Sell Signals All Across the Board
Welcome to today’s Rude Awakening…
Yesterday marks another trading day with a strong open, followed by a selloff to lower lows than the day before.
We are definitely in a downtrend in this bull market.
Trading the Trend
Today, markets opened flat.
We’ve been up and down over the past trading week.
And, there’s no real catalyst to the marketplace at the moment, other than that potentiality of a new stimulus bill — which is looking less and less likely to pass soon.
Looking at the 50day MA, the S&P mini futures are just barely up above that support level at the moment.
It will be interesting to see if we can hold that level…
We are seeing sell signals across the board on all our major indicators:
Stochastics, RSI, MACD and histogram, all relatively weak and pointing down.
Trade volume is also dropping off.
Volatility is very low, right now.
This is usually a precursor to a big move taking place…
So, we’ll have to continue to keep a close eye on these indicators to see where markets are headed next.
We have been focusing on trades with a bearish bias, and they’re performing quite well.
The NFLX trade we set up yesterday in the Rude Pro is knocking out of the park, looking to give us an implied rate of return of nearly 11% in just three days — or, a 1,300%+ annualized percentage rate.
Cash on Cash vs. APR
When comparing trades, it’s important to look at things on equal footing.
That’s why when I share trade data, I give you the cash on cash gains — the percentage of return on investment (ROI) which is simply showing how much money you’re getting against how much invested.
But I also follow up with the trade’s annualized percentage rate (APR).
Traders always want to track their trades based on APR. it’s an apples to apples comparison of different trades over different time periods.
Let me explain why with an example.
Trade A would give you a 20% cash on cash gains in 2 months.
Trade B would give you 5% cash on cash gains in 2 days.
Which one is better?
Well, at first glance, 20% is obviously more than 5%. But the key to trading is we want to keep our money moving. If we have capital tied up for 2 months to get 20% gains, that’s less beneficial to our overall portfolio.
This is why we want to compare them by annualizing those gains.
A quick 5% is much better than a drawn out 20%, because it means you’re keeping your money moving.
That’s why trade A gives us a 121.67% APR, and trade B gives us a 912.5% APR.
Annualizing gains demonstrates a much better point of comparison.
Where Will Markets Go Next?
Today’s market offers a lot of uncertainty.
But, no matter what happens in the market, traders can trade! And the best way to do it is getting in and out quickly. Getting in and out of an uncertain market quickly increases our chances for overall success.
In the Rude Awakening Pro, we set up a high POP trade on Tesla for 6% gains in just 2 days, which amounts to a whopping 1,095% annualized rate of return.
It’s a trade that stands to make money whether the stock falls further, middles out, or even goes up somewhat.
We did this using options.
If you want to learn more about our Pro level trades, you will be able to sign up for our Rude Awakening Pro service very soon…
But that’s it for today!
Have a great rest of your trading day, folks.
We’ll talk again tomorrow…
Editor, Rude Awakening