Category Archives for Scott Redler
The Ultimate Guide to Moving Averages: Trend Analysis the Pro’s Way
Moving averages have been a mainstay in my toolkit since I began my professional trading career in 1999.Moving averages help me determine:How aggressive to be with my portfolioWhich stocks I want to be long or shortJust how strong the current market trend isWhat news matters, and what doesn’tIn terms of importance, I rate moving averages above news, economic data, earnings, and just about any indicator you can think of.If I was a beginning trader looking to build my net worth, moving averages would be my #1 focus.And through a series of helpful case studies, you’re about to learn:What a moving average IsHow moving averages are calculatedThe specific moving averages I use, and how I interpret themThe biggest myth of moving averages Editor’s Note: If you’d like a downloadable and printable PDF version of this article, please check out The Ultimate Guide to Moving Averages. Click here to learn more ==> What Is a Moving Average? How Are They Calculated?Let’s talk about how a moving average is calculated.A moving average is a stock’s average price over a certain time period.We’re going to focus on the daily time frame this article. A daily moving average is the average of a stock’s daily closing prices over a specified number of days.(a weekly moving average would be the average of a stock’s weekly closing prices over a specified number of weeks)For example, the 50 day moving average is a stock’s average closing price for the last 50 days.Every day, the newest closing price in the moving average replaces the oldest, which is why we call it ‘moving’ — a moving average change every day.Here’s a simple chart of Apple (AAPL) with its 50 day moving average. The Biggest Myth About Moving AveragesYou may hear people say things like “moving averages don’t work” or “everyone sees the same moving averages, so they have no value”But here’s the reality: most serious technician understand that a moving average is not the same as a trading strategy or even signal. I don’t buy and sell purely because of a moving average.But moving averages do help me make decisions. They’re one piece of the puzzle.That’s why they’re so valuable to me.Simple vs. Exponential Moving AveragesThere are 2 types of moving averages — simple and exponential. They are calculated in slightly different ways. A simple moving average is a straight average of the stock price. An exponential moving average gives recent prices a bigger weight, so it does a better job of measuring recent momentum. Here’s Nvidia (NVDA) with its 50 day simple (blue) and exponential (pink) moving averages.You can see they’re pretty close, but the exponential (pink) is a bit closer to the current price.The Moving Averages I UseTraditionally, technicians and traders have focused on the 10, 20, 50, and 200 day simple moving averages.You can think of them in these terms:10 day simple moving average: very short-term trend20 day simple moving average: short term trend50 day simple moving average: intermediate trend200 day simple moving average: long-term trendI use a slightly different set of moving averages in my own trading, and in Redler All-Access.8 day exponential moving average: very short-term trend21 day exponential moving average: short term trend50 day exponential moving average: intermediate trend200 exponential moving average: long-term trend(I matched the colors on the names with their colors in the charts below.)I use exponential moving averages because they are more sensitive to the recent action, and give me a slightly better read on the near-term trend.Going forward in this article, all moving averages are exponential.Is There a REALLY Difference Between an 8 and 10 Day Moving Average?You may be asking “why the 8 day? Why not the 10 day?”In most cases, they’re not terribly different, as you can see on this SPY chart:But here’s what most people miss about moving averages: It’s not the exact moving averages you use that counts.What matters is how well you use those moving averages to help you manage risk.As I’ll soon discuss, I pay most attention to the 8 and 21 day exponential moving averages. I stick with those because my brain is trained to judge the action based on those time frames.If I was using, say, the 10 and 20 day simple moving averages, I’d probably end up with the same results — I’d just get there in a slightly different way.The Power of the 8 & 21 Day Moving AveragesTraders often ask me why I talk about the 8 & 21 day exponential moving averages so much. Whether you see me on CNBC, Twitter, or the Virtual Trading Floor®, odds are you’ll hear me me talking about them.Stocks that are in uptrends find support at the 8/21/50day. Stocks in downtrends get rejected at them on Bounces. Below the 200day is real selling. Rules to live by— Scott Redler (@RedDogT3) November 14, 2018 It’s because these moving averages are the most accurate short-term road map I’ve found.And I value moving average more than any other analysis I see out there.8 & 21 Day Moving Average Case Study I: The ‘Overvalued’ Beyond Meat (BYD)In mid-2019, Beyond Meat (BYND) was one of the hottest stocks in the market, and we focused on it heavily in Redler All-Access.This stock was very controversial, and I bet you saw plenty of headlines like this:But let’s look at the chart.What were the 8 & 21 day moving averages telling us?They were telling us the trend was strong. As you can see, it never even touched the 21 day! And most of the time, it was above the 8 day. This is a perfect example of a powerful trend. Even if you’re not long a stock like this, resist the urge to short because you think it went too far. Because if a stock goes from $46 to $200 while staying above the 8 & 21 day moving averages, there’s no telling how high it can go. A stock you think is overvalued can easily become more overvalued. So I never, ever short a stock that shows momentum above the 8 & 21 day moving averages. NEVER short a stock that shows momentum above the 8 & 21 day moving averages
