This blogpost I had written some time ago, but due to a delayed launch, I never got to post it. That’s ok, the cycles are the same and repeat over and over and over… Our training is all about identifying market and stock patterns and looking for similar ones in the future. New opportunities will appear like these so let’s be prepared when they do show up by becoming hyper-familiar with how these cycles setup. Besides, I like the blog title so I am forced to use it later rather than never 😊
As I sit down to write this, there is something “lurking in my craw.” It is that I am looking at the third massive stock setup this weekend that exploded without me having caught the entry. There was no good excuse for it because it was a classic cycle setup…a CAT-3 at that!
The stock is RETA (Reata Pharmaceuticals) and it came out of a TM-3 cycle setup.
So why did I blink? I had seen the setup gestating several weeks earlier.
Frankly, it was disorganization and the fact that 80% of my time lately has gone into outside business and to be honest is one of the reasons why a few years back I grew open to the idea of building a training community where I could train other traders not currently familiar with the style of trading I developed.
That way we would have hundreds of eyes (if not thousands) watching for these setups.
I’ve written more about the trading community I'm building >> here <<
But to give you a little taste of this particular setup and why it was a no brainer…here is the chart:
The chart had everything going for it: strong momentum, strong support where it counted, the “right” cycles lining up and a strong “story”: From TheStreet.com: Shares of Reata (RETA) - jumped in after-hours trading Monday after the biopharmaceutical company reported positive drug-trial results. The company said it would begin to seek marketing approval for its Omaveloxolone treatment for patients suffering from Fredreich's ataxia, a rare genetic disease that causes difficulty walking, a loss of sensation in the arms and legs, and impaired speech.
RETA had an internal TM-3 Cycle just short of the key $100 PPP (Psychological Price Point) zone and was also bouncing off of another dominant PPP (Psychological Price Point) Zone ($75). The TM-3 cycle is our dominant cycle for high quality chart patterns and monitoring just this cycle can be one of the most effective things to do with your trading.
That’s not the most interesting part. Many of you who have followed me in the past know that I am all about minimizing and cutting risk via options if at all possible. Well the nice thing about finding “under-the-radar” cycle based price squeezes is that these quiet periods can allow stealth entry into a trade.
…and stealth entries mean lower implied volatility and thus lower option pricing.
The options on this particular trade, the November $115 strike purchased for $1.33 ($133 per lot) on October 2nd were worth $6595 just three weeks later. This is over a 4800% gain in less than a month. Had you bought four contracts for $532, you would have had the equivalent gain of buying $25,000 of the stock. WITH DRASTICALLY decreased risk and return on your trading capital
Truly a Big Kahuna Trade…
More hits and less misses coming in the future as we build our tribe!
Let’s Rule The Freakin' Market’s Together!
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