................................................................ 412 Chapter 17: Futures ............................................................................................................... 456 Chapter 18: Risk Management .............................................................................................. 462 Chapter 19: Emotional Trading .............................................................................................. 464 Chapter 20: Winning Mindset................................................................................................ 466 Chapter 21: Outside Resources ............................................................................................. 468 Chapter 22: Use Short-Term Gains to Generate Long-Term Wealth .................................... 480 Conclusion.............................................................................................................................. 482

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DISCLAIMER I am not a certified financial advisor. Everything I say is based on my opinion and experience and is not to be taken as advice or suggestion for you to act upon. Please do your own due diligence before utilizing anything discussed in this book. Trading options is a risky form of investment and not suitable for everyone. It is possible for you to lose all your money and/or your personal investment. Please consult with your certified financial advisor before investing in options. I, Brandon Rosewag/Brandon Trades, am not responsible for any loss of funds. Any ideas or strategies discussed herein should not be undertaken by any individual without prior consultation with a financial professional for the purpose of assessing whether the ideas or strategies that are discussed are suitable to you based on your own personal financial objectives, needs, and risk tolerance. Brandon Trades expressly disclaims any liability or loss incurred by any person who acts on the information, ideas, or strategies discussed herein. The information contained herein is not and shall not constitute an offer to sell, a solicitation of any offer to buy, or an offer to purchase any securities, nor should it be deemed to be an offer, or a solicitation of an offer, to purchase or sell any investment product or service Although material contained in this book was prepared based on information from public and private sources that Brandon Trades believes to be reliable, no representation, warranty, or undertaking, stated or implied, is given as to the accuracy of the information contained herein, or that it indicates future results. Brandon Trades expressly disclaims any liability for the accuracy and completeness of the information contained herein. This material is distributed for general information and educational purposes only and is not intended to constitute legal, tax, accounting, or investment advice. The information, opinions, and views contained herein have not been tailored to the investment objectives of any one individual, are current only as of the date hereof, and may be subject to change at any time without prior notice. Brandon Trades does not have any obligation to provide revised opinions in the event of changed circumstances. All investment strategies involve the risk of loss. Nothing contained in this book should be construed as investment advice. Any reference to an investment’s past or potential performance is not, and should not be construed as, a recommendation or guarantee of any specific outcome or profit.

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Acknowledgments To my fiancé and soon-to-be wife, Madison, who kept my head on right and helped me through the struggles of being a trader, without you, I would not be where I am today, and I cannot thank you enough for everything you have done. To my mom, dad, and sister Carlie, thank you for all the support over these years through the transition from wanting to be a police officer to an options trader, entrepreneur, and author. Without your endless support, I do not know where I would be. Finally, a special shoutout to my family at Team Bull Trading—Jacob, Geno, Jared, Nate, Noah, and Uncle. Without you guys, I would have never grown into the trader I am today. You are the ones that helped me take my trading to the next level, and words cannot express the gratitude I have for you and everyone in Team Bull Trading. With that being said, I now present you with The New Age of Technical Analysis.

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Introduction Hello everyone, my name is Brandon Rosewag, also known as Brandon Trades, and I have been trading the Stock Market since 2017. I began trading as an escape from the career path I was pursuing, which was criminal justice. I knew from the very beginning that criminal justice was not for me, but I had nothing else going for me in life. I graduated high school with a 1.85 GPA and did not see a bright future for myself. The only thing I could see myself doing was becoming a police officer. But in that field, you must work holidays, overtime, anniversaries, birthdays, etc. One day, I stumbled upon a trader on YouTube giving a recap on how he made over $2,000 in a single day trading options, and that immediately caught my attention. As I started looking more into the stock market and options trading, I discovered that this genuinely interested me, and it was a skill that I wanted to learn. Before I knew it, I was obsessed with the stock market, and I wanted to see what I could make of it. For me, it was either becoming a successful trader or going into law enforcement. Because you are now reading this book, I am sure that you know which path I ended up pursuing. I have made many mistakes while trading and have learned from them, which was the best teacher of all. I have had amazing trades, and I have had terrible trades; however, I still became a profitable trader at the end of the day due to motivation and the fact that I had to make it my career unless I wanted to work a job that I would have hated. I have spent countless hours reading trading textbooks, watching endless trading content via YouTube, hiring mentors, and spending years of trial and error to acquire the information I have now that has led me to my success in trading. Now I do my best to educate others on how to successfully trade in the stock market. I post daily videos on my YouTube channel: BrandonTrades, and mentor individuals who are looking for extra help. In this book, I will be sharing a new generation of technical analysis and walking you through how to become the successful trader you want to be. I have written one other book titled Profitability, Technical Trading Done Right. In that book, I discussed exponential moving averages, chart patterns, Calls vs. Puts, the Greeks, and Fibonacci. That book will be the equivalent of a fraction of what I will be writing about in this book which is why it is no longer for sale. Not only will that information be included within this book in updated content, but I will also be diving deeper into those contents and helping you build a strong foundation and understanding of the overall markets and how to profit from them. If you have any questions while reading this book, feel free to message me on Instagram, and I will gladly assist you. My Instagram account handle is @Carwhorns; be aware; that there are fake accounts that pretend to be me on social media. If it is not the account just named, it is NOT me.

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I want to give a special thank you to John Carter for allowing me to discuss the TTM Squeeze in this book. The TTM Squeeze is by far my favorite trading indicator, and I am thrilled to have the opportunity to have an entire chapter about it in this book. John has authored a book called Mastering the Trade, which all traders should read, as it is one of my favorites and lays a solid foundation for any trader. I would also like to thank John Person for allowing me to discuss the Persons Pivots in this book. The Persons Pivots have changed the way I trade forever, and I am glad I came across his work. If the Persons Pivots chapter interests you, I highly suggest checking out his book, Candlestick and Pivot Point Trading Triggers. I hope this book serves you well and helps you develop into a profitable trader in the future.

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Chapter 1: Options Trading The majority of this book will be geared toward options trading. Options trading is what I prefer to engage in as a trader; however, you can apply all the technical analysis taught throughout this book in many markets, such as the foreign exchange market, bond market, or cryptocurrency market. In options trading, you are making a bet with another market participant. You are essentially saying that the underlying asset will increase in price or decrease in price. If you say that the stock will go up in price, this would be considered a “Call”. On the flip side, if you say that the stock will go down in price, that would be considered a “Put”. Yes, believe it or not, you can profit from a stock going up in price or down in price. The Calls and Puts have expiration dates that usually fall on each Friday throughout the month unless that Friday is a holiday, in which case they will expire on Thursday. Or, if you are trading a heavily traded ETF like the $SPY or $QQQ, the contracts expire Monday, Wednesday, and Friday. Each contract has a predetermined strike price, which is where you are saying the stock price will be by expiration. You then pay the premium for the contract (this varies depending on the stock and is determined by the market makers) to lock in your bet. For example, I am betting that $AAPL is going up to $145 a share by August 20, 2021, and I am willing to pay $160 to lock in my bet. The strike price is $145, which is where I am saying $AAPL stock price will be by the expiration date of August 20, 2021. I am also saying that $AAPL stock price is going up, initiating a Call. The price per contract would be $160 since that is what I paid ($AAPL $145 Call Expiration: 08/20/2021 price: $160). On the flip side, if I believed $MSFT would drop to $220 a share by July 23, 2021, I would be willing to pay $130 to lock in my bet. The strike price would be $220, and the expiration would be July 23, 2021. I purchased a Put since I believe the stock price will drop, and the cost per contract was $130 ($MSFT $220 Put, Expiration: 07/23/2021, price: $130).

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Chart A.1 - Chart by ThinkorSwim

Chart A.1 is an example of how an option chain will look on ThinkorSwim. Each platform will look different; however, the concept is the same. Each expiration is listed within the option chain, and the trader gets to choose an expiration date for the contracts.

Chart A.2 - Chart by ThinkorSwim

In Chart A.2, the left side of the option chain is for Calls, and the right side of the option chain is for Puts. Keep in mind that some brokers might be different regarding which side the Calls or Puts are on, but they should be easily labeled for the trader on each platform. The middle numbers are the strike prices for the stock. For example, $114, $115, $116, etc. As you can see, there are predetermined expiration dates. Again, each expiration falls on a Friday. Each contract already has a set amount you need to pay to get into that trade, also known as the premium, again determined by market makers. Once you pay the premium for the contract, the trade is now active. The most money you can lose is what you purchased the contract for, but your reward is unlimited. Sounds great, doesn’t it? Not so fast. There is still much more to learn. Looking at $AMD in Chart A.2, theoretically, if we are betting that $AMD will be at or above $115 (Call) by March 25th, 2022, we would have to pay $245 to place our bet. On the other hand, someone is selling 10

you this Call. It is sad to say, but one of you will make money, and one of you will lose money. The goal of this book is to make sure that you are the winner in most scenarios. It is essential to understand the basics of options trading before diving into the subject deeper. Many technical analysis books discuss equity trading, but do not dive into much detail on options. While in the equity world, they buy long or sell short, in options, we buy Calls for upside moves and buy Puts for downside moves. The only difference is that to make a hefty profit in the equity market, you need to have a substantial size to make good money. But with options, the contracts are cheaper, and you can generate a much larger return on your investment. Do not get that confused because you can also quickly lose a lot of money with options. With equity, you do not have to say where a stock will go by a specific date, but in the options world, you must select a Call or a Put, a strike price, and an expiration date. Now that you understand what options are, let me explain how you will profit when you are on the right side of the market.

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Chapter 2: The Greeks The Greeks are one of the most crucial elements that you must pay attention to when options trading. Later in the book, I will be showing you a swing trading strategy that heavily relies on the Greeks. There are four Greeks that I will be discussing. The Greeks that appear in options trading are Delta, Gamma, Theta, and Vega. I will also discuss other important options trading elements, such as Volume, Open Interest, and Implied Volatility. Delta: This is how much the contract will increase in price based on a $1 move in the underlying asset. For example, if $AAPL stock price is sitting at $100, and we buy a $105 Call and pay a $150 premium, we will know before we even enter the trade how much $AAPL needs to increase for us to make a substantial profit. Every single contract will tell you the Delta price before entering. For this example, the Delta is .20 (multiplied by 100), meaning we will make an additional $20 for every $1 $AAPL stock price increases. Scenario: You purchased the $105 Call for $AAPL for $150 a contract. There is a Delta of $20, and the price of $AAPL stock is $100 a share. If $AAPL stock goes up to $101 a share, the contract will now be worth $170. If the stock price increases to $102 a share, the contract would now be worth $190. If the stock price goes up to $103 a share, the contract will now be worth $210. Based on a $3 move in $AAPL stock price, the contract increased by $60.

Chart B.1 - Chart by ThinkorSwim

Looking at Chart B.1 of the $PYPL option chain, looking at the Calls on the left, theoretically, if I were to buy the $120 Call expiring on March 25th, 2022, I would need to spend roughly $254 a contract to enter 12

the trade. The Delta value is .42. If $PYPL is currently at $118.77 a share, and the stock price increases +$1 to $119.77, the $120 Call will increase by $42, making the contract worth $296. If $PYPL stock price increases another dollar, the contract will roughly increase by another $42, making the contract now worth $338. Notice how I said “roughly”. That is because Gamma plays a vital role in contract pricing. Remember, for every dollar the stock goes in your favor, the contract will increase by the Delta. Eventually, the Delta will max out at .99 and will not go any higher. Gamma: This is how much will be added to the Delta for every dollar the stock price moves in your favor. Look at the previous picture; you can see how each Delta value is different within the option chain. This is due to Gamma being added or subtracted from each Delta’s value.

Chart B.2 - Chart by ThinkorSwim

As seen in Chart B.2 above, looking at $TAP for a contract that expires in 25 days, the $55 Call would cost $90. The Delta value is .33, and the Gamma value is .08. $TAP stock price is currently $52.96 a share. If $TAP stock price increased by $1 to $53.96, the trader would make the original Delta on the contract; however, the next $1 $TAP increases, the trader will profit from the Gamma + Delta. The Gamma value will be added to the Delta value for each dollar the stock price moves in your favor. Therefore, the first +$1 move, the trader would have made $33, but on the next +$1 move, the trader would make $41 per contract. To make this visually easier, here is the example laid out. Stock: $TAP $55 Call, Price Per Contract $90, Delta = $33, Gamma =$8 $TAP Stock Price: $52.96 $TAP Increases to $53.96: You profit $33 (the original Delta) 13

$TAP increases to $54.96: You profit an extra $41 (Delta + Gamma) $TAP increases to $55.96: You profit an extra $49 (new Delta + Gamma) In total, the contract increased by $123, making the contract worth $213, and returning the trader, a +136.67% return on their investment. Now I know the Delta and Gamma portion of the Greeks has you excited, but contracts decay in value leading up to expiration. That is why paying attention to Theta is important for traders. Theta: This refers to the amount in which the option contract will depreciate each day. The further expiration you choose, the lower the Theta will be; however, the closer the expiration gets, the higher the Theta will become.

Chart B.3 - Chart by ThinkorSwim

Looking at Chart B.3 above of the $FB option chain, these contracts expire in twelve days. Focus your attention on the $220 Call. To get into this trade, you would need to pay $455 a contract; however, look at the Theta value of –.25. This means the contract will depreciate $25 each day if you continue to hold, and the Theta value will only get higher the closer the expiration comes. If you were to buy this contract on a Friday, you would have Theta depreciation on Saturday and Sunday. In short, when the market opens on Monday, you will automatically lose $50 on that contract due to Theta. All contracts have Theta, which is one of the major downsides of options trading.

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Chart B.4 - Chart by ThinkorSwim

Chart B.4 above is another example of Theta, but this time on $TSLA, with a contract that expires the same week. Looking at the Theta on the $920 Call, the Theta is -2.41 ($241) when the contract itself costs $1,850-$1,950. Essentially if you were to buy this Call on a Monday and swing it for two days, you would roughly lose $482 unless $TSLA goes up in price, which will limit the losses. Due to the Theta when swing trading, it is important to give yourself more time. Remember, the further dated the expiration, the lower the Theta (This concept will be discussed further in-depth in the “Swing Trading” chapter). Vega: Vega measures the option's price sensitivity to Implied Volatility. Vega is shown as a number in an options contract and represents how much the contract will increase or decrease based on a 1% move in the option's Implied Volatility. Before I dive deeper into Vega, what is Implied Volatility? Implied Volatility is the market's expectations of what will happen to the stock price in the future. When expectations rise, so will the Implied Volatility. When expectations drop, so will the Implied Volatility.

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Chart B.5 - Chart by ThinkorSwim

Looking at Chart B.5 above, the option chain on $CVS for a contract that expires in 25 days is seen. Looking at the $110 Call, one would need to spend $135 to enter this trade. Looking at the Implied Volatility measurement, the market is not expecting any big moves in $CVS as it is giving an Implied Volatility of 21.10%. This is a low amount of Implied Volatility. Remember, the higher the Implied Volatility, the higher the expectations, which results in higher priced premiums. Looking at the Vega, it shows .10. This tells the trader that if the Implied Volatility goes up +1% to 22.10%, the contract will increase by $10; if the Implied Volatility goes up to 30.10%, the contract will increase by $90. However, if the Implied Volatility were to drop down to 15.10%, the contract would lose $60 in value. When swing trading, I try to avoid contracts with high Implied Volatility. The reason is, if the stock price drops, I will lose the Delta; however, if the Implied Volatility drops with it, I will lose the Delta and the Vega.

Chart B.6 - Chart by ThinkorSwim

Chart B.6 is another example of Implied Volatility. An increase in Implied Volatility also occurs once earnings reports get closer. Above is a screenshot of $NVDA with the Implied Volatility measurement just three days before their earnings release. Looking at the $245 Call expiring the same week, you would need to spend $1,040 per contract with an Implied Volatility measurement of 118.01%. What happens once earnings are released is that the Implied Volatility will drop. There are higher expectations going into the earnings event, which increases the premiums on the contracts due to high Implied Volatility, 16

then finally, when earnings are released, there are no longer high expectations. As a result, the Implied Volatility will drop regardless of a big move or not, and the contracts will lose a good portion of their value simply due to the Implied Volatility decreasing. Higher Implied Volatility levels always result in higher-priced options premiums. It is important to know the level of Implied Volatility before entering a trade because if you buy when the Implied Volatility is high, and it ends up dropping a decent percentage, that is known as an “IV Crush”, and you are going to lose a good chunk of the contract’s value. Volume: The volume presented within the options chain refers to the total number of options contracts bought and sold for that day. At the end of the trading day, the volume will go to zero and will reset for the next trading day.

Chart B.7 - Chart by ThinkorSwim

Looking at $AAPL in Chart B.7 shows the options that expire the same week. One can see how many contracts were bought and sold that day through the volume tab. The $165 Call for $AAPL shows that 119,314 contracts were bought, sold, or both. The $170 Call had 68,688 contracts bought, sold, or both. Paying attention to the volume is important because it will show you the amount of activity going on in that contract. Therefore, that contract has a lot of trader’s interest. Usually, the higher volume will narrow the spreads, while low volume results in wider spreads. Comparing volume and open interest is essential in options trading. Open Interest: After volume, you will also see open interest. This lets you know the total number of open contracts held by other traders. These contracts have yet to be sold by the traders and show you the open interest in that specific contract. The option chain will show the total number of open interest each morning before the trading session begins.

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Chart B.8 - Chart by ThinkorSwim

Looking above at Chart B.8 of an $AAPL contract that expires the same week, we can see that on the $165 Call, there was 119,314 volume, but 25,994 open interest. This means there are currently 25,994 open contracts as of market open, not including the volume. The next day, the volume of the contracts will go to zero, and the traders who held their contracts overnight will then be reflected in the open interest. However, if there was a lot of selling being done today, tomorrow, you would notice a sharp decrease in the open interest.

It is essential to look at the amount of volume and open interest for several reasons. The first reason is that it shows you the number of other traders interested in those contracts, but the second and most important reason is the bid and ask spread. The bid is where buyers are willing to buy, and the ask is where sellers are willing to sell.

Chart B.9 - Chart by ThinkorSwim

Above in Chart B.9 of the $MSFT option chain, notice the volume and open interest on the $305 Call. There is 8,090 volume and 2,774 open interest. In my opinion, this is a relatively good number, but the higher, the better. Looking at the bid, buyers are only willing to pay $185 for the contract, but sellers are only willing to sell it for $203 a contract. As a result, this creates an $18 spread in the contracts. The 18

difference in the spread is known as the “Bid & Ask Spread.” There is also something known as the “Midpoint,” which is the middle between the bid and the ask. In this scenario, we would want to purchase the contract at the midpoint, which would be around $194 a contract. As the volume and open interest are high, you would likely get filled at this price. On the flip side, you must be careful of contracts with low volume and low open interest because the spreads will be wide, and it will be nearly impossible to enter the trade.

Chart B.10 - Chart by ThinkorSwim

Looking at Chart B.10 above of the $DPZ option chain, look at the volume and open interest on the $420 Call. There was a total of 29 volume and 12 open interest. If you think about it, there were only twentynine people in the entire world interested in this contract. As a result, look at the bid and ask. The bid is $370 where buyers are willing to buy, and the ask is $520 where the sellers are willing to sell. This creates a $150 spread, which is something you want to avoid. Look at some of the other Calls in the option chain. Some of them have a $110 spread and a $400 spread. Stay away from these spreads! With low open interest and volume, it will be hard for you to get filled on the contracts, and if you do, it will be nearly impossible to sell. Do not buy at the mid-point either when the spread is this wide. Going back to the $420 Call, the midpoint between the bid and ask is $450. If you managed to get filled on the order, you would become the asking price, and the bidding price would stay the same; as a result, the midpoint would now be $410, putting you at an automatic loss of $40 a contract.

Now that you understand the overall basics of options trading, Calls, Puts, the Greeks, and how options can work in your favor or against you, let me explain the first step of technical analysis: candlesticks.

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Chapter 3: Candlesticks Candlesticks let the trader know the stock's high, low, open, and close within a given time frame. These ranges can include one-minute, five-minute, ten-minute, fifteen-minute, thirty-minute, one-hour, fourhour, daily, weekly, monthly, or even yearly. You can also preset custom time frames for most brokers. Candlestick charting first originated from the Japanese rice merchants. The candlestick was able to show Japanese rice traders the high, low, open, and close of rice prices and the momentum of price increases or decreases. This was an amazing discovery because we still use candlesticks hundreds of years later. There are hundreds of candlestick patterns; however, in this book, I will only explain the main candlesticks that you want to pay attention to. The basics of a candlestick is seen in the image below (See Chart C.1).

Chart C.1

Looking at Chart C.1, this is how candlesticks will appear in the markets. They will appear in many different shapes and sizes. The green candle tells the trader that the stock closed higher than it opened on whichever time frame the trader is watching. The red candle lets the trader know that the stock closed lower than it opened, depending on which time frame the trader is watching. There are also two thin black lines, one on top and one on the bottom of the candles. These are known as “wicks” or “tails.” I will refer to them as wicks. The wicks let the trader know how high or low the stock price has gone within a given period.

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Chart C.2 - Charts by TradingView

In Chart C.2 above, the lower shaded green area is where the market opened. Using Eastern time zones, at 9:30 a.m. EST, this is where the stock price opened at. Sometime throughout the day, the stock price went as high as the upper wick and as low as the lower wick. The high of the day is labeled “High,” and the low of the day is labeled “Low.” But, at 4 p.m. EST, the stock price closed at the upper portion of the green shaded area. This lets everyone know that the stock price increased in price and closed higher than the opening price.

Chart C.3 - Charts by TradingView

In Chart C.3 above, a red candlestick shows that the stock price closed lower than it opened for that time period. Looking at the wicks of the red candlestick, this still lets you know how high and how low the stock price went throughout that time period. The only difference is that the opening is the upper red shaded area of the candlestick, and the lower red shaded area of the candlestick is the close. As a result, the trader knows that the stock price closed lower than it opened on the day. 21

Now that you know the basics of candlesticks and the difference between green and red candles, I will now share with you the select candlestick patterns I look for in my trading.

Chart C.4 - Charts by TradingView

Chart C.4 shows an example of a Doji candlestick. This candle shows that the stock price opened and closed within the same general area. As a result, giving a small body but simultaneously giving a long upper wick and a long lower wick. Dojis represent uncertainty amongst traders. When you see a doji, both the buyers and sellers are neutral on the stock being traded and do not believe the price should be higher or lower. When both sides are uncertain, this is where you want to be cautious and not trade until one side overtakes the other. Doji candles are especially important at the top of an uptrend, or the bottom of a downtrend. If this is spotted, it could signal an immediate reversal in the opposite direction.

Chart C.5

Chart C.5 above represents a perfect reversal after a doji printed at the top of an uptrend. If a stock is increasing in price and then suddenly dojis, the buyers have become uncertain about the stock price going higher, but at the same time, the sellers are showing a presence by keeping the stock price down.

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Chart C.6 - Charts by TradingView

Looking at Chart C.6 above of $D on the weekly time frame, a doji appeared at the top of an uptrend. Again, this represents uncertainty in the buyers, but sellers are showing a presence at the same time. As a result, once $D broke below the low of the doji, the stock immediately reversed and headed lower, giving a clean entry to the downside.

Chart C.7 - Charts by TradingView

Looking at Chart C.7 above, this is an actual trade that I took on the U.S. Dollar Index $DXY. The $DXY was beaten down in price since the COVID sell-off of 2020. Again, on the weekly time frame, a doji was spotted at the bottom of a downtrend in June of 2021. Once the $DXY broke above the high of the doji, that is when I entered long, and the currency continued higher. Breaking down the doji, sellers were in 23

control for the entire sell-off but became uncertain about driving prices lower. As a result, a reversal was created once the price was above the high of the doji. This gave a perfect entry to the upside with a stoploss below the low of the doji.

There are three variations of doji candlesticks. The first variation is the doji shown in Chart C.4, Chart C.5, Chart C.6, and Chart C.7. Then the other two variations are known as gravestone dojis and dragonfly dojis.

Chart C.8

Chart C.8 shows what a gravestone doji will look like on a chart. Again, the body will be small; however, this time, there will be a long upper wick. I mainly look for gravestone dojis at the top of an uptrend because they signal a possible reversal. Looking at the gravestone doji, the stock price opened at the lower end of the candle and went to the highs of the upper wick. From there, sellers drove the stock price back down to the opening price and kept it there for the remainder of the candle. As a result, the buyers were uncertain, and sellers were clearly visible. As seen in the chart above, the stock immediately reversed after.

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Chart C.9 - Charts by TradingView

Looking at Chart C.9 of $NOVT on the daily time frame, the stock's price had a nice push to the upside, followed by a gravestone doji at the top of the uptrend. Notice how the stock immediately reversed following the gravestone doji. If you were long $NOVT, this was the sign to get out.

Chart C.10

Chart C.10 is an example of a dragonfly doji. Again, a small body can be seen, but this time, a long bottoming wick can also be seen. I mainly look for this candlestick formation at the bottom of a downtrend because it can hint at a possible reversal to the upside. Breaking down the dragonfly doji, at one point, the candle had an entire red body as sellers drove the price down throughout the day, but sometime throughout the day, buyers showed their presence and pushed the stock price back up to its opening price and did not let the price drop any lower. As a result, buyers showed their presence, but the

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sellers remained uncertain about pushing the stock price lower. As seen in the image above, the stock immediately reversed to the upside.

Chart C.11 - Charts by TradingView

Looking at Chart C.11 of $GOOGL on the daily time frame, $GOOGL had a brutal pullback to the downside, dropping from $1,530 a share to $1,009 a share and formed a dragonfly doji. Notice what happened to the price of $GOOGL after the dragonfly doji appeared. The stock price ran to a high of $1,475 before pulling back.

Chart C.12

There is also a candlestick formation known as the bullish hammer. As seen in Chart C.12 above, the bullish hammer looks like the dragonfly doji, but the difference can be found in the candlestick's body. With the dragonfly doji, there is no body or very little of a body; however, with bullish hammers, a body 26

is present, and the candle is in the shape of a hammer. The body does not matter; it can be green or red. The importance is the long bottoming wick. Again, at one point, this was a solid red candle, but the buyers were able to push the price of the stock higher and have it close higher than the opening price. Throughout the day, the sellers diminished, and only buyers showed their presence until the end of the day. If a bullish hammer is spotted at the bottom of a downtrend, it can hint at an immediate reversal.

Chart C.13

Chart C.13 shows an example of a bullish hammer at the bottom of a downtrend, but instead of a green body, this time, it is red. Again, the color of the body does not matter. As long as it is a hammer at the bottom of the downtrend, this can hint at a reversal. This leads to a common question, "what if a bullish hammer occurs at the top of an uptrend?" It would no longer be considered a bullish hammer if this were to occur; it is now considered a hanging man.

Chart C.14 - Charts by TradingView

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Looking at Chart C.14 of $T on the daily time frame, the stock had a slight sell-off from $34 a share down to $31.25 a share. At the same time, the stock formed a bullish hammer at the bottom of the move. From there, $T rebounded from $31.25 up to $38.75 before pulling back.

Chart C.15

As seen in Chart C.15, what looks like a bullish hammer signaling a continuation of the trend is actually signaling a reversal of an uptrend to a downtrend. The key thing to look for when this occurs is the volume and the distance between the candlestick compared to other surrounding candles. If the volume drops and this candle forms at the top of an uptrend, this is a key indication that the trend will reverse.

Chart C.16

Looking at Chart C.16, again, the color of the hammer does not matter. If it is red or green, the meaning is the same.

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Chart C.17 - Charts by TradingView

Looking at Chart C.17 above of $DISH on the daily time frame, a perfect hanging man candle can be seen at the top of an uptrend. As seen in the chart, $DISH quickly reversed back to the downside after a hanging man candlestick was printed on the chart.

Chart C.18

Looking at Chart C.18, the opposite of a bullish hammer is a bearish hammer, also known as an inverse hammer. I like to look for these at the top of an uptrend because they can signal a significant reversal. Again, the difference between a bearish hammer and a gravestone doji is that the bearish hammer has a body to it. At one point, the bearish hammer was an all-green candle. However, throughout the day, the buyers diminished, and the sellers pushed the price of the stock lower and were able to make the stock close lower than the opening price.

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Chart C.19

Looking at Chart C.19 above, it does not matter what color the body of the inverse hammer is. It can be red or green. As long as the hammer is at the top of an uptrend, it can hint at a possible reversal to the downside. However, just like the hanging man, if a bearish hammer occurs at the bottom of a downtrend, this can signal a reversal from a downtrend to a new uptrend. If a bearish hammer appears at the bottom of a downtrend, this is known as an inverted hammer.

Chart C.20 - Charts by TradingView

Looking at Chart C.20 above of $HD on the daily time frame, the stock continued to push up in price, but an inverse hammer appeared at the top of the uptrend. As a result, the stock price dropped from $340 down to around $298.

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Chart C.21

Looking at Chart C.21 above, an inverted hammer formed at the bottom of a downtrend. One may think that sellers are in control and are ready to drive the price even lower; however, this is a reversal pattern and lets the trader know to be cautious when looking for trades to the downside.

Chart C.22

Looking at Chart C.22, like most of the other candlesticks, color does not matter when it comes to the inverted hammer. I like to look for inverted hammers at the bottom of a downtrend and then piece them together with the indicators discussed throughout this book.

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Chart C.23

Looking at Chart C.23, a bullish engulfing candlestick can be seen. A bullish engulfing candle is one big green candle that swallows up the previous red candle. When you spot a bullish engulfing candle, this lets the trader know that the buyers are present while little sellers are participating. The bullish engulfing candle is usually an unusual size compared to all other previous candlesticks. If you spot a bullish engulfing at the bottom of a downtrend, this can lead to a reversal. I like to pay attention to them even during a market uptrend because it shows the buyers' strength compared to the sellers.

Chart C.24 - Charts by TradingView

Looking at Chart C.24 above of $HD on the daily time frame, two bullish engulfing candles can be seen. Notice the size of these candles compared to the other candles on the chart, and how they are just one solid green candle. As the bullish engulfing entails, strong buyers are present in the stock.

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Chart C.25

Chart C.25 is an example of a bearish engulfing candlestick. This candlestick is one solid red candle that swallows a previous green candlestick and can hint at a reversal of the current trend. With a bearish engulfing, there are minimal buyers and a massive number of sellers. Again, the bearish engulfing candlestick will be bigger than other surrounding candles. This is how you know the number of sellers is a substantial amount. I also like to look for bearish engulfing candles while the stock is in a downtrend because it can help show the amount of selling pressure and will let you know that the stock is more than likely going to continue to drop.

Chart C.26 - Charts by TradingView

Chart C.26 is a perfect example of what a bearish engulfing candlestick will look like. This example of $AMZN on the daily time frame shows the candlestick before the drop was a doji followed by the bearish engulfing. After the doji and bearish engulfing, $AMZN continued to drop in price from around $3400 a share to around $2880 a share.

These will be the main candlestick formations I pay attention to when trading. There are hundreds of candlestick formations that you can learn to assist you in your trading journey. There are entire books written on just candlesticks, and I highly suggest purchasing them. The books are called Beyond Candlesticks: New Japanese Charting Techniques Revealed by Steve Nison and Japanese Candlestick Charting Techniques: A Contemporary Guide to The Ancient Investment Techniques of The Far East by Steve Nison.

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Chapter 4: Understanding Stock Trend There are three ways that a stock can move. Stocks can either uptrend, downtrend, or consolidate. In this chapter, I will help you understand what these trends mean and how to apply them to your trading. The first thing I do when looking at a chart is establishing the current trend the stock is in. I check the monthly, weekly, and daily time frames to help answer this question. Always start on the monthly time frame to get an understanding of the major trend, then break it down to the weekly time frame to see any minor trends, and then finally down to the daily time frame to help spot any other trends that can be taken advantage. Using these higher time frames to determine trends helps in the decision-making process for day trading and swing trading. Uptrend: The stock or underlying assets is on an upward trajectory. As a result, there are higher highs and higher lows, in which the stock continues to go up in price. If the stock continues to make higher highs and higher lows, it will be considered an uptrend.

Chart D.1 - Charts by TradingView

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As you can see in Chart D.1 above, the “stock” is making new successful highs while creating higher lows. If you can understand which way the stock is trending, adding the indicators from later chapters will help you make a highly educated assumption about what will happen next in the market.

Chart D.2 - Charts by TradingView

Chart D.2 of $FB on the daily time frame shows that the stock price continues to set new highs, while each successful pullback never goes lower than the previous low. Remember, higher highs and higher lows = uptrend. This is a perfect example of how an uptrend will look on a stock.

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Chart D.3 - Charts by TradingView

Chart D.3 is another example of $FB, but this time on the monthly chart. Again, as you can see, there is a clear uptrend. Each pivot high sets a new high, and each successive pullback is higher than the previous pullback.

Downtrend: Where the stock creates a sequence of lower lows and lower highs. As a result, the stock will continue to decrease in price. As long as the stock continues to set lower highs and lower lows, the downtrend will be intact.

Chart D.4 - Charts by TradingView

As seen in Chart D.4 above, the stock is creating lower lows and lower highs. As a result, you would want to stay away from the Call side of the market and ideally look for puts. Again, adding the technical indicators from later chapters will help form a story about what will happen next for the stock.

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Chart D.5 - Charts by TradingView

Chart D.5 is an example of $BA on a daily chart. Notice how it continued to make lower highs and lower lows. The highs never surpassed the previous highs, and the lows continued to go lower than the previous low, thus forming a downtrend.

Chart D.6 - Charts by TradingView

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Chart D.6 is an example of a downtrend on $KO (Coca-Cola) on the monthly time frame. Notice the lower lows and lower highs that continued to form from 1997 to 2003. Each pullback to the upside was followed by a lower high, and each price drop made a new lower low.

How does the trend change? An uptrend will change if two things occur. The first one is that the stock needs to set a lower high. If that occurs, it is the first clue that the trend may be changing. The second thing that must happen is that the stock must set a lower low. If these two things occur, the uptrend will likely reverse into a downtrend. As for a downtrend, a stock must set a higher high and higher low for it to become an uptrend. Refer back to the monthly downtrend on $KO. Again, lower highs and lower lows mean there is a downtrend; however, notice what happened as soon as $KO created a higher low instead of a lower low, as well as a higher high (See Chart D.7 Below).

Chart D.7 - Charts by TradingView

Looking at Chart D.7 of $KO, the stock trend shifted direction and created an uptrend instead of a downtrend, and that uptrend is still valid to this day, thirteen years later. (The uptrend began in 2008).

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Chart D.8 - Charts by TrendSpider

Looking at Chart D.8 of $JNJ on the daily time frame, as seen, the stock was making lower lows and lower highs; however, as soon as $JNJ set a higher low and then a higher high, that is when the trend changed, and price began to move to the upside, thus creating a new uptrend.

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Chart D.9 - Charts by TradingView

Chart D.9 is a basic drawing of what a trend reversal will look like. Notice at the beginning that the stock is setting lower highs and lower lows. However, later in the trend, the stock failed to create a lower low and instead created a higher low, which is the first sign of a reversal. Then the stock created a higher high (trend change confirmed); as a result, a new uptrend was established, and the stock continued up in price.

Chart D.10 - Charts by TradingView

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Chart D.10 is an example of an uptrend turning into a downtrend. In this example, I will be showing you the weekly time frame of $JPM (JP Morgan Chase & Co.) Notice at the beginning of the trend, it was an uptrend. The stock was making higher highs and higher lows. However, suddenly, it created a lower low and broke that pattern. $JPM then proceeded to make a lower high which confirmed that the trend was changing. What happened to $JPM? It dropped from $46 a share to $14 a share during the downtrend.

Chart D.11 - Charts by TradingView

Chart D.11 is another example of a trend change seen on $SQ. Looking at the daily time frame, on the left of the chart, one can notice that $SQ created higher highs and higher lows, creating an uptrend. However, as soon as $SQ created a lower high and then a lower low, the stock trend changed. As seen in the picture, $SQ has continued to make lower lows and lower highs, which constitutes a downtrend.

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Chart D.12 - Charts by TradingView

As shown in Chart D.12, the stock was in an uptrend initially; however, as soon as the price set a lower high and lower low, the trend had changed and will more than likely continue to go in the opposite direction. When looking at the retracements of higher lows in an uptrend and lower highs in a downtrend, these levels more than likely occur at a Fibonacci retracement zone. In the Fibonacci chapter, I will discuss how to accurately predict where the levels of retracements can occur in both an uptrend and a downtrend. This will allow you to find low-risk entries while following the prominent trend. Consolidation: This is where the stock trend is undecided on whether it wants to continue in its current trend or reverse the current trend. As a result, the stock stays in a narrow range until buyers or sellers decide which direction they want to move the stock. Traders want to avoid making trades during consolidation periods. From experience, you will get whipsawed and stopped out of many trades. When consolidation forms, it usually results in a price pattern, which I will discuss in a later chapter. It has also been shown that if a stock was previously in an uptrend, then goes into consolidation; the trend will more than likely continue up once it breaks consolidation and vice versa if it were to consolidate after a downtrend. But you will always want to confirm this with the indicators discussed in this book. Below are multiple examples of what consolidation looks like on a chart (See Chart D.13, Chart D.14, and Chart D.15 Below).

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Chart D.13 - Charts by TradingView

Looking at Chart D.13 of $GLD on the monthly time frame, the stock experienced a consolidation period that lasted seventeen months before breaking out and continuing in price. Pay attention to the overall trend; when the stock broke out of the consolidation, it then formed a higher high, letting the trader know that the stock is more than likely going to continue to push further in price.

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Chart D.14 - Charts by TradingView

Chart D.14 shows $HD on the weekly time frame. $HD was previously in an uptrend where the stock price traveled from $140 a share to $280 a share. $HD then went into a thirty-three week consolidation period before continuing in an uptrend.

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Chart D.15 - Charts by TradingView

Looking at Chart D.15 of $GOOGL on the daily time frame, you can see that $GOOGL was previously in an uptrend before its fifty-one-day consolidation period. Once $GOOGL broke out of the consolidation, the stock continued in its uptrend setting higher highs and higher lows. Then $GOOGL went into another consolidation period of forty days before breaking out again and setting a higher high.

Now that you understand stock trends and how to spot an uptrend, downtrend, or consolidation, I am now going to move on to support and resistance. I will show you three ways of plotting support and resistance levels. The first method is the old-fashioned way, which is plotting support and resistance manually. The second method is with Persons Pivots, which plot support and resistance levels for you. The third method uses Fibonacci extensions and retracements. Be prepared to learn some new mind-blowing techniques in the next chapter.

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Chapter 5: Support and Resistance Before I show you multiple ways to draw support and resistance, you must first understand these two terms. Support: Created by buyers stepping into the market. The buyers believe that this is an excellent area to start buying up the underlying asset, and as a result, the asset refuses to fall under this point, and most of the time, buyers will push the stock price back up. You will more than likely notice a support area as the stock is in a downtrend. This is where the stock falls to and then begins to bounce off the support area as buyers flood the market.

Chart E.1 - Charts by TradingView

Looking at Chart E.1, in Bitcoin’s case, $30,000 is a support level. Each time Bitcoin drops down to this level, the number of buyers stepping into the market pushes Bitcoin’s price higher. The more hits there are on this $30,000 level, the stronger the support area becomes due to trading psychology. If you were to pull up a chart of Bitcoin and notice that Bitcoin has hit the $30,000 level five times and continued to go back up in price, what would you more than likely do if Bitcoin hit this $30,000 level a sixth time? You would buy Bitcoin there, would you not? You are not the only person who can see this either. Suppose

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you have a plan to buy Bitcoin when it comes back down to $30,000 for the sixth or seventh time; more than likely, hundreds of thousands, if not millions of other people have the same plan as you. That is why support works in the markets. We recognize previous price points in which an asset has bounced off before, and we continue to buy it off that area if it stays valid. I will be putting updated pictures of Bitcoin below as the days progress.

Chart E.2 - Charts by TradingView

Looking at Chart E.2, this is now Bitcoin a couple of months later. Notice the reaction Bitcoin had off the support level and the increase in price since Bitcoin met the support level. I will now update bitcoin's price again (See Chart E.3 Below).

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Chart E.3 - Charts by TradingView

Now, look at Bitcoin in Chart E.3 above! Bitcoin has rallied over $25,000 since the support zone at $30,000. Support is a powerful tool for many reasons. It allows you to spot where other buyers are waiting to enter the market, allowing traders to exploit low-risk entry points. If there was strong support on stock XYZ at $110 and the stock came down to that level, this would offer any trader a perfect opportunity to go long in the market. If you can time the entry off support, the stop-loss should be placed on the opposite side of that level. Resistance: Created by sellers selling short or buyers cashing out on their gains by selling their positions for profits. The short sellers believe the stock is overbought and want to profit from the stock dropping in price. At the same time, buyers exit the market to secure their gains before the stock goes against them. As a result, the price of the stock will drop. Resistance points are found during an uptrend. At this point, buyers are unable to exceed the number of sellers, and as a result, buying pressure diminishes, and sellers take over.

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Chart E.4 - Charts by TradingView

Looking at Chart E.4 of $COST (Costco), one could observe that there was previous resistance in November 2020 and December 2020, where it tested resistance six times. Six months later, $COST had returned to that exact resistance point and tested it as resistance seven extra times. As a result, there were many sellers in this area. Again, if you break it down to trading psychology, if you noticed that $COST rejected $385 thirteen times, what are you more than likely going to do if you bought a $385 Call when $COST was at $375, and it is now approaching $385? You would more than likely sell your position and secure your profits since, in the past, it has tested that area, rejected, and then dropped in price. As a trader, you want your money, so you pull out. Well, if you think that, more than likely, 90% of all the other traders in $COST are as well. Resistance areas will always make longs liquidate their positions out of fear of the stock getting rejected. That is why we want to pay attention to these areas.

What happens to the stock if it breaks support or resistance? As seen in Chart E.4 on $COST, once the stock closed with a solid green candle through the resistance area at $385, the price exploded to the upside. $COST is now sitting at $412.37 as of this writing. Let me explain why $COST moved the way it did once it finally cleared key resistance.

Imagine you were a buyer of $COST at $370, and you spot a clear resistance at $385; therefore, you plan to buy $COST options at $370 and sell at $385 to secure profits. You are not the only person in the world 49

with that plan. Being a good trader (like you should be), you stick to your plan and sell $COST at $385, and so did hundreds of thousands of other traders who were following the same plan; however, this time, $COST blows through that $385 level and goes higher. The number of buyers in this scenario outweighed the number of sellers; therefore, Costco broke the $385 resistance. You and everyone else are now upset that you sold your positions because $COST broke that key resistance and will likely continue higher. What do you and every other trader who sold at $385 want to do? Buyback in for a move higher. That is exactly what happened with $COST. Old buyers bought back in, and new buyers are buying in. A combination of fresh buyers and old buyers returning to the stock creates a massive upside push. When a stock breaks a solid area of support or resistance, it is common to see the price come back and retest that area. This happens due to trading psychology. Imagine you are waiting for a stock to break a key area of resistance to go long. When the stock breaks the resistance point, you could not get your order filled. Instead of chasing the trade, smart traders wait for the stock to return to its breakout point to enter. As a result, old resistance then becomes new support. This type of pullback allows traders to enter a lowrisk trade with a stop-loss below the breakout point.