Continue Reading -->Scott Redler: A Hot Active Sequence in TWTR
Twitter (TWTR) ignited with a Red Dog Reversal buy on June 28, when $34.57 was reclaimed. I picked up calls. Then, it gapped with power to clear $35.60 which got me in the stock.. This morning, I said that holding $35.80 makes it easier to stay with, and that it could get momentum by clearing $36.65 on volume.And we did get that move through $36.65, with Twitter hitting a high of $37.65 this afternoon.Traders that missed the boat on that initial Red Dog Reversal could have added through $36.64, and been sitting on a decent gain. Active sequences like this teach an important lesson: you don’t have to go all-in on every trade from the get to. You can start with something small, and then add Tiers as the stock rallies. It’s often better to average up into something that’s working than it is to double down on a loser. Then when it really gets stretched, you can take profits to manage the trade. I’ve been trimming Twitter stock throughout today while holding onto my calls. Positions Disclosure: As of July 9, 2019 at 2:34 p.m. ET, Scott J. Redler was long TWTR, UBER, STNE, DIS, NFLX, FB, SYMC calls, TWTR calls, NVDA calls, GWPH calls, AMZN calls; is short SPY, AMZN calls
Continue Reading -->Scott Redler: Using the Tier System on UBER
Your P&L isn’t only determined by your entry and exit.How you manage the trade along the way matters a lot.So let me give you a look at how I use a Tier System to trader around names, using Uber (UBER) as an example.UBER was on my radar last week, and I grabbed some shares on Thursday morning around $44, as I shared on the Redler All-Access private Twitter feed:UBER had a solid green day, closing at $45.30.Then, I was looking to add a second Tier to add on a move through the $45.50-$45.75 area:Uber kept pushing higher on Friday hitting a high of $47.08 and closing at $46.38.And as you can see on the right of the chart, UBER opened up today, and I sold most of my position over $47. It goes to show — if you’re not ready to commit to a position, think about starting small and waiting for a breakout. That way, you can at least get confirmation that a trade is in motion. Now, I’m watching for an opportunity to add back to my UBER position. Positions Disclosure: As of 7/1/2019 at 11:20 a.m. ET, Scott J. Redler was long TWTR, DIS, UBER, NFLX, SYMC calls, TWTR calls, AMZN calls; is short JPM
Continue Reading -->Scott Redler: Beyond Meat Delivers Big Time
Yesterday, I took Beyond Meat (BYND) call options into its earnings report. Now I’m going to show you how the trade worked out, plus a quick trick for judging a stock’s initial earnings reaction. Here’s the Tweet I sent to Redler All-Access readers:As I noted, these trades are pure spec. When they work out, they’re amazing. And when they fail, you lose 100% — which has happened to me in the past. So I’m always extra careful with them. Still, I liked the setup enough to speculate. And it worked out nicely with BYND gapping up over 25% at the open. Here’s a chart of the call options:The calls opened at $27.30 and hit a high of $29.50 before coming down to $20 in the first minute. I was out of all my calls by 9:41 a.m. ET. But what if you didn’t get in ahead of the print? What could you have done? Well, after a company reports earnings, I always look to see if a prior momentum high gets taken out. If it does, the stock often extends. In this case, it was the $108.67 high. You can see how the stock sliced right through it after hours yesterday:Again, this was a high-risk trade — but sometimes, the reward is worth it. Positions Disclosure: As of 6/7/2019 at 11:02 a.m. ET, Scott J. Redler was long UBER, AMD, GOOGL calls; is short SPY
Continue Reading -->Scott Redler: When Holding Overnight Is Hard, These Tactics Help
Holding stocks overnight has been hard lately, so I came in today flat equities. That means I had to lean on intraday tactics, as I’ll outline today with an SPY trade. I didn’t like today’s setup. We were gapping up after a tough day yesterday. But just because I don’t like the setup doesn’t means I won’t trade it. I adapt to the action, or I don’t get paid. It’s as simple as that. In today’s Redler All-Access Morning Note, I said: SPY made a low at $273.09 yesterday later in the afternoon, which complicated things. Buyers stepped up in the last 20 minutes and now we’ll see if it holds above yesterday’s high of $276.55. If it holds, next resistance is up at the 200 day at $277.60ish. Now let’s look at today’s intraday chart so you can see how I traded it based on my plan:SPY gapped up to start the day, so mission #1 was to see if the gap held. It did, and around 10:12 a.m., I bought SPY with a stop at the morning low of $276.62 — just above yesterday’s high of $276.55. I added when it crossed above $277. Then it took out the morning high of $277.63. After that I started selling, and I closed it out around $279 — good for a $2+ gain from the original buy. You could have followed this all live on the VTF®. (If you want to learn my process for scaling in/out with a Tier System, check out the Path to Profits program.) The lesson here is simple: on a gap up after a downtrend, you want to see that gap hold. And you want the market to stay above prior key pivots. Then you often get continuation in the direction of the gap. And on the downside, if the low of the day breaks, I’ll typically just stop out. There’s no need to press things in an uncertain market. Facebook’s (FB) Red Dog Reversal The Red Dog Reversal is another of my favorite intraday tactics — and Facebook had a beautiful one today when it broke below $161 to hit a low of $160.84.Then it reclaimed $161 to trigger a long signal. With RDR’s, I put my stop at the day’s low. So that’s 16 cents of risk. FB went on to break $167 — pretty amazing! I’d look to trim, though it has room to $170. (If you want to learn the full Red Dog Reversal process, check out the Path to Profits program.) Positions Disclosure: As of 6/4/2019 at 1:31 p.m. ET, Scott J. Redler was long TSLA calls
Continue Reading -->Inside the Redler All-Access IPO Corner: Uber and Beyond!