Chart E.5 - Charts by TradingView

Looking at Chart E.5, I can almost 100% guarantee you this was the same thing that happened on $AMD. Buyers accumulated shares on dips with plans to sell in the $34 zone. The ones who sold at $34, once they saw the break and continuation past $34, became buyers again with the combination of new buyers flooding into $AMD. As a result, the stock price continued higher. 50

Chart E.6 - Charts by TradingView

Looking at Chart E.6, the same thought process can occur when it comes to support. $SQ had a support area at $225.60; therefore, this is where buyers were accumulating shares so that they could profit when $SQ rebounded in price. If you were buying into a trade at support, your stop-loss is always below support. Since this trade is based on the daily time frame, $SQ would need to close below $225.60 for the day. Suppose you are buying up $SQ this entire time while it is at support, just like everyone else who sees this support level, but suddenly, $SQ falls below support and closes below it. What is everyone more than likely about to do? Sell their trades, which they rightfully should if they are using proper risk management. The thought process is, “I do not want to lose money. I am going to sell before it drops more.” If everyone is doing this simultaneously, the stock will likely drop at a rapid pace, which it did. At the same time, short sellers were waiting for $SQ to fall below this level to profit from the stock dropping in price. You are going to see many references to trading psychology throughout this book. I finally became successful at trading when I started to think more about everyone else’s psychological state of mind when an occurrence happens in a stock. Going back to the $SQ example in Chart E.6, where everyone panic sold after the stock broke below the support area of $225.60, we can take full advantage of what is about to happen. Remember, you can profit from a stock dropping in price. If many people are buying on support, and the stock drops below it, many 51

people will sell. As we are thinking about what everyone else is about to do, we could buy a Put and profit from everyone else’s fear. Now that you understand support and resistance and why they work in the market, I will show you how to plot support and resistance levels. First, I will show you how to set it up for swing trading, and then I will show you how to plot the levels for day trading. I will first go over the old-fashioned way of support and resistance, but then I will show you the new way of plotting these levels in the new age of technical analysis.

Drawing Support and Resistance for Swing Trading

There are three specific criteria I keep in mind when drawing support and resistance: 1. Hit as many wicks as possible. The reason being, this is how high or low the stock price went during that period. 2. There must be a minimum of two to three hits. The more hits, the stronger the level. 3. When swing trading, default support and resistance levels will be fifty-two-week highs, fifty-twoweek lows, all-time highs, and all-time lows. When plotting support and resistance levels, always start on the monthly time frame. The monthly time frame will give you a bigger picture of the trend, and major support and resistance areas will be clearly visible. For this example, I will be plotting levels on $AMD.

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Chart E.7 - Charts by TradingView

Chart E.7 is $AMD on a monthly time frame with no support or resistance levels plotted. If you look closely, you can see that $AMD has four bottoming wicks bouncing off $73.87. Again, this meets the minimum criteria of two to three hits, and since the stock has bounced off this level four times (four months), this is a strong support level that you need to know about. Therefore, one should draw a support line at that level. Remember, if it hit this support area four times in the past, it will more than likely act as support when it hits it a fifth time.

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Chart E.8 - Charts by TradingView

Looking at Chart E.8, as for resistance, if you look closely, you can see that $AMD has three direct hits to the upside at $94.48, as well as the current month of July 2021 struggling to break through this level. Therefore, I am going to draw a resistance line at $94.48.

Chart E.9 - Charts by TradingView

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Looking at Chart E.9, if a stock is near all-time highs, always plot this level as resistance. This is because there will more than likely be resistance at this level in the future unless the stock price breaks above it. In that case, it will become support. This happens because the buyers who chased $AMD at all-time highs did not want to sell their shares at a loss. But, as soon as the price comes back to their entry point, they are more than happy to liquidate their positions at breakeven, or a slight loss.

Chart E.10 - Charts by TradingView

Looking at Chart E.10 above of $AMZN on the daily time frame, this is a perfect example of how a previous all-time high can act as a resistance point.

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Chart E.11 - Charts by TradingView

Looking at Chart E.11, going back to $AMD, this is how the monthly chart should look when you are done plotting the support and resistance levels. There are multiple hits for both the support and resistance, followed by the all-time highs.

Chart E.12 - Charts by TradingView

Looking at Chart E.12, after you have plotted all the support and resistance levels on the monthly time frame, break it down to the weekly time frame to find more support and resistance levels. On the weekly time frame, there is a major area of resistance and support between $86 and $87.50; one thing to note 56

about support and resistance is that support is not exactly at $73.87 in the monthly example, and resistance is not exactly at $94.48. Support and resistance are more so an area. In reality, the support area is between $73.50 and $73.87, and resistance is between $94.25 and $94.50; our job as technical analysts is to find these areas to identify potential buying or selling opportunities.

Chart E.13 - Charts by TradingView

Notice how in Chart E.13, the area was resistance and support in the past. There were seven direct hits as resistance, meaning seven weeks out of the seventeen weeks the stock was below, it resisted breaking this level. That is huge and something you want to pay attention to. Now when a stock breaks above a resistance level, nine times out of ten, it will become support, and that is precisely what ended up happening on $AMD. Notice that as soon as $AMD broke above the resistance level, it immediately returned and tested as support six times out of the twelve weeks above it. As soon as it broke below the new area of support, it became resistance again, and finally, as of this week, it broke back to the upside and made it support.

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Chart E.14 - Charts by TradingView

Looking at Chart E.14, there is one more support and resistance area for $AMD on the weekly time frame, between $95.92 and $96.50. Now that the weekly support and resistance levels have been plotted, you will then go to the daily time frame and find more levels. At this point, most of the support and resistance levels should be plotted, and you will see how important these levels are on the daily time frame.

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Chart E.15 - Charts by TradingView

Looking at Chart E.15 of AMD on the daily time frame, at this point, I am going to add the final additions of support and resistance to the chart. There is a clear area of support and resistance at $90.90.

Chart E.16 - Charts by TradingView

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Looking at Chart E.16, there is one more resistance area at $91.97-$92.

Chart E.17 - Charts by TradingView

Chart E.17 is a completed chart of $AMD with all support and resistance levels plotted. If I were swing trading, this is where I would stop plotting levels. Remember, the stock meets resistance in an uptrend and support in a downtrend. When the stock price breaks above resistance, the resistance then becomes support, and when the stock price breaks support, support then becomes resistance. Now that the $AMD chart is complete, these will be the levels to use as potential price targets and entries. Looking at Chart E.17, if $AMD breaks above $92, a gap needs to be filled to $94.48-$94.50. Again, breaking it down to trading psychology, you are not the only person in the world who knows about this gap, nor are you the only person who plans to buy on the break of $92 and sell at $94.50; therefore, when $AMD breaks above $92, you will likely notice significant buying pressure come into the stock. As everyone has the same plan, we can profit from it. Buy at $92 for a swing and sell at $94.50; if it breaks $94.50, it is going to the next level at $96. This is why buying multiple contracts helps the trader so that you can scale out and secure profits along the way. I will discuss scaling out in a later chapter. To wrap up plotting support and resistance levels for swing trading, start on the monthly time frame, break it down to the weekly time frame, and break it down to the daily time frame. Again, plot support 60

and resistance levels on each time frame. The free range to trade is in between the levels where no support or resistance is blocking the stock price. I will return to swing trading in a later chapter once we piece the entire puzzle together.

Drawing Support and Resistance for Day Trading The same rules will apply when plotting support and resistance levels for day trading. 1. Hit as many wicks as possible. The reason being, this is how high or how low the stock price went during that period. 2. There must be a minimum of two to three hits. The more hits, the stronger the level. 3. The previous day’s high, low, and close will act as support and resistance points, so make sure to mark these points. For day trading, instead of starting on the monthly time frame, instead, start on the weekly, then break it down to the daily, then the four-hour, and then the one-hour. Let’s chart $AAPL together. First, I will show you how to plot all your support and resistance points for day trading on $AAPL. Then I will show you how the previous day’s high, low, and close have acted as support and resistance points.

Chart E.18 - Charts by TradingView

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Chart E.18 is a blank chart of $AAPL on the weekly time frame. Right away, I can spot a level of support, resistance, and a trendline, which I will discuss in a later chapter.

Chart E.19 - Charts by TradingView

Looking at Chart E.19 above, the green line represents a trendline which is an inclined support point. However, there is clear support at $123.11, with six hits as support and four as resistance. Since there are ten hits in total, this is an area to know about for $AAPL, especially in the future. There is resistance at $138 that has three hits as well (you will see this better on a daily chart). Then finally, plot the all-time high, which $AAPL hit recently. After plotting all the key support and resistance areas on the weekly time frame, break it down to the daily time frame.

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Chart E.20 - Charts by TradingView

Looking at Chart E.20, the daily support and resistance levels have been drawn on the chart. Again, notice how previous all-time highs became a resistance level in the future! As day traders, we want to be as precise as possible regarding price targets. Therefore, after plotting the levels on the weekly and daily time frames, you would then view $AAPL on a four-hour time frame to find more support and resistance areas that were not spot on the weekly or daily time frame. When looking at the four-hour time frame, I watch more recent price data that is within the last three to five months.

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Chart E.21 - Charts by TradingView

Looking at Chart E.21 of $AAPL on the four-hour time frame, one thing I think is worth mentioning is observing the trend. What do you see? Higher highs and higher lows? What is that? AN UPTREND!

Chart E.22 - Charts by TradingView

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Looking at Chart E.22, four-hour support and resistance have been plotted on the chart. The picture is becoming clearer about where buyers and sellers are in this chart, providing you with trading opportunities. Notice the new additions of support and resistance on the four-hour time frame.

Chart E.23 - Charts by TradingView

Looking at Chart E.23, once finished plotting support and resistance on the four-hour time frame, then go to the one-hour time frame to find the remaining support and resistance levels. When plotting my levels on the one-hour time frame, I only focus on recent price action within the past twenty days. One-hour support and resistance tends to invalidate over time, so I only focus on recent price action. The chart is now complete once you have plotted support and resistance on the one-hour time frame. One thing I would suggest doing at first is color-coding the levels based on the time frame you drew the support and resistance levels. For example, make the monthly support and resistance levels green, weekly white, daily purple, four-hour orange, and one-hour pink. I did this when I first started plotting my levels; however, I now leave them white and just run through the time frames for simplicity and quickness.

With day trading, you trade the free ranges between the support and resistance levels. $AAPL had an alltime high at $145.25 and only one resistance level before that at $140.66. Again, if you break it down to trading psychology, you are not the only person in the entire world who knows about this gap that needs

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to be filled, nor are you the only person in the world who has a plan to buy on the break of $140.66 and sell at $145.25.

Chart E.24 - Charts by TradingView

Looking at Chart E.24, notice what happened on $AAPL once the price broke the resistance at $140.66. The stock tested that level as support a few hours later and filled the resistance gap the following day. The day proceeding tested $140.66 again as support, filled the gap again, and set a new all-time high. Using simple support and resistance levels, one could have created a trading plan for $AAPL, which would have played out to a T.

Now that you know how to plot support and resistance for swing trading and day trading, I will show you how the previous day’s high, low, and close can act as key areas of support and resistance for day traders. Once you feel comfortable plotting support and resistance, feel free to continue reading.

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Chart E.25 - Charts by ThinkorSwim

Looking at Chart E.25 of $TSLA on the five-minute time frame, I was planning to buy Calls for an upside move at either a break of the premarket high or a bounce at the previous day’s high, which was $805.57. As seen in the chart above, $TSLA came down and treated the previous day’s high as support where it gave a perfect entry. From there, $TSLA rallied to $840.76

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Chart E.26 - Charts by ThinkorSwim

Looking at Chart E.26 of $FB on the five-minute time frame, my plan was to short Facebook under its previous day’s lows at $193.92. As seen in the chart above, $FB treated the previous day’s low as support five times before finally breaking below and closing below the level. Once $FB broke its support, the price dropped to $191.12 before forming a double bottom and bouncing back for the day.

Chart E.27 - Charts by ThinkorSwim

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Looking at Chart E.27 of $GM on the ten-minute time frame, notice how the previous day’s high became a strong resistance area. Once $GM broke above premarket highs at $51.64, the price ran straight to the previous day’s high at $51.9, where it became resistance two times before selling off.

Chart E.28 - Charts by ThinkorSwim

Looking at Chart E.28 of $HD on the ten-minute time frame, notice how the previous day’s high acted as a resistance point, and the previous day’s low acted as a support point. This is why it is important to pay attention to the previous day’s high and low points. As seen in these examples, they will act as a solid support and resistance point. Once price breaks these levels, you can usually look for a continuation in the direction of the break. As for the previous day's close, this is the point where buyers and sellers agreed on a price for the stock. There is a reason why stocks X, Y, and Z closed at a specific price and not ten cents above or ten cents below.

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Chart E.29 - Charts by ThinkorSwim

Looking at Chart E.29 of $AAPL on the ten-minute time frame, notice how the previous day's close became premarket support. Notice what happened to $AAPL once the price broke below the previous day's close. $AAPL dropped to the previous day's low, went slightly below the level, and rebounded. This was a simple textbook setup with an entry and exit well defined.

Chart E.30 - Charts by ThinkorSwim

Looking at Chart E.30 of $MRNA on the ten-minute time frame, again notice how the previous day's close became resistance first thing in the morning, where $MRNA was then denied and continued to go lower. Where did $MRNA find short-term support? Right on the previous day's low, until price finally 70

broke below. Once $MRNA broke below the level, price dropped much lower.

As seen in the last few examples, it is essential to identify the previous day's high, low, and close. These areas will act as support and resistance points and possible price targets on the traded stock. Being prepared with these levels each trading day is necessary, and remember, I only use these levels for day trades.

Now that I have shown you how to plot support and resistance for swing trading and day trading, as well as showing you some tips and tricks, let me show you some more complex variations of identifying support and resistance points. Both methods will take most of the guesswork out of finding these key levels and will make it much easier to plot support and resistance.

Plotting Support and Resistance Using Persons Pivots Before discussing the Persons Pivots, I would like to thank John Person for giving me permission to discuss this indicator within this book. The Persons Pivots have changed the way I trade forever, and I cannot be any more thankful for him allowing me to talk about his indicator. The Persons Pivots is an indicator created by John Person from Persons Planet. The Persons Pivots ™ is a trademark that is owned by Persons Planet. The copyright and trademark of this indicator are the property of Persons Planet. Therefore, moving forward in this book, all the statements and views are solely based on my view and not Persons Planet. If you would like to learn more about this indicator, please visit personsplanet.com and check out John’s best seller Candlestick and Pivot Point Trading Triggers: Setups for Stocks, Forex, and Futures Markets. In that book, he discusses the Persons Pivots much more in-depth and other indicators that he has created. From here, I will discuss how the Persons Pivots are calculated and how I use them in my trading strategy.

What are the Persons Pivots? The Persons Pivots is an indicator that draws predetermined support and resistance areas for you, depending on which time frame they are set to. The pivot points are found by calculating the High + Low + Close/3. For example, if you are using the weekly Persons Pivots, and the high of the week = $148.76, the low of the week = $141.66, and the close of the week = $147.52. You would then add the high + low 71

+ close together and divide it by three. This calculation will give you a weekly pivot at $145.98. The Persons Pivots plots two resistance points and two support points. To get resistance point one, you take the pivot point (in this case, $145.98), multiply it by two, and then subtract the weekly low. $145.98×2$141.66=$150.3 is the weekly resistance one. You then take the weekly pivot point + the weekly high – the weekly low to get the second resistance point. $145.98+$148.75-$141.66=$153.07 for the weekly resistance two. As for the support areas, the weekly support one calculation is the pivot point × 2 – weekly high. $145.98x2-$148.76=$143.2. As for weekly support two, take the pivot point – weekly high + weekly low. $145.95- $148.76+$141.66=$138.85.

Luckily in the new age of technical analysis, you do not need to do these calculations to find the pivot points. Many brokers now have an indicator that will do everything for you. If you use ThinkorSwim by TD Ameritrade, the indicator is called "Persons Pivots." All you need to do is go to the studies and add this indicator to the Chart. To demonstrate this indicator's effectiveness and almost pinpoint accuracy, I will show you a few examples of Persons Pivots on multiple time frames.

Chart E.31 - Charts by ThinkorSwim

Chart E.31 of $CRM (SalesForce) shows an example of the weekly Persons Pivots. The chart shows that the stock had plenty of price action off the weekly pivot point, weekly support one, and weekly resistance one.

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Chart E.32 - Charts by ThinkorSwim

Chart E.32 of $BA on the ten-minute time frame shows how accurate the daily Persons Pivots can be. Based on the previous day’s price action, the Persons Pivots determined where the next day’s support and resistance would be. As seen in the chart, $BA rejected the daily pivot point almost to a T and then continued to sell-off. The stock came down to support one from the Persons Pivots and treated it as support for the rest of the day. Price action bounced off the support level six times throughout the day until the market closed.

Chart E.33 - Charts by ThinkorSwim

Chart E.33 is an example of $FB on the 10-minute time frame. At the beginning of the day, and even in premarket, $FB tested the daily pivot two times as resistance and could not hold above it. As a result, the stock price sold off, and a trader could have easily gone short with a price target of support point one, which was almost a $3 drop. $FB sold off to the support point, where the stock found short-term support until it finally broke below support and continued to drop another $3 before recovering for the day. 73

When setting up the Persons Pivots, I set them to multiple time frames. I like to use the daily, weekly, quarterly, and options expiration Persons Pivots. Feel free to experiment with the multiple time frame settings within the Persons Pivots. For example, some traders like to use the monthly Persons Pivots, but John Person has found that the options expiration setting works best on individual companies that offer options such as $AMD, $FB, $TSLA, etc. Using these multiple different time frames on the Persons Pivots will ensure that you get the most accurate support and resistance points. Now that you know which pivot points you should be utilizing, please continue reading and see how these other levels react as the stock price approaches them.

Chart E.34 - Charts by ThinkorSwim

Chart E.34 is an example of $BA on the daily time frame. One can spot many different pivot points that acted as support and resistance. Starting at the bottom cyan pivot, this is the quarterly pivot point. On October 21st, 2021, the Persons Pivots calculated that this point would be potential support in the future, and magically the same level became support and was the dead bottom for $BA on December 20th, 2021. At the same time, the top cyan line is the quarterly resistance one. Again, this was calculated as a resistance area on January 3rd, 2022, and validated its resistance on January 18th, 2022, over two weeks later. As for the other lines, the orange lines are the option expiration pivot point which was calculated on December 17th, 2021. That option expiration pivot point became resistance on December 28th, 2021, January 3rd, 2022, and then support on January 6th, 2022, January 10th, 2022, and January 11th, 2022. Looking to the left shows the importance of the quarterly and options expiration pivots. Price had hit these areas multiple times, acting as support and resistance.

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Chart E.35 - Charts by ThinkorSwim

Looking at Chart E.35 of $COST on the daily time frame, there are several examples where the pivot points have acted as support and resistance. The orange and yellow lines are the option expiration pivots, and the big purple and cyan lines are the quarterly pivots. Notice the areas that I have circled on the chart. $COST came up to its quarterly pivot, which became resistance and denied the pivot ten times before breaking through. At the same time, the option expiration pivot acted as support nine times. Once $COST broke above the quarterly pivots, it ran up to the next options expiration resistance, which became shortterm resistance. Once $COST broke through option expiration resistance one, it then proceeded to move higher to option expiration resistance two. The wonderful thing about Persons Pivots is that these areas are being given to us days, weeks, and sometimes even months before a stock approaches that area. This helps identify invisible support and resistance zones, which as a result, helps the trader make much more accurate and precise trading decisions.

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Chart E.36 - Charts by ThinkorSwim

Looking at Chart E.36 of $SQ on the daily time frame, I have it so the weekly pivots are shown all over the chart to show you the accuracy of these pivots. The red lines are the weekly resistance points, the purple is the pivot point, and the green is the weekly support points. Visually looking at the chart, notice the price action on the weekly support and resistance points. These levels are being calculated each week and are constantly changing based on the previous week’s price action.

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Chart E.37 - Charts by ThinkorSwim

Looking at the NASDAQ futures in Chart E.37, the quarterly pivots are applied on the chart. The Persons Pivots formula calculated this resistance area over two months in advance and let traders know that there would be possible resistance at that level. The NASDAQ proceeded to test this area as resistance four times before being sold off. The Persons Pivots gave a fair warning of this area, and knowing how to use these levels could have helped traders develop a trading plan on the NASDAQ.

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Chart E.38 - Charts by ThinkorSwim

Looking at Chart E.38 of $SE on the daily time frame, notice the price action at the options expiration resistance. $SE came right to resistance one, where price was rejected and then pulled back. $SE proceeded to push back to option expiration resistance one before pulling back again.

Chart E.39 - Charts by ThinkorSwim

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Chart E.39 above is an example of $SQ on a ten-minute time frame. On this chart, I have the weekly pivots applied. As seen in the chart, at the beginning of the day, $SQ denied the weekly pivot point treating it as resistance. As a result, a trader could have entered short with a price target of support one. $SQ continued to drop from $163.77 down to $150.9, which was support one. From there, $SQ bounced and never went lower that day.

Chart E.40 - Charts by ThinkorSwim

In the last example of the Persons Pivots, I will show you an intraday setup on $NVDA. Looking at Chart E.40, $NVDA opened below the daily pivot point (white line) and later approached this level. The pivot point should now act as resistance as $NVDA is coming up to this level. $NVDA tagged the pivot point twice as resistance before selling off. From here, the Persons Pivots did not have any support on $NVDA until $241, which was $14.50 lower than the current daily pivot point. $NVDA proceeded to sell off to weekly support one and daily support one, which became the exact low for the day. From all the examples shown on the Persons Pivots, you should be able to see how accurate these levels are. I love using the Persons Pivots to plot support and resistance that could otherwise visually not be seen. Some traders solely trade based on the pivot points and are successful in doing so. The Persons Pivots is a super accurate, quick, and easy way of identifying support and resistance points as they are predetermined for you at the beginning of each time interval. Test this indicator out and let me know how you like using them! As previously mentioned, the Persons Pivots have been a game-changer for me and have helped escalate my trading to a new level.

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Which Persons Pivots Should You Use? Personally, I like to use the daily, weekly, quarterly, and option expiration Persons Pivots. Make sure to color-code each set of pivots differently. That way, you can identify which pivot is seen when doing your analysis. If you would like to copy my person's pivot layout, here is how I have mine color-coded:

Daily Pivot Point = White Daily Support & Resistance Pivots = Black Weekly Pivot Point = Purple Weekly Resistance Pivots = Red Weekly Support Pivots = Green Option Expiration Pivot Point = Yellow Option Expiration Support & Resistance = Orange Quarterly Pivot Point = Purple Quarterly Support & Resistance = Cyan

Feel free to color code as you wish, but this is how I like to have my set. I also changed the thickness of the higher time frames to differentiate between them and the smaller time frames.

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Chapter 6: Fibonacci Extensions & Retracement Another form of support and resistance can be found using Fibonacci extensions and retracements. I will be referring to Fibonacci a few times throughout this book, so let me explain who and what Fibonacci is. Fibonacci, a famous Italian mathematician, found that adding a certain sequence of numbers up in a certain order applies to many things in life. For example, sunflowers, pineapples, acorns, the human body, etc. In Fibonacci, the "Golden Ratio", is the number .618. This is not a random number, and I will show you how Fibonacci found the golden ratio. The Fibonacci sequence is quite simple, and we will revisit this later once I discuss Exponential Moving Averages. The sequence is 1+1=2, 2+1=3, 3+2=5, 5+3=8, 8+5=13, 13+8=21, 21+13=34, 34+21=55, 55+34=89, and so on. For the Fibonacci sequence, you take the sum of each addition and add it to the previous higher number. To find the Fibonacci ratios, you take one of the numbers from the sequence and divide it by the next highest number. For example, 55/89= .618 and 34/55= .618. To find the .382 Fibonacci ratio, you take one of the Fibonacci numbers and divide it by the Fibonacci number two times out. For example, 34/89=.382 and 21/55=.382. Mind-blowing, right? You can find this entire sequence online on how each of these Fibonacci levels is calculated; however, this is the new age of technical analysis, so let's look into this tool's actual utilization.

How To Draw Fibonacci Extensions To draw the Fibonacci extensions, there must be a well-defined pivot high and pivot low. Going back to the stock trends chapter, the high points are the pivot highs, and the low points are the pivot lows. Below is an example for visualization purposes.

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Chart F.1 - Charts by TradingView

Chart F.1 shows the two points in which you would draw the Fibonacci extensions. Once the stocks pivot high and low have been identified, take the Fibonacci retracement tool, place it first at the high, then drag it down to the low. Always go from left to right, high to low. Do not get confused; there are two separate Fibonacci tools. The Fibonacci extensions are a separate tool from the Fibonacci retracements. However, I use the Fibonacci retracements tool and add my extensions to it, which I will discuss shortly.

Chart F.2 - Charts by TradingView

Looking at Chart F.2, this is how the chart should look after plotting the Fibonacci extensions. I will be showing you two ways to draw Fibonacci. The first one will be used when a stock is breaking above all82

time highs. If that is the case, I take off all the Fibonacci numbers under 1, and I only want to know about the extensions to the upside. These numbers are known as 1.272, 1.618, 2.618, and 4.326. In the second part, I will be showing you the retracement side of Fibonacci, in which case you would want to use .382, .50, and .618. Now, let’s review the first way I like to use Fibonacci extensions. This method will be used when a stock breaks out from all-time highs, and you have no other way of finding price targets. Let’s look at a swing trade that I took on December 31st, 2020, on $QCOM. On December 31, 2020, I entered a $QCOM swing, purchasing the $165 Call. I got filled on this swing trade for $145 per contract. My overall price target was the 127.2% extension at $166.22. The 127.2% extension is a well-known price target among many traders; therefore, if you break it down to trading psychology, there will likely be price action at this level. As $QCOM had a straight shot to the 127.2% extension, I decided to choose the $165 Call.

Chart F.3 - Charts by TradingView

Looking at Chart F.3, at this point, this is all that I had on $QCOM and had zero clues of how the chart would look in the future. All I knew was what the indicators and the Fibonacci extensions were showing. The above chart is what I saw before entering the trade.

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Chart F.4 - Charts by TradingView

Looking at Chart F.4, the two circled points are the points in which you would draw the Fibonacci extensions. Again, go from pivot high to pivot low, left to right, wick to wick.

Chart F.5 - Charts by TradingView

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In Chart F.5, the 127.2% extension lined up at $166.47, so I entered the $165 Call to get the contract in the money. Guess where $QCOM ended up going around three weeks later? Right to my price target at the 1.272% Fibonacci extension, where I fully exited the swing trade position. The 1.272 extension is an extremely common price target for many swing traders.

Chart F.6 - Charts by TradingView

Chart F.6 shows the exact day I fully exited my position for maximum profits. Notice the reaction $QCOM had once it reached the 1.272 Fibonacci extension.

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Chart F.7 - Charts by TradingView

Chart F.7 above shows the significance of the 127.2% extension. $QCOM tested this area three times, making it resistance each time. Eventually, buyers gave up, and sellers took control and drove the price of $QCOM down.

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Chart F.8 - Charts by TradingView

Looking at Chart F.8 of $SQ on the daily time frame, taking the pivot high to pivot low, you can see that the 127.2% extension and the 161.8% extension acted as resistance, which ultimately was $SQ all-time high. The stock resisted this level four times before being sold off to the downside. Again, once $SQ broke over its previous all-time high, no one had a clue where it could go in the future. Using the Fibonacci extensions helped the trader determine their future price targets.

Chart F.9 - Charts by TradingView

Looking at Chart F.9, let me show you another example of a trade I took using the Fibonacci extensions for price targets. On June 29th, 2021, I purchased the August 20th $245 Call for $V. The chart shows what I saw when entering $V. I had zero clue how the chart would look in the future, but using Fibonacci and a few other indicators, there was a high probability that $V would continue to push up in price. The price targets were the 127.2% extension at $242.19 and the 161.8% extension at $248.15. My final exit was at the 161.8% extension.

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Chart F.10 - Charts by TradingView

Chart F.10 shows the day I fully exited the $V swing trade position.

Chart F.11 - Charts by TradingView

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Chart F.11 above is an example of a swing trade I took on $MSFT. For this trade, I entered a complex spread that I will go into in a later chapter known as the butterfly spread; however, my overall price target was the 127.2% extension. Looking at the daily chart, there are two points where you would draw the Fibonacci levels. I took the Fibonacci tool and drew them from the all-time-high at $233 to the low point at $196.06 to give the extension levels. As seen on the chart, $MSFT achieved the level within two days.

Chart F.12 - Charts by TradingView

I will be revisiting this exact trade in a later chapter; however, looking at $CAT in Chart F.12 on the daily time frame, one can notice the previous all-time high followed by the pullback to the downside. As a result, draw the Fibonacci extensions, and the price target will be the 127.2% extension. Again, I did a butterfly spread for this swing trade, so I am excited for you to read the chapter about spreads, but notice how $CAT was quick to run to the 127.2% extension before treating it as resistance multiple times and then dropping in price.

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Chart F.13 - Charts by TradingView

Chart F.13 is an example of $MCK on the monthly time frame. Once $MCK broke above all-time highs, the 127.2% extension and the 161.8% extension were the only price targets. As seen in Chart F.13, $MCK was able to fill the entire gap to the 127.2% extension. Notice the stock's reaction once it achieved the first price target. From there, $MCK continued to break through the 127.2% extension and fill the gap straight to the 161.8% extension.

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Chart F.14 - Charts by TradingView

Chart F.14 above is an example of another trade I have taken based on Fibonacci extensions. Looking at $TGT, the most recent, clear-cut pivot high and pivot low are drawn onto the chart. Since then, Target has given no retracements to draw new Fibonacci levels. Once the stock broke the all-time high, the next price target was the 127.2% extension at $141.23; however, once the stock price broke above the 127.2% extension, the market had a gap fill to the 161.8% extension. What did $TGT do? It filled the entire gap to the 161.8% extension at $155.06. This was a $25 move from $130 to $155 in three weeks.

Fibonacci extensions can be an effective tool when a stock breaks all-time highs, especially if you combine it with the person’s pivots. These two indicators will give you the most accurate price targets for your trading. Remember, you must always take a pivot high to pivot low and draw the Fibonacci levels from left to right. Traders can use the Fibonacci extension for day trades and swing trades. If a stock is breaking above all-time highs as the market is ready to open, you need to know your daily price objective. As a swing trader, you need to recognize where the stock has room to go once it surpasses all-time highs. As a result, you can determine the strike price and calculate how long it will take to reach the price target. Now that you know how to use Fibonacci extensions to find upside price targets, I will now explain a method known as Fibonacci gaps.

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Fibonacci Gaps Fibonacci gaps occur when multiple Fibonacci extensions are drawn at different pivot highs and pivot lows, but no extension is blocking the stock from increasing substantially in price until the next Fibonacci extension. The gaps occur from free space in the market where there is a significant price difference between two Fibonacci levels. For this example, I will show you multiple trades that traders could have taken on $MRNA due to Fibonacci gaps. As you can see in the chart below, $MRNA was smashing alltime highs repeatedly. Therefore, traders needed to resort to Fibonacci extensions to get price targets to the upside.

Chart F.15 - Charts by TradingView

Looking at Chart F.15, paying attention to the Fibonacci extensions drawn in multiple different areas on the chart, $MRNA had no resistance from $269.43 to $304. I know the chart looks like a disaster, but I would never leave all of the lines on the chart. I would simply remove the irrelevant Fibonacci extensions and keep the chart clean. $MRNA would be a perfect example of a Fibonacci gap since there is tons of free space between one extension and the next. When you spot these gaps in the market, make sure to take full advantage of them because the market will more than likely fill the gap, and if it does, that can offer traders substantial profits.

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Again, breaking the gaps down to trading psychology, if we notice a huge gap that needs to fill from $264.89 to $304, more than likely, millions of others will see the same gap. What is more than likely going to happen? Buyers will push $MRNA up in price to $304 and begin to take profits once it hits their price target. If it breaks above the price target and has another gap to fill, it will likely fill that gap before having any pullback. As seen in Chart F.16, there was a gap from $304.16 to $340.3, and $MRNA filled the gap in two days. $MRNA had another gap from $340.3 to $360.3, and $MRNA filled the gap in two days. The final gap was from $360.34 to $420.14, and $MRNA filled that gap in two days.

Chart F.16 - Charts by TradingView

Looking at Chart F.16, let me walk you through my thought process on this trade. I noticed a massive gap in the market that needed to be filled. That was check #1. Check #2 was the break of premarket resistance at $288.92 (or $290). As seen in the chart, once $MRNA broke above the premarket high, it quickly reached $317.88 during the session. Why did $MRNA stop right at $317.88? Continue to Chart F.18 to see why.

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Chart F.17 - Charts by ThinkorSwim

Looking back at Chart F.17 and then Chart F.18, the daily Persons Pivots gave $MRNA a price target of $318, where price stopped twelve cents short. Piecing together Fibonacci and Persons Pivots is like solving a puzzle. You might not see the clear picture with one indicator, but the picture makes more sense when you piece the indicators together. When piecing them together, you will know which price targets to aim for and have an idea of other traders’ price objectives. As the stock price breaks above one level, the stock price will more than likely move to the next price target. If price breaks there, it will likely see the next price target.

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Chart F.18 - Charts by Discord

Looking at Chart F.18, this is a screenshot of my premarket notes on $MRNA. Refer to the first chart of $MRNA in Chart F.15. Notice the Fibonacci gap that needed to fill from $305 to $340? Well, it filled that gap today (7/20/21). Again, piecing together Fibonacci and the Persons Pivots helped identify price targets, entries, and exits. If no pivot points or extensions were blocking $MRNA from filling the gap, more than likely, buyers would run the price up to the levels before taking profits.

Chart F.19 - Charts by TradingView

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As seen in Chart F.19, $MRNA was able to fill the remainder of the Fibonacci gap and increase in price to $346 before finally pulling back.

Chart F.20 - Charts by ThinkorSwim

Looking at Chart F.20 of $SE on the daily time frame, notice the Fibonacci gaps that needed to be filled by the market. The first gap to fill was once $SE was able to break above $298.58. Once $SE was above $298.58, the market had a gap to fill to $310-$312. As everyone in the market knew about this gap, they pushed the price of $SE up to fill the gap before taking profits. The next gap that needed to be filled was from $312 to $324-$329. Notice how $SE reacted once it broke above $312. Price filled the gap the same day, making a $12-$17 move. The next gap to be filled was from $329 to $343.95. $SE went ahead and filled that gap in just two days.

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Chart F.21 - Charts by ThinkorSwim

Chart F.21 is another example of a Fibonacci gap found on $UPST. Looking at the Fibonacci extensions drawn at the beginning of the chart, $UPST had a gap that needed to fill from $188.63 to $215. $UPST filled that gap in two days. After that, there was another gap from $217.86 to $244.19, $UPST filled this gap within a few days. After that gap, there was another gap from $244.19 all the way to $302.32, and $UPST filled that gap within ten trading days. After $302.32, there was another gap to $328.12, which was filled in one day. From there, $UPST finally gave a new pivot high to pivot low that allowed a trader to draw a new Fibonacci level. The Fibonacci extensions then showed that $UPST had two more gaps to be filled. The first gap occurred from $346.54 (new all-time highs) to $364.33, then the second gap to $386.96. $UPST filled both of those gaps as well. Throughout the entire $UPST move up, you could have been trading the gaps and profiting the entire time.

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Chart F.22 - Charts by TradingView

Looking at $AMZN in Chart F.22, I had taken three different Fibonacci levels to draw the extensions, and there was a massive gap that $AMZN had to fill from $3551.2 to $3644.18. Since this gap is obvious, everyone can see it, and everyone is planning the same trade. If everyone has the same plan, what is more than likely going to happen? The market is going to fill that gap. $AMZN ran over $100 in a single day to initiate the gap fill. After that gap, there was then another gap from $3666.76 to $3737.17. $AMZN filled that gap as well. Spotting gaps in the market is significant because, as you have seen in the examples, the market favors filling the gap before having any form of price action. As a result, you can trade the free space in between the gaps and use it to your advantage to profit. Always remember, the gaps are your friend. Now that you know how to find possible price targets to the upside using Fibonacci extensions, as well as how to use Fibonacci gaps to capture significant moves in the market, I am now going to show you how to use Fibonacci retracements to understand where a stock can retrace to after a big move has occurred in the market.

Fibonacci Retracements I use Fibonacci also to find possible retracements after a big move has been made in the market. As I discussed earlier, 38.2%, 50%, and 61.8% are other Fibonacci ratios, and these act as the most common retracement areas, with the 50% and 61.8% retracement being the most popular.

A retracement is a short-term pullback against the stock's current trend before the original trend continues. Retracements are perfectly normal and can provide the trader with excellent opportunities to 98

enter a position. I know it is hard to believe, but stocks do NOT go up forever. Instead of doing what amateur traders do, which is chasing the move, once you understand how to use Fibonacci retracements, this will help you identify where you should be looking to enter the trade. This will ensure you have the best possible risk-to-reward ratio when entering.

Chart F.23 - Charts by TrendSpider

Looking at Chart F.23 of $SPY on the daily time frame, as far as drawing the retracement levels, using the Fibonacci retracement tool, take the pivot low (the low before the move was made) and draw it to the newest pivot high (the high of the move). With the retracements, you draw them the opposite way of the extensions. Make sure to draw from wick to wick, left to right. As you can see in the above chart, $SPY came down into the retracement zone and made a full 61.8% retracement before continuing in its trend. Ideally, I look for a 50% or 61.8% retracement to enter my trades; however, there are times when the stock decides to retrace by 38.2% before continuing its trend. Something worth noting, just because the stock makes a retracement into these zones does not mean it will bounce and go higher. Make sure to confirm a bounce with the indicators discussed in this book. Understanding the retracements is super important because it helps traders not buy the top of the market and instead provides levels that the stock could retrace to, thus helping traders identify low-risk entry points.

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Chart F.24 - Charts by TradingView

Looking at Chart F.24, going back to the $V example in Chart F.11, taking the most recent pivot low in late March 2021 to the high of May 2021, the retracement zone was automatically drawn. Where did $V retrace to? Right to the 50% retracement, where $V bounced and went to new all-time highs. In this scenario, the retracements and extensions helped identify a low-risk entry, and the extensions provided the price targets. If one entered the $V trade at the 50% retracements, the stop-loss would simply be placed on the opposite side of the retracements.

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Chart F.25 - Charts by TrendSpider

Looking at Chart F.25 of Gold on the daily time frame, there was a massive increase in price from $1,451 to $2,075. As a trader, you know a move like this is not sustainable for very long. Instead of chasing the trade, you instead take the Fibonacci retracement tool and draw the retracements onto the chart. Staying patient, you wait for a full retracement, ideally to the 50% or 61.8% level, where you could have identified a low-risk entry. As seen on the chart, Gold retraced to the 61.8% retracement at $1,686 and formed a double bottom. Since the 61.8% retracement, Gold has continued to increase in price to $2,080.

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Chart F.26 - Charts by TrendSpider

Chart F.26 shows two examples of how efficient the Fibonacci retracements are. Looking at the chart above, the first Fibonacci retracement on $SE, taking the low point before the move to the high point after the move, $SE made a 50% retracement before continuing back up in price. $SE made another big move following the 50% retracement. As a result, you can take the retracement tool and draw it on the chart to understand possible retracements. $SE made a 61.8% retracement before bouncing and continuing back to the upside.

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Chart F.27 - Charts by TrendSpider

Looking at Chart F.27, one can also use Fibonacci retracements on a stock dropping in price. Instead of taking the low to the high, take the high to the low. From here, the retracements still play a significant role. As seen in all three examples, $BABA retraced back into the retracement zones before continuing its downtrend. Each subsequent pullback was followed by a more significant move to the downside. Going back to stock trends, notice how the retracements let traders know where the stock price could retrace before continuing in its primary trend. The higher lows in an uptrend and the lower highs in a downtrend can be predicted using Fibonacci retracements. What is the result if the stock breaks the entire retracement zone? If a stock were to break the retracement levels, the trend is more than likely changing directions. For example, in a market uptrend, if a stock falls below the 61.8% retracement, the stock could continue to fall as the retracement has failed. On the flip side, in a market downtrend, if a stock breaks above the 61.8% retracement, buyers will more than likely flood the market and push prices higher. (See Chart F.30 Below).

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Chart F.28 - Charts by TrendSpider

Looking at the example of $SPY in Chart F.28, notice price made a full 61.8% retracement but closed below it. The day $SPY closed below the 61.8% retracement was on a Friday, and the overall market continued to trend down on Monday. This is typically the result of a retracement being violated. Remember, if it violates that level, it is more than likely not a retracement anymore, and the stock will more than likely shift its trend.

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Chart F.29 - Charts by Trendspider

Looking at $NIO on the daily time frame in Chart F.29, notice the steep increase in price. As a result, you do not want to get stuck buying Calls at the top, and instead, you would want to wait for $NIO to give a retracement before going long. Notice how the price reacted once $NIO broke below the 61.8% retracement. When breaking it down to trading psychology, short sellers are waiting for the stock to invalidate the retracement, so they then sell short, then there are also the buyers who are forced to sell their positions to cut losses. As a result, the stock price goes lower.

Wrapping up Fibonacci When plotting the Fibonacci extensions, always start on the monthly time frame to understand the longterm perspective. After identifying which long-term Fibonacci extensions are applicable based on the monthly time frame, break it down to a weekly time frame and plot the weekly Fibonacci extensions. Again, figuring out which ones apply to where the current stock price is at and deleting the ones that are irrelevant to price. Then finally, break it down to the daily time frame to find any remaining Fibonacci extensions. Make sure to delete the levels that hold no value to where the stock's current price is; that way, the chart does not become cluttered. On the flip side, utilize the Fibonacci retracement tool if a stock has had a substantial run-up or drop in price. Instead of going long at the top of the move, or going short at the bottom of a move, the retracements will let you know where to possibly start your position, which 105

as a result, will give you the best risk-to-reward possible. Also, make sure to utilize the Fibonacci gaps that occur in the market. If there is a price gap, the market favors filling the gaps before significant price action occurs. This offers traders some of the best possibilities to profit.

That will wrap up using Fibonacci extensions, retracements, gaps, support, resistance, and Person Pivots. Make sure to use all of these tools to your advantage when trading. Simply relying on basic support and resistance is not part of the new age of technical analysis. Now that you know how to plot support and resistance in a few different ways, your entries and exits should be much more accurate. Another form of support and resistance worth knowing is the trendline, which I will discuss next

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Chapter 7: Trendlines A trendline is a sloped support or resistance line that successfully connects two to three swing lows or swing highs. Trendlines can be found on any time frame and can assist traders in making proper trading decisions. Like regular support and resistance points, the more direct hits a trendline has on price action, the stronger the level becomes.