2019 is turning out to be a BIG year for IPO’s. Pinterest (PINS), Zoom (ZM) and Lyft (LYFT) were big names of interest in April. Since then, Uber (UBER) and Beyond Meat (BYND) joined the club. In fact, the Redler All-Access Morning Note now has an IPO corner. Here’s what I wrote today before the market open: LYFT showed some rare relative strength but it’s still very broken. The recent low is $47. It reclaimed $50 yesterday. It needs to hold $49. There is some room towards $52-$54 but that’s heavy resistance.PD has trended higher. $42 was our listed pattern price. It’s done very well, hitting a high of $54.57. Now it’s a bit extended. The 8 day is $49.ZM needs to hold $70 to keep upper momentum.PINS is choppy but the pattern is building. Now see if $27.02 holds to keep things constructive.UBER showed some strength yesterday as it closed near the highs. I bought some. My stop is in the $38 area. Hopefully it can get another day up and clear $40 for a push towards $41.BYND remains very strong as it cleared $72 to make a high of $80.75 yesterday. See if it can hold $76 to keep momentum. UBER had a rough first 2 days after coming public. But yesterday, it was strong and I got long before the close. Turns out good news hit right after the bell rung:Here’s the UBER chart I made just before noon today, where you can see the follow-through:UBER filled the gap and hit $41.69 today for a nice one-day gain. This was a nice little cash flow trade. Moves like this won’t make you rich but short-term 5% winners do add up. Now I’m looking for another setup in UBER, which I’ll be sharing in Redler All-Access. Let’s talk about BYND now, which was trickier. I said it needed to hold $76. It broke that level this morning, but look at how fast it came back to shoot up to $92:That’s a sign you need to pay attention. The key here is that BYND broke above that nice bull flag to take out $80.75, then the post-IPO high of $85, before finally reaching $92. So you probably know why we’re following the IPO names so closely in Redler All-Access (click that link to follow along) — they often set up great patterns for nice intraday cash flow trades and swings.Positions Disclosure: As of May 15, 2019 at 1:11 p.m. ET, Scott J. Redler was long SPY, TWTR, QQQ, AMRN calls
Continue Reading -->Scott Redler’s Reality Check: How to Take Control of Your Trading, and Finally Turn Things Around
Every day is a new day. And that’s the beauty of trading. You can always start over. But if you want to make a fresh start, you need a reality check. Put your ego aside, and take a serious look at what you’re doing right, and what you’re doing wrong. Most traders, especially when they’re losing money, can’t do that. But if you’re ready to take control of your trading, you can start now. Here’s how: 1) Break Down the Last Year This is where the rubber meets the road. Your first step to getting on track and stemming the bleeding is to know where you stand. Take your last 12 months of trade data, and put it in a spreadsheet. What was your P&L for each month? What about each week? And each day? What was your average gain or loss per trade? What were your 5 best and worst 5 days? 2) Connect the Dots Start working your numbers and look for the common threads. Did you let losers run too far? Did you sell your winners too early? Are you having trouble shorting stocks? If you look deep enough, you’re going to see some really interesting things… especially if you think about your life outside of trading. I’ve seen many traders post their worst results when they’re having family, career, or health problems. Something big like a divorce or surgery can really set you back. A lot of traders think they can fight their way through anything. And you do need a little bit of that attitude to get ahead in life. But if a major life event throws you off your mental game, take a break, regroup, and come back fresher. 3) Set New Goals Your #1 goal for the second half should be to break bad habits. Did you hit your daily loss limits too often? Did you keep doubling down on bad trades? Make a list of habits that cost you money, and print it out. Then, post it at your desk and read it every day. Breaking bad habits gives you instant results. For example, let’s say you keep breaking your daily loss limit, which drags down your average daily P&L by $500. If you can eliminate that bad habit and take back that $500, you’re going to have an extra $10,000 a month. That takes care of a lot of mortgage and tuition payments. How do you do this? Start by following the list you just made. 4) Create a Trading Daily Routine Successful