Chart G.1 - Chart by ThinkorSwim

Looking at Chart G.1 of $DISH on the daily time frame, the downward sloping trendline is acting as resistance. $DISH had hit this level multiple times before breaking above and pushing higher in price. As a result, the breakout generated buying pressure.

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Chart G.2 - Chart by ThinkorSwim

Looking at Chart G.2, a different trendline can be spotted on the same example of $DISH, but this time a slightly slopped trendline to the upside. This new trendline acts as resistance to the upside and suggests that $DISH will continue to have resistance at this level. Notice the price increase once it broke above both trendlines. I took this trade based on the stock price breaking above the trendlines.

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Chart G.3 - Chart by ThinkorSwim

Looking at Chart G.3 of $GILD on the daily time frame, there is an upward sloping trendline acting as support. The idea behind this trendline is that each time the stock comes back to this area, it will find support and continue higher, which it did.

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Chart G.4 - Chart by ThinkorSwim

Looking at Chart G.4 of $AAPL on the weekly time frame, the same upward sloping trendline can be seen. Notice how each time $AAPL retested the trendline, it successfully bounced and continued higher in price.

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Chart G.5 - Chart by ThinkorSwim

Looking at Chart G.5 of $HUT, notice how the wicks have successfully touched the trendline four times. Once two successful wicks connect a trendline, one can be drawn. As a result, this trendline will continue to act as downward resistance until the stock price pushes through the trendline and holds above.

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Chart G.6 - Chart by ThinkorSwim

Looking at Chart G.6, in this final example of a trendline, notice how $DKNG formed support at this level multiple times over the course of six months. Each pullback led to a bounce; however, notice the reaction once price broke below the trendline. It had a massive sell-off in the following weeks. This is all due to trading psychology. Imagine you are adding to your $DKNG position with each successful pullback to the trendline, and then eventually, the stock breaks below the trendline. Any sane person would sell their position, and remember, you are not the only one who would sell in that scenario. As a result of the trendline break, $DKNG dropped in price significantly. There are many different ways to draw these trendlines, which has caused significant discussions on whether trendlines are useful in technical analysis. In my opinion, yes, they are, but the way that some traders use trendlines makes the topic very subjective. When you are using trendlines, you want to draw the ones that will be the easiest to spot because, remember, the entire market is one big game of trading psychology. If you are searching for a trendline with a magnifying glass, more than likely, the majority of the market will not know about that trendline. Therefore, the price is going to ignore it altogether. Only plot the obvious trendlines as those will be the ones where price reacts. If you need a website to doublecheck your trendlines, check out FinViz.com; type in a ticker on the website, and it automatically draws 112

the trendlines for you. This way, you can compare and eliminate any useless trendlines. As seen in the $DKNG example, when a trendline is violated, buyers or sellers will flood the market and either drive prices up or down. I will show you a few more examples in the following charts.

Chart G.7 - Charts by ThinkorSwim

Looking at Chart G.7 with the uptrending trendline on $X, notice what happened once the stock broke below the trendline. Significant selling pressure hit the stock, and prices fell hard the first two days of violating the trendline. Why did this happen? With each successful pullback to the trendline, many traders and investors see this as a good buying opportunity. They begin to build a bigger position as they add with each pullback. What do you do if you add to your position each time the stock returns to a trendline, and suddenly the stock falls below it? You would probably sell, and that is exactly what happened. It would be best to keep in mind that people started a position or added to a position when it came back to touch the trendline the last time before breaking. If this was your first position and you saw the price break below the trendline, you would quickly sell and cut your losses. At the same time, short sellers enter the market to drive the price lower and profit from it. See how trading psychology justifies the drop in price you see at the breakdown of the trendline?

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Chart G.8 - Charts by ThinkorSwim

In Chart G.8 of $MRO, there is a slightly inclined trendline that has three hits as resistance. With this kind of trendline, usually, once the price breaks above the trendline, you will notice a big reaction, and that is exactly what happened with $MRO. Short sellers would sell short at the trendline, and the buyers would buy on the dips. Once the stock broke above the trendline, short sellers had to cover their positions, meaning they would repurchase the shares, plus people had been on the sidelines waiting for the stock to break before starting a position. That is the psychology behind why this move occurred.

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Chart G.9 - Charts by ThinkorSwim

Looking at Chart G.9, a fascinating aspect of the trendline is that if broken, the price will usually return to the trendline and make it support or resistance. Looking at $MSFT in the chart above, there is a long-term inclined trendline acting as resistance. Notice what happened when $MSFT broke above this resistance point. It treated the trendline as support on multiple occasions.

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Chart G.10 - Charts by ThinkorSwim

Looking at Chart G.10 of $TSLA on the daily time frame, three trendlines are spotted. Ignore the two long upper wicks that break above the trendline. These are misprints on the ThinkorSwim platform. Looking at the declining trendline, there are three hits. That meets the criteria to draw a trendline. Notice how $TSLA treated the declining trendline as resistance multiple times until the stock was able to break above the trendline. $TSLA then treated the trendline as support on multiple occasions. Following the breakout, $TSLA then went into a channel where two trendlines could be drawn to capture the swing highs and swing lows.

Chart G.11 - Charts by ThinkorSwim

Looking at Chart G.11, the final example of how price likes to retest the trendline can be seen in the chart above. Looking at the daily chart, there are plenty of times where price came up, hit the trendline, and then dropped. However, notice what happened as soon as price broke above the trendline. It came right back, tested it as support, and then continued to push higher.

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Why does this happen? This happens due to the same reason regular support becomes resistance, and resistance becomes support. Imagine you missed the breakout or breakdown of a trendline, and you are stuck missing out on the trade. What would you do if the stock came back to revisit the trendline? You would likely enter the position as the stock is back near the original entry. If buyers anticipate selling $HD at the trendline in Chart G.11 to take profits, what happens if $HD breaks above it? They want to get back into $HD for as close to where they sold. As a result, the stock will likely retest the trendline before breaking out and advancing further to the upside. The same thing happens with a trendline that has been acting as support. If buyers have been adding to their positions at the inclined trendline, and miss their sell once the price breaks below, they would likely wait for a retest of the trendline before selling. As a result, this creates a perfect lowrisk entry to the downside. If you were to go short at a retest of the trendline in this example, the stop-loss would be on the opposite side of the trendline, while profits are virtually unlimited. Trendlines are a powerful form of support and resistance, especially when combined with horizontal support and resistance, Fibonacci, and pivot points. Traders can also use trendlines to form the chart patterns that will be discussed in a later chapter. Do not search too hard for a trendline, as they should stick out like a sore thumb. Those are going to be the most effective since anyone can find them. Did anything in the last few chapters blow your mind? Wait until you read the following few chapters where I discuss my favorite trading indicators.

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Chapter 8: Exponential Moving Averages Before discussing which Exponential Moving Averages (EMAs) you should be using in your trading, let me tell you what the EMAs are. The EMAs is the average price of an asset set over a length of time the trader chooses. The average price is then plotted with a line, and this line moves with each bar and will change depending on which time frame is used. However, the EMAs put a greater weighting on more recent price action than older price action. For example, suppose you use a 100-day EMA. One would assume that out of the 100 days, the EMA would weigh each day the same. However, that is wrong. The EMA will emphasize the previous ten days more than the price action from 90 days ago. In short, the EMAs are weighing recent price action heavier than older price action. One moving average, the Simple Moving Average (SMA), weighs each day the same.

Chart H.1 - Charts by ThinkorSwim

Looking at Chart H.1, I have placed an EMA and SMA on the chart for visual reference. The red line is the 100 EMA, and the blue line is the 100 SMA. Notice how the two moving averages are in two 118

completely different areas on the chart. In my opinion, EMAs are more effective for short-term traders, while SMAs are more effective for long-term trends. Now that you know the difference between EMAs and SMAs, going back to the Fibonacci sequence, the EMAs I use in my trading strategy are the 5, 8, 21, and 55. Before I begin discussing how to use these moving averages, each EMA will be used the same way as shown in the following pages. The only difference will be the time frame you base the trade. For example, if you base a trade on the daily time frame, you must rely on the daily EMAs. If you base a trade on the five-minute time frame, you must use the EMA rules on the five-minute. It all depends on which time frame the setup occurs.

The 5 EMA First, I will discuss the 5 EMA and how to use it to keep you in winning trades longer, alert you of possible exit points, and how use it as an RSI. I know some people are questioning that statement, “How are you comparing a moving average to RSI.” Well, let me show you.

First, I will show you how to use the 5 EMA as your babysitter and keep you in winning trades longer. I will show you a series of charts in the coming pages. Notice how the entire time, these stocks never violated the 5 EMA. Therefore, my rule is that if the stock is following the 5 EMA, there are zero reasons to panic and zero reasons to sell your position unless a price target is hit, or you are satisfied with your profits.

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Chart H.2 - Charts by ThinkorSwim

Looking above at Chart H.2 of $BA on a 10-minute chart. Notice that $BA followed the 5 EMA to a T and did not break above the EMA until much later in the day. Theoretically, there were zero reasons to sell the $BA options, and if held, the trader caught a $6.37 move to the downside, which is easily $150200+ of profit per contract.

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Chart H.3 - Charts by ThinkorSwim

Looking above at Chart H.3 of $SQ on the ten-minute time frame, look at what the price did for most of the day. It simply followed the 5 EMA to the upside without breaking below it until much later in the day.

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Chart H.4 - Charts by ThinkorSwim

Looking at Chart H.4 above, this is a perfect example of why you should not panic when the stock follows the 5 EMA. As you can see on the chart of $AAPL above, there was a beautiful breakout above the trendline, and due to the breakout, I entered long. I entered the trade during the big green bar (labeled “Entry); what happened the following three days? Red, red, and more red. Should I have panicked and sold just because I saw red? NO. Looking at the chart, all $AAPL did was pullback to the daily 5 EMA. From there, $AAPL proceeded to run $17 and create new all-time highs at $150. While increasing in price, all $AAPL did was follow the 5 EMA to the upside. Therefore, there were zero reasons to exit the position. By ignoring the 5 EMA rule, one could have sold the position at –40%, just to look back a few days later and see the contracts were now up +300%.

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Chart H.5 - Charts by ThinkorSwim

Looking at Chart H.5 of $HD on the daily time frame, all price did was follow the 5 EMA to the upside for a $65 move without ever violating the moving average. As a result, theoretically, you could have ridden $HD to the upside and caught this entire move, resulting in a significant amount of profits.

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Chart H.6 - Charts by ThinkorSwim

Finally, looking at Chart H.6 of $TSLA on the one-hour time frame, notice how the price followed the one-hour 5 EMA for most of the move. If you base a trade on the one-hour time frame, you must pay attention to the hourly 5 EMA. As a result, $TSLA gave a great move to the upside without violating the moving average. As seen in the many examples provided, if the price follows the 5 EMA in the respected direction, there is no reason to panic during the trade. The 5 EMA will guide you to profits as long as the stock follows. However, it is important not to be greedy. As the stock continues to follow the 5 EMA, make sure to scale out of your position to secure profits and move the stop-loss until it is eventually triggered. Now that you know how to let the 5 EMA guide you, I will show you how to also use it as an RSI indicator.

How To Use The 5 EMA As An RSI Before discussing how the 5 EMA can substitute the RSI, it would be beneficial to know what RSI is. RSI, also known as the Relative Strength Index, was created by J. Welles. Wilder Jr. and written about in his 1978 book New Concepts in Technical Trading Systems. This indicator has two extremes marked, 124

which indicate overbought or oversold conditions. The 70-mark signals that the stock is overbought, and the 30-mark signals that the stock is oversold. As a result, you want to avoid going long when the RSI is in overbought territory and avoid going short when the RSI is in oversold territory. I, however, prefer to use the 5 EMA instead of the RSI for the reasons that you will see in the following examples.

Chart H.7 - Charts by ThinkorSwim

Chart H.7 of $HD on the daily time frame has RSI applied at the bottom of the chart, and shows the similarities between the two indicators. The two can give the same signals regarding overbought and oversold conditions. There are, however, many times when the RSI gives an overbought reading, but the stock is still close to the 5 EMA. As seen in the $HD example, RSI is giving an overbought reading, yet the price is hugging the 5 EMA. My general rule is that I will not sell the position until price gets overextended from the 5 EMA.

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Chart H.8 - Charts by ThinkorSwim

Chart H.8 of $AAPL on the daily time frame, shows the RSI giving $AAPL an overbought at $136 a share. As seen in the picture above, the stock continued to move to the upside, following the 5 EMA all the way to $150 a share before getting overextended from the 5 EMA and pulling back.

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Chart H.9 - Charts by ThinkorSwim

Looking at Chart H.9 of $ZS, the RSI showed that the stock was overbought on multiple occasions, but as seen in the picture, the stock kept following the 5 EMA. $ZS was first considered overbought at $210 but proceeded to move to a high of $224.50 before pulling back and letting the RSI cool off. Then $ZS proceeded to run again and was considered overbought at $233. From there, $ZS continued to run to a high of $249.41 before pulling back. Then it was considered overbought one more time at $255 but proceeded to move to $293.27 before finally giving a pullback. Notice how the pullbacks occurred once the stock was over-extended from the 5 EMA instead of when the RSI was considered overbought.

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Chart H.10 - Charts by ThinkorSwim

Looking at Chart H.10 of $LOW on the daily time frame, the RSI started flashing overbought conditions at $185. From there, the RSI stayed in overbought territory, but the stock continued to push to $209 before pulling back to the downside. As seen in the chart, $LOW continued to ride the daily 5 EMA to the upside before getting over-extended and pulling back.

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Chart H.11 - Charts by ThinkorSwim

Looking at Chart H.11 of $TSLA on the daily time frame, notice how the RSI showed overbought conditions at around $800. RSI users probably missed the move to $1,243.49 due to the overbought reading. $TSLA followed the 5 EMA to the upside, where it got over-extended from the 5 EMA a couple of times, pulled back, then continued to push to the upside.

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Chart H.12 - Charts by ThinkorSwim

Finally, looking at Chart H.12 of $BABA on the daily time frame, oversold conditions were marked when the stock was $175 a share. However, $BABA continued to sell off and eventually dropped to $150 a share within a few days. A majority of the time, the stock followed the 5 EMA before getting overextended and coming back up to the moving average. As you can see in the examples, the RSI can show the stock is overbought; however, the price continues to push to the upside, and the RSI can show oversold, but the price can continue to drop. We are not talking about a few dollars; the stocks continued to push or drop a significant amount, and if you listened to the general concept of RSI, which is “do not buy when overbought” and “do not sell when oversold,” you are potentially missing out on an even bigger move to the upside, or downside. Therefore, I let the 5 EMA dictate when the stock is overbought or oversold, and most of the time, the 5 EMA will let you know about these conditions well before the RSI does. The rule for the 5 EMA is that whenever the stock is over-extended, it will ALWAYS pullback to it. Well, not always. Two things can happen: price pulls back, or the stock bull/bear flags, which I will show later. It is also worth mentioning that I am not saying, “Do not use RSI,” I know plenty of traders who use this indicator and are incredibly successful. If anything, you can combine the 5 EMA and RSI to help you spot overbought and oversold conditions. 130

However, in my strategy, a lot of it relies on the moving averages. That is why I prefer to use the 5 EMA over RSI. If the RSI interests you, I highly suggest you purchase J. Welles Wilder Jr. Book, New Concepts in Technical Trading Systems. It is a fantastic trading book that all traders must read. Now I will be removing the RSI from the charts and showing you how to identify over-extensions with the 5 EMA.

Chart H.13 - Charts by ThinkorSwim

Looking at Chart H.13, on July 20, 2021, I was live streaming on my YouTube channel looking for stocks to trade when I stumbled upon $BA. I told everyone in the live stream that $BA could get bought up back to the daily 5 EMA due to the over-extension. That is a bold statement; however, looking at the $BA Chart, the previous day, it closed at $206.62, but the 5 EMA was at $218.5, which is almost a $12 gap. Because of this, we already knew that $BA was super over-extended to the downside and needed to be bought back up to at least the daily 5 EMA. $BA that same day increased in price from a low of $206.5 to a high of $217.25; almost an $11 move.

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Chart H.14 - Charts by ThinkorSwim

Chart H.14 is another example of how understanding over-extensions in the 5 EMA helped me spot trading opportunities. Running up into April 9th, I was trading $SQ Calls the entire time; however, on April 8th and April 9th, $SQ was getting very over-extended from the 5 EMA on the daily time frame. The day I took this trade was on the over-extension on April 9th. Looking at the chart of $SQ, the 5 EMA was at $260, and $SQ opened at $274 where price proceeded to push to $278. At this point, $SQ was over-extended from the 5 EMA by $18. Knowing this over-extension could have served you two ways. 1. Not buying Calls and losing because the stock pulled back on you, and 2. hinting that you could start a short position as long as all the other technicals confirm this act. $SQ pulled back down to the daily 5 EMA that day and offered a beautiful short position.

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Chart H.15 - Charts by ThinkorSwim

Looking at Chart H.15 of $SPY on the daily time frame, notice how when the price became overextended from the 5 EMA, it quickly pulled back to the moving average before dropping again.

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Chart H.16 - Charts by ThinkorSwim

Looking at another example of $SPY in Chart H.16, notice the three red arrows I have drawn on the chart. Each time price got visually over-extended from the 5 EMA, it pulled back to the moving average.

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Chart H.17 - Charts by ThinkorSwim

Take one good look at Chart H.17 of $SQ on the daily time frame. How many over-extensions can you spot? Again, the over-extensions may not be enough to put on a trade in the opposite direction, but it will save you from losing money.

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Chart H.18 - Charts by ThinkorSwim

Looking at Chart H.18, notice all the daily over-extensions on $FB. At the beginning of the chapter, I mentioned that one of two things could happen when a stock is overextended from the 5 EMA. 1. The stock could pullback to the 5 EMA, or 2. The stock could create a bull flag or bear flag. I will discuss the bull flag and bear flag further in-depth in a later chapter, but for now, I want you to know that a bull flag is a continuation pattern to the upside. It consists of a move up, followed by consolidation, and then another move up, while a bear flag is a continuation to the downside. The bear flag consists of a move down, followed by consolidation, and another move down (See Charts H.19 & H.20 Below).

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Chart H.19 - Charts by ThinkorSwim

Looking at Chart H.19 of $TSLA on the 10-minute time frame, notice what happened when the stock price got over-extended from the 5 EMA. The price consolidated until it returned to the 5 EMA, forming a bull flag, and then pushed higher in price.

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Chart H.20 - Charts by ThinkorSwim

Looking at Chart H.20 of $NVDA on the five-minute time frame, once the stock price became overextended from the 5 EMA, the price consolidated until coming back to the moving average, giving the next leg up. These two charts above are just a couple of examples for now. You will notice the over-extensions that turn into bull flags and bear flags once I discuss flags further in-depth in the chart patterns chapter. Of course, we never know if the stock will pullback to the 5 EMA or if it will bull flag, so you need to consider many other indications before exiting the winning positions. What I prefer to do in this scenario is to move my stop-loss up and scale-out of my position when the stock gets over-extended. That way, if it does pullback, in the worst-case scenario, you will get stopped out at break-even or in profits. To sum up the 5 EMA, this moving average will act as your babysitter in all winning trades. If the stock follows the 5 EMA in your respected direction, there are zero reasons to exit the position. Instead, move the stop-loss until it eventually triggers, or you are satisfied with the profits. The 5 EMA also acts as an RSI. When the stock gets over-extended from the moving average, it will either pullback to the 5 EMA or create a flag. If you are ever in a winning position and the stock gets over-extended from the moving average, secure some of your profits and move the stop-loss up to limit your risk if the stock does 138

pullback. The 5 EMA will play a crucial role in all your trading decisions; therefore, you need to know how to use this moving average. Another moving average can be combined with the 5 EMA, which creates a powerful duo, and that moving average is the 8 EMA.

The 8 Exponential Moving Average The second EMA from the Fibonacci sequence that I will be discussing is the 8 EMA. The 8 EMA is used in several ways, and when you combine it with the 5 EMA, it creates a powerful technical tool. The 8 EMA will be your stop-loss in a winning position and a stop in a losing position. When you combine the 5 EMA and 8 EMA, it acts as a MACD indicator and is my two favorite EMAs.

Using The 8 EMA As A Stop-loss My rule of thumb when trading is to always set my stop-loss on the opposite side of the 8 EMA. As you will see in the following few charts, it is common for the price of a stock to come back to this area but end up bouncing and going back in its respected direction. However, as I have seen repeatedly, once a stock loses the 8 EMA, it tends to reverse and go in the opposite direction. When using this moving average, depending on which time frame you have used to initiate the trade, the price must close on the opposite side of the 8 EMA on that time frame to stop you out of the trade. For example, if you base a trade off the 10-minute time frame, the stock must close below the 10-minute 8 EMA. If you base the trade off the 1minute time frame, the stock must close below the 1-minute 8 EMA.

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Chart H.21 - Charts by ThinkorSwim

In Chart H.21 of $ROKU on the daily time frame, notice that a $140 run-up was held by the 5 EMA and 8 EMA the entire way to the upside. When $ROKU pulled back, it tested the 8 EMA and continued higher in price. You could have trailed the stop-loss below the 8 EMA during this entire run-up until $ROKU finally fell the moving average. Notice the day that $ROKU lost the 8 EMA on the daily time frame, price then proceeded to fall $28 to the downside before rebounding. Then once back above the moving averages, price followed the two EMAs for another $106 move to the upside.

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Chart H.22 - Charts by ThinkorSwim

In Chart H.22 of $TSLA on the one-hour time frame, notice how the stock rode the 5 EMA and 8 EMA to the downside without ever violating the moving averages until days later. Since the break below the EMAs, $TSLA stock dropped from $1150 to $950.5 without breaking above the 8 EMA besides in postmarket and premarket.

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Chart H.23 - Charts by ThinkorSwim

Looking at Chart H.23 of $AAPL on the daily time frame, notice that once the stock lost the daily 8 EMA, $AAPL immediately went into a downtrend. If you were to take puts, trail the stop-loss above the 8 EMA the entire way down. Notice what happened to $AAPL once the price closed above the 5 EMA and the 8 EMA. $AAPL then proceeded to push to the upside until the price fell below both moving averages again. From there, $AAPL followed the 5 EMA and 8 EMA back to the downside before breaking back above the moving averages. This combination never ends.

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Chart H.24 - Charts by ThinkorSwim

Chart H.24 of $Z on the daily time frame can also help show how the two moving averages work together. Looking at $Z, there were two scenarios where the stock followed the 5 EMA and 8 EMA to the upside without ever violating the moving averages. The first run-up in price consisted of a $16 move, and the second run-up in price consisted of a $32 move. At the same time, notice what happened each time $Z began to close below the 8 EMA. The stock then reversed directions and followed both EMAs to the downside.

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Chart H.25 - Charts by ThinkorSwim

Looking at Chart H.25 of $FB on the weekly time frame, the two moving averages help paint a clear trend in the stock price. Once $FB broke consolidation, the price was $282 a share. Until recently, all $FB did was follow the 5 EMA and 8 EMA to the upside without ever violating the 8 EMA. $FB ran to a high of $384 a share, which was a $102 increase without having any violations.

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Chart H.26 - Charts by ThinkorSwim

In this final example of how the 8 EMA should act as your stop-loss, notice $TSLA on the daily time frame lost the 8 EMA entirely on April 27th, 2021. The price of $TSLA at the close of that day was $704. $TSLA continued its drop to $540 without ever violating the 8 EMA to the upside. This was a - $164 move in which you could have shorted or bought puts on $TSLA and profited the entire way down. Notice how $TSLA got over-extended from the 5 EMA, pulled back, broke above the daily 8 EMA, and then continued to push higher. Remember, the stop-loss is on the opposite side of the 8 EMA. If you are long, the stop-loss is below the 8 EMA. If you are short, the stop-loss is above the 8 EMA. Depending on the time frame chosen for the trade, the stock must close on the opposite side of the 8 EMA, on that time frame to stop you out. I have seen too many people sell as soon as the stock price breaks the 8 EMA, but quickly after, price rebounded and closed above the moving averages. Remember, it must CLOSE on the opposite side of the 8 EMA.

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How To Combine The 5 EMA and 8 EMA To Create A MACD Before showing you how to use the 5 EMA and 8 EMA as the MACD, it will be beneficial for you to know what this indicator is. MACD, also known as the Moving Average Convergence Divergence indicator, is a momentum/trend following indicator that gives buy and sell signals based on two EMAs. The two EMAs used are the 26 EMA minus the 12 EMA. It then plots the nine-day EMA from the difference between the 26 EMA and 12 EMA, and then uses the difference between the 26 EMA and 12 EMA as another line. With the MACD indicator, there is also a histogram plotted on the chart. The histogram is presented with a few different colors. The first color is dark green, the second color is light green, the third color is dark red, and the fourth color is light red. These colored bars show the momentum of the stock. The bars are calculated based on the difference between the two averages on the MACD. During a sell signal, if the two moving averages gap far away from each other, you will see the red momentum bars, which signals strong selling momentum. The same can be said based on buy signals. When the green is presented on the MACD, this shows strong buying momentum. When the two moving averages get closer, the bars turn into their opposing lighter color. Below is how the MACD indicator would look on a chart (See Chart H.27 below).

Chart H.27 - Charts by ThinkorSwim

Looking at Chart H.27, when the blue line curls below the tan line, this generates a sell signal; however, when the blue line curls above the tan line, this generates a buy signal. As you can see, there is also a histogram on the chart as well. This histogram measures the difference between the two EMAs.

Something to make a note of, I am not against MACD, nor do I hate the indicator. I do not use it in my strategy as the 5 EMA, and 8 EMA will do exactly as the MACD. Now that you know what the MACD is, let me show you a simple trick with the 5 EMA and 8 EMA, which can substitute for the MACD.

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Chart H.28 - Charts by ThinkorSwim

Looking at the example of $HD in Chart H.28, using the 5 EMA, 8 EMA, and MACD, you can see that the MACD crossed to the upside and had a clear buy signal. Look at the 5 EMA and 8 EMA as well. What did it do? It also generated a buy signal. When the 5 EMA and 8 EMA curl, this generates buy and sell signals. That is exactly what the MACD does.

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Chart H.29 - Charts by ThinkorSwim

Looking at Chart H.29 of $AMD in, notice how the MACD and the two EMAs generated buy and sell signals at similar times. Sometimes the MACD generates the signals first, and other times the EMAs generate the signals first. In my experience, I have noticed that they tend to form the same signals simultaneously, which is why I prefer to use just my EMAs.

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Chart H.30 - Charts by ThinkorSwim

Looking at Chart H.30 of $HD, the first buy signal on the MACD happened when the 5 EMA crossed over the 8 EMA. However, when MACD generated the sell signal, the EMAs NEVER gave a sell signal, and instead, the stock began to bull flag. While MACD said sell, theoretically, there was no reason to sell. From there, the MACD told you to buy back eight trading days later after the move had continued.

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Chart H.31 - Charts by ThinkorSwim

Looking at Chart H.31 of $BA on the daily time frame, the MACD gave a buy signal at the same time as the 5 EMA and 8 EMA. However, the big difference here is seen in the sell signals. Notice how the stock was super over-extended from the 5 EMA on the daily time frame and was telling you to exit the position ASAP. This occurred days before the MACD generated a sell signal. Would this have been a profitable trade regardless? Of course, it would have, but you would have lost a lot of potential profit if you waited for the MACD to generate a sell signal first.

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Chart H.32 - Charts by ThinkorSwim

Chart H.32 is another example of how the MACD, 5 EMA, and 8 EMA tend to generate signals simultaneously. Due to the almost identical buy and sell signals, plus knowing how to use the 5 EMA and 8 EMA for entries, exits, stop-losses, and take profits, it would be much more beneficial for you to use the 5 EMA and 8 EMA on your charts.

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Chart H.33 Charts by ThinkorSwim

Chart H.33 of $RIOT on the daily time frame shows how the 5 EMA and 8 EMA generated a buy signal at the same time as the MACD, and then generated a sell signal at the same time as the MACD. This is how to use the 5 EMA and 8 EMA as a MACD. Instead of having more indicators on your screen, like the RSI, MACD, and the EMAs, all you need to have now is two moving averages to do all the work. Next, I will be discussing another important EMA, which will be the 21 EMA.

The 21 Exponential Moving Average The following moving average I will be discussing is the 21 EMA. This is an essential moving average on almost all-time frames depending on your trading style. This EMA and the 20 EMA/SMA are considered the mean of a stock. When the stock extends too far away from the mean, it will always revert back to it. As many traders use one of the three moving averages just discussed, there will almost always be price action in the general area of those moving averages if you break it down to trading psychology. I use the 21 EMA because it is a part of the Fibonacci sequence. Before diving deeper into this topic, I want you to

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remember through this entire chapter that the 21 EMA is the BEST possible spot to enter a trade. Personally, I make the 21 EMA white.

Chart H.34 - Charts by ThinkorSwim

Take one good look at the chart above of $AAPL on the daily time frame with the 21 EMA applied. Notice how much price action occurred at the daily 21 EMA.

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Chart H.35 - Charts by ThinkorSwim

Another excellent example of how strong the daily 21 EMA can be, is found in Chart H.35 of $GS. While $GS was consolidating, you can see that the price bounced around both sides of the daily 21 EMA. While $GS was above the 21 EMA, price treated it as support, while $GS was below the 21 EMA, price treated it as resistance.

The 21 EMA does not only apply to the daily time frame either. It is applicable to all time frames. It just depends on which time frame you use to initiate the trade. If you like to use the 1-hour time frame to make trades, you want to rely on the 1-hour 21 EMA.

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Chart H.36 - Charts by ThinkorSwim

Looking at $DKNG in the chart above, notice the stock price's reaction to the one-hour 21 EMA. Price resisted this level on multiple occasions and continued to trend down.

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Chart H.37 - Charts by ThinkorSwim

Chart H.37 above is another example of $BA. Again, notice the support that occurred at the daily 21 EMA. If a trader was looking for a long entry, $BA offered many perfect opportunities to enter a trade while giving a fantastic risk-to-reward.

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Chart H.38 - Charts by ThinkorSwim

Looking at the same chart of $BA except with the 20 SMA, 20 EMA, and 21 EMA applied, notice how price reacts to these general areas. Again, if you break it down to trading psychology, most traders use one of these three moving averages on their charts. As so many traders use these moving averages, there will likely be price action in that area. Looking at the chart above, you can see that most of the time, the stock is bouncing off one of those moving averages as support or resistance.

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Chart H.39 - Charts by ThinkorSwim

Back to just the 21 EMA in Chart H.39, I want to start with a trade that I took on $AXP. On March 26th, 2021, I entered $AXP $150 Calls expiring April 30th. I chose this date because it would cover earnings, and the stock could experience a run-up into their earnings report. Again, the 21 EMA is the BEST possible spot to enter a position. Looking at the dragonfly doji with the red arrow pointing at it, notice the stock's reaction to the daily 21 EMA. As the stock pulled back to the daily 21 EMA, I entered this swing trade. This offered me a low-risk, high reward trade. By default, I placed my stop-loss below the daily 21 EMA. As the trade was based on the daily time frame, $AXP would have to close below the 21 EMA at the end of the day to stop me out. When the 5 EMA, 8 EMA, and 21 EMA are super tight, the stop-loss is ALWAYS below the 21 EMA. The next day, $AXP dropped in price and came back to the daily 21 EMA and made it support. Did the stock ever close below the 21 EMA? Nope. Two days later, the same thing happened. The stock price pulled back to the 21 EMA. Did it close below the 21 EMA? Nope. As a result, I added a few more contracts due to the amount of support on the 21 EMA. Again, giving me the best possible risk-to-reward, and an excellent average down on my contracts. Would some people panic sell in this scenario? Yes.

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However, there were zero violations and zero reasons to sell from a technical standpoint. I would feel bad for those that sold because the contracts went +40% when I fully exited my position.

Chart H.40 - Charts by ThinkorSwim

Chart H.40 is another example of a trade I took using the ten-minute 21 EMA. In this example, this was a day trade I took on $TSLA. As seen in the picture above, where I labeled “ENTRY,” this is where I entered a $TSLA Put. My stop-loss was a break and close above the ten-minute 21 EMA (you always rely on the moving averages depending on the time frame the trade was based on). As seen in the picture, $TSLA never closed above the 21 EMA, and instead dropped from $877.5 down to $837.5 for the day.

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Chart H.41 - Charts by ThinkorSwim

One more example of the 21 EMA will be shown using Chart H.41. This trade was on a leap contract I had purchased on $BLNK. On October 6th, 2020, I purchased $BLNK $25 Calls expiring January 2022. I bought these contracts for only $160. For the next four weeks, all $BLNK did was drop in price, and the contracts were down −40%. Again, plenty of people would have panic sold in this scenario. When trading something that expires a year+ out, you must focus on the weekly time frame. Taking one good look at the weekly time frame, it was suggested that $BLNK could find support on the weekly 21 EMA. A break below there was my stop-loss. Many people could have closed their positions at a loss because they failed to look at the bigger picture and were caught up in what was happening today. $BLNK touched the weekly 21 EMA and then ripped to the upside. Those $160 contracts then turned into $1,385, where I completely exited. Imagine selling at that –40% loss and missing +765% gains.

Remember, the 21 EMA is the best possible spot to enter a position. The stop-loss is on the opposite side of the 21 EMA when you do so. Another thing worth noting is that if the 5 EMA, 8 EMA, and 21 EMA are tight together, your stop-loss is always below the 21 EMA until the 5 EMA and 8 EMA start to

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generate distance from the 21 EMA. From there, trail the stop on the opposite side of the 8 EMA, or until the stock gets overextended from the 5 EMA. Notice this same setup on $BA in the chart below.

Chart H.42 - Charts by ThinkorSwim

Using Chart H.42, the following way you will be using the 21 EMA is as an intraday support and resistance level. If the stock is near the daily 21 EMA, always chart this level on your chart because it can serve as a strong resistance and support level, as seen in the previous examples.

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Chart H.43 - Charts by ThinkorSwim

Chart H.43 shows $MO on a daily time frame. Notice the amount of support that occurred at the 21 EMA. Since I noticed the support, I decided to enter a swing trade the day before $MO broke above the trendline. I entered the $MO swing trade as the price came to the daily 21 EMA. This offered a perfect low-risk entry, and I was able to exit the trade on February 18th, 2022, for +63% on the contracts.

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Chart H.44 - Charts by ThinkorSwim

Looking at Chart H.44, when breaking down the time frame to a ten-minute chart, you can see how $MO came down to the daily 21 EMA at $50.09 and gave it a little kiss before going back up in price. If I am trying to snipe an entry off a level, like $MO off the daily 21 EMA, I will lower the time frame to watch price approach the entry level and enter as soon as price hits.

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Chart H.45 - Charts by ThinkorSwim

Chart H.45 is an example of a trade I entered on $SLV. I entered this trade right off the daily 21 EMA, which I ended up swinging and making over +250% profits on the trade. Since I entered this trade at the daily 21 EMA, my stop-loss was on the opposite side of the 21 EMA. I was risking around 10% on my Calls, and as a result, I made over +250% returns on my initial investment. That is the kind of risk-toreward that traders should look for. Again, if the stock is near the daily 21 EMA, you always want to chart this area for intraday support or resistance.

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Chart H.46 - Charts by ThinkorSwim

In Chart H.46, the blue arrow and the white line represent my exact entry on the $SLV swing trade. Notice how the stock price came down to the daily 21 EMA level before making it support and then bouncing to the upside and never returning.

The 21 EMA is not just the best possible spot for entries from the daily time frame, but the ten-minute and five-minute time frames work just as well for day traders, or even the weekly and monthly time frames for long-term investors.

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Chart H.47 - Charts by ThinkorSwim

Looking at Chart H.47, $PYPL gave a perfect opportunity to go long on the five-minute time frame. This setup offered an excellent risk-to-reward, and the stop-loss would have been a break and close below the 21 EMA. This never happened, and instead, $PYPL moved higher in price. Again, you would have been risking around 10% on the Calls if you bought the contracts off the 21 EMA.

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Chart H.48 - Charts by ThinkorSwim

Chart H.48 is another example of $COST. Again, one had multiple buying opportunities off the 21 EMA on the ten-minute time frame. If one entered the trade at the 21 EMA, the stop-loss was below the moving average. As seen in the example, $COST pushed from $579.50 (the ten-minute 21 EMA) to $586.32 while following the 5 EMA and 8 EMA on the way up.

Chart H.49 - Charts by Thinkorswim

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In the last example of the 21 EMA, I will show you a day trade that I took on $FB on July 24th, 2021. As seen in Chart H.49, I was watching $FB over $362.5, which was post-market and premarket resistance. As soon as $FB broke over this area, the price pulled back and tested the 10-minute 21 EMA. That is where I entered the trade and placed my stop-loss below the 21 EMA. This trade went up over +1000% in a single day. This happened on Lotto Friday, which is when the weekly options expire the same day. On Lotto Friday, the contracts are cheap due to Theta decay and can increase or decrease at a rapid pace due to the high Delta and Gamma on the same day expiration contracts. I, however, took my profits at +220%, and I have a full trade recap on my YouTube channel: BrandonTrades.

The 55 EMA The 55 EMA is an important moving average on all the higher time frames. Therefore, I only pay attention to the 55 EMA on the daily, weekly, and monthly time frame. First, I will show you how strong the daily 55 EMA is on several charts, and then I will discuss how to use it in your trading strategy.

Chart H.50 - Charts by ThinkorSwim

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Looking at Chart H.50, the first example shown is $SPY on the daily time frame. Each time $SPY has had a pullback in the market, it has pulled back to the daily 55 EMA. As you can see in the picture above, it has tested this level ten times, where price found support and then continued higher to make new alltime highs.

Chart H.51 - Charts by ThinkorSwim

Looking at Chart H.51 of $AAPL on the daily time frame, look at the amount of support and resistance $AAPL has had at the daily 55 EMA.

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Chart H.52 - Charts by ThinkorSwim

Looking at Chart H.52 above of $AMD on the daily time frame is another example of how the daily 55 EMA will act as support or resistance.

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Chart H.53 - Charts by ThinkorSwim

Looking at Chart H.53 of $BA on the daily time frame, one more example of the 55 EMA's effectiveness can be seen.

As you can see in the previous examples, the daily 55 EMA plays a major role when it comes to support or resistance. Stocks tend to react to this moving average almost every time the price approaches. If a stock is near the 55 EMA, chart it to know where this level is. Now that you know how to use the 55 EMA on the daily time frame, I will now be showing you how to use the 55 EMA on the weekly time frame.

Using The 55 EMA On the Weekly The following way to use the 55 EMA is on the weekly time frame, and there is no better way of showing you this moving average than a trade that I took on $O (Realty Income).

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Chart H.54 - Charts by ThinkorSwim

Looking at Chart H.54 of $O on the weekly time frame, you can see the stock's multiple attempts to break and hold above the weekly 55 EMA. However, price denied this moving average seventeen times before finally breaking to the upside and continuing higher. $O was on my radar for months, but there was no entry until the price broke and closed above the weekly 55 EMA with a bullish engulfing candle. Once the price finally broke and held, that is where I entered the trade.

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Chart H.55 - Charts by ThinkorSwim

Looking at Chart H.55 above of the weekly time frame on $FCX, you can see three times that the stock price had come down to the 55 EMA and had a direct reaction as support. As a result, this gave three possible entries to go long on $FCX.

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Chart H.56 - Charts by ThinkorSwim

Chart H.56 is another example of how strong the 55 EMA is on the weekly time frame. Looking at $AMD, notice the amount of support price had at the weekly 55 EMA. As someone who now knows about this level, the weekly 55 EMA could have assisted you in buying opportunities for $AMD

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Chart H.57 - Charts by ThinkorSwim

As seen in Chart H.57, the weekly 55 EMA is filled with plenty of support and resistance areas. As a result, if the stock being traded is near the weekly 55 EMA, plot a line in that area and name it "55 EMA weekly". Chances are, there WILL be price action at that level.

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Chart H.58 - Charts by ThinkorSwim

One last example of the weekly 55 EMA is seen in Chart H.58 of $GS on the weekly time frame. The stock price made this moving average resistance more than ten times in the picture and generated plenty of support in the process.

Using the 55 EMA on the Monthly The final time frame that I use the 55 EMA is on the monthly time frame. Yet again, there is no better way to discuss this moving average than with a story. On December 7th, 2020, many people were hyping up $BA on Twitter. They believed $BA was ready to breakout and head back to $292.50. On this day, $BA was $243.11 a share. As a result, everyone implied that $BA would make almost a $50 move to the upside. What did everyone do? They bought Calls... at the WORST possible spot. Knowing about the 55 EMA in this scenario would have saved you the loss. The Monthly 55 EMA was sitting right at $243.11, where everyone went long. Please review the pictures below.

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Chart H.59 - Charts by TradingView

Chart H.59 is $BA on the weekly time frame. I labeled the point where everyone went long on $BA. Everything looks good, right? NOPE. If you zoom out to the monthly time frame, you will see that the monthly 55 EMA is blocking $BA from filling that gap to the upside.

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Chart H.60 - Charts by TradingView

Looking at the Chart H.60 above, $BA hit the monthly 55 EMA to a T and then dropped like a dime. As a result, many people lost money in this trade; however, knowing how to use the monthly 55 EMA would have saved you a headache and some cash. After seeing this happen, I created a rule: “When in doubt, zoom out.”

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Chart H.61 - Charts by TradingView

Looking at Chart H.61, notice the daily price action at the monthly 55 EMA. Price did not cross above the monthly 55 EMA level until five months later. Everyone got stopped from this trade. As you now know about the monthly 55 EMA, you should NEVER be one of those people.

In a super bullish market, like the one in 2021, it is hard to find stocks that have come down to their monthly 55 EMA since almost everything has been destroying all-time highs since the COVID sell-off in 2020. However, let me show you a few more examples of the 55 EMA on the monthly time frame and the significance behind this moving average.

Chart H.62 - Charts by ThinkorSwim

Chart H.62 above is an example of $JNJ on the monthly time frame. The stock price had come down to the monthly 55 EMA many times before the price rebounded and headed higher.

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Chart H.63 - Charts by ThinkorSwim

Chart H.63 is an example of $BIDU. Again, notice the amount of price action at the monthly 55 EMA. The 55 EMA acted as support and resistance on many occasions.

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Chart H.64 - Charts by ThinkorSwim

Finally, looking at Chart H.64 above of $F, notice the significance of the monthly 55 EMA. Notice the multiple points of resistance, which, when finally broken, $F was able to make a significant move to the upside.

To sum up the monthly 55 EMA, you want to use this moving average on the daily, weekly, and monthly time frames. As you have seen through the many examples provided, the stock has plenty of price action once it approaches this moving average. Do not be the loser like in the $BA example, and do not get caught buying a losing contract right as the stock is approaching the 55 EMA. Instead, use it to your advantage as a point to enter a trade with minimal risk or as a spot to trim your current position.

These will be the EMAs that I will discuss in this chapter. I will revisit these moving averages in a later chapter once I start discussing swing trading and day trading, where I will share my successful strategies. In the next chapter, I will be discussing three SMAs that are a MUST use in technical analysis.

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Chapter 9: Simple Moving Averages The three SMAs I will discuss in this chapter are the 50 SMA, the 100 SMA, and the 200 SMA. These are three institutional moving averages that have many rules in place regarding buying and selling. If the big shots with billions of dollars invested are using these SMAs and have specific rules when it comes to them, you should also understand how to use them. I have noticed that there is always plenty of price action at these three SMAs. However, these will only be used on the daily time frame and will only be assisting you when it comes to charting. Other than that, I do not use them for anything else.

I have noticed that these SMAs have saved me multiple times from getting into a losing trade, but at the same time, they helped pinpoint an entry point for my trade, offering the least amount of risk while maximizing the reward.

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The 50 Simple Moving Average

Chart I.1 - Charts by ThinkorSwim

Looking at $X on the daily time frame in Chart I.1, notice how strong the 50 SMA was. In multiple instances, $X pulled back to the 50 SMA, found support, and then continued higher in price, which could have offered a trader the best possible entry to go long. Treat this moving average as another support or resistance area. Many institutions have rules surrounding the 50 SMA. For example, they cannot buy unless the stock is on the 50 SMA.

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Chart I.2 - Charts by ThinkorSwim

Looking at $RIOT on the daily time frame in Chart I.2, this chart shows how vital the daily 50 SMA can be. Recently, $RIOT has been hovering around this area for the last three months and constantly treated the 50 SMA as support and resistance.

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Chart I.3 - Charts by ThinkorSwim

Chart I.3 is an example of $V on the daily time frame. Again, notice the support and resistance $V had on the daily 50 SMA.

If you are a day trader, you always want to know where the daily 50 SMA is. If you notice the stock you want to trade is near the 50 SMA, always plot it on your chart with a line that corresponds to the moving average. The reason is that there will more than likely be price action in this area, and it can make the difference between making money and losing money.

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Chart I.4 - Charts by ThinkorSwim

Pay attention to the area between the two horizontal red lines drawn in Chart I.4. Notice the price action on the daily 50 SMA.

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Chart I.5 - Charts by ThinkorSwim

Chart I.5 is still $BA, just on a ten-minute time frame. Notice the price action that occurred at daily 50 SMA. Ignoring the 50 SMA level could have been the difference between losing and winning trades.

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Chart I.6 - Charts by ThinkorSwim

Finally, in Chart I.6, notice the price action on the 50 SMA for $JKS. There are multiple direct hits on this moving average as support and resistance. It is also important to pay attention to this moving average as a swing trader. As you have seen in the many examples shown above, there tends to be almost direct price action on the 50 SMA each time the stock price touches it. As a result, you would not want to purchase a swing trade if a stock is coming up to the 50 SMA because chances are, price will treat the 50 SMA as resistance. Instead, wait for the stock to close above the 50 SMA before initiating your purchase. You can also use the 50 SMA as a price target for the trade. There are multiple variations of how traders can use this SMA, but to simplify it, always know where it is on the daily time frame. We will revisit this SMA and combine them all once I discuss the 100 SMA and 200 SMA.

The 100 SMA I also like to use the 100 SMA for charting purposes. As far as using the 100 SMA, I use it the same way that I would use the 50 SMA. If a stock is approaching the 100 SMA, you want to know about it due to 188

the price action involved. The 100 SMA should hold more significance once the stock price approaches it, as it takes more price action to plot the average.

Chart I.7 - Charts by ThinkorSwim

Looking at $AAPL on the daily time frame in Chart I.7 shows the amount of support and resistance at the 100 SMA. There were multiple scenarios where $AAPL came down to the 100 SMA, where the SMA acted as support before the price continued higher. On the flip side, there were multiple occasions where the 100 SMA acted as resistance. In the case of resistance, notice how the stock reacted once it broke and held above the 100 SMA.

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Chart I.8 - Charts by ThinkorSwim

Looking at Chart I.8, this was a trade that I took on $DKNG. The pink line is a trendline, as discussed in an earlier chapter. Looking at $DKNG on the daily time frame, I was able to spot this trendline while at the same time knowing that the 100 SMA is a strong area for support to the downside; my plan was that if $DKNG broke below the trendline, I would go short with a price target of the daily 100 SMA. Once $DKNG broke the trendline intraday, that is where I entered puts to ride the stock to the downside. The price target hit almost a T while riding the intraday 5 EMA, 8 EMA, and 21 EMA to the downside. This was also on the weekly watchlist that I uploaded to my YouTube channel: (BrandonTrades). I upload a free weekly watchlist every Sunday.

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Chart I.9 - Charts by ThinkorSwim

Chart I.9 is the actual $DKNG day trade I took from a one-hour time frame. As seen in the chart above, as $DKNG broke below the trendline, I initiated my short position with a price target of the daily 100 SMA. I fully exited my position as the stock was approaching the 100 SMA, and as seen in the picture, it bounced and went back up in price.

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Chart I.10 - Charts by ThinkorSwim

Chart I.10 of $FB on the daily time frame shows one final example of how effective the 100 SMA can be. Again, notice the amount of support and resistance at this moving average. By observing the price action, you should understand why the 100 SMA is important. Seeing that the stock has direct price action as support or resistance at this point should be important to all traders. Ignoring this moving average could be the difference between making money and losing money. If the stock is near the 100 SMA, you want to know about it. If you are day trading that stock, always plot a support or resistance line and label it “100 SMA” because the stock is likely to experience price action in this area. Now, let’s move on to the final SMA, which is the 200 SMA.

200 Simple Moving Average The final SMA I will be discussing is the 200 SMA. As this is such an extended period, you WILL see price action when the stock price comes to this level. As you are only using the 200 SMA on the daily time frame, it will be uncommon for a stock to see its 200 SMA. But, when it does, you want to make a note because it can be a strong area of support or resistance.

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Chart I.11 - Charts by ThinkorSwim

Looking at Chart I.11 above of $FB on the daily time frame. Once $FB came back to its 200-day SMA, price bounced around the area, treating the 200 SMA as support and resistance on multiple occasions.

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Chart I.12 - Charts by ThinkorSwim

Chart I.12 is an example of a trade I took on $BA due to the 200 SMA. On November 13th, 2020, I noticed that $BA had a solid close above the 200 SMA compared to previous days. It was a bullish engulfing candle that signaled an influx of buyers. Since there was a solid close above the 200 SMA, this signaled that $BA was ready to continue up in price. Within three trading days, $BA moved to a high of $234 a share from $186 a share.

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Chart I.13 - Charts by ThinkorSwim

Looking at $CHWY in Chart I.13 above, price has had major price action at the daily 200 SMA for the last three months. Pay attention to the far left side of the chart. The first time $CHWY fell below the 200 SMA, notice the stock price's reaction due to the violation of the moving average. This violation could have offered a beautiful short position to a trader.

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Chart I.14 - Charts by ThinkorSwim

Taking another look at a different example of $BA on the daily time frame, notice the amount of price action at the daily 200 SMA in Chart I.14. Do you think this level is important yet?

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Chart I.15 - Charts by ThinkorSwim

I want to add that throughout my time trading the markets, I have noticed that market news is always tied to technicals, and the technicals tend to confirm the news before the news is announced. This occurs because insiders have the information before the public does, and they will make trades based on it. Looking at $JPM, in Chart I.15, notice the huge gap-up overnight. Notice what happened just two days before the news occurred. $JPM gave a solid close over the 200 SMA and then proceeded to hold above the 200 SMA for another day. Was the news planned? In my opinion, yes. I will show you many more examples of this in later chapters.

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Chart I.16 - Charts by ThinkorSwim

Looking at Chart I.16, notice all the price action that has occurred at the 200 SMA for $F.

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Chart I.17 - Charts by ThinkorSwim

The final example of the 200 SMA can be found on $RIOT in Chart I.17. $RIOT is a Bitcoin mining company that took a hard hit after the 2021 Bitcoin sell-off. As you can see, $RIOT fell to the 200 SMA before rebounding and running an extra $16 to the upside before coming back down. Again, when doing your technical analysis, you want to know where the 200 SMA is for the stock being traded. If the stock is near the 200 SMA, you should always draw a support or resistance line and then treat it as such. The 200 SMA is one of the most, if not the most commonly used SMAs in the market, which is why there are many institutional rules and guidelines for this moving average. Always pay attention when a stock is near the 200 SMA because I can promise you there will almost always be price action there. To conclude the SMAs, I only utilize them on the daily time frame and when doing my analysis. If a stock is near one of the SMAs, I always plot a line, color code it corresponding to the moving average, and name the line which SMA price is near. Once the levels have been plotted on the chart, make sure to change the level each day as the SMAs change daily. After that, I remove the SMAs from the chart to make room for the other indicators I will discuss in the chapters to come. I personally leave the SMAs on 199

their own chart and briefly look at them to see if the stock is near the SMAs. If not, I move on over to my other charts. Remember, a lot of big money traders use these SMAs and have specific rules and criteria that must be met to enter or exit their positions. Big money moves the market, so if they use the three moving averages discussed, so do we.

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Chapter 10: Combining All Moving Averages to Trade Now that you know how to use both the EMAs and the SMAs in your trading strategy, I will show you a few trading scenarios that would be ideal for entering a trade. All of these examples will be shown on the daily time frame. Before showing you the remaining indicators that I use for trading, I would like to show you how to piece all the moving averages together for effective trading.

In these scenarios, you can see that I have the moving averages color-coded. The green moving average is the 5 EMA, the purple moving average is the 8 EMA, the white moving average is the 21 EMA, the skyblue moving average is the 55 EMA, the yellow moving average is the 50 SMA, the dark blue moving average is the 100 SMA, and the red moving average is the 200 SMA.

Chart J.1 - Charts by ThinkorSwim

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Looking at $BA on the daily time frame in Chart J.1, there was plenty of price action at the moving averages. First, the ideal entry would have been when the price returned to the 100 SMA, 50 SMA, 21 EMA, and 55 EMA, where the moving averages acted as resistance. The reason being that four major moving averages are blocking $BA to the upside; however, to the downside, the stock had room to the 200-day SMA. Once $BA fell below the moving averages, the price dropped to the 200 SMA. Why would you not buy puts on $BA once price fell below the 200 SMA? It got over-extended from the 5 EMA. When it is overextended, you should always be looking to secure your gains and for pullbacks to the 5 EMA. Look a little further, and you can see $BA rebounded and went back to the daily 50 SMA, where it hit it to a T, treated it as resistance, and then fell further to the downside. This is one example of how the moving averages work together.

Chart J.2 - Charts by ThinkorSwim

Looking at $GD on the daily time frame in Chart J.2 can help paint a clear picture of what to expect. Looking at the stock, you can see recently that the price came down and tested the 200 SMA to a T two times before bouncing back to the upside. I would not enter the trade just because the price bounced off the 200 SMA. For all I know, the stock could come back to the 5 EMA and then drop more in price. Instead, I would be waiting for $GD to come above all the moving averages. Once it did that, I would 202

then be looking for a position. Notice the price action the day after $GD pierced the moving averages. The stock ran from $152 to $159 in two days, where it then broke all-time highs and continued to increase in price. Each pullback was greeted by support at the 8 EMA, and eventually, the stock pulled back and hit the 21 EMA to a T as support, and then proceeded to push back above the moving averages. Think of the moving averages like a puzzle. You piece them all together, and it will show you a picture.

Next, I will show you a series of trades that I have taken on numerous stocks and explain why I entered these trades.

Chart J.3 - Charts by ThinkorSwim

Chart J.3 shows a trade that I took on $ABBV. Looking at the $ABBV chart, there was a gap that needed to be filled to the upside, but if you look at the EMAs and SMAs, there is too much resistance to go long on $ABBV. That is why I waited until the day the stock closed above the 50 SMA with the dragonfly doji. At that point, no moving averages were blocking $ABBV from moving freely to the upside. If you look at the 5 EMA and 8 EMA, they generated a buy signal by curling. The stock closed above the 50 SMA, which now signals to buy, and the stop-loss was well defined. All $ABBV had to do was close

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below the 50 SMA, and I would have been out of the trade. Instead, notice the reaction $ABBV had the following day after closing above the 50 SMA.

Chart J.4 - Charts by ThinkorSwim

Looking at Chart J.4, the same setup was present on $JNJ during the same period. Notice the resistance $JNJ had at the 50 SMA before finally breaking above. As we know about the 50 SMA and how to use it, there was no entry until $JNJ closed above the 50 SMA. Once it did, I entered the trade. Again, knowing the 50 SMA, once a stock clears it, it should continue to go in that direction, and the stop-loss was a close below the 50 SMA. Since $JNJ cleared the 50 SMA, the price followed the 5 EMA and 8 EMA until the price got over-extended, and that is where I took my profits.

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Chart J.5 - Charts by ThinkorSwim

Chart J.5 is another trade taken due to the EMAs and SMAs. Looking at the daily time frame on $ORCL, the stock gapped down after earnings and consolidated in a narrow range. As you can see, the 50 SMA and 21 EMA acted as a significant resistance area. Therefore, there was NO entry until $ORCL closed above the 50 SMA and 21 EMA. Once it did, I entered the trade. That same day, the 5 EMA and 8 EMA generated a buy signal by crossing. At that point, all $ORCL had to do was close below the 50 SMA, and I would have stopped out of the trade. However, looking at $ORCL, the price increased substantially, which I then trailed my stop-loss under the 8 EMA and let the stock run. $ORCL never violated the 8 EMA until 22 days after the entry and moved from $79.50 to $91.25.

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Chart J.6 - Charts by ThinkorSwim

Chart J.6 is a chart of a swing trade that I recently took on $SNAP. Looking at $SNAP, it formed a weekly bull flag, and the daily 50 SMA and 55 EMA acted as a powerful support level. This is where I started my position because all $SNAP had to do was break below the two moving averages, and I would have stopped out of the trade. The stock never closed below and instead rose above the moving averages. From there, I added to my position, and the following day $SNAP broke out of the weekly bull flag and increased in price substantially. Getting the best possible entry off the 50 SMA and 55 EMA, and then adding once $SNAP began to confirm the breakout generated a beautiful trade, and some beautiful profits!

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Chart J.7 - Charts by ThinkorSwim

Looking at Chart J.7, this is another swing trade that I have taken recently on $USO. This trade can show another perfect example of using these moving averages to your advantage. Looking at $USO on the daily chart, the yearly highs were at $51.40. Once $USO broke above the yearly highs, I entered the swing trade with a stop-loss below the daily 8 EMA. As you can see on the chart, the stock continued to ride the 5 EMA to the upside and had pulled back to retest the 8 EMA as support on multiple occasions but never closed below. As a result, I was able to pocket a +207% gain on $USO. This is how you utilize all of the moving averages discussed in the previous chapters. Remember, the SMAs act as major support and resistance on the daily time frame. You always want to know where the moving averages are because if you ignore them, it can make the difference between winning and losing trades. The 55 EMA is most beneficial on the daily, weekly, and monthly time frame, and the 21 EMA will be the best possible spot to enter a trade depending on the time frame being used. The 5 EMA and 8 EMA will be your babysitter in all trades, depending on which time frame is used for the entry. Let these moving averages do the storytelling and make highly educated decisions based on what the moving averages are telling you. If the stock holds above the moving averages, the stock will more than likely continue to be bullish. The same can be said for the downside as well. If the stock price remains below the moving averages, odds are it will continue to be bearish. In the following few chapters, I will be 207

discussing the other indicators that I utilize in my trading strategy. In the next chapter, I will be discussing the Stochastics.

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Chapter 11: Stochastics George Lane created the stochastic oscillator in the late 1950s. Now that you are familiar with MACD and RSI from the EMAs chapter, the Stochastics is a combination of the two, but it generates much more accurate buy and sell signals. The Stochastics have two extreme readings: twenty represents oversold conditions, and eighty represents overbought conditions. The stochastic consists of a %K line and a %D line. The Stochastics generate a buy signal when the %K line crosses above the %D line. The Stochastics generate a sell signal when the %K line crosses below the %D line. The %K line is the fastest of the two, so that will be the line you want to pay attention to for buy signals and sell signals. Then the %D line will tell you if the stock is overbought or oversold. If the %D line is above the 80 mark, the stock is considered overbought, and if the %D line is below the 20 line, the stock is considered oversold. It is, however, essential to pay attention to where the buy or sell signals are generated. If a buy signal occurs at or above the 80 line, this is a strong buy signal on the Stochastics. On the flip side, if a sell signal is generated at or under the 20 line, this is considered a strong sell signal on the Stochastics. However, if a sell signal is generated above the 80 line, the stock will likely pullback, especially if it falls below the moving averages. On the flip side, if a buy signal is generated below the 20 line, the stock will likely reverse to the upside. There are a few variations of the Stochastics, but the most popular are the Stochastic Fast and the Stochastic Slow. The Stochastic Fast generates more buy and sell signals, while the Stochastic Slow generates fewer buy and sell signals. Some may think the more signals generated, the more trades you can make, and the more you can profit. That is false. In reality, less is better in the market. I have also noticed that the Stochastic Slow tends to generate more accurate buy and sell signals than the fast variation, which is why I prefer to use the Stochastic Slow.

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Chart K.1 - Charts by ThinkorSwim

Chart K.1 is an example of how different the Stochastic Fast and Stochastic Slow can be when generating buy signals and sell signals. The top Stochastic is the slow version, and the bottom Stochastic is the fast version. You can feel free to experiment with the Stochastic Fast; however, it is not a part of my strategy. Therefore, I will not be talking about the Stochastic Fast in this book. Instead, I will show you how to master the Stochastic Slow and how I use this indicator in my trading strategy.

Stochastic Slow When using the Stochastic Slow, I prefer to use it on the daily time frame and the weekly time frame. It also holds value during intraday price action; however, it is not something I go out of my way to check when day trading. I have a different way of day trading than swing trading, and I will show you the difference between the strategies in later chapters. Feel free to experiment with the Stochastic Slow in your day trading strategy and see if it works for you.

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When using the Stochastic Slow, you always need to use the moving averages to confirm the buy or sell signals. If the Stochastic generates a buy signal, but the stock is below all the moving averages, there are ZERO reasons to go long; however, if the stock is above the moving averages, you can now use the stochastic buy signal as another confirmation to go long.

Chart K.2 - Charts by ThinkorSwim

Looking at the $NIO in Chart K.2, notice how the Stochastics generated a sell signal well before moving to the downside. Using the 8 EMA and 21 EMA, once $NIO fell below the 8 EMA, you could then go short with a price target of the 21 EMA. On top of $NIO falling below the 8 EMA, the sell signal served as double confirmation. Another way of looking at this is if you were long on $NIO, say you purchased Calls for $NIO and let the stock ride to the upside; as soon as the Stochastics generated a sell signal, this lets you know to exit the position and secure profits.

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Chart K.3 - Charts by ThinkorSwim

Chart K.3 is an example of a swing trade I took on $CRM. There was plenty of confirmation to buy Calls, and I want to walk you through my thought process at the time. The Stochastics generated an important buy signal which assisted me in this trade. Looking at $CRM on the daily time frame, there was a falling wedge (which I will discuss further in-depth in a later chapter), and $CRM was able to breakout to the upside. Looking down at the Stochastic Slow, it generated a buy signal where the SlowK crossed above the SlowD. Not only that, but $CRM closed above the 8 EMA and 21 EMA, which added more confirmation to the buy signal. I purchased a butterfly swing trade where I bought the $245 Calls, sold twice as many of the $250 Calls, and bought the $255 Calls as protection. As you can see on $CRM, the following two days gave a beautiful push to the upside and resulted in a winning trade. Seeing the buy signal gave me more confidence going into this trade when pieced together with the EMAs and falling wedge breakout.

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Chart K.4 - Charts by ThinkorSwim

Chart K.4 is an example of a trade I took on $EBAY to the downside. Looking at the daily chart for $EBAY, the stock lost the 8 EMA and closed below it. We know that once the stock starts losing the 8 EMA, it is a negative sign, but the Stochastics gave double confirmation to purchase puts. The Stochastic Slow generated a sell signal two days before $EBAY fell below the 8 EMA. Therefore, you use that sell signal as another confirmation tool when entering the trade. Notice how $EBAY reacted once losing the 8 EMA. The price dropped down to the 21 EMA, but once the stock lost that, it dropped significantly.

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Chart K.5 - Charts by ThinkorSwim

Chart K.5 is another example of a swing trade I took recently on $HOOD. Notice the Stochastic buy signal that $HOOD generated below the 20 line. Remember, when the %D line is below 20, the stock is considered oversold, so the fact that it gave a buy signal below the 20 level tells the trader to watch the stock for a possible reversal. Why did I not enter once stochastics generated the buy signal? It was not above the moving averages. Once the stock broke above the moving averages, that is when I entered the trade. This swing trade returned me +113% profits at my final exit.

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Chart K.6 - Charts by ThinkorSwim

Looking at the next trade on $RUN in Chart K.6 (which was called out on my YouTube channel: BrandonTrades), the Stochastic Slow generated a buy signal once the stock broke out of the daily falling wedge. As a result, there was a breakout with a buy signal, and the stock was above the moving averages. This is plenty of confirmation to enter a trade. The stock increased in price by $8.50 within a few days.

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Chart K.7 - Charts by ThinkorSwim

In Chart K.7, I have circled each time the Stochastics have generated a buy or sell signal. Notice what happened with the stock price almost every time the Stochastics generated a buy or sell signal.

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Chart K.8 - Charts by ThinkorSwim

In Chart K.8, I also circled each time the Stochastics generated a buy or sell signal. Notice the representation between the stock price and the Stochastics. As you can see in the examples provided, the Stochastic Slow is super accurate when providing buy and sell signals. It generates fewer signals because it is the slow version compared to the Stochastic Fast; however, the Stochastic Slows' signals are incredibly reliable when the signals are generated. Combining the Stochastic Slow with the moving averages makes the picture even clearer. Another way that I like to use Stochastics is on the weekly time frame. Like chart patterns and other technical indicators, the higher the time frame, the more superior it becomes. When doing my technical analysis for the week, I always check the weekly Stochastics for any buy or sell signals. These signals can help traders plan their trades for the upcoming week.

Chart K.9 - Charts by ThinkorSwim

Chart K.9 is an example of $AAPL on the weekly time frame with each buy and sell signal marked on the chart. Again, notice the correlation between the stock price and each buy and sell signal generated.

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Chart K.10 - Charts by ThinkorSwim

Chart K.10 is an example of $GOOGL on the weekly time frame with each stochastic buy signal and sell signal marked on the chart.

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Chart K.11 - Charts by ThinkorSwim

Chart K.11 is $TSLA on the weekly time frame with each Stochastic buy signal and sell signal marked on the chart. As you can see in the Stochastic examples on the weekly time frame, the buy and sell signals tend to be super accurate. It is essential to pay attention to both the daily and the weekly time frames for these signals. Ideally, you want to simultaneously see both time frames generating/corresponding a buy or sell signal. If the weekly time frame generates a sell signal, but the daily time frame generates a buy signal, it is always wiser to pay attention to the bigger trend. Meaning do not go long when the weekly Stochastic tells you to sell, and vice versa. You can also utilize the Stochastics to help find divergences in the market, which I will be discussing next.

Divergences On The Stochastics To Spot Reversals A divergence is when a stock's price moves in the opposite direction of where a technical indicator is saying the stock price will go. For example, if a stock is going up in price, but there are multiple sell signals on the Stochastics, or if a stock is going lower in price, yet the Stochastics is generating many buy signals, that is a divergence. A convergence is where the technical indicators confirm the stock price's direction.

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Chart K.12 - Charts by ThinkorSwim

Looking at $SPY on the daily time frame in Chart K.12, $SPY continued to go up in price; however, the Stochastics showed bearish divergence. The divergence was formed by the Stochastics constantly generating lower sell signals. At the same time, the buy signals were getting lower as well, thus creating bearish divergence. If you notice this in the market, DO NOT go long; stay patient and wait for a better setup.

Chart K.13 - Charts by ThinkorSwim

The same scenario can be found on $MO in Chart K.13. The stock consolidated for a few weeks before a major breakout area; however, the Stochastic Slow generated bearish divergence signaling a possible reversal to the downside. Again, forming lower buy signals and lower sell signals. Notice what happened to $MO shortly after.

The same sequence works to the upside. But in this scenario, a stock will be going down in price, yet the Stochastics is generating higher buy signals along the way, letting the trader know of an impending reversal.

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Chart K.14 - Charts by ThinkorSwim

Looking at the daily time frame of $LVS in Chart K.14, notice the first buy signal below the 20 line, letting the trader know of a possible reversal. The second buy signal occurred higher than the first signal, letting traders know of a divergence. As soon as the second buy signal occurred, $LVS increased in price rapidly.

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Chart K.15 - Charts by ThinkorSwim

Chart K.15 is an example of $GOOGL where the Stochastics continued to generate higher buy signals until $GOOGL finally exploded in price. With $GOOGL consolidated but at the same time getting higher buy signals, this was a clear hint that $GOOGL was ready to make an upside move.

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Chart K.16 - Charts by ThinkorSwim

Looking at Chart K.16, a clear stochastic divergence can be seen. $VXX continued to hold below the moving averages, but the Stochastics continued to give higher buy signals and higher sell signals. After the third buy signal, $VXX finally gave an upside move that traders could have taken advantage of. The $VXX does the opposite of the overall market. When $VXX goes up, the market goes down, and vice versa. Spotting this clear divergence could have let traders know that the overall market would likely drop and would let traders know to stay cautious. I called this exact divergence out on my YouTube channel the week before the $VXX moved significantly to the upside. To conclude the Stochastic Slow, a buy signal is generated whenever the %K crosses above the %D; however, a sell signal occurs when the %K crosses below the %D. If a buy signal is generated above the 80 line, this is a powerful buy signal, and when a sell signal is generated below the 20 line, this is a strong sell signal. However, if a buy signal is generated below the 20 line, that is a good indication of an upside reversal, as well as a sell signal generated above the 80 line is an indication of a reversal to the downside. Always use the moving averages discussed in the previous chapters to time your entries. Ideally, I pay attention to the Stochastic Slow on the daily and weekly time frames. However, it has significance on the lower time frames as well. Play around with it on the smaller time frames and see if it suits your strategy. Then finally, if a stock continues to go up in price, but the Stochastics is generating lower buy signals and lower sell signals, proceed with caution because bearish divergence is occurring. On the flip side, if the stock is going down in price, yet the Stochastics are generating higher buy signals and higher sell signals, 223

look for a move to the upside just like the $VXX example in Chart K.16, which is known as a bullish divergence.

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Chapter 12: TTM Squeeze The TTM Squeeze is an indicator created by John Carter from Simpler Trading. TTM SQUEEZE ™ is a trademark owned by Simpler Trading, LLC. This indicator combines the Bollinger Bands, Keltner Channels, and the Momentum indicator. The TTM Squeeze identifies positive and negative momentum through the multicolor histogram and tries to identify breakouts of consolidation. The TTM Squeeze Indicator is © Simpler Trading, LLC 2009. Before I begin this chapter, I would like to thank John Carter and Simpler Trading, LLC for allowing me to discuss the TTM Squeeze in this book, as it has been my favorite indicator to use when trading. The TTM Squeeze indicator copyright and the TTM Squeeze™ trademark are each property of Simpler Trading, LLC and not the author, and the discussion herein is by permission of Simpler Trading, LLC. Nonetheless, all statements, views, and representations expressed herein are solely those of the author and not of Simpler Trading, LLC. Looking at the TTM Squeeze histogram bars in Chart L.1 below, there are four colored bars on this indicator. The first color is light blue. The light blue color identifies strong buying momentum in the market and is reflected in the histogram with growing bars. The dark blue color is where the buying momentum starts to die down and is ideal for traders to take their profits and to be cautious moving forward. The red color indicates strong selling momentum, and as a result, you will see the stock start to drop in price. The final color is yellow, where the selling momentum dies down, and the buyers begin to step into the market. When the yellow appears, the stock tends to begin its move to the upside. As the bars on the TTM Squeeze histogram get bigger or smaller, the bars represent the amount of momentum in that phase. For example, if there is light blue on the TTM Squeeze histogram, and the bars are getting bigger, more buying momentum is coming into that stock. However, if the dark blue color appears and the bars start to shrink, that lets the trader know that the buying momentum is dying down. If there is red momentum on the histogram, and the red bars are growing to the downside, this lets the trader know that the selling momentum is increasing. If the yellow momentum appears on the histogram, and the yellow bars start to shrink, this lets the trader know that buying momentum is picking up and that the yellow may turn into light blue, representing strong buying momentum.

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Chart L.1 - Charts by ThinkorSwim

Chart L.1 is an example of the TTM Squeeze in action on $ADSK on the daily time frame. Notice how the stock price and the colored histogram bars on the TTM Squeeze correlate.

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Chart L.2 - Charts by ThinkorSwim

Chart L.2 is an example of $FB on the daily time frame with the TTM Squeeze applied. Again, notice the stock price in conjunction with the TTM Squeeze bars.

Chart L.3 - Charts by ThinkorSwim

Chart L.3 is an example of $AAPL on the daily time frame with the TTM Squeeze applied. Notice the accuracy of the squeeze bars compared to the momentum in the $AAPL stock price! Light Blue = Strong Buying Momentum Dark Blue = Buying Momentum is Dying Down Red = Strong Selling Momentum Yellow = Buyers Are Back in The Market As shown in the multiple examples above, whenever you see the light blue bars on the TTM Squeeze histogram, it is almost always accompanied by a move to the upside. When looking at the dark blue bars, notice that the stock tends to consolidate or drop in price. The red bars then show strong selling momentum, and this is where the stock could see a major drop in price. As the yellow bars appear on the

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histogram, the stock gives an initial push to the upside. This tends to be a constant pattern on the TTM Squeeze ranging from various time frames. The TTM Squeeze Pro also has colored dots on each bar. There is a red, green, black, and occasionally an orange dot. The orange dot is extremely rare, so always make a note when you see an orange dot on the TTM Squeeze. All the dots result from the Bollinger Bands and the Keltner Channels. Before diving further into the squeeze, I believe it will be beneficial to know what the Bollinger Bands and Keltner Channels are and how to use them. John Bollinger developed the Bollinger Bands in the 1980s. The Bollinger Bands consists of a centerline with two bands, one band above the centerline and one band below the centerline. The centerline is a 20 Simple Moving Average and helps calculate both bands using price volatility. The upper band acts as a resistance area, and the lower band acts as a support area. If the stock is constantly touching the upper band, it is considered overbought, and if prices come outside the upper band, price is almost always greeted with a pullback inside the Bollinger Bands. Notice I said "almost" because sometimes a stock can stay outside the bands for a few days before price pulls back in. When the stock price is constantly hitting the lower band, it is considered oversold, and if it comes outside the lower band, the stock almost always pulls back in. The Bollinger Bands will contract when price volatility lowers and expand as price volatility increases. Remember, volatility is the market's expectations of the stock going into the future. As expectations rise, so does volatility. When expectations shrink, so does volatility. Therefore, if volatility increases, the Bollinger Bangs will widen. If volatility decreases, the Bollinger Bands will tighten.

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Chart L.4 - Charts by ThinkorSwim

Looking at Chart L.4, this is an example of the Bollinger Bands applied to $AAPL on the daily time frame.

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Chart L.5 - Charts by ThinkorSwim

Looking at Chart L.5, this is an example of the Bollinger Bands applied to $BA on the daily time frame.

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Chart L.6 - Charts by ThinkorSwim

Chart L.6 is another example of the Bollinger Bands applied on $D on the daily time frame.

Chart L.7 - Charts by ThinkorSwim

Finally, Chart L.7 is an example of $CMG on the daily time frame with the Bollinger Bands applied. As shown in the multiple charts above, each time the stock price reached the upper Bollinger Band, it acted as resistance, and if the stock price came down to the lower Bollinger Band, it acted as support. If the stock price was outside the Bollinger Bands, it was greeted with a pullback inside. Also, make a note of how the Bollinger Bands contract and expand. When the Bollinger Bands are contracting, the volatility is lowering. When the bands open, the volatility increases. This is the basics of Bollinger Bands. Since it is not a part of my strategy, I will not discuss it any further. This is all you need to know about the Bollinger Bands for the TTM Squeeze. As for Keltner Channels, these were created by Chester W. Keltner, who described how to use this indicator in his 1960s book How to Make Money in Commodities. This indicator looks exactly like the Bollinger Bands, but the calculations are different. The Keltner channels have three separate lines. However, one variation that I will discuss later has seven lines. The middle line is an Exponential Moving Average, and the upper and lower line is calculated off the Average True Range (ATR). The ATR is how much a stock moves in a given day on average within the past fourteen days. The upper band is set at two 231

times the ATR, and the lower band is set at two times the ATR from the EMA. Depending on the ATR values, these bands move each day, either contracting or widening. The upper band will act as resistance, and the lower band will act as support. If the price goes too far outside the upper band, the stock now has “unusual strength” and can continue to make a bigger move to the upside. If the stock drops below the lower band, this signifies that the stock has “unusual weakness” and can continue to drop further in price.

Chart L.8 - Charts by ThinkorSwim

Looking at Chart L.8 of $MU on the daily time frame, the Keltner Channels applied to the chart.

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Chart L.9 - Charts by ThinkorSwim

In Chart L.9 of $FB on the daily time frame, Keltner Channels are applied to the chart.

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Chart L.10 - Charts by ThinkorSwim

Looking at Chart L.10 of $SE on the daily time frame, the Keltner Channels are applied.

Chart L.11 - Charts by ThinkorSwim

Finally, Chart L.11 shows $ROKU on the daily time frame with the Keltner Channels applied to the chart. As seen in the pictures above, the stock tends to come back into the Keltner Channels after being extended on the outside for too long. However, violations of the upper or lower channel give beautiful trading opportunities. Now that you know the Bollinger Bands and Keltner Channels, I will show you how the TTM Squeeze dots appear on the histogram. In the following few examples, the pink lines are the Keltner Channels, and the blue lines are the Bollinger Bands. When the Bollinger Bands curl inside the Keltner Channels, a red dot appears on the TTM Squeeze. When you see a red dot, this is signaling that the stock is in a squeeze. So, a “squeeze” is when the Bollinger Bands curl inside the Keltner Channels. To imagine what a squeeze is, imagine you take a Ziplock baggie and blow it up full of air. After the baggie fills with air, you then zip it up and begin to twist the baggie. Eventually, the Ziplock bag is going to pop. That is exactly what a squeeze is. The stock price becomes so tight that it is forced to pop and

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breakout of its consolidation.

Chart L.12 - Charts by ThinkorSwim

Looking at Chart L.12 above, notice how the red dots appeared on the TTM Squeeze as the Bollinger Bands curled inside the Keltner Channels.

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Chart L.13 - Charts by ThinkorSwim

As shown in Chart L.13, as the Bollinger Bands curled inside the Keltner Channels, a red dot appeared on the TTM Squeeze. At the same time, notice what happens when the Bollinger Bands curl outside the Keltner Channels. A black dot appears.

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Chart L.14 - Charts by ThinkorSwim

Looking at Chart L.14, notice what happens when the Bollinger Bands curl outside the Keltner Channels. A black dot will appear on the TTM Squeeze when this occurs.

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Chart L.15 - Charts by ThinkorSwim

Looking at Chart L.15, again notice that when the Bollinger Bands curled inside the Keltner Channels, a red dot was reflected on the TTM Squeeze, but as soon as the Bollinger Bands curled outside the Keltner Channels, a black dot appeared on the TTM Squeeze. The black dot signifies that the squeeze has begun stage one of firing in its respected direction. Again, notice what happens when the Bollinger Bands curl outside the Keltner Channels, the TTM Squeeze dot turns black, and the stock can now begin to move more freely since the stock price is no longer as compressed. Remember, if the Bollinger Bands are tight, the stock has limited room to move; however, when they curl outside the Keltner Channels and begin to open, this allows the stock to move more freely. The green dot appears on the TTM Squeeze once the squeeze has officially fired in its respected direction. This is where the stock will move the most both ways since the Bollinger Bands are now finally open and are no longer tight. Below are a few examples of the moves that price can make during the green dot sequence.

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Chart L.16 - Charts by ThinkorSwim

As seen in Chart L.16, when the Bollinger Bands disperse away from the Keltner Channels, a green dot appears on the TTM Squeeze, and the stock moves more freely.

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Chart L.17 - Charts by ThinkorSwim

Looking at Chart L.17, multiple times in this chart, the Bollinger Bands separated from the Keltner Channels. As a result, green dots appeared on the TTM Squeeze. Notice how wide the Bollinger Bands become when the TTM Squeeze dots are green. A green dot will appear on the squeeze indicator when the Bollinger Bands move away from the Keltner Channels and open, allowing more room for the stock to move. There is, however, one more dot that can appear on the TTM Squeeze, and this dot is super rare to see. Therefore, you need to take note every time you see it because it hints that a big move is about to be made in that stock. When you see the orange dot on the squeeze, it screams, “Grab me by the face and pay attention to me.” I will show you many trades I have taken in the past based on the orange dot squeeze. Before I do so, how does the orange dot appear on the squeeze? The orange dot appears on the TTM Squeeze when the Bollinger Bands curl inside the Keltner Channels and gets super tight in between. In the examples below, you can spot the difference between the Bollinger Bands in a red dot squeeze versus an orange dot squeeze. With the orange dot, the two Bollinger Bands are super tight to the point that the stock has a very narrow range that it can move. If the stock is supposed to stay inside the Bollinger Bands, and the bands are tight, the stock is left with nowhere to go until the squeeze fires.

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Chart L.18 - Charts by ThinkorSwim

Looking at Chart L.18 of $BJ on the daily time frame, when the Bollinger Bands curled inside the Keltner Channels, the TTM Squeeze reflected a red dot; however, once the Bollinger Bands became very tight within the Keltner Channels, that is when an orange dot appeared on the TTM Squeeze.

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Chart L.19 - Charts by ThinkorSwim

An orange dot squeeze can be seen in Chart L.19 of $CAT on the daily time frame. Notice how deep the Bollinger Bands curled inside the Keltner Channels, resulting in the orange dot squeeze.

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Chart L.20 - Charts by ThinkorSwim

Looking at Chart L.20 of $BBBY on the weekly time frame, notice the orange dot squeeze. It was previously in a red dot squeeze once the Bollinger Bands curled inside the Keltner Channels, but as the Bollinger Bands contracted further, the orange dot appeared.

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Chart L.21 - Charts by ThinkorSwim

Looking at Chart L.21 of $TXN on the weekly time frame, notice the extended period that it has been in a squeeze. While in this squeeze, it has changed from red dots to orange dots, back to red, and back to orange. Again, notice the difference in the contraction of the Bollinger Bands at each point. Now that you know what all the dots mean on the TTM Squeeze, I will remove the Bollinger Bands and Keltner Channels from my chart to free up space and place the Exponential Moving Averages on the chart instead. On the new chart, I have the 5 EMA, 8 EMA, and 21 EMA with the TTM Squeeze. Let me show you a few trades I have taken based on the orange dot squeeze.

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Chart L.22 - Charts by ThinkorSwim

Chart L.22 above is a daily perspective of $BJs.

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Chart L.23 - Charts by ThinkorSwim

Chart L.23 above is a weekly perspective of $BJ. Looking at both Charts L.22 and L.23, In January 2021, I noticed that BJs was in a weekly orange dot squeeze with the yellow momentum, plus it was in a daily light blue squeeze with the orange dots at the same time. Both squeezes showed that this squeeze was likely going to fire to the upside. As it was a closer-term swing, I had to find my entry based on the daily time frame. In the first picture, which is the daily time frame, the price broke above the daily 8 EMA and 21 EMA and held above it. As a result, I went long on a retest of the daily 21 EMA, and my stop-loss was a daily close below the daily 21 EMA. As you can see in the charts, $BJ ran from $38 to a high of $50! If you can identify the momentum on the TTM Squeeze and get in when the dots are orange, the dots still need to go red, black, and then green, and in that scenario, you caught a HUGE move from the stock price releasing. This trade was a perfect scenario of this process.

Chart L.24 - Charts by ThinkorSwim

Chart L.24 is a day trade taken on $TSLA and was solely due to the orange dot squeeze. Looking at the TTM Squeeze, there are two things to make a note of. The first one is the orange dot squeeze, and the second is the light blue momentum with rising histogram bars, with the stock price holding above the 246

EMAs. Therefore, these two things let me know what more than likely was going to happen on $TSLA. Again, knowing the 21 EMA is the best entry, that is exactly where I entered. My price target was $742, and my entry was $736. $TSLA made a $6 move within 5 minutes, and I was able to exit the trade entirely.

Chart L.25 - Charts by ThinkorSwim

The chart above shows a swing trade that I took on $CAT based on the orange dot squeeze. Using the Fibonacci extensions from pivot high to pivot low, the 127.2% extension lined up at $243.69; therefore, that was the price target. As you can see on the TTM Squeeze, it began to hint that the squeeze wanted to fire up due to the light blue histogram bars. As a result, the squeeze quickly fired to the upside and then straight to the price target, where I exited my position. Below are a couple of trades I have taken based on the red dot squeeze.

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Chart L.26 - Charts by ThinkorSwim

Chart L.26 above is another example of a swing trade I have taken. $GLD and the entire gold sector was something I was watching very closely due to the weekly squeeze showing signs of wanting to fire to the upside. At the same time, $GLD had a clear trendline acting as resistance that had to be broken before I entered the trade. As soon as $GLD broke above the trendline, that is when I entered this swing trade. I purchased the $180 Calls expiring June 17th, 2022, and some leaps expiring 6+ months out. The $180 Calls went $2.50 in the money, and I was able to pocket almost a +120% return on my investment. This trade would not have been on my radar if it were not for the squeeze.

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Chart L.27 - Charts by ThinkorSwim

Chart L.27 above is an example of $TAP on the daily time frame. Unfortunately, I entered this trade at the breakout of the trendline and got stopped out the following day on the red candle, just to see the stock start flying to the upside the following day. Just because I got stopped out does not mean this was not a picture-perfect setup. Looking at the TTM Squeeze, $TAP was squeezing and showing signs of wanting to fire up while breaking above the trendline and holding above the EMAs. As a result, the squeeze did fire to the upside, and as painful as it is for me to say this, the contracts went up over +100% from my entry. Ouch.

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Chart L.28 - Charts by ThinkorSwim

Looking at $FB on the 5-minute time frame in Chart L.28, this was a day trade that I took today (February 28th, 2022). Looking at the 5-minute time frame, $FB had positive momentum on the TTM Squeeze, and the orange and red dots letting me know a big move was coming. Once $FB broke above the high of the day at $209, the squeeze fired, and the stock continued to push to $213.15 before pulling back.

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Chart L.29 - Charts by ThinkorSwim

Chart L.29 is a screenshot of a swing trade I took on $FB. Looking at $FB on the weekly time frame, there was a bull flag breakout; however, looking down at the TTM Squeeze, Facebook was in a weekly orange dot squeeze for five weeks. Again, the higher the time frame, the more superior the orange dot squeeze is. Taking the Fibonacci extensions from the most recent pivot high to pivot low, the 127.2% extension was at $321. $FB broke out of the bull flag while still squeezing, and I entered the trade. Looking at the squeeze, the yellow momentum turned light blue, and the orange dots turned red, red turned black, and black turned green. This trade was spotted by looking at the TTM Squeeze. I have said this before, and I will say it again, the TTM Squeeze is my favorite trading indicator. While your attention is on $FB, I want to mention a method called the “Slingshot Squeeze.” A slingshot squeeze is where the stock is currently squeezing, and the histogram bars are yellow. The stock MUST be above 5 EMA, 8 EMA, 21 EMA, and 55 EMA for this to validate a buy signal. As the stock price stays above these moving averages, the yellow bars will get smaller and eventually turn light blue and will have the squeeze firing as the stock transitions into the light blue momentum. As a result, this creates a slingshot effect and sends the stock on its way to the upside.

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Chart L.30 - Charts by ThinkorSwim

Looking at Chart L.30 of $FB on the weekly time frame, this is a perfect example of a slingshot squeeze in effect.

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Chart L.31 - Charts by ThinkorSwim

A clean slingshot squeeze can be seen when looking at $JNJ on the weekly time frame in Chart L.31.

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Chart L.32 - Charts by ThinkorSwim

Looking at $AAPL on the daily time frame in Chart L.32, notice how $AAPL broke above the moving averages with yellow momentum and red dots. That yellow momentum turned into light blue, and the squeeze released to the upside. From there, $AAPL followed the 5 EMA and 8 EMA from $126 to $150.

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Chart L.33 - Charts by ThinkorSwim

Looking at Chart L.33 of $EA on the daily time frame, notice how the momentum was turning from yellow into light blue, and at the same time, broke above the EMAs. From there, the red dot squeeze fired to the upside with strong buying momentum.

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Chart L.34 - Charts by ThinkorSwim

A slingshot squeeze can be seen in Chart L.34 of $DAC on the weekly time frame. The squeeze had yellow momentum indicating that buyers were coming back into the market. Those yellow bars were shrinking, giving the possibility of the momentum turning light blue. As the stock price was above the moving averages, the momentum turned light blue, and the squeeze fired up. This is going to wrap up this chapter on the TTM Squeeze. This is my favorite indicator in my strategy and is involved with almost every trade I take. I could write about this indicator for hundreds of pages, but I promised myself I would keep it short and sweet. To summarize everything about the TTM Squeeze, the light blue momentum indicates strong buying momentum. The dark blue indicates that the buying momentum is dying down and can lead to a reversal or consolidation. The red momentum indicates strong selling momentum, where the stock will more than likely pull to the downside. Then the yellow momentum indicates buyers are now showing a presence, and you could see the stock price move to the upside. If the TTM Squeeze is an indicator that you think can assist you in your trading, you can purchase it at: https://www.simplertrading.com/courses/squeeze-pro-system-affl/?utm_campaign=squeezepro&utm_medium=referral&utm_source=affl-linktrust<afid=507159<campaignid=439968. This is an affiliate link, so I will get credit if you purchase the indicator. Keep in mind that I have been using the TTM Squeeze for years before I became an affiliate. 256

With the TTM Squeeze, there are four colored dots; orange, which is rare, red, which indicates there is a squeeze, black, indicating that the squeeze is in the first stage of firing, and green which indicates the squeeze has fired. Remember to always piece the TTM Squeeze together with the moving averages. If the histogram bars are light blue, but the stock price is below the moving averages, you should not be initiating a long position until the stock price holds above the moving averages. The same can be said about the red momentum on the squeeze. If the histogram shows red bars, but the stock price is above the moving averages, you should not be going short or buying puts. I will be discussing the squeeze again in the Swing Trading and Day Trading chapters later in this book. The next chapter will discuss the final indicator I use in my strategy: the On Balance Volume (OBV). Make sure to check out the multiple videos I have made about the TTM Squeeze on my YouTube channel: BrandonTrades. I have an entire playlist on the TTM Squeeze there.

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Chapter 13: On Balance Volume The On Balance Volume indicator (OBV) is a momentum indicator created by Joseph Granville and written about in his 1960s book Granville's New Key to Stock Market Profits. The OBV predicts momentum in the asset being traded. The OBV considers the total trading volume of a stock and indicates if that volume is flowing in or out. In other words, it measures money inflow versus money outflow. As a result, continued positive volume and money inflow will result in the OBV increasing, and negative volume and money outflow will result in the OBV decreasing. It also helps the average retail investor understand what smart money and institutions are doing when it comes to that stock. I like to use this indicator because options trading has become more popular in the new age of technical analysis, and since options are not reflected in the stocks volume, volume analysis has become more complex. There have been numerous examples where the normal volume is low; however, the OBV hinted at a bigger move in its respected direction. Old technical analysis books always state that volume needs to be present on major breaks, but if more individuals are trading options instead of shares now, we would miss too many moves. The OBV solves this issue regarding lower volume, and I will show you how to use it to your advantage. As far as which time frames to use the OBV, I prefer to use it on the daily and weekly time frames. These are the time frames that I prefer because I have noticed that the OBV gives clearer signals on these time frames; however, when you break it down to smaller time frames like the thirty-minute, it tends to be choppier and not give you as clear of a signal as the higher time frames. You can always feel free to try it out on these smaller time frames, but I personally do not like using it on anything lower than the daily. Going back to Chapter 3: Understanding Stock Trends, the OBV should be treated similarly. The OBV can uptrend, downtrend, or consolidate, and it is essential to pay attention to which trend it is currently in. Not only that, but you can also spot chart patterns on this indicator as well as divergences.

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Chart M.1 - Charts by TradingView

Looking at Chart M.1 above is a picture of how the OBV looks on the daily time frame. I personally lap mine over the normal volume indicator. When looking at the OBV, notice the uptrends, downtrends, and consolidations.

Chart M.2 - Charts by TradingView

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In Chart M.2, try to pick out the trend of the OBV and reflect it with the stock price. The stock and the OBV show almost the same thing; however, notice that the OBV hinted at a shift in direction a few times before the stock shifted trend. Notice how the OBV downtrend was broken, and the OBV line broke above the recent lower highs, thus creating a higher high, then a higher low. This happened well before the actual stock price indicated a reversal from its previous downtrend. From there, the OBV created an uptrend, and $SNOW continued to go up in price.

Chart M.3 - Charts by TradingView

In Chart M.3 of $SQ on the daily time frame, notice how the old downtrend was broken, and the OBV indicated the new uptrend. Notice how $SQ continued to move to the upside, and as soon as the OBV set a lower low and lower high, that indicated that $SQ was more than likely going to pull to the downside, which it did.

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Chart M.4 - Charts by TradingView

In Chart M.4, I will be going back to the $CAT swing trade I took. The OBV played a crucial role in my entry into this trade. Looking at $CAT on the daily time frame, it broke out of the symmetrical triangle, but looking down at the OBV, it had an uptrend while the stock was consolidating. This was a fair hint that $CAT would breakout to the upside well before the price ever broke out. Then when $CAT did breakout, notice the OBV reading as well. It created a much higher high than before, which added more confirmation to the breakout. It is also super important to know the OBV readings from a weekly time frame. I know I keep repeating this, but I cannot stress this enough, always remember, the higher the time frame, the more significant the signal is.

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Chart M.5 - Charts by TradingView

Chart M.5 of $V on the weekly time frame shows a clear reading for the OBV. Notice how the OBV was in a downtrend at the first set of arrows. Once the indicator made a higher high and then a higher low, this was a clear indication that $V was now ready to move back to the upside. As seen in the OBV, the stock price made higher highs and higher lows. Once the OBV dropped below the previous higher low, that’s when the stock pulled back even harder, setting lower lows and lower highs on the indicator, as well as the stock price.

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Chart M.6 - Charts by TradingView

In Chart M.6 of $MO on the weekly time frame, notice how the OBV was able to show the trend of the stock much more clearly. Each time the OBV made a higher high and then a higher low, the indicator showed that more money was inflowing into the stock than outflowing. Piece this uptrend on the OBV with the TTM Squeeze, EMAs, and Stochastics, and you have one amazing swing setup.

Chart M.7 - Charts by TradingView

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Looking at Chart M.7 of $ABBV on the daily time frame, notice how the OBV was consolidating while the stock was doing the same. I want you to notice that the OBV indicator broke out of its consolidation before the stock itself did. Shortly after, $ABBV stock price followed through and gave a perfect continuation in price

Chart M.8 - Charts by TradingView

Chart M.8 above is a perfect example of a divergence on $AMD. Looking at the daily time frame, the OBV set higher highs and higher lows while the stock was dropping in price. As a result, you would want to avoid the short side on $AMD because there is more buying than selling occurring, which is why the OBV was in an uptrend. Will this get you into a long position? Maybe not, but it will help you avoid entering a losing position. In this scenario, I would wait to see what happens. If the OBV breaks below its previous low, the downtrend will continue, and I will look to short the stock. But, if the uptrend continues and the stock gets above the EMAs, I will look for long positions.

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Chart M.9 - Charts by TradingView

Looking at $XLE on the daily time frame in Chart M.9, the OBV helped confirm the move to the upside as soon as it broke above the previous highs. As seen on the chart, the lime green line was the high of the OBV, and once the line broke above there, that let the trader know that the stock was ready for the next leg up.

Chart M.10 - Charts by TradingView

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Looking at $CVX on the daily time frame in Chart M.10, notice what happened both times when the OBV broke out and set new highs. The stock price followed shortly after. The On Balance Volume indicator is one of the most reliable indicators you could use in your trading strategy. It clearly shows uptrends, downtrends, and reversals before they occur on the chart. Due to this indicator's extreme accuracy, I believe any technical analyst should be using this indicator in their strategy. Remember, I only use this indicator for swing trades and utilize it on the daily and weekly time frame. I will be revisiting the OBV in a later chapter when I begin to discuss my swing trading strategy. In that chapter, I will be reviewing previous swing trades I have taken and giving a list of confirmations for each trade. This will wrap up all the indicators that I use when trading. In the Day Trading and Swing Trading chapters, I will show you how to combine these indicators for effective trading and what to look for before entering trades. Before I go into detail, it is also essential to know chart patterns. Pattern recognition is one of the most important aspects of technical analysis. From a psychological standpoint, there are thousands of indicators and thousands of different variations that can assist in decision making; however, there are only a select number of chart patterns. We may not all use the same indicators, but if there is a bull flag on the daily time frame, all indicators aside, everyone will see that bull flag. In the next chapter, I will be discussing all the chart patterns that you should pay attention to when trading.

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Chapter 14: Chart Patterns Chart patterns play a crucial role in identifying buy signals and sell signals and providing guidelines for future price movements and objectives. These patterns naturally occur in the markets, and they repeat themselves daily. There are entire books written on only chart patterns that are 300+ pages in length. In this chapter, I am going to discuss the chart patterns I see the most, which are Bull Flags, Bear Flags, Falling Wedges, Symmetrical Triangles, Ascending Triangles, Descending Triangles, Head and Shoulders, Inverse Head and Shoulders, Cup and Handles, Double Tops, Multi Tops, Double Bottoms, and Multi Bottoms. There are more chart patterns than the ones discussed in this book, but I pay more attention to those with a higher occurrence in the market. One thing to make note of with all the chart patterns discussed, is that they are applicable on any time frame. As mentioned multiple times, the higher the time frame, the bigger the reaction will be once the pattern is broken. Bull Flag A bull flag is commonly found in stocks with a recent strong uptrend in price, also known as the flagpole. Following that strong uptrend in price is a consolidation area known as the flag. The pole results from a vertical movement to the upside in the stock price, with the flag resulting in the consolidation of the stock price. Below is an example of what a stock forming a bull flag would look like. A bull flag is a bullish pattern, meaning a continuation to the upside is more than likely to occur. When you spot a bull flag, you should only be looking to go long.

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Chart N.1 - Charts by TradingView

Chart N.1 is a visual representation of what a bull flag will look like. As seen in the picture, the “stock” had a vertical move to the upside, followed by a consolidation period, and once the price broke above the consolidation, the stock continued to go higher.

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Chart N.2 - Charts by ThinkorSwim

Chart N.2 shows $FB on a monthly time frame. I went ahead and marked out the bull flag for you; that way, it is easier to spot. Looking at the monthly time frame of $FB, the stock did nothing but increase in price from April 2020 to August 2020, traveling from $150 a share to $304.67. The price increase generated the flagpole; however, at the time, no one knew that $FB was forming a bull flag. After three to four months of $FB consolidating, you would be able to recognize that a bull flag is forming. You can then trace the consolidation, which would be the flag. When drawing the two trendlines that create the flag, you want to connect the trendlines in a way that they hit as many wicks as possible. Now, all you are waiting for is for Facebook to break above the monthly bull flag for the stock to continue going higher. Once $FB broke the flag in March of 2021, $FB increased in price from $287.50 a share to a high of $377.55.

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Chart N.3 - Charts by ThinkorSwim

Chart N.3 shows another example of a bull flag on the 1-minute time frame of $AMD. Again, notice the price increase (the flagpole), followed by the consolidation (the flag), and then the breakout. This was an actual trade I was able to take, where I scalped for a quick +20% profit. Like I said, the bigger the time frame, the bigger the breakout, but this was on a 1-minute time frame. That is why I quickly scalped the trade and then exited my position. I have noticed through my time trading that the breakouts from a 1minute bull flag tend to be weak and do not last long.

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Chart N.4 - Charts by ThinkorSwim

Chart N.4 is an example of a bull flag on the 1-hour time frame of $AMD. Again, notice the sharp increase in price followed by consolidation. Once the stock price broke out, the price of $AMD rocketed to the upside.

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Chart N.5 - Charts by ThinkorSwim

Chart N.5 is an example of a bull flag on the ten-minute time frame of $PYPL. Notice how after the vertical movement to the upside, the price consolidated in a way that allowed two trendlines to be drawn against the highs and lows of the candles. Once $PYPL broke the flag, the stock gave a nice push to the upside. These were a few examples of how the bull flag looks and how the bull flag forms. Now, I will show you a few tips and tricks that can be utilized when trading a bull flag. The first trick is entering the trade during the consolidation period when the stock forms the flag. This is one of the few chart patterns where I will enter the trade prematurely. I like to enter the trade early because we already know that a bull flag is a continuation pattern. Therefore, the stock will likely continue to increase in price. Another reason I like to enter the trade early on bull flags is because of the low Implied Volatility. Remember, Implied Volatility measures the market's expectation of where a stock can go and directly correlates with the Vega in the options contracts. When a stock consolidates, the Implied Volatility drops with it. As a result, you get a cheaper contract. As soon as the stock breaks out of that consolidation (the flag), the Implied Volatility immediately shoots up. This will increase the cost of the contracts rapidly as the breakout occurs. That is how I made +20% on such a small breakout in the $AMD example. Finally, in a bull flag scenario, the stop-loss is well-defined. All the stock needs to do is break below the lower portion of the flag, and you are stopped out. Utilizing the 8 EMA also gives a 272

perfect entry point to enter the bull flag. I have noticed that most of the time, a bull flag forms because the stock overextends from the 5 EMA and 8 EMA. I have also noticed that when the stock price comes back to the 8 EMA, that is where the stock tends to retrace before continuing its move to the upside. The riskto-reward in bull flag scenarios is too good to give up. That is why I like to enter early.

Chart N.6 - Charts by TradingView

Looking at Chart N.6 of $TSLA on a 5-minute time frame, notice how a trader could have easily found an entry based on the bottom trendline of the bull flag.

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Chart N.7 - Charts by TradingView

Looking above at Chart N.7 of $FB on the 10-minute time frame, a trader could have obtained a perfect entry off the bottom trendline of the bull flag.

Chart N.8 - Charts by TrendSpider

Looking at Chart N.8 of a different example of $TSLA on the 10-minute time frame, notice how the 8 EMA and the lower trendline of the bull flag both gave perfect entries for this trade. A stop-loss was well defined, while the reward was substantial. 274

Chart N.9 - Charts by ThinkorSwim

Looking at Chart N.9 of a 5-minute bull flag found on $NVDA, as seen, the stock rallied up in price and then consolidated until retracing to the 8 EMA before continuing to the upside. Now when it comes to finding a price target on the bull flag, there is a standard measurement that people like to use to find a price target. This method is 50/50, but you can utilize it to help you decide which contract you should be buying for the breakout. If you duplicate the flagpole and place it at the breakout zone, the stock should continue to the pole's distance. Again, in my experience, this is a 50/50 chance, but I figured it was worth mentioning in this book.

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Chart N.10 - Charts by ThinkorSwim

Chart N.10 is an example of an actual trade that I took based on the bull flag measurements. Looking at $BA on the 4-hour time frame, I noticed that it created a bull flag, and I was looking to swing trade Calls a few weeks out. Since $BA was in an area that it had not been in for three years, there was not much resistance that I could utilize as far as price targets. As a result, I duplicated the flagpole, placed it at the breakout, and chose my strike price based on the pole. In this scenario, $BA traveled the distance of the flagpole, where it eventually broke above the price target but could not sustain the level for long. Remember, it is not a 100% guarantee that the stock will react to this level. Sometimes it will fall short, and sometimes it will break above periodically, but the main reason to use this strategy is to help you plan the trade and have a price objective in mind. This is one real-life example of how the flagpole assisted me in developing a trading plan.

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Chart N.11 - Charts by ThinkorSwim

In Chart N.11, going back to the $AMD 1-hour bull flag, taking the flagpole, and placing it at the breakout would give you the price target. As seen in this $AMD example, the flagpole measurement worked to a T. To recap the bull flag, this pattern appears after a sharp increase in price to the upside, which forms the pole, followed by a consolidation area known as the flag. The best spot to enter the trade is off the lower trendline of the flag or on the 5 EMA and 8 EMA. The reason is that the stop-loss is well defined, and the contracts are cheap due to the consolidation. As for a price target, if you duplicate the flagpole and place it at the breakout, that should be the profit goal, but remember, this helps you have a price target in mind. It is not always 100% set and stone that the stock will go to that level. Now that you understand bull flags, it's time to move on to the bear flag.

Bear Flag A bear flag is a bearish formation created by a strong move down, followed by consolidation and then another move down. The strong move down will be the pole, and the consolidation will be the flag. Since this is a bearish chart pattern, you should only be looking for short opportunities when bear flags occur.

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Chart N.12 - Charts by TrendSpider

Looking at Chart N.12, this is an example of what a bear flag will look like on a chart. Price had a strong move down, followed by a slight pullback (probably back to a moving average) where it consolidates before making a stronger move to the downside.

Chart N.13 - Charts by ThinkorSwim

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Chart N.13 shows two examples of a bear flag on the 30-minute time frame on $QQQ. With both bear flags, a strong downward move is first spotted, followed by a pullback and consolidation period, which then was broken, and the stock price dropped lower.

Chart N.14 - Charts by ThinkorSwim

Looking at Chart N.14, there is a bear flag example on the 30-minute time frame on the S&P Futures. As seen, a strong move down was given for the flagpole, followed by consolidation, which then provided the flag. After that, the S&P Futures broke down and dropped further in price.

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Chart N.15 - Charts by ThinkorSwim

Looking at Chart N.15, a bear flag can be seen on the 4-hour time frame on the S&P Futures. A strong move down in price, followed by consolidation, and another strong move down provided traders with an excellent short opportunity.

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Chart N.16 - Charts by ThinkorSwim

Chart N.16 is another example of a bear flag on the 10-minute time frame of $AMD. Notice the price reaction once $AMD broke below the consolidation (flag). $AMD continued to drop another $1.05, which offered a perfect opportunity to short $AMD. Like a bull flag, you want to enter the trade either during the consolidation period or when the stock price comes back to the moving averages or trendlines to ensure the best entry possible. This will give you the best possible risk-to-reward for that trade since all the price action has to do is break above the moving averages or above the trendline to stop you out.

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Chart N.17 - Charts by ThinkorSwim

Chart N.17 of the $QQQ 30-minute bear flag shows how a perfect entry was given off the upper trendline or 8 EMA of the first bear flag. This would have offered the trader the best risk-to-reward for a downside trade.

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Chart N.18 - Charts by ThinkorSwim

Looking at Chart N.18 of a weekly bear flag on $DKS, again, what ended up happening? The stock consolidated and bounced off the upper trendline of the bear flag multiple times, which would have given a perfect opportunity to go short. As seen in the chart, $DKS has recently broken below its bear flag and dropped $15.77 before rebounding to the upside. Traders can also apply the same measurement tool used on bull flags to get a price target for bear flag breakdowns. Once the stock price breaks below the bear flag, take the pole, and place it at the breakdown, which will give the price target.

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Chart N.19 - Charts by ThinkorSwim

Looking at Chart N.19, at the S&P Futures 4-hour bear flag, using the same measurement tool as previously discussed, the measurement implied that the futures could drop almost 110 points to the downside. As seen in the chart above, the futures dropped almost to the price target before rebounding.

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Chart N.20 - Charts by ThinkorSwim

Looking at Chart N.20, taking the pole of the first bear flag and placing it at the breakdown gave $QQQ a price target of $386.77, which became support at the market open. I decided to swing puts overnight due to a daily gap to the downside and the 30-minute bear flag.

Chart N.21 - Charts by ThinkorSwim

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Looking at Chart N.21, a daily bear flag can be seen on $TLT. Once $TLT broke below the bear flag, the next leg down was given, and the price continued lower. That will wrap up how to identify, use, and take advantage of bear flags. Remember, there always needs to be a strong move down in price, followed by consolidation, for it to be considered a bear flag. The best possible entries are off the upper trendline or one of the moving averages with the stop-loss set on the opposite side. To get a price target, duplicate the flagpole and place it at the breakdown to understand where the stock has room to drop.

Symmetrical Triangles The following chart pattern to be discussed will be the symmetrical triangle. This chart pattern is often referred to as a “neutral chart pattern,” meaning it has no direct bullish or bearish trend. However, it has been shown that more than likely, a stock that goes into a symmetrical triangle will continue to move in the trend it was in previously. A symmetrical triangle is a chart pattern with two converging trendlines connecting a series of swing highs and swing lows. The two trendlines will eventually meet at a point where the stock is forced to breakout. However, it has also been shown that the breakout is much more effective if the stock can breakout 50%-75% of the way through the symmetrical triangle. If you break it down to trading psychology on why 50%-75% of the way through is so effective, this will give obvious answers. For a stock to go up, buyers must outweigh sellers. For a stock to go down, sellers must outweigh the buyers. For a symmetrical triangle, the buyers or sellers must show their presence early for the stock to move in its respected direction. If the stock consolidates inside the symmetrical triangle until the point where the two trendlines meet, the buyers and sellers were uncertain about which direction the stock price should go. Therefore, if both sides are uncertain, the breakout or breakdown will be minimal. However, if the stock breaks to the upside 50% of the way through the symmetrical triangle, the buyers clearly outweighed the sellers, and the stock should see a continuation in price. The same goes for the downside.

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Chart N.22 - Charts by TradingView

Chart N.22 shows how the “stock” was in an uptrend before going into a consolidation period; at the same time, notice how the stock was coiling up during the consolidation, setting lower highs and higher lows, which allowed one to draw two converging trendlines. From there, you would wait for confirmation of the breakout, and then enter the trade.

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Chart N.23 - Charts by ThinkorSwim

One example can be found on $TSLA in Chart N.23. Looking at $TSLA on the daily chart, there was a significant increase in price from $270 to $500, then $TSLA went into consolidation. Notice how price continued to make lower highs and higher lows, allowing you to draw the symmetrical triangle with two converging trendlines. From here, wait for a breakout or breakdown to enter the trade. The indicators discussed throughout this book can help you understand which way the stock will break, but do not try to assume which direction the trade will go until it happens. A measurement tool used to find price targets is by duplicating the opposing trendline from the breakout and placing it at the beginning of the opposite trendline or measuring the distance between the beginning of two trendlines and placing it at the breakout.

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Chart N.24 - Charts by ThinkorSwim

Notice how the indicators in Chart N.24 gave the trader a clear indication of $TSLA wanting to breakout to the upside. The Stochastic Slow gave two buy signals, the OBV was increasing, and the TTM Squeeze was creating a slingshot effect, plus the TTM Squeeze had a red dot. Once $TSLA broke out to the upside and held, that was the confirmation to go long. Using one of the measurement tools discussed gave a clear price target for the trade.

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Chart N.25 - Charts by ThinkorSwim

In this example on $MSFT, notice how the stock had a previous uptrend going into the symmetrical triangle. Again, it is not set and stone that the stock will always continue in the direction of the previous trend; however, in my experience, I have noticed that it more than likely will. Again, in this scenario, you can utilize the measurement tools to understand where the stock can move.

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Chart N.26 - Charts by ThinkorSwim

As seen in Chart N.26, $MSFT achieved the price target before making the trendline resistance and dropping in price. Notice how the indicators provided extra confirmation on the breakout. Remember, the entry is at the breakout or breakdown of the symmetrical triangle. Utilizing indicators can give one a highly educated assumption of which way the stock will breakout, but the trade is not valid until the stock has broken the trendline. You should never anticipate the breakout because I will show you where a stock did not follow the previous trend and instead reversed direction.

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Chart N.27 - Charts by ThinkorSwim

Chart N.27 of $PLUG on the daily time frame shows a huge price increase followed by a symmetrical triangle. This is an example of why you must wait for the actual breakout before entering the trade because if you went long in this scenario, you lost money. This was also an actual trade I took to the downside because all the indicators hinted that $PLUG would drop in price instead.

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Chart N.28 - Charts by ThinkorSwim

Notice in Chart N.28 in the $PLUG example how all the indicators hinted at a breakdown. There was a decreasing OBV reading, Stochastic sell signals, decreasing squeeze momentum, an orange dot squeeze looking to fire down, and then the stock lost the 5 EMA and 8 EMA. Once the stock broke below the lower trendline, that was the entry to go short. Then again, you can use the two measurement tools to help find price objectives. This trade played out beautifully, reaching the price goal.

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Chart N.29 - Charts by ThinkorSwim

In Chart N.29, the previous trend in $JPM was down, so one would think that $JPM would continue to move back down; however, notice how $JPM broke out to the upside and continued to move higher in price. (The gap up occurred from the news, which so happened to occur once $JPM broke out of the symmetrical triangle). Hence why you must wait for the break and hold outside the symmetrical triangle before initiating a position.

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Chart N.30 - Charts by ThinkorSwim

Chart N.30 shows that all the indicators confirmed a move to the upside on $JPM. Yet again, $JPM met the price objective in this scenario.

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Chart N.31 - Charts by ThinkorSwim

Traders can use symmetrical triangles on smaller time frames as well. Looking at Chart N.31, this is a trade I took on $NVDA based on the 5-minute time frame. Looking down at the indicators, the Stochastic generated a buy signal, while there was light blue momentum on the TTM Squeeze with orange dots, and on top of that, the stock price was holding above the EMAs. As a result, once $NVDA broke above the upper trendline, that is when I went long on this trade. As seen in the picture, $NVDA climbed to a high of $230 from $226.

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Chart N.32 - Charts by ThinkorSwim

Chart N.32 shows a chart that is currently breaking out of a symmetrical triangle on the daily time frame. This breakout occurred on August 8th, 2021.

Chart N.33 - Charts by TradingView

Chart N.33 is an update as of August 12th, 2021.

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Chart N.34 - Charts by TradingView

Chart N.34 is an update as of September 1st, 2021.

Chart N.35 - Charts by TradingView

Chart N.35 shows the price target being achieved. That is going to wrap up symmetrical triangles. Remember, a stock that goes into a symmetrical triangle will likely continue in the direction of the previous trend; however, always wait for a breakout or 298

breakdown because, as you have seen from the previous examples, the stock can reverse and go in the opposite direction. Make sure to use the indicators to your advantage. The indicators can help hint at a breakout or breakdown before it occurs and can be used as confirmation once the stock breaks out. Also, remember that you can always utilize the two measurement techniques laid out for price targets.

Ascending Triangles An ascending triangle is another bullish chart pattern. This pattern consists of an upward trendline that connects the stock's swing lows and has a horizontal resistance line that can be drawn above the swing highs. You can add to your position on the bounces from the rising trendline with ascending triangles, but ideally, I like to wait for a break and close above the resistance level, thus breaking above the ascending triangle and giving confirmation to enter.

Chart N.36 - Charts by TradingView

Chart N.36 is a visual example of how an ascending triangle would look on a chart. Notice the flat resistance point and the upward trendline acting as support. The idea behind the symmetrical triangle is that the stock will continue to deny resistance, but then come back to the trendline as support until the stock price is forced to break above resistance or break below the trendline. 299

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Chart N.37 - Charts by TradingView

Chart N.37 is an example of $GILD on the weekly time frame. Notice how the stock had multiple hits on the ascending trendline as support. At the same time, $GILD had significant resistance at the $70 area with multiple hits. As a result, you can now draw the horizontal resistance, creating the ascending triangle. From here, ideally, you want to wait for a breakout above the resistance point to go long. Do not be surprised if the stock breaks above resistance and comes back to test it as support. The retest offers traders a fantastic opportunity to add to their current position or enter the trade.

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Chart N.38 - Charts by ThinkorSwim

In Chart N.38, utilizing the indicators could have helped you decide when the stock will breakout, and could confirm the breakout. The chart showed an increasing OBV reading, strong Stochastic momentum, and a light blue squeeze looking to fire to the upside.

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Chart N.39 - Charts by ThinkorSwim

Looking at $CHSCP on the weekly time frame in Chart N.39, this stock recently broke out of its ascending triangle. Notice the indicators again in this scenario that indicated $CHSCP wanted to break to the upside. The OBV was increasing, the Stochastics generated a buy signal, and there was a squeeze with light blue momentum.

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Chart N.40 - Charts by ThinkorSwim

Chart N.40 shows $CMCSA finally breaking out to the upside and giving a perfect trade opportunity. For two weeks, $CMCSA sat above the top of the ascending triangle making it support, before giving a push to the upside.

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Chart N.41 - Charts by ThinkorSwim

Looking at Chart N.41, $HZNP formed an ascending triangle on the daily time frame. Notice how all the indicators hinted at a further continuation to the upside.

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Chart N.42 - Charts by ThinkorSwim

Chart N.42 is a picture of $CPK on the daily time frame. Again, notice the flat top acting as resistance and then the rising trendline acting as support, thus creating an ascending triangle. The indicators showed an increased OBV reading, two Stochastic buy signals, price was above the EMAs, and a slingshot squeeze was present. That is going to wrap up ascending triangles. Remember, these are bullish patterns which means the stock should continue to the upside once price breaks above resistance. With an upward slopped trendline acting as support, and a flat resistance point, it is always essential to wait for a solid break and close above the resistance line before entering. Utilize the indicators to help confirm the breakout and to give you higher conviction going into the trade. From there, the stop-loss is if the stock falls below the breakout point. As the stock continues higher, trail the stop-loss under the 8 EMA, and take profits as the price objectives are met, or when you are satisfied with your profits.

Descending Triangles A descending triangle is a bearish chart pattern found by a downwards trendline connecting swing highs and a horizontal support area acting as support. Ideally, for a descending triangle, I would like to see the

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stock break below support before entering my position. More aggressive traders look to add to their short position at pullbacks to the trendline with a stop-loss placed right above the trendline.

Chart N.43 - Charts by TradingView

Chart N.43 of $WD on the daily chart shows how the descending trendline connects multiple hits from the swing highs. At the same time, there is a solid area of support where there are multiple hits. The idea behind the descending triangle is that the stock will continue to return to the trendline, where it will act as resistance, and continue to make lower highs. From there, wait for a break and close below support to initiate a short position. However, notice how $WD broke above the trendline and had an explosive move to the upside in this scenario. Why did this happen? When breaking it down to trading psychology, the more aggressive traders are going short at the descending trendline while buyers buy off support. If the stock broke above the trendline, the short sellers had to rebuy their positions to cut losses, while buyers flooded in because the stock invalidated the descending triangle. As a result, the stock had a nice short squeeze to the upside.

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Chart N.44 - Charts by TradingView

Chart N.44 shows the daily chart of $EA. Notice the short descending triangle formation that occurred. Looking at the chart, there was a solid support area and a descending trendline. Again, wait for the break below support to go short. As seen in the picture, $EA had a negative reaction once breaking below support. Going back to trading psychology, many traders waited for the break below this level. Once $EA broke below, that is when shorts piled onto their positions and drove the price of $EA down.

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Chart N.45 - Charts by TrendSpider

Chart N.45 of $UNF shows a picture-perfect descending triangle on the daily time frame. Each time the stock reverted to the trendline, price denied it before dropping lower. At the same time, the stock continued to bounce off the horizontal support area and eventually broke below, where traders could enter short.

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Chart N.46 - Charts by TrendSpider

Chart N.46 of $LUNG on the daily time frame shows a descending triangle. Again, there is a descending trendline acting as resistance and a flat support area that the stock refuses to break below.

Chart N.47 - Charts by TrendSpider

A descending triangle can be seen in Chart N.47 of $ACHV on the daily time frame. There is strong support at $6.61, and a descending trendline acting as resistance each time the stock price comes back to it.

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Chart N.48 - Charts by TrendSpider

Looking at Chart N.48 of $WBX on the daily time frame, another descending triangle can be seen. There are three successful lower highs allowing a trendline to be drawn and a strong support level at $11.77. That is going to wrap up the descending triangles. Remember, this is a bearish chart pattern, and you should only be looking for short positions when these occur. Ideal entry points would be off the lowering trendline or a break below support. However, if the stock breaks above the descending trendline, the stock will likely increase in price due to shorts covering their positions, and buyers flooding the markets.

Falling Wedge A falling wedge shares characteristics with a bull flag. There is usually a significant increase in the stock price, followed by a consolidation area. But the consolidation area in the falling wedge tends to have a sharper pullback to the downside and consolidates for a longer time. When drawing the two trendlines for a falling wedge, they converge to a point where the two trendlines will eventually meet. As for a bull flag, it looks more like the letter “F”.

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Chart N.49 - Charts by ThinkorSwim

Chart N.49 has two examples of a falling wedge on $CRM.

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Chart N.50 - Charts by ThinkorSwim

Looking at Chart N.50, remember to use the indicators to help get a hint before a stock breaks the falling wedge, and use them as confirmation once the breakout occurs.

Chart N.51 - Charts by ThinkorSwim

A daily falling wedge can be spotted in Chart N.51 on $AMD. Notice the reaction that took place at the breakout of the falling wedge and then the follow-through from earnings. Once again, all the discussed indicators hinted at a bigger move to the upside.

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Chart N.52 - Charts by ThinkorSwim

Chart N.52 shows a falling wedge on the daily time frame on $X. Notice that the indicators confirmed the move to the upside through a Stochastic buy signal, increasing OBV, and the stock holding above the EMAs.

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Chart N.53 - Charts by ThinkorSwim

As for $IBM in Chart N.53, this falling wedge can be spotted on the weekly time frame. Again, notice the previous increase in price, followed by a sharp pullback. The pullback allowed two converging trendlines to be drawn, which, as a result, formed a falling wedge.

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Chart N.54 - Charts by ThinkorSwim

Finally, looking at $NIO on the weekly time frame in Chart N.54, the two trendlines can be drawn in a way that they would eventually intersect while capturing all the price action inside the trendlines. Notice the breakout and follow through once $NIO was able to breakout. This is going to wrap up the falling wedge. Remember, the difference between a bull flag and a falling wedge is that the bull flag has more of a vertical move up followed by sideways consolidation. The falling wedge consists of a move to the upside, followed by a sharper pullback that allows one to draw two trendlines that contract near the end. This is still a bullish continuation pattern; however, you want to wait for the breakout before entering the trade. As with the other chart patterns, utilize the indicators to help confirm the breakout.

Head and Shoulders The head and shoulders pattern is one of the most accurate reversal patterns in the market. You will mainly notice this pattern at the top of an uptrend. The head and shoulders pattern signals a reversal from bullish to bearish; however, these formations can also be found at the bottom of a downtrend which can signal an even lower move to the downside. The head and shoulders pattern consists of three peaks—the left shoulder, the head, and the right shoulder. At the same time connecting these three points is the 316

neckline. The neckline connects the three peaks together. One can use multiple measuring techniques to find price targets in a head and shoulders pattern, but you must also pay attention to volume, as volume plays a crucial role in confirming a reversal.

Chart N.55 - Charts by TradingView

Chart N.55 is an example of how a head and shoulders formation will look on a chart. One thing to note is that not all head and shoulders will form perfectly symmetrical. In some cases, the head might be a little funky, or it may have a deformed right shoulder. The head and shoulders can also form slightly slanted up or down. If it is slanted up, this is a stronger formation, but if it is slanted down, this is a sign of weakness. You want to pay attention to the volume with the head and shoulders because if you break it down to the basics, the three peaks are rallies in the market. You should notice a decent amount of volume on the left shoulder, but as the head forms and the stock heads higher than the left shoulder, you should notice equal volume or even less volume throughout the head. This tells the trader that the stock is moving to higher highs with weaker volume, which is a warning sign for a reversal. At this point, there are just two rallies

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in the market. The first rally has high volume, but the second bigger rally has equal volume, or less volume than the first rally. However, on the right shoulder, the third rally, you should notice significantly weaker volume than the left shoulder and head. If you spot this, the head and shoulders pattern will likely confirm the reversal soon. With the head and shoulders pattern, you always want to wait for a break and close below the neckline before entering the trade.

Chart N.56 - Charts by TradingView

As shown in Chart N.56, there is notably weaker volume as the peaks progress. Once it hit the third peak, which had the weakest volume of the three, it gave a fair warning that the stock would reverse to the downside. The entry would have been when $AAL broke below the neckline marked “Entry”. As far as measuring techniques, you can use one of two ways. Some traders prefer to measure the length between the top of the right shoulder and the neckline and then place the measurement at the breakdown, or more aggressive traders prefer to use the length between the top of the head, measured down to the neckline, and then placed at the breakdown.

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Chart N.57 - Charts by TradingView

The breakdown achieved both price targets in Chart N.57 of $AAL before bouncing back to the upside.

Chart N.58 - Charts by TradingView

In Chart N.58, looking at $UAL on the daily time frame, one could notice a head and shoulders pattern forming. Notice the right shoulders volume, and the weakness shown in the volume compared to the left shoulder and head. As soon as $UAL closed below the neckline, you could have initiated a short position. To find the price targets, measure the top of the right shoulder to the neckline and measure the top of the 319

head to the neckline. Place both measurements at the breakdown, and then those will be the price objectives.

Chart N.59 - Charts by TradingView

Looking at Chart N.59, $UAL reached both price objectives at the breakdown.

Chart N.60 - Charts by TradingView

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Chart N.60 of $WFC shows another head and shoulders formation with a perfect horizontal neckline on the weekly time frame.

Chart N.61 - Charts by TradingView

Looking at Chart N.61, $WFC hit the first price target quite quickly. The second price target took a little longer to hit but was eventually achieved. That is going to wrap up the head and shoulders pattern. Remember, this is an extremely important reversal pattern that has shown time and time again to be one of the most accurate reversal formations. Always pay attention to the volume because it will hint if the stock is ready to breakdown. The left shoulder should have the highest volume, whereas the head should have equal volume or even less volume, then the right shoulder should have significantly less volume than the left shoulder and head. If this volume pattern takes place, there is an extremely high probability that the head and shoulders will break to the downside. Always wait for a break and close below the neckline before entering a short position, and then make sure to use the two measurement tools discussed in the previous pages as price objectives.

Inverse Head and Shoulders The inverse head and shoulders pattern is a common chart pattern found at the bottom of a downtrend. This formation looks exactly like the normal head and shoulders but flipped upside down. This formation 321

predicts a bearish to bullish reversal; however, inverse head and shoulders can also be found at the top of an uptrend. If this is the case, the inverse head and shoulders will be considered a continuation to the upside. Like the head and shoulders pattern, the inverse head and shoulders will not always form in picture-perfect examples. Sometimes the head might be a little messed up, or even a deformed shoulder.

Chart N.62 - Charts by ThinkorSwim

Chart N.62 is an example of $DKNG on the daily chart. Notice the downtrend before the inverse head and shoulders pattern appeared on the chart. The stock formed the left shoulder, the head, and the right shoulder. At this point, the neckline can be drawn. All you need to do is wait for a breakout and close above the neckline to go long. Again, the volume will be important on the breakout of the neckline (it can also help if you use the OBV). Anyways, looking at the volume on the breakout candle helped indicate that buyers are present and ready to push the stock higher. The OBV hinted at the move well before the breakout by giving an uptrending reading. The same measurement rules will apply to the inverse head and shoulders to give you future price targets. Measure from the bottom of the right shoulder to the neckline and place it at the breakout, or measure from the bottom of the head to the neckline and place it at the breakout.

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Chart N.63 - Charts by ThinkorSwim

Looking at Chart N.63 above, again, with both measuring techniques shown on the chart, you can see that $DKNG achieved both price targets, and the price hit the measurement from the head to the neckline to the T before the stock began dropping. I took this swing trade and based my price targets on the measurement tools.

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Chart N.64 - Charts by TradingView

Chart N.64 of the NASDAQ futures shows an inverse head and shoulders formation. All the patterns discussed in this chapter do not only apply to the stock market. They also apply to futures, cryptocurrencies, commodities, bonds, etc. Looking at the NASDAQ futures, the inverse head and shoulders broke above the neckline with a solid buyer's candle. As a result, one could go long with a price target of the two measurements, and the original stop-loss would be below the breakout candle.

Chart N.65 - Charts by TradingView

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As seen in Chart N.65, the NASDAQ achieved the first price target in this scenario, plus more to the upside. The NASDAQ did not hit the second price target until three months later; however, one would have been stopped out of the trade since the NASDAQ had a nasty pull to the downside. As a result, always move your stop-losses up in a winning trade! We will discuss this more in a later chapter.

Chart N.66 - Charts by ThinkorSwim

Looking at Chart N.66 of $ERX on the daily time frame. $ERX had continuously sold off until it formed an inverse head and shoulders, letting traders know of an impending reversal. Once $ERX broke above the neckline with a solid green candle, it never looked back and continued to push up in price.

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Chart N.67 - Charts by ThinkorSwim

As seen in Chart N.67, $ERX quickly reached both price targets plus more on the trade. The price targets would have served you well when choosing a strike price.

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Chart N.68 - Charts by ThinkorSwim

Finally, looking at Chart N.68 of $PYPL on the 4-hour time frame, $PYPL dropped significantly in price during the previous days. Once the right shoulder had formed, the neckline was able to be drawn. Once $PYPL broke above the neckline, that was the signal to get in. Using the measurement tools, $PYPL was able to achieve both price targets.

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Chart N.69 - Charts by ThinkorSwim

Looking at Chart N.69, both price targets were achieved through the measuring strategies.

Cup and Handle A cup and handle formation is considered a bullish formation in technical analysis. The cup is in the shape of a U, also known as a rounding bottom, and the handle forms a slight downward slope before breaking out to the upside and continuing higher in price.

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Chart N.70 - Charts by ThinkorSwim

Chart N.70 is an example of $CHWY on the daily time frame. Notice how the price formed the rounding bottom in the shape of a U, and then the handle is shown with the yellow trendlines. Once the stock broke out from the handle, $CHWY stock price increased from $109.75 to $120 in just one day.

Chart N.71 - Charts by TradingView

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Chart N.71 is an example of the S&P Futures on a 5-minute chart. As seen at the beginning of the day, the futures sold off and eventually created a rounding bottom. From there, the futures came back up, gave the little consolidation zone for the handle, and then broke out and ran over 20 points to the upside.

Chart N.72 - Charts by ThinkorSwim

Chart N.72 is an example of $HUT on the weekly time frame. This is a trade I have been in since $5.64, and the stock ran to a high of $11.09; however, I have not sold it yet due to the large cup forming on the weekly time frame. The three proceeding weeks were a downwards slope where I could draw two trendlines around the price action, which gave the handle. Once $HUT broke the handle, it continued to run to a high of $16.60.

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Chart N.73 - Charts by ThinkorSwim

Looking at Chart N.73 of the Gold Futures (/GC) on the monthly time frame, notice how there was a giant cup and handle that Gold has recently broken above. This was a setup that I had been waiting on for more than six months, and I took full advantage of it once it finally broke out.

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Chart N.74 - Charts by Thinkorswim

Chart N.74 is the final example of a cup and handle formation found on the daily time frame for $TSCO. As seen on the chart, there was a beautiful rounding bottom creating the cup, followed by a slight pullback which created the handle. Once the stock broke out, it continued to push $12 in eight trading days.

Double Bottoms A double bottom is considered a bullish pattern and is found at the bottom of a downtrend. Therefore, the double bottom predicts a bearish to bullish move to the upside. If you go back to the support and resistance chapter, remember that all price needs is two hits to draw a support or resistance level. That is exactly what a double bottom is—a newfound support level. Double bottoms tend to happen the most at 52-week lows or all-time lows. As for day trades, I tend to notice them more at the low of the day. That is not to say that they do not occur in many other areas on the chart. I personally notice them more at these lows and like to trade them off those levels.

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Chart N.75 - Charts by ThinkorSwim

Looking at Chart N.75 of $TPTX on the daily time frame, one could see price formed a double bottom at the bottom of a downtrend, which was also 52-week lows. $TPTX had found new support at this level, creating a double bottom. In this example, since the double bottom, $TPTX increased in price from $60 a share to a little over $80 a share, returning +33.33% if you had traded the equity. It is important to utilize your indicators to help confirm that the stock may bounce and go higher in price when spotting double bottoms.

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Chart N.76 - Charts by ThinkorSwim

Chart N.76 is an example on $IBBJ, which offered another beautiful example of a double bottom. The stock price tested $27.87 two times as support. On the second attempt, $IBBJ rebounded and pushed in price to a high of $31.75. Again, a $3.88 move in the options world would offer an excellent return.

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Chart N.77 - Charts by ThinkorSwim

Chart N.77 of $XBI on the daily time frame also created a double bottom. Twice $XBI came down to $118.55, and once it came down the second time and rebounded, the price increased to a high of $137.66 before pulling back. The bounce would have offered a return of $19.11 on the trade, and the stop-loss would have been slightly below $118.55. Talk about fantastic risk-to-reward Remember, double bottoms are a newfound area of support. If the stock comes down to the area and generates a bullish candlestick with substantial volume the second time, this can indicate that the stock will likely rebound and head higher in price. Once in the trade, the stop-loss will be a break and close below where the double bottom occurred.

Double Tops Double tops are the exact opposite of a double bottom. A double top predicts a bullish to a bearish trend reversal. Remember, price only needs two hits for resistance; therefore, during a double top, a stock has found new resistance. As far as identifying double tops, I notice them the most when a stock reaches 52week high, all-time highs, or the high of the day for day trades. Again, I am not saying that double tops do not happen in other areas. I just prefer to trade them off the areas previously mentioned.

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Chart N.78 - Charts by TrendSpider

Observing Chart N.78 on the daily chart of $SOXL, a clear double top lets traders know of a possible trend reversal. The stock had a nice run-up in price until the stock price approached the previous 52-week high, hit it again, then ultimately dropped in price. The stock dropped from $48.01 down to $37.17 before rebounding to the upside.

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Chart N.79 - Charts by TrendSpider

Chart N.79 is another example of a double top on $MDT. Notice the first time $MDT came up to $132.32, the stock rejected the level hard and pulled back. This created a new all-time high. Months later, as $MDT came back to this level, it formed a double top and dropped almost $9 to the downside.

Chart N.80 - Charts by TrendSpider

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Chart N.80 is another example of a double top on $AMZN. As seen in the picture, $AMZN had an alltime high at $3,556.50, which was set in October of 2020. $AMZN revisited this level in late April of 2021 and treated it as resistance. Therefore, creating a newfound resistance point plus a double top. $AMZN dropped from a high of $3,549.76 a share down to $3,127.91 a share before rebounding back to the upside.

Chart N.81 - Charts by TrendSpider

The final double top I will be showing you can be found in Chart N.81 of $ACI on the daily time frame. Notice how months prior, the stock came up to $37.85. Once $ACI came back to this level, price formed a double top and sold off. Double tops are straightforward as far as a common reversal point. You will most likely notice double tops at an all-time high, or 52-week high. Again, going back to the support and resistance chapter, alltime highs will always be a resistance point. That is how double tops are formed, and that is how one will know that a double top could be in the making. There are also other bottoming and topping patterns worth making a note of. There can also be triple bottoms, multi bottoms, triple tops, and multi tops. The higher the number of hits on a specific area, the stronger the support and resistance. Again, with these bottoms and tops, you will see them occur mostly at all-time highs, all-time lows, 52-week highs, 52-week lows, high of the day, and low of the day.

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Mutli Bottoms Like double bottoms, multi bottoms are a strong area of support and can hint at a reversal in price if buyers show interest in that area. A multi-bottom is an area at the bottom of a downtrend where the stock has hit multiple times. Each time the stock successfully bounces back to the upside, the level becomes stronger. I have noticed that the strongest multi bottoms occur over a long period of time.

Chart N.82 - Charts by ThinkorSwim

Looking at Chart N.82 of $LVS on the monthly time frame, we can notice a strong support area that has been a buy zone for many traders over the last ten years. Each time $LVS has come back to this zone, buyers have bought $LVS up and pushed the price back up. This setup is a beautiful example of a multibottom.

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Chart N.83 - Charts by ThinkorSwim

Looking at Chart N.83 of $OPEN on the daily time frame, you can notice that on multiple occasions, the stock price came down to the support zone at $13.85 and has acted as support, followed by a push back to the upside. On $OPEN most recent touch of the multi bottom, it had rebounded from $13.85 to $21.

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Chart N.84 - Charts by ThinkorSwim

As seen in Chart N.84 on $SPAK, the stock had come down to the $21.50-$22 level multiple times before bouncing each time. As a result, this creates a solid multi-bottom.

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Chart N.85 - Charts by ThinkorSwim

The final multi bottom can be found in Chart N.85 of $OHI on the daily time frame. The chart shows that the stock price had come down multiple times to the $27-$27.07 level and made it support before successfully bouncing each time.

Multi Tops Multi Tops are a reversal pattern from bullish to bearish. This pattern is like the double top but has multiple hits acting as resistance at the top of an uptrend.

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Chart N.86 - Charts by ThinkorSwim

Looking at Chart N.86 of $SPG on the daily time frame, each time the stock comes up to the $136 to $137.50 area, the stock kept denying the level. Since there are multiple hits, this will identify as a multi top, and could hint at a reversal if the buyers cannot push the stock price above the resistance point.

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Chart N.87 - Charts by ThinkorSwim

Another perfect example of a multi-top is in Chart N.87 of $MAN on the daily time frame. For six months, this stock had tested the resistance area multiple times and failed to break through each time. As a result, price sold off and dropped from $124 a share down to $106 a share.

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Chart N.88 - Charts by ThinkorSwim

Looking at Chart N.88 of $NEA, another beautiful example of a multi-top can be found. From July 2021 to September 2021, price tested the same resistance area multiple times. Since the stock could not push above resistance, it sold off a significant amount.

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Chart N.89 - Charts by ThinkorSwim

Finally, looking at $DBA in Chart N.89, notice how each time price came to the $19.50 area, it treated it as resistance. The more price denies this area, the stronger the resistance will become. That will wrap up the chart patterns that I will be discussing in this book. Again, understanding chart patterns and how to identify them is extremely important for your trading strategy. As I mentioned earlier in the chapter, there are thousands of different trading strategies. One trader may draw a support or resistance area differently from the next trader, and one trader may draw a trendline differently than the next trader; however, chart patterns will always be the same. A bull flag is a bull flag, and an inverse head and shoulders will always be a reversal pattern from a downtrend to a possible new uptrend. The only challenge is being able to identify these patterns properly. Once you can, this will be a powerful tool in your trading strategy. Now that you know how to correctly plot support and resistance, trendlines, the indicators I use for trading, candlestick formations, and chart patterns, it is time to piece everything together and share my swing trading strategy with you.

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Chapter 15: Swing Trading Swing trading is the purchase of options or shares that you will hold anywhere from a day, a few days, a week, a few weeks, a month, a few months, etc. When swing trading, you are NOT buying and selling the stock on the same day. I prefer swing trading because I can catch better moves in the market and the trades play out slower. With day trading, the timing makes a huge difference. Being off by just five seconds in a day trade can invalidate an entire setup. With swing trading, you can take your time entering the trade and develop a solid plan before entering. The indicators I use for swing trading are different from the indicators I use for day trading. When swing trading, I use the 5 EMA, 8 EMA, 21 EMA, 55 EMA, 50 SMA, 100 SMA, and 200 SMA. I also use the On Balance Volume indicator, Stochastic Slow, and the TTM Squeeze. Many traders say that these are too many indicators; however, I look at indicators the same way people look at filters on Instagram. There are many different variations of a picture that one can post, but there will only be one variation you like. The indicators act as a filter in the market. There are plenty of trades that can be taken, but only so many will fit the filter standards.

Chart O.1 - Chart by ThinkorSwim

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Chart O.1 is a screenshot of my main setup for swing trading on ThinkorSwim. This is the first chart I look at to see if a stock is near any of the SMAs or EMAs and to get an overall picture of the stock's sentiment. After looking at this chart, I then go to a separate chart with only the 8 EMA and 21 EMA, TTM Squeeze, On Balance Volume, and Stochastic Slow. Changing the charts allows me to have a clearer picture of the stock that I will potentially be swinging. I prefer to trade "different" companies when swing trading. I mostly leave the $TSLA, $GOOGL, $FB, $MSFT, and $NVDA to day trading. Instead, when I am swing trading, I prefer to trade companies like $X, $JNJ, $BJ, $GILD, $ABBV, $GLD, $GDX, etc. I prefer to trade these less "popular" names because the contracts are cheaper, meaning I can buy more, and they have a high Delta and Gamma, low Theta, and offer a great risk to reward ratio. For example, recently, I swung a Call on $X that expired a little more than a month out. The total cost of the contract was $120. If you were to swing trade a stock like $FB a month out, it would cost you $500-$900 depending on the contract chosen. That is a substantial price difference. The $X contract had a .53 Delta and a .08 Gamma. As for $FB, it had a .40 Delta and a .02 Gamma. Which contract is truly the winner here? The $X trade would be chosen by me each time. Suppose you only had $500 to spend, and let's say the $FB contract was $500 and the $X contract was $100 for simple math. For $FB, you would make $40 for every dollar move plus an additional $2 on each dollar move after that. On $X, you would be making $265 off a $1 move (.53 Delta x 5 Contracts) plus the additional $8 worth of gamma per contract after that. I have an entire video dedicated to this topic on my YouTube channel, make sure to check it out: BrandonTrades

Chart O.2 - Chart by ThinkorSwim

Chart O.2 shows the Greeks for $AMD contracts expiring 21 days out. Notice the price you must pay to enter the trade. The contracts have a high Delta, but low Gamma, and higher Theta. Delta is on the left, Gamma is the second one in, then Theta, then Vega.

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Chart O.3 - Chart by ThinkorSwim

Chart O.3 shows $CCJ contracts expiring 21 days out. In this example, notice the low price of the contracts, the high Delta, the high Gamma, and the low Theta. These are the kind of Greeks I am looking for when swing trading. Now that you understand what companies I am looking to swing trade, I will show you how to piece all the indicators together to make a highly educated assumption about what will happen next in the market. There will be no better way to show these examples other than on trades I have taken in the past.

Chart O.4 - Chart by ThinkorSwim

Chart O.4 is $X on the daily time frame. 349

Chart O.5 - Chart by ThinkorSwim

Chart O.5 is a weekly chart of $X Focusing on Chart O.4 and Chart O.5, $X was a trade that I recently had taken and was able to profit over +100%, where I made the rest of my contracts free, and proceeded to cash out on a +7,800% gain using a calendar spread. Before looking at the list of confirmations below, see if you can figure out the technical reasons behind taking this $X swing trade, utilizing all the information I have taught you in this book.

Confirmations: 1. Above all The EMAs and SMAs 2. Breakout From Trendline 3. Increasing Daily On Balance Volume 4. Daily Stochastic Buy Above The 80 Line = Strong Buy 5. Light Blue Squeeze 6. Increasing Weekly OBV 7. Weekly Stochastic Buy Signal 8. Light Blue Squeeze Weekly 9. Red Dot Squeeze From Orange Dot Squeeze Weekly 350

10. Above Weekly Moving Averages In total, there were ten confirmations to take the $X swing trade, and that is exactly why I entered the trade. I bought the $29 Calls expiring one month out for $120. It is also worth noting that you should be swinging the monthly expirations when you do swing trade these “different” companies. The monthly expiration is the third Friday of every month. These contracts tend to have the most liquidity and are usually where the swing traders are positioned. Most brokers will label the expiration as “Monthly”. Using support and resistance, I knew that $X had room to at least $28.66, then $29.97. This is why I decided to choose the $29 Calls. Make sure to study all these confirmations. When all the indicators point in the same direction, especially on multiple time frames, that is what you want to see before entering a swing trade.

Chart O.6 Chart by ThinkorSwim

Looking at Chart O.6, I know I said that I usually do not swing trade $FB; however, if the setup is there, I will take it. This picture is of $FB on the weekly time frame, and again you can notice all the indicators are pointing in the same direction. $FB was also in a monthly bull flag at the time. See if you can list all the confirmations that helped me decide to enter this $FB swing trade. Confirmations: 351

1. Monthly Bull Flag Breakout 2. OBV Uptrending 3. Breakout On Volume 4. Yellow Momentum On Squeeze = Slingshot Squeeze 5. Red Dot On Squeeze (The Stock Is Going To Pop) 6. Previous Orange Dots On Squeeze 7. Stacked EMAs 8. Two Stochastic Buy Signals There were eight confirmations to take $FB to the upside. Going back to Fibonacci extensions, to get a price target, I used the most recent pivot high to pivot low, and my price target was the 127.2% extension, as well as the 161.8% extension. Since the 127.2% extension is an extremely common price target, I purchased the $320 Calls expiring three months out. At the time, these contracts were $40 out of the money; however, the technicals gave a clear understanding that $FB could go to this level, which it did, plus much more.

Chart O.7 - Chart by ThinkorSwim

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Looking at Chart O.7, this is another example of a swing trade that I took on $SBUX. In this swing trade, I bought the $110 Calls expiring two weeks out, and then I purchased the $112 Calls expiring one month out. I bought the $110 Calls because that was $SBUX all-time high, then I purchased the $112 Calls because the 127.2% extension was at $112.57. Again, see if you can notice all the confirmations involved with this swing trade before reading on. Confirmations: 1. Above All Moving Averages 2. Increasing OBV 3. Light Blue Momentum 4. Red Dot On The Squeeze 5. Stochastic Buy 6. Increased Volume 7. Straight Shot to All-Time Highs Then 127.2% Extension

Chart O.8 - Chart by ThinkorSwim

Chart O.8 is a picture of $O on the daily time frame. 353

Chart O.9 - Chart by ThinkorSwim

Chart O.9 is a picture of $O on the weekly time frame.

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Chart O.10 - Chart by ThinkorSwim

Chart O.10 is a picture of $O on the monthly time frame. Utilizing Chart O.8, Chart O.9, and Chart O.10, the next swing trade was made on $O. There was plenty of confirmation going into this swing trade. However, I entered the trade due to the solid buyers' candle above the weekly 55 EMA. Looking at the previous price action, the weekly 55 EMA was denied at least 15 times. Once the stock finally had a solid close above the weekly 55 EMA, that was the hint to hop into the trade. As $O went in my favor, I trimmed most of my position, making my contracts almost free, then turned the remainder of the trade into a risk-free debit spread which I will discuss later in this chapter. There were plenty of indications that signaled to enter this trade. See if you can list all the confirmations from this trade. Confirmations: 1.

Above All EMAs - Daily

2. Light Blue Momentum Squeeze - Daily 3. Stochastic Buy - Daily 4. Increasing OBV – Daily 5. Solid Close Above Weekly 55 EMA 6. Orange Squeeze – Weekly 7. Yellow Into Light Blue Squeeze (Slingshot) - Weekly 355

8. Stochastic Buy – Weekly 9. Yellow Squeeze – Monthly 10. Increasing OBV – Monthly 11. Solid Close Above All EMAs – Monthly

Chart O.11 - Chart by ThinkorSwim

Chart O.11 shows a picture of $BA on the weekly time frame.

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Chart O.12 - Chart by ThinkorSwim

Chart O.12 is a picture of $BA on the daily time frame. Looking at Chart O.11 and Chart O.12, the next swing trade I will discuss was a trade I took on $BA. Observing $BA on the weekly time frame, several confirmations gave hints that price was ready to breakout to the upside. See if you can list all the confirmations before continuing to see why I entered the trade. Confirmations: 1. Weekly Falling Wedge Breakout 2. Volume On The Breakout 3. Weekly Increasing OBV 4. Weekly Stochastic Buy Signal 5. Orange Dot Squeeze Weekly 6. Slingshot Squeeze Weekly 7. Daily Slingshot Squeeze 8. Daily Increasing OBV 9. Daily Stochastic Buy Signal

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Chart O.13 - Chart by ThinkorSwim

Chart O.13 shows a weekly time frame of $CVS.

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Chart O.14 - Chart by ThinkorSwim

Chart O.14 shows a daily time frame of $CVS. Looking at a swing trade that I took on $CVS, I purchased the $90 Calls that expired on November 19th, and I purchased the contracts for $90. As you can see on the charts, $CVS had a massive move to the upside on this trade, which resulted in +168.68% gains.

Confirmations: 1. Weekly Orange Dot Squeeze 2. Weekly Light Blue Momentum 3. Weekly Stochastic Buy Signal 4. Weekly Increasing OBV 5. Weekly Increasing Volume 6. Daily Slingshot Squeeze 7. Daily Light Blue Momentum 8. Daily Increasing OBV 9. Daily Stochastic Buy Signal in Previous Days

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Chart O.15 - Chart by ThinkorSwim

Chart O.15 is a picture of $USO on the weekly time frame.

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Chart O.16 - Chart by ThinkorSwim

Chart O.16 is a picture of $USO on the daily time frame. Chart O.15 and Chart O.16 show the setup of a swing trade I took on $USO. The swing trade was a nobrainer. Zooming out and looking at the weekly chart clearly showed that $USO wanted to continue to the upside and had no resistance until $58.64. Once $USO was able to break above the yearly highs at $51.4. Confirmations: 1. Weekly Stochastic Buy Signal 2. Light Blue Momentum Squeeze 3. Increasing Weekly On Balance Volume 4. Above All Moving Averages Weekly 5. Huge Weekly Gap to Next Resistance 6. Daily Increasing On Balance Volume 7. Multiple Stochastic Buy Signals Daily 8. Light Blue Momentum on TTM Squeeze Daily

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Chart O.17 - Chart by ThinkorSwim

Chart O.17 is a picture of $GILD on the 4-hour time frame. For $GILD, I ended up taking a swing trade overnight based on many factors that I was able to identify on the 4-hour time frame. I purchased the $72.5 Calls expiring one month out in case it took $GILD a little longer to breakout, but $GILD hit my price target within one day. Look back at the chart and see if you can name all the confirmations, I saw on $GILD before you continue to read any further. Confirmations: 1. 4-hour Orange Dot into a Red Dot Squeeze 2. Light Blue Momentum on TTM Squeeze 3. Multiple Stochastic Buy Signals 4. Increasing On Balance Volume 5. Symmetrical Triangle After Previous Uptrend 6. Breakout Of Symmetrical Triangle 7. Measurement Tools For Symmetrical Triangle At Breakout For Price Target

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Chart O.18 - Charts by ThinkorSwim

Looking at $XLE in Chart O.18 above is a swing trade I took on February 28th, 2022. For this swing trade, I purchased the $72 Calls expiring on March 18th. I purchased these contracts for $161 and fully exited at $302 per contract. See if you can spot all the confirmations before reading all the ones I saw.

Confirmations: 1. Red Dot Squeeze 2. Light Blue Momentum 3. Stochastic Buy Signal 4. Increasing OBV 5. Straight Shot To 127.2% & 161.8% Extension That is going to wrap up looking at previous swing trades of mine. I included this because I want you to see the number of confirmations I am using before entering any swing trade. I do not act off two confirmations. There are often many confirmations that get me into a swing trade. When swing trading, it is essential always to know what is going on as far as the daily, weekly, and monthly time frames. Something I like to do with my losing trades is figuring out why the trade did not work out, and there was one thing I noticed when it came to swing trades. I had noticed that they became losers because I was 363

oblivious to what was happening on the higher time frames. The daily time frame could look beautiful; however, on the monthly time frame, the stock could be super over-extended from the 5 EMA, and then on the weekly, there could be a decreasing OBV, Stochastic sell signal, and dark blue momentum on the squeeze. However, you would have had no clue if all you studied was the daily time frame. As a result, you will more than likely lose money on that trade. That is why it is important to do multiple time frame analysis when swing trading. You want to see the same confirmation from all three-time frames. Always remember, the higher the time frame, the more superior it becomes. Also, note that the higher the time frame the signal is generated, the further dated expiration you should go. For example, if you see a breakout from a monthly bull flag, you should purchase a longer-dated expiration instead of something that expires next week. However, if you are trading a daily bull flag breakout, the expiration can be closer. Ensure that all the indicators on all three time frames confirm each other before hopping into a swing trade, as it will add to your confidence when entering. I hope seeing my thought process behind these swing trades will help you when you are looking for your own.

Leaps When it comes to swing trading, there is also a trading strategy known as "leaps." A leap is where you are bullish or bearish on a stock in the long term. As a result, with leaps, you would be buying contracts that expire in a year, two years, or even three years. I like to use the leap strategy on smaller cap stocks that I have done substantial research on and see massive potential for in the future. Since the option is expiring in 1-3 years, it would make zero sense to look at the stock on a daily time frame. I would prefer and suggest watching these leaps on a weekly and monthly time frame. This way, you are not concerned about what is happening on a daily basis and do not fake yourself out of the trade. I will show you a scenario of a leap I did on $BLNK, which is an electric vehicle charging company. I did a substantial amount of research on the company and became very bullish on the stock. As a result, I purchased the $25 Calls expiring on January 21st, 2022. I entered these contracts on October 16th, 2020. I had a year and three months until the expiration. Since I had a long time until my contracts expired, I had to watch $BLNK on a weekly and monthly time frame and not a daily time frame.

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Chart O.19 - Chart by ThinkorSwim

Looking at Chart O.19, marked on the chart as “entry,” you can see that I entered the contracts at the high on the week of October 5th, 2020. From there, $BLNK did nothing but drop in price for four weeks straight. Going back to the exponential moving averages, where is the stop-loss when the 5 EMA, 8 EMA, and 21 EMA are tight together? Below the 21 EMA. I purchased these contracts for $160, but by the time they dropped to the weekly 21 EMA, they were worth $100. Did $BLNK ever violate the weekly 21 EMA? Nope! Plus, I still had a year and two months until expiration. Why would I sell something that had so much time, plus it did not violate anything technical? Three weeks after price bounced off the weekly 21 EMA, $BLNK started to increase in price rapidly, going from $10 a share to $35 a share shortly after. My contracts were now $10 in the money and worth $1,365. Imagine selling the contracts for a -$60 loss, just to look back a few weeks later and see those same contracts worth $1,365. Needless to say, if you had the patience, you would have made a nice paycheck out of this trade. Do you want to know why people would sell at a loss? Keep reading to find out why.

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Chart O.20 - Chart by ThinkorSwim

Looking at Chart O.20, those who would have panic sold were too focused on the daily time frame. Notice how different the two images appear to a trader's emotions. If you were to follow the EMA rules on the daily time frame, you would have been stopped out of the trade. Since this trade was a leap, the weekly and monthly time frames would hold the most priority.

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Chart O.21 - Chart by ThinkorSwim

Chart O.21 is another example of a leap I made on $RIOT. Looking at $RIOT on the weekly time frame, everything looked perfect. I had done substantial research on the company and was more than confident to buy leaps. I ended up purchasing the $10 Calls expiring January 2022. Since the contracts expired in a year, I had no reason to watch the daily time frame. Instead, I watched the weekly time frame. As a result of not watching the daily time frame and being faked out by everyday moves. Leaps can be made on any stock from $FB, to $AAPL, to $TSLA; however, I do not like buying leaps on big-cap companies due to how expensive the contracts are. I prefer to purchase leaps on the small-cap companies that I have done substantial research on and have faith in the future. In my opinion, leaps are decided upon by fundamental analysis more than technicals. However, you want to use the technicals to help you in the trade.

Gap Trading Gap trading is essentially where the market or stock has no areas of support or resistance. These gap areas usually occur from news or earnings reports. When spotted and combined with indicators, these gaps could result in substantial profits if traded correctly. I will also show you what to look for when swing trading a gap fill. 367

Chart O.22 - Charts by ThinkorSwim

Chart O.22 is one example of a gap fill trade that I took on $ORCL. Notice the gap down from $71.5 (low of the candle before the gap down) and then $68.1 (high of the candle after the gap down). This is what a gap will look like on a chart, and in this scenario, it was from earnings. When swing trading, you are waiting for a break and hold above the high of the candle after the gap down. Once $ORCL held above the initial gap down, that was my entry to go long. The first price target was the low before the gap down at $71.5, then all-time highs at $73.62, the 127.2% \extension at $75.85, then finally the 161.8% extension at $78.68. As seen on the chart, $ORCL achieved all the price targets to the upside.

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Chart O.23 - Chart by ThinkorSwim

Chart O.23 is another gap fill trade on $ORCL, which offered almost the same setup as the previous example. Again, a gap down occurred due to earnings. However, in this example, notice all the EMAs and the 50 SMA acted as resistance for $ORCL. Therefore, there is no entry to go long on the trade until the stock price can close above the moving averages. Finally, the stock broke above the moving averages, and I entered the trade. Again, the market has a gap to fill to at least the low before the gap down. $ORCL filled the gap the next day, and the contracts increased by over 100%. From there, the following price targets were all-time highs, the 127.2% extension, and the 161.8% extension. $ORCL achieved all the price targets, and the contracts increased by over 800%!

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Chart O.24 - Chart by ThinkorSwim

Chart O.24 is an example of a stock filling a gap to the downside. $BYND had news that created almost a $60 gap up the next day (notice the huge over-extension from the 5 EMA). The high of $BYND before the gap up was $164.25 a share, and the low after the gap up was $183.6 a share. Once $BYND started to lose the low of $183.6, it was quick to fill the almost $20 gap back down. Filling gaps to the downside is easier to achieve even if EMAs are acting as support; however, when a stock is trying to fill a gap to the upside and EMAs or SMAs are blocking it, a lot of the time, the stock will not fill the gap, or it will just take extra-long to fill.

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Chart O.25 - Chart by ThinkorSwim

Chart O.25 is an example of $PTON. Again, notice how quick price was to fill the gap to the downside once falling below the low of the gap up.

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Chart O.26 - Chart by ThinkorSwim

Looking at Chart O.26 on $AMD, a daily gap needed to be filled from $91.88 to $93.63. It was not a huge gap, but a gap that traders could take advantage of. $AMD filled the gap and then immediately continued to drop in price.

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Chart O.27 - Chart by ThinkorSwim

Chart O.27 of $TWTR shows how long it took for price to fill the gap to the upside. It took extra-long because the 55 EMA, 50 SMA, and 100 SMA blocked $TWTR from initiating the gap fill. However, notice how the stock reacted once it finally cleared the moving averages. Remember, these moving averages have a strong significance in the market. Hedge funds and money managers have rules when it comes to these moving averages; therefore, there will be support or resistance at these levels. If the moving averages are blocking a stock from initiating its gap fill, price will more than likely struggle to fill the gap, or price will not fill the gap at all.

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Chart O.28 - Chart by ThinkorSwim

Chart O.28 of $CLX shows a huge gap down occurred from earnings, giving the low point before the gap down and then the high point after the gap down. Without knowing the moving averages, one could simply think that $CLX would fill the gap to the upside, WRONG. For $CLX to fill the gap, it would need to clear the 21 EMA, 55 EMA, 50 SMA, and the 100 SMA. That is a lot of resistance to breakthrough to fill a gap. However, if all the moving averages were below $CLX and were not blocking the stock, it would have likely filled the gap. When gap trading, make sure that if you are trading a stock that looks ready to fill the gap to the upside, no moving averages block the stock as resistance. If so, you will likely wait a while for the gap to fill, or it will not fill at all. I cannot tell you how many traders I have seen make this mistake when trading gaps. Also, make sure to utilize the indicators because they will help confirm the gap fill.

Spreads For Swing Trading As promised, I will discuss option spreads that you can use while swing trading to limit the risk in the trade while maximizing the reward. There are three spreads that I use and will discuss in this portion of the book. These spreads are the debit spread, calendar spread, and butterfly spread. I will start with the easiest of the three spreads, the debit spread. 374

The debit spread is where the trader buys a closer to the money option contract while at the same time selling a further out of the money option contract for the same expiration. As a result, this will make the contracts cheaper and limit the risk for the trade. At the same time, a debit spread caps the potential reward. There are guidelines on how far apart the two legs must be, which will be discussed soon. Before I discuss those guidelines, let me show you how this spread works and how to implement it in your trading strategy.

Chart O.29 - Chart by ThinkorSwim

Looking at Chart O.29, in this example of setting up a debit spread, I will use $TQQQ as an example. Say I was bullish on $TQQQ and wanted to buy a swing trade expiring March 18, 2022. This will give 21 days until expiration; however, say you are a small account and do not want to spend $235 for a swing trade. That is how much the $55 Call would cost. At that point, one would be risking $235 per contract. At the same time, you do have an unlimited amount of reward. Instead of spending $235 for the $55 Call, you can buy that $55 Call and sell the $60 Call to someone else for the same expiration. As a result, the contracts would only cost you $146 instead of the original $235. This spread just saved you $89 contract! As far as the reward, you can make $354 profit per spread. To find the maximum profit, take the spread between the contracts, in this case, 60-55 =5 ($500), and then subtract what you paid to buy the spread

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($146). Say you only had $1,000 for a swing, you have the choice of buying 4 of the $55 Calls, which offer unlimited profit potential, or 7-8 of the debit spreads that offer a max reward of $354 per spread.

Chart O.30 - Chart by ThinkorSwim

Chart O.30 is another example of the debit spread. Again, say you were bullish on $V and wanted to swing trade a $225 Call expiring 21 days out. That one contract would cost you $355 to buy in this scenario. Again, unlimited profit potential, but much more risk per contract. Instead, you could buy the $225 Call and sell a $230 Call for the same expiration. As a result, the spread will only cost you $155. This would give a discount of $200 per contract. Say you only had $2,000 that you were willing to put into this trade. You could buy 5-6 contracts of just the $225 Call, or you could buy the debit spread contracts and buy 12-13 of them. As far as max profit is concerned, again, the difference between the contract bought and the contract sold is $5 ($500) minus what you paid for the contracts, which is $345, meaning you have a max profit of $345 on 12-13 contracts, which is $4,140-$4,485. The debit spread strategy is helpful for small trading accounts. When individuals first begin trading, most do not start with a $50,000-$100,000 account, and it can be hard to find trades that fit your account size. This spread would be great to use since you can limit the premium you have to pay to enter the trade. The main question I get asked about the debit spread is, "how do I know which contract to sell?" and the

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answer to this question is quite simple. Where does the stock have room too, and where does it not have room? Let me show you what I mean.

Chart O.31 - Chart by ThinkorSwim

Looking at Chart O.31 of $AAPL, look to the left of the chart. Notice how $150 was the all-time high, and from there, a Fibonacci extension gave a price objective of $151.81, then $154.34. Using the technicals, $150 was easily obtainable for $AAPL, but for $AAPL to get to $155, price had to break through many resistance points. Since $150 is easy to get in the money, and $155 is a challenge, a trader could purchase the $150 Call while simultaneously selling the $155 Call to someone else for the same expiration. This is exactly how I determine how to set up the debit spread.

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Chart O.32 - Chart by ThinkorSwim

Looking at Chart O.32, this was an actual trade that I took. Looking at $WYNN on the daily time frame, I noticed that $WYNN broke out of a falling wedge. At the same time, the monthly Persons Pivot resistance was at $136.83. Due to the major resistance in this area, I was able to set up a debit spread. I bought the $135 Calls expiring a few weeks out and then sold the $140 Calls against it for the same expiration. $135 was easily attainable for the stock, but for the price to hit $140 would be quite a challenge. The stock ran to $136.83, hitting the monthly pivot resistance, then quickly plummeting. Instead of spending the original $340 per contract, the debit spread made the total cost $128 per spread. I was able to exit these contracts at +70% profits. Another thing to remember is that when determining how wide to make the spread, it depends on the stock being traded. For example, $AAPL moves $2.30 a day. You can set up a debit spread that is $5 wide and get away with it. On the other hand, if you are trading $TSLA, which moves $21.14 a day, you need to make the debit spread at least $50 wide. For example, buying the $750 Calls and selling the $800 Calls or buying the $740 Calls and selling the $790 Calls. If you were to trade $AMZN, which moves $63.64 a day, I would be looking to do a debit spread that is around $200 wide. For example, buying the $3500 Calls and selling the $3700 Calls. It all depends on how much the stock price moves each day. Depending on that, it will determine the difference between the contracts you buy and the contracts you

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sell. Now that you know how to perform a debit spread, let me kick it up a notch and discuss the calendar spread. The calendar spread is when you buy a longer-dated expiration on a contract and at the same time sell the same contract to someone else, but for a closer expiration. The goal is to collect the premium from the buyers to whom you sold the closest expiration contract, thus making the contract cheaper. Here is an example of a calendar spread that I did recently that profited me +332%. The trade was made on the $DIA, which is a stock that follows the DOW Jones futures.

Chart O.33 - Charts by ThinkorSwim

Looking at the DOW Jones in Chart O.33, there was major resistance at $35,000, which is a psychological resistance level. Due to this, I believed a calendar spread was the best spread to use since I was bullish on the DOW. Using the indicators also helped confirm my bullish bias. Then using the Fibonacci extensions showed that once the DOW broke $35,000, price had a gap to fill to $35,300, then $35,500. As a result, those became my price targets.

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Chart O.34 - Charts by ThinkorSwim

Looking at the $DIA in Chart O.34, the technical analysis was almost identical to the DOW. As a result, I knew that if the DOW could crack $35,000, the $DIA could fill its gap to $356. I purchased the $DIA $355 Call expiring one month out. Knowing that $35,000 was a major resistance point for the DOW, it made zero sense for me just to hold my contract and let it depreciate due to Theta while the DOW was choosing if it would break above that key resistance. While the DOW is deciding what to do, I might as well limit the amount of risk involved with this trade and do a calendar spread. Instead of buying the August 20th, 2021, $355 Call for $261 and losing money from Theta, I ended up buying that $355 Call, but selling the July 30th, 2021, $355 Call for $40. If July 30th came around and the $DIA was not at or above $355, I would pocket the $40, and now my contract only cost me $221. Since this happened, I bought the sold contract back completely worthless and sold the August 6th, 2021, $355 Call to someone else for $90. Again, if the $DIA is not at or above $355 by August 6th, I would pocket $90, which is what happened. At this point, I had taken $130 off the original cost of my contract. Now, I had only paid $131 for my August 20th, 2021, contract and still had two weeks until expiration. Finally, I sold the August 13th $355 Call to somebody else and collected the Theta along the way. The DOW finally broke out and was able to push above the $35,000 area sending the $DIA with it. I was able to buy back the sold side of the August 13th expiration for $13, netting myself a $58 gain and decreasing my cost even further.

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On top of that, my August 20th $355 Call was able to go in the money; therefore, it was profitable. Looking at the math, initially, if I had just bought the $355 Call for $261, I would have been down most of the trade, but since I used a calendar spread, I was able to collect $39 one week, $89 the following week, and then $58 the week after that. In total, I gained $186 through selling weekly expirations to someone else. As a result, from the original $261 contract, I had now only put in $7, and the August 20th $355 Call went to $324. This was a +332% profit trade instead of +21.14% and a whole lot of unneeded stress.

Chart O.35 - Charts by ThinkorSwim

Chart O.35 is a scenario where one could have performed a calendar spread. Looking at $NKE on the daily time frame, notice how price consolidated inside the symmetrical triangle for weeks. All of the indicators hinted that $NKE wanted to push to the upside, and if you wanted to take this trade while the price consolidated, you could have done a calendar spread. Each week you could have collected premiums from the sold side of the contracts, and once the price broke above the symmetrical triangle, you would have collected enough premium to the point that the original contracts were much cheaper than originally. Then once the breakout occurred, the profits would have been substantial.

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To wrap up calendar spreads, you are buying a longer-dated Call and selling a closer-dated Call of the same strike to someone else. If the stock stays below the strike price, you will pocket the premium and make the contract purchased cheaper. I often get the question, “what if the stock price goes above the strike price I sold?” The answer is, that you will just not profit as much. Since you have the longer-dated expiration, the contract will always be worth more. The contract you sold to someone else will increase in price, so you will only lose money as their contract gains value. But the contract will continue to increase as well. As a result, you simply close out the sold side of the spread and hold the long contract. Again, calendar spreads are very technical. You cannot simply do a calendar on each swing trade that you perform. There is always a time and place for these types of spreads. Now, the most complex of the three spreads, but my absolute favorite spread, the butterfly spread. A butterfly spread is a three-legged options strategy where you are buying one close to the money contract, selling two further out of the money contracts, and then buying an even further out of the money contract. When done correctly, the reward can be substantial. Below is an example of how to set up a butterfly spread.

Chart O.36 - Charts by ThinkorSwim

Chart O.36 is an example of how you will set up a butterfly spread. The most important thing about a butterfly spread is that you are selling twice as many contracts at the middle leg as you are on the other contracts. That is the number one thing I see people mess up when it comes to butterflies. As far as the risk-to-reward, the contracts become super cheap when performing a butterfly spread, but the profits can be substantial. For example, say you were bullish on $AMD and wanted to purchase a $125 Call expiring in one week. You would need to pay $165 to purchase that contract and must worry about the Theta because it expires in one week.

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Chart O.37 - Charts by ThinkorSwim

In Chart O.37, instead of buying the $125 Calls alone, you could sell two of the $130 Calls to someone else, collect the premium and then buy the $135 Calls as protection. As a result, the spread would cost you $72 instead of the original $165.

Chart O.38 - Charts by ThinkorSwim

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Looking at Chart O.38, the maximum profit is the difference between the first leg bought and the second leg of the sales, which is $5 ($500) minus the contract cost, which is $72. Therefore, the max profit could be $428. This trade would have a max profit of $428 while only risking $72.

Chart O.39 - Charts by ThinkorSwim

In Chart O.39, the green line represents the amount of profit that can potentially be made and shows where the stock needs to be for the maximum profit to be made. The green line begins to move to the upside as the stock price surpasses $125 (the first leg bought) and peaks at $130 (the second leg with the two contracts sold). After the price surpasses $130, the spread begins to lose profit and eventually will go back down to break-even or even worthless once price surpasses $135. I will show you a few examples of butterfly swings that I have personally taken in the past. However, before I show you those examples, a few guidelines must be followed when entering a butterfly spread. The first thing to remember is that a butterfly spread should have a max expiration date of one week to two weeks out. There are strategies where you can utilize longer-term butterflies, but my favorite way to perform them is with a short expiration period. The Greeks will work in your favor when performing a butterfly spread, and they are the best when the expiration date is closer. Make sure you always close your

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butterflies before expiration. The last thing you want is for the options to be exercised on you and for your broker to call saying that you need to deposit money immediately. Yes, that has happened to me.

Chart O.40 - Charts by ThinkorSwim

Looking at Chart O.40, of the $125, $130, and $135 Calls, notice the extreme difference between the Delta and Theta. The goal is to get the first leg in the money, and the two sold legs out of the money and collect the premium. The first leg has a .29 Delta, the sold has a .13 Delta, and the last leg has a .05 Delta. The Delta will gain value as the contract goes in the money, but the ones out of the money will become worthless by expiration. Notice the Delta and Theta on the contracts expiring one month out in the following chart.

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Chart O.41 - Charts by ThinkorSwim

Utilizing Chart O.41, looking at the Greeks for a butterfly that expires in one month, notice how the Thetas are almost identical. The whole point of the butterfly is to have the sold side depreciate from Theta while getting the first leg in the money. The further the stock goes in the money, the less the Theta will become when approaching the expiration date. As expirations get closer, the strikes closer to the money will have a higher Delta and Gamma value, while those further out of the money have a lower Delta and Gamma. The other thing about butterflies is, Theta is almost non-existent when done right. Back to the first example of $AMD, the $125 Call has a Theta of -$14, the $130 Call has a Theta of -$11, and the $135 Call has a Theta of $9. In this scenario, we bought one of the $125 Calls and sold two of the $130 Calls, and bought one of the $135 Calls. Adding the Theta together would look like this; -$14 ($125 Call) +$22 (Sold $130 Calls) - $9 ($135 Call) = -$1. As a result, we would only lose -$1 a day to Theta instead of the original -$14. One thing to note with the butterflies is that most of the time, you can get it to where the Theta is almost $0, and sometimes, you will even receive a credit. There are many variables that this depends on, such as the stock being traded, the expiration date, and how far the strikes are from each other. Before ever attempting a butterfly, make sure to use a simulator first so you know how to execute the buy-side and the sell-side properly. Below are a few examples of butterflies I have taken in the past.

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Chart O.42 - Charts by ThinkorSwim

Chart O.42 is a 4-hour time frame of $CRM. Notice the falling wedge breakout and retest. I mentioned this trade earlier in this book, and I am now revisiting it.

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Chart O.43 - Charts by ThinkorSwim

Looking at Chart O.43 shows a daily perspective of $CRM. The picture shows that the stock broke above the falling wedge and held above the moving averages. 1. Falling Wedge Breakout & Retest 2. Stochastic Buy Signal 3. Yellow Momentum on the TTM Squeeze 4. Holding The Moving Averages 5. Daily Squeeze 6. Increased Volume 7. Daily Increasing OBV I put this trade on July 21st, 2021, a Wednesday, and set up a butterfly that expired 7/23/21, which was only two days away. For the butterfly, I purchased four of the $245 Calls because the price could achieve that within two days, but I sold eight of the $250 Calls. I did this because $250 is a major psychological resistance area, and it would be hard for $CRM to break and hold above $250 within two days. Since the buy and sell legs were $5 apart, I purchased four of the $255 Calls as protection. In total, I paid $51 per contract, and my maximum reward was $449 per contract. The next day, I sold ½ of my contracts for +100% to make the rest of my contracts free. Then came Friday. $CRM broke above $250 very briefly in the morning but held below $250 for most of the day and stayed rangebound. Since $250 was out of the 388

money and expired that day, the contracts were worthless; however, mine had intrinsic value since they were in the money. Due to this, my butterfly spread was now worth $280, where I fully exited the position. That is a little over a 449% return in just two days.

Chart O.44 - Charts by ThinkorSwim

I performed the next butterfly on $CAT. Looking at the technicals in Chart O.44, there were several reasons for entering this trade and choosing the strike prices for my butterfly. As far as the technical confirmations are concerned, they can be seen below. 1. Wedge Breakout 2. Increasing OBV 3. Stochastic Buy 4. Orange Dot Squeeze (PAY ATTENTION) 5. Light Blue Momentum 6. Above All the Moving Averages 7. Increased Volume at the Breakout In this trade, I had seven confirmations before entering. Many people enter a trade based on one confirmation; imagine having seven. As far as the butterfly, I bought three of the $240 Calls, sold six of 389

the $245 Calls, and bought three of the $250 Calls as protection. I entered this position for $56 per spread. Why did I choose the strike prices I did? If you look at the Fibonacci extensions, the 127.2% extension lined up at $243.69. Since I knew that the 127.2% extension is a common price target for many traders, I decided to sell the $245 Calls. $240 was easily attainable for $CAT; however, breaking the 127.2% extension and holding above $245 within a week was highly unlikely. As a result, I sold 2/3 of my position at +100% to make the last set free, and then sold the last spread at $215, +383%.

Chart O.45 - Charts by ThinkorSwim

The next butterfly example I will show is in Chart O.45 of $CHWY. Looking at the daily time frame, several confirmations made me enter this trade. Confirmations: 1. Daily Cup and Handle 2. Above All Moving Averages 3. Increasing OBV 4. Stochastic Buy Signal 5. Red Dot Squeeze 6. Light Blue Momentum 390

The cup and handle played a significant role in this trade. Remember, a cup and handle is a bullish pattern and indicates a continuation to the upside. In this trade, I entered the $115/$120/$125 butterfly spread, where I bought four of the $115 Calls, sold eight of the $120 Calls, and then bought four of the $125 Calls for $45 per spread. Those contracts were completely worthless on Friday morning, but $CHWY broke out from the cup and handle and went directly to $120! First, why did I choose these exact strike prices? Looking at the daily time frame and the Fibonacci extensions helps paint a clear picture. $115 was easily attainable; however, reaching $120 (the 127.2% extension) and breaking above within the same week was highly unlikely. Since the difference between the first buy and the sell was $5, I bought the $125 as protection. Since my purchases of the $115 Calls went in the money, they increased substantially. However, the $120 Calls were not in the money. Therefore, they were worthless. As a result, I made 802% on this trade. Turning $45 per spread into $406! Remember, when setting up the butterfly spread, you need to determine where the stock price does, and does not have room to in the near future. Most of these examples were done on stocks that can be $5 wide on the butterfly. However, if you are trading $AMZN, you need to do at least $100 wide, meaning buy the $3400, sell two of the $3500, then buy the $3600. As for $TSLA, I would go with at least $50 wide. Each stock moves differently and has a different range that it trades in each day. That is why next, I will be discussing the Average True Range (ATR). Remember, all the spreads discussed are used to limit the amount of risk you have in the market while maximizing your potential reward. Each spread has a time and place to be done in the market, so always ensure it is the right time before entering them. Hopefully, the examples provided in this chapter paint a clear picture of the setups necessary.

Average True Range The ATR is an indicator developed by Welles Wilder, JR. The ATR takes the last 14 days' price movement, adds it together, and then divides it by 14. A new ATR reading will be given each day as new data is given to the market. However, the ATR can differ depending on which time frame you select. A different reading will be given on a weekly time frame versus a daily time frame. This indicator lets traders know how much the stock price moves on average each day. With this data, traders can make highly educated predictions when it comes to swing trading and day trading.

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Chart O.46 - Charts by ThinkorSwim

Looking at $BA in Chart O.46, the ATR is $6.41. Knowing that $BA moves $6.41 a day can help aid your trading decisions going forward. The ATR will also help you decide which way to set up a spread, and how wide the spread should be. You can also use the ATR to calculate how far out the expiration should be for a swing.

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Chart O.47 - Charts by ThinkorSwim

For example, on $SO in Chart O.47, the stock moves on average $0.84 a day. Say that the price target was the 127.2% extension in this example. If you were to enter the trade at the break of the neckline at $64.8 and have a price target of $68.78, you would need to use this calculation to determine the expiration date. Take the distance the stock needs to travel, which would be $4 in this scenario, and divide it by the ATR. $4/$.84=4.76, and I always prefer to round up, so this will be 5. If $SO were to go straight up and do its respected ATR, it would take five trading days to achieve the price target. However, you must consider the days when the stock goes down instead of up and when the stock does not achieve its average price movement. To do this, one can simply multiply the number of days it would take to achieve the price target, in this scenario, 5 days, and then multiply that by 4 or 5. It would take 20-25 trading days to achieve the price target. Therefore, the expiration should be 4-5 weeks away. Using the ATR can also help assist in day trades. For example, say you are watching $TSLA for a possible upside move from $795 to $806. Well, if $TSLA has a $22 ATR, and $TSLA opened at $780, and made its move to the entry point at $795, the price had already moved $15, meaning on average, $TSLA has another $7 in the tank. Instead, you would want to aim for $802 instead of $806. Another scenario I have run into in the past is, for example, let’s say we are trading $AMD, and the stock has an ATR of $2.37. If $AMD opens and quickly makes a $1.50 move, on average, the stock will be 393

trading with an extremely limited range for the remainder of the day. Therefore, we would look to trade the remaining $.87 and use that as a price target. Could $AMD continue to run another $5 on that specific day? Of course! But if you look at the average, it is highly unlikely. Using the average range lets a trader know the expected moves that can be made and allows for proper trade planning.

ATR Channels You should now be familiar with the Keltner Channels from the TTM Squeeze chapter. As mentioned earlier, I do like to use the Keltner Channels, but I like to modify them and use the modified version in my swing trading strategy. I will refer to the modified Keltner Channels as the ATR Channels. The ATR Channels are a variation of the Keltner Channels, except that the ATR Channels add more upper and lower bands. With this indicator, there are three upper bands (+1, +2, +3), three lower bands (-1, -2, -3), and a middle band. The middle band acts as the mean of the stock, where the stock always reverts to the mean. Ideally, when using the ATR Channels, the price is not meant to go outside the third upper band or below the third lower band. The other bands also act as a form of support and resistance. The third band also acts as a standard price target for traders. When using the ATR Channels for swing trading, I like to enter positions around the mean, the middle line, and –1 ATR if the indicators show upside potential. I will show some examples here soon, but first, I want you to see what happens when the stock price comes outside the +3 and -3 ATR. To apply the ATR channels on the chart, add three separate Keltner Channels to the chart. From there, make the factor 1.0 on one of the Keltner Channels, a factor of 2.0 on the next Keltner Channel, and then a factor of 3.0 on the final Keltner Channel.

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Chart O.48 - Charts by ThinkorSwim

Looking at $PTON on the daily time frame in Chart O.48, one could notice that the stock price is outside the third band. In many of these scenarios, the stock pulls back inside the ATR Channels, which happened.

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Chart O.49 - Charts by ThinkorSwim

Chart O.49 is another example but on $FB. Three times $FB came outside the ATR Channels and pulled straight back inside. One thing to note is that you should never initiate a short position just because a stock is outside of the ATR Channels. When a stock jumps out of them, and you are currently in a position already, that is when you should exit for maximum profits. There are scenarios where a stock can stay outside of the ATR Channels for multiple days.

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Chart O.50 - Charts by ThinkorSwim

Chart O.50 is a perfect example of why you should not go short or buy puts just because the price is outside the channels. In this example, $AMD stayed outside the channels for five days before coming back in. Within those five days, $AMD ran over $15. This would have destroyed any short positions in the market. Never trade against the trend, but this will let you know that it is not in your best interest to continue staying in your long positions.

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Chart O.51 - Charts by ThinkorSwim

Chart O.51 is a beautiful example of how the ATR Channels on $GOOGL. Looking at the daily chart, $GOOGL sat around the mean for a month and one week. At the same time, there was an orange dot squeeze with yellow momentum, an increasing OBV reading, and a breakout of a wedge. Notice where $GOOGL ran up to before pausing in price, the third ATR. The total move was an increase of $137.56; imagine that in options terms. I personally like using the ATR channels in my swing trading. I like to identify where the channels are located. That way, I can use them for price targets when swing trading. Before entering a stock, I also want to know if it is currently outside the channels, which has happened more than one would think. If I see that price is over-extended, I wait until it pulls back into the ATR channels and look for a proper setup. Again, remember that just because a stock is outside the channels does not mean to initiate a position in the opposite direction. It does, however, let you know that it is not the smartest to initiate a new position and lets you know that it is time to start taking profits. Now I will show you a variety of setups that are picture-perfect for swing trading with the ATR channels.

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Chart O.52 - Charts by ThinkorSwim

Looking at $XLF on the 3-Day time frame in Chart O.52, this was a picture-perfect example of a swing that I would look to enter. As seen on the chart, $XLF consolidated between the mean and –1 ATR. This offered a trader the best possible risk to reward as $XLF only needed to close below –1 ATR to stop one out. At the same time, $XLF was squeezing while holding these levels. Remember, red will turn yellow, and yellow will turn light blue if the stock holds up. What happened with $XLF? The squeeze fired up and offered a perfect swing trading opportunity, not only on $XLF but also on many of the bank stocks.

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Chart O.53 - Charts by ThinkorSwim

Chart O.53 of $XOM on the daily time frame shows another example of this setup. Looking at $XOM, from March 23rd, 2021, to April 27th, 2021, all it did was bounce between the mean and –1 ATR. At the same time, it went into a squeeze while holding above these levels. Again, one could have positioned themselves into a swing trade by entering off –1 ATR. As seen in Chart O.53, the squeeze eventually fired up and $XOM ran to a high of $64 from $55 (If entered off –1 ATR).

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Chart O.54 - Charts by ThinkorSwim

Two examples can be seen when looking at $GILD on the daily time frame in Chart O.54. Notice how $GILD began squeezing with the yellow momentum in the first example. At the same time, the stock rebounded off –1 ATR and began to hold the mean. From there, the squeeze turned light blue and then fired up, offering a fantastic swing opportunity. In the second example, notice how $GILD constantly bounced off the mean while in a light blue squeeze. This was a swing trade I had taken and was discussed earlier in the book. Again, the squeeze fired up and offered profits for anyone in Calls. Charts O.52, O.53, and O.54 are just a few examples of using the ATR Channels to identify swing trading opportunities. This now leads me to the next subject; how do you find swing trades to begin with? How do you find all these potential setups? Well, if you were asking those questions, keep reading on.

How To Find Swing Trades There are several ways that you can go about finding possible swing trades. In this portion of the book, I will share with you my favorite ways to find winning swing trades.

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Method 1: The first method I use is by using SPDR ETFs. These ETFs track each sector in the stock market. This includes real estate, utilities, healthcare, metals, oil, etc. Below is a list of all the SPDR ETFs.

Chart O.55 - Charts by ThinkorSwim

When I look through the list of SPDR ETFs in Chart O.55, I am trying to identify which sectors have the most strength, and which sectors are the weakest. Looking at the list, $XLY (Consumer Discretionary) was down $4.29, which shows signs of weakness, but $XLV was up $1.60 (Healthcare), which shows strength. This is a real example of what I have been trading for the last two weeks, and it all started with this list. I identified the strength in health care and took full advantage of it through swing trades.

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Chart O.56 - Charts by ThinkorSwim

Looking at Chart O.56, after seeing $XLV, I knew I wanted to start trading healthcare. There were plenty of confirmations that this sector wanted to continue to the upside. Once you determine the sector that you would like to trade, you would then go to Google and search “$XLV Holdings.” From here, it will list all the stocks held in the $XLV ETF and list the top 10 holdings based on weighting.

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Chart O.57 - Charts by SlickCharts.com

Looking at the top 10 holdings in Chart O.57, I noticed that $JNJ makes up 9.19% of the entire ETF. Therefore, if $XLV is strong and wants to move higher, $JNJ will likely carry it. Looking at the chart of $JNJ, there was tons of potential since both $XLV and $JNJ confirmed a move higher. Utilizing the technical analysis taught throughout this book confirmed this as well. Therefore, I purchased the $175 Calls expiring on August 20th, 2021.

Chart O.58 - Charts by ThinkorSwim

Chart O.58 is a daily view of $XLV with the entry date labeled. Comparing the chart of $XLV and $JNJ in Chart O.56, the two setups looked very similar.

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Chart O.59 - Charts by ThinkorSwim

Because of the strength seen in $XLV, I decided to start looking for swings in the Healthcare sector. Using the list in Chart O.57, it was easy to identify which stocks to watch. Since $JNJ was the #1 holding, that is where I started, and it happened to be my favorite setup. As a result, I took a swing trade on $JNJ, where my price target was the 127.2% extension, and the 161.8% extension. As seen in Chart O.59, $JNJ achieved both price targets. I also utilized this strategy to find a swing trade on $GILD, another healthcare stock. This had much less weight than the top 10 holdings but is within the top 20 holdings. If the healthcare ETF continues to stay strong, I knew $GILD would continue to increase in price with $XLV.

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Chart O.60 - Charts by ThinkorSwim

Looking at Chart O.60 of $XLV again, the date of when I entered the $GILD trade is labeled on the chart.

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Chart O.61 - Charts by ThinkorSwim

Looking at Chart O.61, there were several confirmations to get into this swing trade. There was an increasing OBV reading, Stochastic buy signal, a squeeze, and ascending triangle breakout. As a result, I purchased the $72.5 Calls on $GILD, expiring September 17th. When I entered the trade, it was August 12th, 2021. The contracts were in the money within three trading days, where I fully exited the position.

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Chart O.62 - Charts by ThinkorSwim

Putting $XLV next to $JNJ in Chart O.62, the similarities are almost identical. In short, if $XLV is going up, most healthcare stocks will also be going up. However, if $XLV goes down, most healthcare stocks will also go down.

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Chart O.63 - Charts by ThinkorSwim

As seen in Chart O.63, a daily chart of $XLU and $D can be seen. $XLU, the SPDR ETF for Utilities, and then $D, a utility stock with a high weighting within the ETF. Both charts are almost identical where they both formed a pennant and came back to the moving averages before exploding to the upside. Due to the correlation between the two and a pending breakout on Utilities, I decided to swing trade the $85 Calls for $D, expiring May 20th, 2022. My favorite setups are when the ETF correlates with the stock setup. I have also used this strategy to identify significant market shifts in consumer staples, industrials, and energy. This technique is relatively easy to use as well. All you need to do is open the market sentiment watchlist, and you can identify strengths and weaknesses within five seconds. Once you have found the strengths and weaknesses, google the top holdings of that ETF, and do the technicals. If the stock correlates with its ETF, that is double confirmation. Method 2: This method will be utilizing FinViz.com; when on the website, go to the tab labeled “Maps.” From there, you can choose to view just the stocks in the S&P 500, the entire world, ETFs only, and full. Looking at the map of the S&P 500, notice how healthcare, medical devices, medical instruments, healthcare plans, and real estate maintained the strength of the market. Also, looking at this list, one can see financials are extremely weak, as well as industrials. Green shows strength, and red shows weakness. 409

Chart O.64 - Charts by FinViz.com

Looking at Chart O.64, after identifying the strength, you can begin to look at the stocks to see where the strength is. As well as identifying the weakness for some possible Put scenarios. Looking at the entire map, one could see that almost everything in healthcare and biotech is green, while almost everything else is red. This lets the trader know which sectors should be focused on. In this example, healthcare and biotech have strength in the overall market and should have a primary focus if one is looking for Calls. At the same time, if one is looking for shorts, airlines, banks, and financials would be a great place to start. Once you have identified the strengths and weaknesses in the market, you can again focus on several stocks in that sector. All you need to do is apply the technicals taught in earlier chapters and decide if it is a high probability setup or if you should avoid the trade. I love using this method because it shows the industries where the strengths and weaknesses are and the stocks in that industry that are performing well or poorly. If you mix this strategy with method #1, finding swing trades should be relatively easier to find. All that a trader must do now is find the proper setup. Method 3: This method will take up more of your time; however, I use it to create my weekly watchlists. The method is simple, create a watchlist, and everything you have ever traded will go into this watchlist. My one rule is that the company must have liquid options. If it has liquid options and I was able to trade it in the past, it goes onto this list. I have well over 350 stocks on this watchlist; therefore, I am bound to 410

find some nice setups when looking through it. What I will do on the weekends is set up the monthly, weekly, and daily time frames on a chart, and flip through each stock on the watchlist. Some things I look for are a squeeze and if the EMAs are stacked up or stacked down. Are there chart patterns? Any Stochastic buy signals? Is there an increasing or decreasing OBV? Look for confluences on these three time frames to confirm direction. By the time I flip through this entire list, I have at least 25 stocks that I can choose to swing trade sometime throughout the week if the setup is validated. Once I find the stocks I like, I create a separate watchlist in ThinkorSwim named “swings” and leave them on that list until the swings are no longer valid, or if I was able to take a successful swing on it. Sometimes I even flip through this list a few times a week to see if any other setups have risen. If you would like to get this watchlist, send me an Instagram message: @Carwhorns and let me know you purchased the book. To sum up everything you have just learned about swing trading, this type of trading consists of buying an option or equity and holding it over the course of a few days, weeks, months, or even years. When swing trading, the primary focus should be on the higher time frames such as the daily, weekly, and monthly. Pay attention to all the indicators because you want to see them all in confluence on each time frame. You do not want to swing trade a Call if the daily time frame gives you the green light, but the weekly and monthly tell you otherwise. If all three time frames confirm each other, that is a clean setup, and that is the ideal swing trading setup. Remember to use support and resistance, Persons Pivots, and Fibonacci for price levels. I know swing trading can sometimes be a little slow, so you can also day trade while your swing trades are playing out. Feel free to continue reading once you feel comfortable with everything I have discussed in this chapter. In the next chapter, I will be discussing my day trading strategy.

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Chapter 16: Day Trading Day trading is a fast-paced, momentum trade that can last for 30 seconds, a few minutes, an hour, a couple of hours, or even the entire market day. The point of day trading is to take advantage of the shortterm market momentum to profit. Risk management will be one of the most important aspects of day trading. This chapter will discuss the day trading strategy I use that helps me decide which side of the market to be on, as well as entries, time frames, level 2, breakouts, and combining support and resistance with the pivot points. The first thing I want to discuss is how I determine if I want to look for Calls or Puts in the market, and it is quite simple. The first thing you want to do is to set up a flexible grid chart where you can see the 1hour time frame, 4-hour time frame, and daily time frame. On these time frames, I use the 5,8,21,34,55, and 89 EMA. I know that I did not discuss the 34 EMA (red line) and 89 EMA (dark blue line); however, this chapter will explain how to use them. To determine if I want Calls or Puts, all comes from the EMAs. If the 5 EMA is below the 8 EMA, the 8 EMA below the 21 EMA, 21 EMA below the 34 EMA, 34 EMA below the 55 EMA, and the 55 EMA below the 89 EMA, I want puts. This is what is known as a “bearish stack”. If this exact EMA lineup is on the one-hour, four-hour, and daily you should ideally be looking for puts. That is not to say that you cannot take a trade in the opposite direction. The EMA stacks just let us know the ideal direction to look for trades.

Chart P.1 - Charts by ThinkorSwim

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Looking at Chart P.1, in this example of $MRNA, all the EMAs created a bearish stack for the last several days on the 1-hour, 4-hour, and daily time frame. As a result, I would ideally be interested in puts. One could have been trading puts and profiting through the entire drop in $MRNA stock price.

Chart P.2 - Charts by ThinkorSwim

Chart P.2 is another example of a bearish stack found on $SQ. Again, if all the moving averages are stacked to the downside, ideally, I am looking for puts. Especially when you go back to the chapter on Exponential Moving Averages, if the stock follows the 5 EMA and 8 EMA, you should not be going against it. As a result, one could have successfully been able to trade puts on $SQ for days in a row.

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Chart P.3 - Charts by ThinkorSwim

Looking at Chart P.3, this is known as a “Bullish Stack”. This is where the 5 EMA is on top of the 8 EMA, the 8 EMA is on top of the 21 EMA, the 21 EMA is on top of the 34 EMA, the 34 EMA is on top of the 55 EMA, and the 55 EMA is on top of the 89 EMA. In this example on $PFE, notice how all the EMAs are stacked up on the 1-hour, 4-hour, and daily time frames. Due to this, you would ideally want to look for Calls. Again, this is not to say you cannot trade puts during a bullish stack. The stack lets us know the ideal direction to look for trades. Due to the bullish stack, I traded $PFE for several days in a row to the upside.

Chart P.4 - Charts by ThinkorSwim

Looking at $AMD on the 1-hour, 4-hour, and daily time frames in Chart P.4, there is a clear bullish stack spanning over the course of several weeks. As a result, you would ideally look for Calls in this scenario, and that is exactly what I did again for multiple weeks in a row. It is that easy to decide if you want to watch the Call side of the market or the Put side of the market. All you need to do is recognize which way the moving averages are stacked on the 1-hour, 4-hour, and daily time frames. If they are stacked up, ideally, look for Calls. If they are stacked down, ideally, look for puts. The reason I am more biased on one side of the market is simply due to the moving averages. As mentioned earlier in the Exponential Moving Averages chapter, all moving averages act as support or resistance. Each trader has a different time frame that they prefer to base trades. That is why we see support and resistance at these moving averages regardless of the time frame.

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Chart P.5 - Charts by ThinkorSwim

Looking at Chart P.5 of $PYPL, it would be risky to look for long positions. The reason is that there is a bearish stack. Since many traders use different time frames, all six moving averages will act as resistance on the 1-hour time frame. 4-hour time frame, and the daily time frame. That is an insane amount of resistance points, isn't it? That is why I tend not to trade against the moving averages. If the moving averages are stacked to the downside, I will look to initiate Put positions, mainly because no moving averages are blocking the stock as support.

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Chart P.6 - Charts by ThinkorSwim

Looking at Chart P.6, the same can be said for $MRNA on why you should ideally be looking for short positions if the EMAs are stacked down. Looking at the entire drop in price on $MRNA, the EMAs NEVER stacked to the upside. If they stay stacked to the downside, you should ideally be looking for puts. Again, there are eighteen possible resistance areas from the moving averages for $MRNA to the upside. You do not know which EMA price will bounce off, which is why I typically avoid trades against them. There are multiple instances where the stock rejected the 34 EMA on the 1-hour time frame, the 21 EMA on the 4-hour, or even off the 55 EMA on the 4-hour time frame. I have seen a stock reject one of the moving averages on these time frames too many times in the past and reverse direction. That is why I am usually biased in the morning and already have a chosen direction for my trades.

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Chart P.7 - Charts by Discord

For example, look at my premarket notes on $MRNA in Chart P.7.

Chart P.8 - Charts by ThinkorSwim

The results are shown in Chart P.8. It took a few hours for $MRNA to make a move, but it was a hefty drop in price when it did.

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Chart P.9 - Charts by ThinkorSwim

That is why I tend to favor one side of the market because these moving averages have been shown to act as support or resistance. Trust me when I say this; respect the stack. Bearish or bullish follow the trend. Once you have determined if you are looking for Calls or Puts, I then begin to look at the TTM Squeeze for more confirmation. Remember, the TTM Squeeze is a momentum indicator where light blue represents strong buying momentum, and red represents strong selling momentum. I like to see the TTM Squeeze correlate with the moving averages. So, if the EMAs are stacked to the upside, ideally, I would like to see the light blue or yellow momentum on the TTM Squeeze. Then if all the EMAs were stacked to the downside, I would like to see red or dark blue momentum on the TTM Squeeze. At the same time, I am also looking for red or orange dots within the squeeze. On top of this, I am also looking for any chart patterns to take advantage of.

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Chart P.10 - Charts by ThinkorSwim

Looking at $COST in Chart P.10. the 1-hour, 4-hour, and daily EMAs have been stacked to the upside for an extended period of time. This entire time you should have ideally been looking for Calls.

Chart P.11 - Charts by ThinkorSwim

Chart P.11 shows a day trade setup that I took on $MSFT. For this trade, I noticed the stacked EMAs. Therefore, I wanted to look for Calls. I then applied the day trading breakout rule that I like to use, which will be discussed in this chapter, as well as using the TTM Squeeze and bull flag setup to my advantage.

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Notice the run $MSFT had! I have a full trade recap on my YouTube channel for this trade: BrandonTrades. Once the trend of the trade has been determined using the EMA stack, with the TTM Squeeze confirming the direction of the trade, any chart patterns being discovered, and all support and resistance points marked, you then want to break the time frames down to the 5-minute and 10-minute. All I am looking for on these time frames is the same exact stack that the higher time frames have. If the 1-hour, 4-hour, and daily time frames are stacked up, I also want the 5-minute and 10-minute time frames to be stacked up. When this happens, it paints a clear picture of which way the stock would like to go. To recap how I decide to look for Calls or Puts in the market, I like to use the 5, 8, 21, 34, 55, and 89 EMAs. If all the EMAs are stacked to the upside, I prefer to look for Calls. If they are all stacked to the downside, I prefer to look for puts. Now, I will share with you an amazing day trading strategy that has changed the way I day trade forever. The strategy is known as the opening range breakout. The opening range breakout helps pinpoint your exact entry for day trading.

Opening Range Breakout There are a few variations of how the opening range breakout can occur. My favorite variation is when the previous day's high, post-market high, and premarket high all reject the same price level. When this occurs, it creates a powerful resistance point, and since many traders like to wait for a break above premarket highs or above the previous day's high for an entry, you are getting double buying pressure when the breakout occurs.

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Chart P.12 - Charts by ThinkorSwim

Chart P.12 of $PFE shows how the previous day's high, post-market high, and premarket high all rejected the same price point at $50.4-$50.5. As soon as $PFE broke the level, $PFE ran to the upside, climbing +$1.40. A $1.40 move in options can mean $60-$80 profit per contract purchased. Which is a substantial return on $PFE contracts considering they are under $100 each.

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Chart P.13 - Charts by ThinkorSwim

Chart P.13 is another variation of the opening range breakout. The stock did not get the post-market resistance; however, the previous day's high was at $236.85, which became resistance in the premarket multiple times. Again, notice the breakout once $BA broke above the resistance level.

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Chart P.14 - Charts by ThinkorSwim

Chart P.14 is another variation of how this setup can occur. When the post-market and premarket both have a solid resistance area to the upside, watch for the breakout above the high to go long.

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Chart P.15 - Charts by ThinkorSwim

Chart P.15 is another variation of the opening range breakout that can be found when a stock creates a solid premarket support level. You are waiting for a break below the premarket support to initiate a short position in this scenario. Notice the drop that occurred in $BA after the break below support.

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Chart P.16 - Charts by ThinkorSwim

Chart P.16 on $NVDA offered a beautiful opportunity to initiate a short position once the stock broke below the premarket lows. Notice the amount of support that $NVDA found in the premarket. Once $NVDA was finally able to break below premarket support, that was the entry to go short. As you can see, the stock followed the 5 EMA and 8 EMA to the downside giving the trader a $16.66 drop.

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Chart P.17 - Charts by ThinkorSwim

Looking at $MARA in Chart P.17, there were three hits at $32.8 in the premarket. Due to this resistance, a break above $32.8 is necessary to go long. Notice how $MARA reacted once the price broke above $32.8. Another variation of an opening range breakout can be identified on the first opening candle of the market. I personally like to use this variation on the first 5-minute time frame, but traders can also apply it to the 10-minute, 15-minute, or even 30-minute. Since I prefer the 5-minute ORB, the examples below will be shown on the 5-minute time frame. When the market opens in the morning, pay attention to the high and the low of the first 5-minute candle. Using the EMA strategy previously discussed, you should already know which way the stock wants to break. Once the first 5-minute candle has closed, you can properly identify the high and low. From here, I like to see the stock trade between the high and low of the first candle for the next few bars. Once the stock can break the high or the low of the opening candle, that is the entry. Piece this together with the EMA strategy and TTM Squeeze, and you will already have an idea of which way you want to see the ORB break.

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Chart P.18 - Charts by ThinkorSwim

Chart P.18 is an ORB example of the opening 5-minute candle on $BA. The high of the candle was $217.85, and the low was $215.28. From there, $BA proceeded to trade within the range of the high and low for the next fifty minutes. Once $BA broke above the high of the opening candle, that was the breakout point and the entry to go long. $BA gave a beautiful $1.24 push to the upside, which could have been a nice scalp opportunity.

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Chart P.19 - Charts by ThinkorSwim

Chart P.19 shows another ORB on $SQ. The opening 5-minute candle set a high of $106.97, and a low of $104.61. The stock traded between the range for the next twenty-five minutes, then broke to the upside, which was the entry. $SQ proceeded to follow the 5 EMA and 8 EMA to the upside and offered substantial profits.

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Chart P.20 - Charts by ThinkorSwim

Chart P.20 shows another ORB on $AAPL. Looking at $AAPL on the first 5-minute candle, the stock set a high at $172.42, and a low at $171.6. From there, $AAPL proceeded to trade between this range for the next fourteen 5-minute candles until the price finally broke out. Once it did, $AAPL offered a perfect day trade to the upside. These are multiple examples of how the ORB can occur, and why it is essential to identify these setups as a day trader. As far as stop-losses go, the stop-loss in this trade would be if the stock fell below the breakout candle. If the stock continues to go in your direction, move the stop-loss on the opposite side of the 8 EMA the entire way throughout the trade, or until the stock becomes overextended from the 5 EMA, or you are satisfied with your profits. Remember not to be greedy in the market because the market will humble you quickly.

ABCD Pattern The ABCD pattern is one of the easiest chart patterns to identify as a day trader. This pattern is great for new traders and even intermediate traders. ABCD formations can occur on the 1-minute, 5-minute, 10minute, 15-minute, and 30-minute time frames. Some traders look for the ABCD on higher time frames, 429

but since this is the day trading chapter, I look for them on the time frames just mentioned. Below are several examples of what an ABCD pattern will look like on a chart.

Chart P.21 - Charts by ThinkorSwim

As seen in Chart P.21 on $SQ, there was an increase in price, followed by a pullback, and then another increase in price. The bottom before the first price increase is known as “A”. The top after the price increase is known as “B”. The pullback in price is known as “C”. Then the continuation in price is known as “D”. The ABCD pattern allows you to start a position in the trade at point “C”. Remember, stocks do not go up or down forever and will provide traders with a pullback to which they can then enter the trade. Once the stock is able to pullback and provide point "C", this is where traders should be looking to enter the trader for a continuation to "D". A common question about the ABCD pattern is, "how do I find point C?". Identifying where "C" will be is quite simple. Through my time trading, I have noticed that "C" tends to occur at one of the moving averages, a common one being the 8 EMA or 21 EMA. Another way of identifying where "C" can occur is Fibonacci retracements. Taking the low of the move to the high of the move will give the retracements, and I have seen "C" form at the 50% retracement, as well as the 61.8% retracement the most. My favorite setup is when the moving averages and retracements are in the same area, as this makes that level even more likely to form "C." 430

Chart P.22 - Charts by ThinkorSwim

Chart P.22 is another example of an ABCD formation on $AMD, but with the 8 EMA and 21 EMA applied. Looking at the chart, $AMD had an initial move to the upside, giving points “A” and “B;” however, the pullback provided the trader with “C” where the price retraced to the 5-minute 21 EMA. This would have been the entry point for traders to catch the continuation to “D”.

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Chart P.23 - Charts by ThinkorSwim

Chart P.23 is another ABCD formation found on $FB. Again, looking at $FB, the initial move to the upside provided the trader with points “A” and “B”. Once the stock pulled back, it provided point “C”, where traders can look for entries to catch the move to point “D”. In this scenario, $FB returned to the 8 EMA before continuing to the upside. Those were a few examples of how an ABCD formation appears on a chart. There are also inverse ABCD formations. The inverse ABCD is a setup that can help a trader time an entry to the downside.

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Inverse ABCD

Chart P.24 - Charts by ThinkorSwim

Looking at Chart P.24 of $AAPL on the 5-minute time frame, an inverse ABCD is spotted. An inverse ABCD consists of a move to the downside, followed by a pullback, and then another move to the downside. The initial move to the downside will give points “A” and “B”, the pullback provides point “C”, and that is where traders want to enter the trade to capture the move lower to point “D”. Notice how the stock retraced back to the 21 EMA before continuing lower.

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Chart P.25 - Charts by ThinkorSwim

Looking at Chart P.25 of $PYPL on the 10-minute time frame, another ABCD pattern can be spotted. The top before the move down is labeled “A”, the bottom of the initial move down is labeled “B”, the pullback is labeled “C”, and then the second move down is labeled “D”. Notice the reaction $PYPL had off the 10-minute 21 EMA.

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Chart P.26 - Charts by ThinkorSwim

Chart P.26 will be the final example of an inverse ABCD pattern. This setup can be identified by looking at $AMZN on the 5-minute time frame. Point “A” was provided at the top before the move down, point “B” was given at the bottom of the first move down, point “C” was at the top of the pullback, and then point “D” at the bottom of the second move down. Yet again, another perfect entry was given off the 21 EMA. That is going to wrap up the ABCD pattern. Again, this is one of my favorite day trading patterns because they are easy to identify and offer a great risk-to-reward when entered on the pullback. Instead of chasing a trade at point “B”, wait for a possible pullback to give you point “C”. From there, you want to enter the trade to catch the move to point “D”. As always, use proper risk management when entering and exiting a position. If you enter at what you thought was point “C” and the stock continues to go against your position, exit the position quickly to avoid a steep loss. Next, I will be discussing another important aspect of day trading that arguably might be the most important in becoming a profitable trader, level 2 data.

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Level 2 Level 2 easily shows a trader the order book of buyers and sellers in the market and shows the quantity of the asset being bought or sold, while also showing the price the trader is buying and selling at. Level 2 can be an extremely helpful tool when confirming breakouts or letting traders know of an impending reversal.

Chart P.27 - Charts by ThinkorSwim

Chart P.27 is an example of the level 2 quotes on $RIOT. Looking at Chart P.27 above, you can see many different exchanges listed, like NASDAQ, AMEX, and BATS. These are the hedge funds with computers trading for them all day long. With the level 2 data, traders can see which exchange is buying or selling, at what price, and the order quantity. On the left side of the level 2, notice where it says “Bid” and “BS.” The bid is the price that buyers are willing to pay to purchase equity of the stock. The “BS” is the number of shares being bought in a lot of 100. 5=500 shares, 2= 200 shares, 3=300 shares. In this example, ARCA is trying to purchase 1,100 shares at $17.06, while Y is trying to purchase 1,700 shares at $17. On the right side of the chart are the sellers. The “ask” is where they are trying to sell their shares, and again, the number next to the ask represents how many shares they would like to sell in lots of 100. For example, 26=2,600 shares to sell. In this example, the EDGX is trying to sell 1,300 shares at $17.09, and H is trying to sell 5,500 shares at $17.45. At the same time, GSCO is trying to sell 2,100 shares at $38.18. This level 2 information can be super helpful when day trading.

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Chart P.28 - Charts by ThinkorSwim

Looking at the live level 2 in Chart P.28, this can help one substantially when it comes to initiating a long or short position in the market. Looking at level 2 on the sellers' side, PHLX, AMEX, ARCA, and BSE are ready to unload a decent number of shares, 2,100 in total, to be exact, at $121.98. When you see sellers like this stacked in the same area, it is best to wait for the stock price to break the sell wall, while the buyers outweigh the sellers. For example, the entry point may be $121.95; however, in my experience, you do not want to go against a seller's wall. I will give you a hint, it does NOT work in your favor. If you break it down to trading psychology, many other traders will be waiting for the price to clear the sell wall before going long. If the sellers do get cleared, buyers will more than likely flood the market and push the stock price higher; however, if the price of the stock comes up to the sell wall and then drops significantly in price, the ones who bought will get stopped out and will contribute to the selling. Therefore, the stock must clear the sellers' wall at $121.98-$122 before going long in this scenario. If you were to enter long, make sure the buyers are also following through. A breakthrough at an important level and no followthrough from the buyers can lead to a reversal, and a break below an important level with no followthrough from the sellers can lead to a reversal.

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Chart P.29 - Charts by ThinkorSwim

Make sure to utilize the EMA strategy laid out earlier in this chapter. Using that strategy will help you understand which side of level 2 to prioritize. If there is a bullish stack on the EMAs, you know you want to specifically pay attention to the buyers on level 2 and pinpoint any big sellers that could block the stock to the upside. Vice versa for bearish stacked EMAs where you would be looking for puts. You also want to make sure that the side of the market you are on maintains control throughout the move. If you see a breakout to the upside, but the buyers on level 2 are not showing a presence, and the sellers outweigh them, it is in your best interest to wait for the buyers to show a presence. The same can be said of the downside. Say the stock has bearish stacked EMAs, and the stock breaks below premarket lows. If you enter short, you want to see the sellers driving the stock price down. A reversal will likely occur if there are more buyers than sellers at a breakdown. This is a basic explanation of how level 2 works. Since I cannot show a video in a book, head on over to my YouTube channel: BrandonTrades, for a further in-depth look at how to use level 2 for day trading.

Scalping Scalping is taking advantage of a small price change and quickly exiting the position. Scalping can last 5 seconds, 30 seconds, a minute, or even a couple of minutes. The point is that you are in and out of the trade very quickly. As a scalper, you are looking to catch the momentum and get out. When scalping, level 2 will be your best friend to identifying buyers and sellers. A proper broker will also be required so that you can buy and sell your position within one click of a button. Preferably as a scalper, you want to use a broker with hotkeys enabled or active trader. That way, you can buy by pressing Shift+B or sell by 438

clicking Shift+S. These hotkeys will vary depending on how you set them up, and there are plenty of YouTube videos that can guide you on setting up hotkeys. When scalping, you must also have extremely strict risk management rules. If a trade goes against you when you are scalping, you need to accept the loss and get out immediately. I will share my favorite form of scalping with you, and this strategy takes place in the first 5-10 minutes of the market opening. I utilize the stacked EMAs on the 1-hour, 4-hour, and daily time frames to determine which direction to watch. From there, mark important support and resistance areas, pivot points, and Fibonacci if needed. Then, mark the entry points using premarket highs, previous day's highs, premarket lows, or previous day's lows. Once all of this has been completed, I will then break the stock down to the 1-minute time frame to scalp the market open. Paying serious attention to Level 2, as soon as the stock breaks my entry point and level 2 confirms, that is when I enter the trade. From here, I am not looking for a huge return. My goal is to get in, catch the momentum, and then get out of the trade. My stop-loss is always a break back in the opposite direction of the entry.

Chart P.30 - Charts by ThinkorSwim

Chart P.30 is an example of $NFLX on the 1-minute time frame. My entry in this trade was a break above $610, which was the premarket high. As soon as $NFLX was able to break above the premarket high, that is when I entered the trade. If $NFLX broke back down below the $610 level or got denied, I would have immediately exited the trade. As you can see, $NFLX gave a beautiful push to the upside, and I was out of this trade at 9:33 AM EST with a +27% return on my investment. In just three minutes, $NFLX ran 439

from $610 to $615.28; even though I had a price target at $619.8, why complain about +27% returns in three minutes? Again, my goal is to get in, catch the momentum, and get out.

Chart P.31 - Charts by ThinkorSwim

Looking at Chart P.31 of $GS, again, I ran through the entire process of determining which way I wanted to take the trade, finding resistance points, pivot points, and then identifying the entry points at premarket high. My entry point in this trade was above $402, which was slightly over premarket highs. Once $GS broke above $402, I had a price target of $403.28. Once $GS hit the first price target, I took most of my profits. From there, $GS bull flagged and gave one more push to the upside to my final price target, where I was able to fully exit the position. The majority of the trade only lasted for a minute and a half. By the time I fully exited my position, the market had only been open for six minutes.

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Chart P.32 - Charts by ThinkorSwim

Looking at Chart P.32 of $TSLA on the 1-minute time frame, again, after going through the entire process of determining the direction of the trade, plotting support and resistance, pivot points, and finding my entry points, the rest came down to executing the trade properly. My entry in this trade was a break above $745, which was slightly over the premarket high at $744.78. I entered the trade once $TSLA broke above $745 with volume. The price targets were $747.82, $750 (where I fully exited), then finally $751.25. $TSLA achieved the $750 price target within the first two minutes of the market opening. Remember, with scalping, my plan is to get in, catch the momentum and then exit the trade in profits. I am not looking for massive moves in the stock, but just looking to take advantage of the volatile swings that the market generates at the open. I personally am not waiting for the 1-minute candle to close above my level because when you scalp, waiting that entire minute could make you miss the entire trade. As soon as the entry is broken and level 2 confirms the break, I do not think twice about it and enter the trade immediately. All the stock must do is break below the breakout candle, and I am out of the trade. As the stock moves in my favor, I am looking to trim profits along the way and then move my stop-loss up as the trade continues in my favor.

Contracts and expiration When day trading, you always want to trade the closest dated expiration. Expirations fall on each Friday throughout the week. Therefore, if it is a Monday, you are trading the expiration that expires that Friday. 441

If you are day trading on a Thursday, you are trading the contracts that expire tomorrow. Regardless of what day it is throughout the week, you are trading the same week's expiration. The reason for doing this is that the further out the expiration date, the more expensive the contracts become.

Chart P.33 - Charts by ThinkorSwim

Chart P.33 shows the option chain for $BA. This coming week's expiration will be March 4, 2022. If you were to look at the $205 Call for March 4th, 2022, they would cost $285-$290 per contract. If you were to trade the following week's contracts, you would now be paying almost $460 per contract. That is $165$170 more than the contract that expires the same week. If you bought the following week's expiration, you would be forced to buy fewer contracts due to the price if you are following proper risk management; however, if you purchase the same week's expiration, you can buy more due to the cheaper premiums. Plus, you will profit more percentagewise if the trade goes in your direction. Again, when day trading, you are always trading the same week expiration, even on a Friday. I like to call Fridays in the stock market “Lotto Friday”. The reason being that you would be trading contracts that expire the same day. Therefore, the option prices can be very volatile. Trust me when I say this, you can make 300%+ returns on a day trade for the same day expiration, but you can also lose –75% in a matter of minutes. I do not suggest trading on Friday if you are a beginner trader, but if you have more experience, Lotto Friday is definitely fun to trade. My general rule for Friday is that I will only use 5%-10% of my weekly profits to trade lotto Friday. If I lose it, I am done for the day and walk away. For example, If I made $10,000 this week, I would only use $1,000 to trade on Friday. If I lose that $1,000, my day is over.

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As seen in Chart P.33, there are plenty of Call contracts to choose from. There is a $202.5 Call, a $205 Call, a $207.5 Call, etc. In these scenarios, it is always best to look at the chart. For example, if $BA had an opening range breakout at $202 and did not have any resistance until $206, a trader can use personal judgment to decide which contract they should go for. The trader in this scenario should buy the $202.5 Call or the $205 Call. Now, pretend this is the same scenario, but $BA only has room to $203. in this scenario, a trader should purchase the $202.5 Call. The contract you end up buying for the day trade depends on what the stock has room to. The bigger the gap that needs to be filled, the more flexibility you will have when choosing the strike price. On the flip side, the tighter the gap, the fewer options you will have for the trade. The idea is that you want to get the contracts in the money so that you can profit substantially.

How To Find Stocks to Day Trade There are many ways to find stocks to day trade, but I will tell you the methods I like to use. When creating a daily trading list, it is important to ensure that the stock offers enough price fluctuation to take advantage of. Ideally, I like to look for stocks that move more than $2.50-$3. The higher the price fluctuations, the better. The stocks on this list must also have liquid options meaning that people trade that stock millions of times a day. Also, on this list, you want to have diversification. When creating a day trading list, you do not want it to consist of 100% tech or 100% financials. Instead, you want it to be diversified, which means a couple of tech stocks, a bank stock, an industrial, a healthcare stock, etc. Ideally, you want to create a list of around 10-15 names that can be in constant rotation. Names will come and go from this list depending on market conditions, but that is the glory of making your day trading watchlist. When day trading, you usually want to stick to popular names since they tend to have the most liquidity in the options and have a decent range the stock price can move. For example, $AAPL, $FB, $TSLA, $BA, $GS, $BABA, etc. One source I use to find stocks to day trade is FinViz.com; on FinViz, a screener will find stocks that meet the criteria you input. There are many different screeners you can set up, but this is the one I like to use. Again, I do not trade small-cap stocks; therefore, in the Market Cap section, I want to select either "Medium," "Large," or "Mega." For Average Volume, you want to input "over 1 million". This will ensure that you find liquid stocks. Then where it says "Option/Short", you want to select "Optionable". Since I am an options trader, options for the stock are needed.

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Chart P.34 - Charts by FinViz.com

Looking at Chart P.34, at this point, 5,400 stocks meet the criteria, but I will further narrow the search to ensure the best stocks for the day trading list. Now head over to the technical tab. These selections will vary depending on if there is a bull market or bear market, but since the market is bullish right now, I will show you how to set it up for bull markets. From here, you want to find "20-Day Simple Moving Average" and select "Price Above SMA20". Do the same setting for the 50-Day Simple Moving Average and the 200-Day Simple Moving Average. Then locate the Average True Range and select "Over 3". These are all the filters needed in this scan. If the market were bearish, you would simply select "Price Below" for each SMA.

Chart P.35 - Charts by FinViz.com

Looking at Chart P.35, sixteen stocks fit the scan results, and as a result, could possibly be traded on a day-to-day basis.

Chart P.36 - Charts by FinViz.com

Looking at Chart P.36, from this list, $AAPL, $COST, $CRM, $GOOGL, $MSFT, $NFLX, $NVDA are all good names to add to a day trading list. Right off the bat, there are seven names for the day trading list. Then, you can change the market cap to a different setting to find more names for the list.

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Chart P.37 - Charts by FinViz.com

Looking at Chart P.37, in the "Mid-Caps", you can find two more companies known for day trading. These companies are $RIOT and $MARA. Now the day trading list consists of nine separate companies.

Chart P.38 - Charts by FinViz.com

Then finally, looking at Chart P.38, in the "Large Caps", forty-two stocks were picked by the scanner. Using these three separate market caps will ensure that you can find 10-15 names to keep in constant rotation when trading. When deciding which companies to use in your list, double-check that the options have enough liquidity for everyday trading! Another method that one can use is simply looking up the top holdings for the S&P 500, NASDAQ, and DOW Jones. Looking at each component's top 10-20 holdings will give you a fair understanding of which stocks to focus on. There is a reason why these companies have such a high weighting in their respected component.

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Chart P.39 - Charts by SlickCharts.com

Chart P.39 shows a picture of the top holdings within the S&P 500.

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Chart P.40 - Charts by SlickCharts.com

Chart P.40 is a picture of the top holdings within the NASDAQ.

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Chart P.41 - Charts by SlickCharts.com

Chart P.41 is a picture of the top holdings within the DOW Jones. At this point, with both methods shown for finding stocks to day trade, finding stocks for the list should be easy. Again, make sure to diversify the list, that way, you are not watching 100% tech or 100% industrials. Chances are, if tech is down one day, financials might be up, or even airlines might be up. Alternatively, if financials are down, tech might be up. Therefore, diversification of the list is essential.

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Chart P.42 - Charts by ThinkorSwim

Chart P.42 shows my current day trading list. Over time stocks will come and go from this watchlist, that is why it is important to constantly be adding new names that have gained more attention and taking names off that have lost hype. For example, now that I am editing this book months later, $MRNA, $ROKU, and $GS are no longer on my day trading list. The liquidity dried up in the option chains and made these companies hard to trade. As a result, I removed them from the list and added new names such as $GME, $XOM, and $CVX since those option chains had seen an increase in liquidity. Once you have selected the 10-15 stocks, you then want to create a watchlist that you can view each morning.

Creating a Day Trading List Once you have decided what stocks to put on the daily trading watchlist, these should always be in constant rotation. From here, it is simple to figure out which stocks from this list you should prioritize for the day. Ideally, out of the 10-15 stocks you have selected, you only need to watch three or four of them each day. Using the 1-hour, 4-hour, and daily time frame mentioned earlier in the chapter with the EMA stacks and the TTM Squeeze, you want to flip through this list and decide which stocks offer the best setup for that day. Look for EMA stacks, the color of the squeeze, red or orange dots, chart patterns on all time frames, and even the opening range breakout setup. When flipping through the list, pick out the stocks that look the best and narrow it down to the top three or four. Make sure to utilize support and resistance, pivot points, entry levels, and Fibonacci levels if needed. When making your list, take notes that look like mine below. 449

Chart P.43 - Charts by Discord

Chart P.43 shows my premarket notes on $NVDA fifty minutes before the market opened.

Chart P.44 - Charts by ThinkorSwim

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Chart P.44 shows $NVDA at the end of the day. Notice the massive run the price had throughout the day.

Chart P.45 - Charts by Discord

Chart P.45 shows my premarket notes on $MSFT an hour before the market had opened.

Chart P.46 - Charts by ThinkorSwim

As seen in Chart P.46, $MSFT had a beautiful run to the upside. 451

Chart P.47 - Charts by Discord

Looking at my premarket notes in Chart P.47 of $TSLA, I wanted to see a further continuation to the upside for the day.

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Chart P.48 - Charts by ThinkorSwim

Looking at Chart P.48, this $TSLA trade took much patience but offered substantial profits when breaking out. Once the watchlist for the day has been narrowed down to 3-4 stocks, create a premarket plan, and then utilize everything else discussed in this book. And remember, stick to your plan! If a stock does not give an entry into the trade, DO NOT enter, and avoid the trade overall. The stock market is not going anywhere, so just come back the next day and create a new plan. Also, make sure not to steer off your plan. For example, if you are watching $FB, $AAPL, and $MSFT, and that is all you planned to trade for the day, you should not have $TSLA on your screen. I have made the mistake of trading off my plan many times, and almost every time, I have lost money. Watch the stocks you are prepared to trade and stick to the plan!

Time Frames for Day Trading Another common question I get asked about day trading is which time frame is the best? This depends on what kind of trader you are. Are you a scalper or a normal day trader? When scalping or pinpointing my entry points, I like to use the 1-minute time frame and 3-minute time frame, but once I find my entry point, I rely more on the 5-minute and 10-minute time frames. If the stock rides the 5 EMA and 8 EMA on these two time frames, I will continue to stay in the trade. But, if you are only watching the 1-minute time frame, then there are many scenarios where you would get stopped out of a trade just to see the 5minute and 10-minute never violated the EMAs.

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Chart P.49 - Charts by ThinkorSwim

Looking at Chart P.49, of $GLD, one could have broken the chart down to a 1-minute or 3-minute time frame to find a solid entry. Once in the trade, set the time frames back to the 5-minute and 10-minute. Notice how $GLD continued to stay with the trend on both time frames for an extended period.

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Chart P.50 - Charts by ThinkorSwim

Looking at Chart P.50, one could have used the same strategy on $FB. Again, one could have broken down the time frames to a 1-minute or 3-minute chart to spot a sniper entry on the break below premarket lows at $214.39. Once in the trade, looking at the 5-minute and 10-minute time frames, $FB dropped down to $212.15, which was a $2.24 move down. The stock never violated the moving average rule the entire time, which could have kept a trader in the winning trade longer. In short, use the 1-minute and 3-minute time frames to find the entries, then use the 5-minute, and 10minute time frames for the rest. Utilize level 2, the opening range breakout methods, the EMAs, and the TTM Squeeze to guide you throughout the trade. Remember, always be prepared with your entries, exits, take profits, and stop-losses.

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Chapter 17: Futures Futures are an obligation to buy or sell an asset on a specific date. Futures set the price for everyday stocks. For example, if Crude Oil futures are rising, stocks like $XOM, $CVX, and $MPC rise with it. Or if we see Corn Futures drop, we will more than likely experience a drop in $CORN. In short, futures are for predicting the future price of commodities or stocks. Therefore, if the futures go up, stocks related to that commodity or component will go up too, and vice versa to the downside. The main futures that I will focus on in this book are S&P 500, NASDAQ, DOW Jones, Crude Oil, and Gold. S&P 500 Futures: The S&P 500 is known for its overlook of the entire market. It is named the S&P 500 because it tracks the top 500 stocks in the United States. Big money controls how the futures move. If they are bullish on the stock market in the future, they will usually drive the price of the S&P futures up, and as a result, you will likely see the overall market continue up in price. However, if big money starts selling the futures, the entire market will likely be red. Looking at the S&P 500 futures allows one to get an overall view of the entire stock market. NASDAQ 100 – The NASDAQ is made up primarily of tech stocks, but some stocks like $SBUX and $PEP are included in the component. When you think of the NASDAQ, think of tech. Again, big money controls where the NASDAQ futures will go. If they are bullish on tech going forward, they will drive the prices of the NASDAQ up, and as a result, you will see many tech names go up with it. For example, $AAPL, $MSFT, $AMZN, and $FB. However, if they become bearish on the NASDAQ, they will then sell the NASDAQ futures, which as a result, will pull many of these stocks down with it. DOW JONES 30: The DOW Jones is made up of the top 30 prominent companies listed on the United States stock market. When thinking about the DOW, consider health care, banks, financial services, food brands, and retail stores. Some of the DOW top holdings include $GS, $HD, $MCD, $AXP, $WMT, $BA, and $IBM. It has some $MSFT and $AAPL in it, but not as big of a weighting as the NASDAQ. With the DOW, especially during COVID, where the entire economy shut down, since the DOW is prominently banks, airlines, healthcare, and retail, what do you think happened to the DOW? It dropped, and as a result, so did all the holdings. However, when the economy opened back up, the DOW started moving to the upside, taking all of the holdings with it. Since stocks rely heavily on the futures, it is essential to know how the futures are moving before trading the stocks. For example, since $AAPL is the highest weighted stock in the NASDAQ, if the NASDAQ

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falls off a cliff, it is not in your best interest to buy $AAPL Calls. The best scenario is when the futures and the stock being traded move in sync.

Chart Q.1 - Charts by ThinkorSwim

Looking at Chart Q.1, in this example of $FB and the NASDAQ, notice how the price action is almost identical. When the futures and the stock line up like this, it adds double confirmation to the trade.

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Chart Q.2 - Charts by ThinkorSwim

Looking at Chart Q.2, the movements are almost identical when looking at $TSLA compared to the S&P 500 futures.

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Chart Q.3 - Charts by ThinkorSwim

Looking at a 5-minute chart of both $AAPL and the NASDAQ futures in Chart Q.3, the similarities are shown. In the morning session, $AAPL and the NASDAQ pushed to the upside and then fell to the downside. In the late morning, both $AAPL and the NASDAQ increased in price substantially before pulling back again.

Chart Q.4 - Charts by ThinkorSwim

Chart Q.4 is a 5-minute chart of $BA and the DOW Jones futures. Remember, when trading airlines, banks, healthcare, or retail, you want to primarily look at the DOW. Notice how the charts look very similar. Since I enjoy swing trading oil stocks, I also pay attention to the Crude Oil futures. Crude Oil futures are used to predict the future price of oil, and it connects the producers of the oil to the consumers of oil. The producers in these scenarios can sell futures contracts to consumers that match their predictions of the price of oil in the future. Since I like to swing trade oil stocks, it is essential to pay attention to what is going on with crude oil futures because if crude oil is going up, stocks like $XOM and $CVX are going up as well. However, if crude oil futures are going down, oil stocks will likely decrease in price.

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Chart Q.5 - Charts by ThinkorSwim

Looking at Chart Q.5 above, the left chart shows $XOM, and the right chart shows the Crude Oil futures. Notice how identical price movement is between XOM and the Crude Oil futures. Since I do not trade futures, the next best thing is the oil stocks. I also like to pay attention to Gold futures. If I am trading gold-related stocks such as $GOLD, $GLD, $GDX, or $RGLD, it is essential to watch the Gold futures since the stocks move based on the price of Gold. If Gold increases in price, these stocks will follow. But, if gold drops in price, these stocks will decrease in price.

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Chart Q.6 - Charts by ThinkorSwim

Chart Q.6 is a picture of $GLD and the Gold futures. Recently Gold saw a dramatic price increase; therefore, all gold-related stocks followed. As a result, this allowed a trader to identify a breakout on Gold, and trade options on gold-related stocks. This is going to sum up the futures. Make sure to always do technical analysis on the futures as they determine where stock prices go on a daily basis. Use the futures to your advantage to help create double confirmation when deciding to enter a trade. Now that you have all the information you need to know about trading from a technical standpoint, you must also learn the art of preserving your capital, risk management, having a winning mindset, and dealing with emotions in the market.

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Chapter 18: Risk Management When trading in any market, the most important concept to learn is risk management. I always tell my students that it only takes one trade to lose your entire account if you are not using proper risk management. To start this chapter, I want to tell you the true story of someone who blew their entire trading account by not following basic risk management rules. After that, I will then share with you my risk management guidelines for trading. In 2020, $TSLA was gaining a lot of hype from investors and, as a result, sent the stock flying to the upside. This one trader, who will remain anonymous, turned $5,000 into almost $27,000 within one week. One would think that this would be enough for the trader and that they would at least take their original $5,000 out of the market and put it back into their bank account. Did this happen? Not at all. Since this trader felt like they were on top of the world after securing a $22,000 gain, what do you think they ended up doing? They went back into another $TSLA trade using all $27,000! Within just three days, they saw their entire $27,000 portfolio turn into $0. Yes, you read that correctly, ZERO. Nothing. Instead of being smart with their recent winner and either paying themselves or using the gain to take calculated risks in the market, they just threw everything back into the market and lost it all. This is why risk management is the most important concept when it comes to trading. And trust me when I say this, I have seen this happen to many traders countless times.

Risk Management Rules Rule #1: Never use more than 10-15% of your trading account at all times. Reading back to the story of the trader who blew their entire account, it is self-explanatory why you should never use 100% of your trading account in active trades. Some traders may even think 10-15% of your trading account is crazy; however, it will all piece together when you read the following few rules. For example, if you are trading with a $100,000 trading account, no more than $10,000-$15,000 of your account should be in active trades. If you are a new trader, I suggest using 5-10% Rule #2: Never have more than 2-3 open positions at a time. I cannot describe the number of times I have seen traders with 10+ open positions at a time while trying to monitor each one of them actively. I get overwhelmed when monitoring three positions at a single time. If you have more than three positions open at a time, you are probably not following rule #1. Not only 462

that, but you are trying to place your eggs in too many baskets at once. When trading, you only want to have the highest probability setups as active positions. Do not spread yourself too wide in the market because it takes one bad day to lose your account. If you were to go on the lower portion of the spectrum with two trades, what I would do is have one swing trade and one day trade. It is rare for me to day trade two stocks at the same time. When day trading, I like to focus all my attention on that single trade; however, with swing trading, I can monitor a few positions at the same time. Rule #3: Stick to your stop-loss This is another rule I have seen traders violate time and time again. When entering a trade, you must be calculating exactly what you are willing to lose, and if the trade goes against you and hits your stop-loss, get out of the trade. Too many traders are afraid to admit they are wrong and instead widen their stoploss, thinking that the stock will go back in the direction they wanted, only to see it go against them even more. Always admit when you are wrong and stick to your stop-loss. I promise it will save you a lot of money and stress in the future. Rule #4: Stop listening to others' opinions This might be the #1 risk I see traders take every day. Many traders fall victim to someone else's opinion without ever doing their own due diligence. Instead, they generate a bandwagon bias and follow the crowd. If 20 people got together and said, "Nike stock is going to explode! We are all going to buy a bunch of shares", you would more than likely do the same thing without doing any research. A few days later, you look at your portfolio, and it is down substantially. This is what happens when you listen to other people's opinions without ever validating their reasoning. Do your own research and come to your own conclusion before ever entering a trade. These are my four rules of risk management. It will be tough to fail if you follow these simple rules. In the market, you can either make money or lose money. It is a 50/50 game. Apply basic risk management, and now the game is skewed in your favor. Apply the technical analysis taught throughout this book, and now you have the upper hand.

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Chapter 19: Emotional Trading Emotional trading is something that I struggled with a lot when I first started trading. In fact, it almost forced me to quit and almost never look at a chart again. Think about how different my life would have been if I had quit. In this chapter, I will walk you through how to eliminate emotions when it comes to trading. Most of it will come down to experience and education; however, one can take other steps to ensure that they do not trade off emotions. When you are in an emotional state of mind, that is where you are most prone to act out and make major mistakes. As a trader, a major mistake could be a -$30,000 loss. One of the main reasons I see individuals start emotional trading is because they are trading with money they are not willing to lose. When you begin your trading journey, you must only be trading with money that you can afford to lose. If you only have $5,000 to your name, it is not in your best interest to trade with $5,000. However, if you have $150,000 to your name, you could probably afford to take a potential $5,000 loss, and your life would not be affected. Because of this, you must only be trading with capital that you are okay with losing. Let's face it, nobody likes to lose money, but if you are losing money that you need for bills and groceries, well, you are more than likely going to have an emotional reaction to a losing trade. If you needed that $5,000 for bills and groceries and lost $200 in a trade, you would more than likely feel obligated to make the $200 back. In this scenario, the trader would force another trade, which would send the trader into a bigger loss. Then, the same cycle would repeat until the trader quits or blows their entire account. However, if you traded with money you were willing to lose, that initial loss of $200 would suck but would not send you into a frenzy and make you think that you must make it back as soon as possible. The second reason I see individuals start emotional trading is because of the success they see from others online. There will always be a trader who is better than you. Maybe your friend started trading six months after you and has made $15,000 while you have only made $2,000. Reading that sentence probably made you a little angry as well. What happens in this scenario? The individual feels obligated to outperform their friend by taking a bigger position or trading more frequently, only to become frustrated with losing trades. Never compare yourself to another individual in the market. You will bring yourself down, and it will cause an emotional reaction. The third reason a trader becomes emotional in the market is that they are dealing with stress in their personal lives. If you are moving, going through a breakup, have had the death of someone close to you, or any other stressful event, I suggest not trading until everything is past. There have been days and even

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weeks when I have taken off from trading because of something in my personal life. The market will always be here. Take time off if needed. That way, you do not respond to trading with emotions. Emotional trading is not just limited to lashing out and trading based on anger; it also applies to being fearful. How often have you looked at a trade, were about to enter, but didn’t because you feared being wrong and the consequences? I know I have. Being wrong is a part of trading, and you should not be afraid of it. With every loss, there is a lesson. If you take two L’s and put them together, you get a W. The losses only become a problem if you are not using proper risk management. Wall Street’s finest are not even 100% correct all the time, and neither are the computers that do the trading. Losses are unpreventable. All you need to do is apply the risk management rules, and you should make it out of the markets alive. An excellent book on trading psychology and emotions is Trading in The Zone by Mark Douglas.

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Chapter 20: Winning Mindset A winning attitude is needed regardless of what you begin doing. No trader ever goes into the market saying, "I am going to lose my account today", or "I am going to take a losing trade". All successful traders have a winning attitude regarding trading and their overall life. Do you think Eminem woke up each day saying, "Damn, I suck at rapping." NO. You need to have a winning attitude when it comes to your trading, regardless of what you have experienced in the past. Have you ever told someone that you would grow up and do big things, and their response was, "Okay, keep dreaming"? If so, then this more than likely created a negative response in your head, and if done repeatedly, you have probably developed a losing attitude. However, there are several things you can do to develop a winning attitude. First, recognize why you started trading. Was it because you needed extra money to pay the bills? Need money to get out of debt? Do you want to leave your crappy 9-5 job? Identify your why. I started trading because I did not want to go into the state police. I sucked at school and had nothing else in my life ahead of me. There was only one thing I could do to escape becoming a police officer, and that was trading. Through each bad day I had, I always reminded myself of the bigger picture. You started trading for a reason. Write that reason down on post-it notes and stick it to the bottom of your trading monitor so that you can see it each day. Surround yourself with the right people. There is a famous saying that if you hang around four millionaires, you are bound to be the fifth, but if you hang out with four drug addicts, you are more than likely to be the fifth, and this is true. My trading nor my entrepreneurial self were at the level I am at now until I finally changed my inner circle. I went from negative individuals who brought me down every second they had to working with individuals way more successful than me. Plus, my new circle motivated me to become even better each day. Without them, I would not be writing this book. Have faith in yourself. So many people lose faith in themselves and just work a regular hourly job and live a normal life because they cannot see the bigger picture. Anyone can do anything that they put their mind to. There are felons who spent twenty years in jail that became millionaires because they wanted a better life for themselves. Nineteen-year-olds are making triple their parents' salaries because they are determined. I have seen it all, myself included. Anyone can achieve anything, and I do not care what anyone else tells you otherwise. Have faith in yourself because you can achieve way more than you think you ever could.

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I would also add to this list to eat right, exercise, and get a good amount of sleep per night. The saying "you are what you eat" is absolutely true. As someone who is big into bodybuilding and nutrition, I notice the difference in my mental state when I am on my whole food, clean diet compared to when I am on vacation drinking, eating out, and even eating dessert. When I am on vacation, I feel like absolute garbage from the food I am eating. I always suggest a solid diet because it will make you feel better and help build self-confidence. Exercising can help reduce anxiety and depression, which might result from trading. Trust me. Personally, when I am not working out, I feel terrible, tired, unmotivated, and heavy-eyed. However, I feel like a much better person when working out consistently. Finally, sleep is a MUST. If you do not get adequate sleep, you will be tired when you try to trade, you will be unfocused, more irritable, and maybe even depressed. If you have all these symptoms and then have a losing trade on top, the result will be catastrophic. Take all these steps to develop a winning mindset!

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Chapter 21: Outside Resources There are several outside resources that I use daily. Not only must we pay attention to the technical data being provided to us on the charts, but we also need to pay attention to fundamental news, where big money is going in the market, and what stocks are hot and on everyone's radar. First, I will discuss where to get market news. There are several sources that you can use to get the news. There are sources like Yahoo Finance, Benzinga (which offers live news and is my favorite), Zacks, and even Twitter. On Twitter, you must find accounts that post news throughout the day. Some of my favorite accounts on Twitter are ZeroHedge, CBCAlerts, and Bloomberg Markets. While most of these news sources release the same news, I use Benzinga Pro. In Benzinga Pro, I can see everything from price upgrades and downgrades to acquisitions, premarket movers, after-hour movers, and random news articles about specific stocks throughout the day. Not only that, but it also offers a 52-week high and 52-week low scanner in the same window. The following outside source that will be extremely helpful is a flow scanner. A flow scanner will allow you to discover large and unusual trades other individuals or institutions make. There are plenty of websites that you can use for a flow scanner; however, I prefer CallsorPuts.com and FlowAlgo.com. Within the flow scanner, there are a few different order types. The first order type is known as “Sweep.” A sweep is a large market order that is split into different sizes so that a trader can fill all their contracts at the best prices available from multiple exchanges. This is where the smart money is said to be. Since the sweeps are market orders, it indicates that the buyer wanted to get filled as soon as possible, meaning they think there will be a big move in the stock soon. Since the sweep is multiple orders through multiple exchanges, the trader is trying to stay under the radar when making these kinds of orders. As for a “Block” trade, these are large privately negotiated orders that are executed outside of the public market. The primary order type you want to pay attention to is the sweep. Highly actionable options sweeps are something I pay very close attention to, as well as unusual option sweeps. Again, the smart money is behind these sweeps, and if they are putting multiple orders in totaling hundreds of thousands of dollars, or even millions, that is something you should pay attention to. Just because you see a sweep come through does not mean you should follow it. There are many other factors that you must consider before following the flow. For example, let’s look at an unusual option sweep that came in just before the weekend.

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Chart U.1 - Charts by CallsorPuts.com

In Chart U.1, multiple orders came through for the $SPXU $15 Calls expiring in one week. The expiration date is September 3rd, 2021, and the order came through on August 27th, 2021. $SPXU is an inverse ETF of the $SPY; therefore, if the $SPY drops in price, the $SPXU will increase. If $SPY goes up in price, $SPXU will drop in price. Understanding what is going on from an economic standpoint can help paint a clearer picture of why these orders were coming through. Currently, U.S Military has been pulled out of Afghanistan, and terrorists have taken over the city of Kabul. There were multiple bombings at the Kabul airport throughout the week, causing fear in investors. There was also economic news from Jerome Powell, the FED Chairman, or as we call him, the “Money Printer”, stating that interest rates will continue to stay low for the time being. The $SPY ran up in price due to the news of low rates, but anything could happen in Kabul over the weekend. Due to this, if big money has millions of dollars in $SPY Calls, they want to protect themselves going into the weekend due to what is going on overseas. As a result, they purchased $767,848 worth of $SPXU $15 Calls. That way, if things got worse in Kabul over the weekend and it affected the U.S market, they would not lose as much money. Not understanding how to read options flow, one could have seen this and then bought a ton of $SPXU Calls just to see their investments lost over the weekend. This is one way that I use options flow. Another way I use flow is by identifying unusual options sweeps.

Chart U.2 - Charts by FlowAlgo.com

In Chart U.2, unusual options flow was coming in for $PLTR. Multiple sweeps were coming in for the June 17th, 2022, $27 Calls. There was $2,822,000 put into this trade, and in total, a trader purchased 7,029 contracts at $400-$405 a piece. Of course, I followed this trade! So far, those contracts have hit a 469

high of $481 a piece, putting the trader/traders up +$569,349. UPDATE: I sold these contracts for +50%, making these traders up +$1,411,000 in just a few weeks. When observing unusual options flow, I like to see multiple orders of the same strike, and the same expiration bought. One must also make sure that the contracts are being purchased, which will be discussed shortly.

Chart U.3 - Charts by FlowAlgo.com

Chart U.3 shows another example of unusual options flow on $BABA. On August 23rd, 2021, I noticed unusual options flow sweeping the $BABA $160 Calls expiring the same week. As a result, I followed the same contracts. In total, $4,695,000 was put into this trade, and the trader purchased a little over 8,000 contracts. These contracts went deep in the money, with $BABA gapping up to $174 the very next day. These contracts increased well over 100%, making this trader, or traders, over +$4,695,000 in one day.

Chart U.4 - Charts by FlowAlgo.com

As seen in Chart U.4, with most flow scanners, there is also something known as “Golden Sweeps.” A golden sweep is essentially a large opening sweep order, as you can see in the examples above, a $7.2 million order, a $1.3 million order, and a $2.3 million order. Paying attention to the $7.2 million order on $SPY, a trader or traders purchased an enormous position for 33,776 contracts for the $452 Call. It is essential to ensure that these contracts are being bought when looking at golden sweeps. On ThinkorSwim, you can filter the options flow and see if these contracts were purchased or sold.

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Chart U.5 - Charts by ThinkorSwim

Chart U.5 is an example of a $PYPL golden sweep on February 20th, 2022. The contracts were bought because they are green in the options time and sales tab. In total, this trader purchased 1,298 contracts of the $PYPL 5/20/22 $105 Calls at 10:26 AM EST. Remember, with sweeps, these come through as multiple orders through multiple exchanges. In this scenario, the trader spent a total of $1.5 million. When observing options flow, it is also essential to make sure that the technicals line up. If the technicals do not align with the order type, never follow it. The reason being these sweeps can come through for several different reasons. Maybe the sweep is tied to equity, or the trader has a bigger position on the opposite side of the market and uses that trade as a hedge.

Chart U.6 - Charts by ThinkorSwim

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Chart U.6 of $PYPL on a 10-minute time frame can show you exactly where the trader entered. As soon as $PYPL broke above the EMAs intraday, they started loading up. In this scenario, the technicals did make sense for an entry for at least a day trade. Again, the trader has an expiration date three months away, so I am sure they plan to swing those Calls. That is how I would use the options flow to my advantage when trading. If you plan to swing this trade, you will want to look at the daily time frame and make sure all the technicals confirm the move as well. Once you have confirmation that big money is flowing in and the technicals, that is when you execute and use proper risk management. Since the sweeper had purchased the Calls, $PYPL has rallied to a high of $122.81, putting the contracts $17.81 in the money.

Chart U.7 - Charts by ThinkorSwim

Going back to the $SXPU example in Chart U.7, the flow was picking up on the orders, and the options time and sales confirmed that they were buys; however, the technicals did not confirm the move. Therefore, I would not follow the flow. Flow scanners can be a handy tool if you know how to use them properly. Again, always make sure that the orders are actual buys and that the technicals align with the flow. Also, try to think about economic news when the flow appears. The orders could be hedges to a much larger position on the other side of the market.

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Dark pool prints Another feature with most flow scanners is the darkpool prints. The darkpool is a huge block of orders that are being bought or sold by institutions or major banks. These dark pool prints will appear a few days or even weeks after the trade has taken place. The institutions and banks do not disclose their intentions behind the trade so that they do not affect the underlying stock price. Most of the time, the dark pool prints will not tell us if they are a buy or sell order—just a large position in the market.

Chart U.8 - Charts by FlowAlgo.com

Chart U.8 is an example of how the dark pool prints will appear. They are not green, and they are not red. Just huge transactions were occurring on these stocks. You can, however, piece together the flow and darkpool to conclude what is going to happen. For example, maybe the two $SNAP darkpool prints appeared totaling $34,000,000, and then ten sweeps came through for Calls. You could piece together that the dark pool prints were a bullish position with the flow. Then as always, utilize the technicals to confirm the possible move. 473

Finding Hot Stocks There are several ways to find what stocks are heating up and gaining attention from investors. One way I find hot stocks is through Facebook. If you go on Facebook and go to the group's tab and search for "Stock Market," you will find hundreds of thousands of groups. Find active groups with a decent number of daily posts and join 20-30 of these groups. Each weekend I go on my Facebook feed and just see what everyone is talking about. Some companies might have reported news that you did not see, and sure enough, someone on Facebook brought it up in a group, and you ended up seeing the news. There might be a Chinese electric car company gaining much attention from investors that you have never heard of. That stock could be only $3 a share but later grow to be a $67 stock at one point. Yes, this is a true story about $NIO. All I saw on my Facebook for weeks was $NIO $NIO $NIO. As a result, I researched, liked the company, and later became an investor for the short-term. I unfortunately sold all of my shares at around $35 a share and did not catch the entire move to $67.

Put:Call Ratio The Put to Call ratio shows investors and traders the difference between Put options versus Call options on a day-to-day basis. Using the Put to Call ratio can be super beneficial when making trading decisions. If you are using ThinkorSwim at the bottom of the option chain, there is a tab named “Today’s Options Statistics”. If you click the tab, it will tell you the number of calls and puts purchased throughout the entire day. For example, say you were looking at a possible swing trade on $NET. The technicals are beautiful, but you want one more piece of confirmation to let you know that this is an excellent trade to take. You go look at the Today’s Options Statistic tab and see that 23,182 Call contracts were purchased, and only 8,549 puts were purchased. The Call buyers outpaced the Put buyers 3 to 1. As a result, this will give you another confirmation to go long.

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Chart U.9 - Charts by ThinkorSwim

Chart U.9 shows the Put to Call ratio for $MO. This was a stock I was looking to swing due to many technical reasons, and the Put to Call ratio gave me more confidence when entering this trade.

Chart U.10 - Charts by ThinkorSwim

Chart U.10 is a picture of $MO on the daily time frame. Notice all the technical confirmations.

Fear and Greed Index

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As an investor or trader, you will experience two types of emotions: fear and greed. That is essentially what the fear and greed index is. This index lets you know the emotions that market participants are experiencing. Fear is what causes investors to leave the market, which means selling their positions, and as a result, the market will drop in price. On the other hand, when investors are greedy, they drive prices higher to the upside and make the overall market overbought. A famous quote from Warren Buffett is, “Be fearful when others are greedy, and be greedy when others are fearful.” When investors are greedy, they are buying, buying, and buying—sending prices way over their fair value in the hope of making a quick profit. When there is an unusual amount of buying for a substantial amount of time, eventually, prices will climb so high from greed that you should be fearful. We know that stocks do not go up forever and will eventually come back down. Eventually, there will be profit takers, and individuals will sell in the fear that they will lose money. On the other hand, when investors become fearful, they tend to sell off their stocks regardless of how much the price drops. This is when you should be greedy because you are getting a discount! Use COVID-19 as an example. During the March 2020 COVID-19 sell-off, investors were selling their stocks because they thought COVID was the end of the world. Since the COVID sell-off, $SPY has increased +100% from March 2020 to August 2021. Using the Fear and Greed index can help you make an educated decision going forward in the market, especially if you are in a profit-taking area or a buy zone.

Chart U.11 - Chart From CNN.Com/Market/fear-and-greed

Chart U.11 is a picture of the Fear and Greed Index from CNN

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Chart U.12 - Charts by TrendSpider

Chart U.12 is a line chart of the $SPY on the daily time frame. Notice the resemblance between $SPY and the Fear and Greed Index? The greed peaked right before COVID and then hit a low in fear at the bottom of the COVID sell-off. There is much resemblance between these two-line charts, and it is something that I pay very close attention to on a weekly basis.

Economic Calendar This is one of the most important things you want to pay attention to as a trader. The economic calendar lets you know about all the important economic news coming up the following week. These economic reports range from pending home sales, consumer confidence, job reports, consumer price index, etc. Here I will share the most important economic reports that you must pay attention to.

Consumer Price Index: This shows the change in prices over time for consumer goods and services. The CPI includes food, fuel, and utilities. The higher the CPI becomes, hints that you are paying more for everyday items such as gas. When I first got my license in 2016, gas was $2 a gallon. Now it is $5 a gallon! Therefore, you have less purchasing power and are paying higher prices. An increase in CPI hints at inflation, and the stock market hates the word "inflation". CPI numbers are released once a month and can be found on the economic calendar.

Producer Price Index: This shows the average changes in prices received by domestic producers for their output. These measurements are based on consumer goods such as food, medical care, and even 477

retail. The PPI shows the change in prices from the seller's standpoint and often hints at inflation. Again, the market hates the word "inflation." This is also released once a month. The difference between CPI and PPI is that CPI measures the costs and viewpoint of the customer; however, PPI measures the costs and viewpoint of the producers or sellers.

Initial Jobless Claims: These numbers are released weekly by the U.S Department of Labor. Jobless claims are released at 8:30 am EST on Thursday. These claims refer to the number of unemployment benefits claims filed by unemployed individuals. The more people that file unemployment generally means fewer people are working; however, the fewer individuals that file unemployment generally means more people are working. If jobless claims start ramping up, this can hint at a weakening economy and often result in the stock market dropping in price. However, the lower jobless claims become can hint at a striving economy, and as a result, stocks will more than likely edge higher.

Unemployment Rate: This measures the number of workers who currently do not have a job but actively seek employment. As a result of a weakening economy, the unemployment rate will be higher than normal. If unemployment stays high, stocks will likely drop. But lower unemployment rates can hint at a strengthening economy. Federal Reserve: Whenever the Federal Reserve speaks, I do not trade during that time. Jerome Powell, the current chairman of the federal reserve, can make or break the market in just one sentence. If he gets on TV and says two words, "inflation" and "tapering," the market can go flying or drop substantially, depending on the context they are used. Below is an example of what the stock market did when Jerome Powell mentioned that no tapering was expected in the short-term. Since we do not know what Jerome Powell will say when he speaks, it is best not to trade and wait until he is done.

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Chart U.13 - Charts by ThinkorSwim

As seen in Chart U.13, once Jerome Powell mentioned that no tapering was expected in the short-term, the $SPY began to rally. There are plenty of other economic indicators that investors pay attention to; however, these are the main ones that I keep my eye on. I have noticed that these tend to have the biggest impact on the stock market, which is why I want to watch them closely.

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Chapter 22: Use Short-Term Gains to Generate Long-Term Wealth In this book, I have laid out everything you will need to know on how to become a profitable trader. Now, what do you do? It is important to pay yourself from the market every week or two weeks. I see no value in having a $500,000 trading account because if you follow the rules of risk management, most of your account will not be in active trades. As a result, you need to figure out the right amount of capital to keep in your account. When deciding this number, think about this: if you were to lose all the money in your trading account, would your life change for the worse? If your answer is yes, you need to take money out of your account. You should only put what you are willing to lose in your account, or you will experience emotional trading. Once you figure out the magic number, the rest is easy. For me, I pay myself once a week from my profits. Again, I have a set amount of money that I trade with, and anything over that I withdraw from my account to generate long-term wealth. There are so many places where you can put your capital to generate wealth in the long-term. One of the most important places to put your excess cash is into a long-term portfolio. There are many different stocks, ETFs, or mutual funds that you can place in your long-term portfolio. I prefer to go with individual stocks since this is where the most growth potential can be found. If you were just to look up the S&P 500 top holdings, you are bound to find the stocks you should be looking to add to your portfolio. When investing in individual stocks, you need to research the companies' fundamentals more than you would if you just bought an ETF. When looking at an individual stock like $AAPL, since the COVID sell-off, $AAPL has risen from $53.15 a share to a high of $155 a share which is almost a +200% gain. $NVDA went from $45.17 a share to a high of $230.43 a share in just a year and a half, resulting in a +410% gain. However, $SPY, a common ETF many investors invest in, has only increased by +111%. This is why I prefer going the individual stock route. Much more research is required, but it is well worth it. On the other hand, an ETF is a fund compiled of many stocks. When investing in an ETF, you essentially own a piece of 500 stocks, 2,000 stocks, or even as many as 4,000 stocks, depending on the ETF. ETFs also tend to be a lot more expensive than most other stocks. If you are someone who does not have the time to do individual research on stocks to invest in, ETFs may be the way to go. The average return on the $SPY in the last century has been 10% per year, which is 480

good. There are many other ETFs that you can invest in. My favorites are the ones from Vanguard, specifically $VTI. However, there are other ETFs one could invest in. The SPDR ETFs mentioned in the swing trading section, Vanguard ETFs, ARKK ETFs, Invesco ETFs, iShares ETFs, Charles Schwab ETFs, and many more. Make sure to do your research on the ETFs that you want to invest in. Some ETFs do terrible and only return 4% per year, while others outperform the market returning 13-15% yearly. On top of that, there is also dividend investing. A dividend is a "thank you" payment from a company that is paid out monthly or quarterly to its shareholders for investing in the company. For example, $T (AT&T) pays $2.04 per year per share held. The current price of $T is $28 a share. I know you may be thinking that $2.04 does not sound like much money, especially for an entire year of holding. But, what if you own a few thousand shares? That is $6,120 a year just for owning a stock. Imagine what you could do with an extra $6,120 put in your pocket each year. That beats the amount of money you will generate in a bank account. You might as well put your money to work for you. What if you had 5,000 shares of $T? That is now $10,200 a year just from owning a stock. Not only can you invest in the stock market for the long-term, but there are also many other long-term investments out there; just get creative. Some examples of other fantastic passive income sources are cryptocurrency, and real estate. You now have a way of making money in the short-term through trading, but the short-term profits can be used to generate long-term wealth and financial freedom if done correctly.

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Conclusion With that being said, this will conclude The New Age of Technical Analysis. I want to thank you for purchasing this book and putting your faith in me to teach you the needed material on how to become a successful trader. I hope this book will serve you a lifetime of benefits and helps you on your journey to success. All these strategies have proven to my students and me to be efficient and accurate, so I hope it can treat you how it has treated us. If you could leave a review for the book, it would mean the absolute world to me. If you have any questions about anything written in this book, please reach out to me on Instagram: @Carwhorns or on Twitter: @Carwhorns. Also, check out my YouTube channel: BrandonTrades, where I have hundreds of videos on how to trade effectively. As always, stay motivated, and chase your dreams. We all started trading for a reason. Remind yourself of that reason every day you get up. Did you start trading because you hated your job? Did you need more money to pay the bills? Are you looking for an extra income stream? These are all reasons to remind yourself to keep pushing each day. You will struggle at the beginning, but it is just like anything else in life. Babies are a great example. The first time they get up and walk, they fall and cry, but get back up and try to walk again. If a baby is motivated to learn how to walk and keeps getting back up, you should be able to learn how to trade and learn to pick yourself back up on a bad trading day. Have I wanted to quit? Of course I have. No matter how hard it is, keep pushing. Quitters do not get anywhere in life. Push yourself as much as you can. My life would have been completely different if I had given up when trading got hard. I would be working for the state police and probably hating my life. Instead, I continued to push myself and became successful at trading, and not only that, but I am also changing others' lives daily through YouTube, mentoring, my first book, and now my second book. With that being said, I would like to leave you with a quote from my favorite rapper, Logic: "How can the sky be the limit when there's footprints on the moon?" I wish you all immense success. -

Brandon.

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