people don’t come in to work wondering what they’re going to do. They have a routine. Elite performers like Steve Jobs, Winston Churchill and Benjamin Franklin all used daily routines to stay productive and on track. Trading is no different. So I’m challenging you to make a checklist of 10 things you’re going to do when you get to your trading desk in the morning. This can be stuff you’re already doing. But I want you to systemize it so you flow from one task to the next without getting sidetracked by the news, social media, or TV. It could be checking news, scanning charts, tracking futures, previewing the economic numbers, whatever. Just have a routine and stick to it. 5) Get Some Balance I love trading. But I’d hate it if I never got away to blow off steam. I highly recommend picking up a sport or hobby that forces you to be 100% in the moment. So start running, swimming, playing chess, or even video games to give your trading brain a rest. You’ll work out your stress and come back fresh. Plus, you’ll be taking better care of your body. Your P&L is tied to your health. If you eat well, and get to sleep at a decent hour, you’re going to be a better performer day in and day out. But if you’re coming in on 4 hours of sleep and chugging coffee to stay awake, you’re doing this all wrong! The Bottom Line You’ll never get where you want to go in trading if you can’t see the truth about yourself. Hopefully, you now have some ideas that can help you take that first step towards turning your P&L around. Positions Disclosure: As of 5/10/2019 at 10:56 a.m. ET, Scott J. Redler is long TWTR, TWTR calls, AMRN calls, BRKB calls
Continue Reading -->Scott Redler: What Is a “Special” Stock?
FYI – I discussed the broader market action with CNBC yesterday. Click here to read the article. ****** If you follow me, then you probably know I have my own trading language. It’s easy to understand once you get the hang of it, but I sometimes get questions about on particular term I use: ‘special’ As in, there are special stocks and not-so-special stocks. So what is a special stock? To me, a special stock is trending above the 8 & 21 day moving average (or an earnings gap) and showing relative strength vs. its sector and the market. These are the names I want as swing longs. I typically start them as Tier 1 positions (which is essentially a foothold), so I can add when these names break to near-term or all-time highs. (I discuss the Tier System in the Path to Profits program) This is a daily chart of Diebold (DBD), one of my picks from the 2019 Market Outlook Report:As you can see, it held the 8, 21, and 50 day to start the year. Then it gapped up big on earnings and reclaimed the 200 day moving average. Then it held the gap and didn’t fill it at all. This is ‘special’ behavior because it held the moving average, then held post-earnings highs with no trouble whatsoever. So what does a ‘not-so-special’ stock look like? Well, Lyft (LYFT) is a good example. It hasn’t been able to hold a high, and it’s below its brand-new 8 & 21 day moving averages.And Apple (AAPL) recently lost special status when it couldn’t hold its post-earnings gap.Want to learn more about my system? Check out Path to Profits.Positions Disclosure: As of May 8, 2019 at 10:49 a.m. ET, Scott J. Redler was long TWTR, PSN, BABA, TWTR calls, AMRN calls, BRKB calls
Continue Reading -->Scott Redler: Twitter Knocks It Out of the Park
Twitter (TWTR) crushed its earnings report this morning and surged big-time. Let’s wind the clock back and see how it played out. In Monday’s Redler All-Access Morning Note, I said this: “TWTR reports tomorrow morning. It’s hard to tell if this lower-level channel can resolve higher. I bought $36 calls in case it makes a big move. I’ll also see if it’s buyable after the report tomorrow, but it needs to hold $35.50-$36 on big volume to get some momentum back.” I also sent this chart on my private Twitter feed (for subscribers only):Good thing I had those calls… because it did make a big move! Twitter gapped up big today, as you can see:I sold my stock premarket, and then trimmed some calls as the stock rallied higher and higher. Here’s a chart showing the action in those April 26 $36 calls:Wow! Obviously, not all trades work out like this, but it feels great when they do! I typically look to hit singles and doubles when I’m trading, but sometimes, you make contact just right and things work out better than you think. Plus, as Redler All-Access members know, I’ve been in Facebook (FB) stock and calls too, and Twitter’s giving those a boost.Positions Disclosure: As of April 23, 2019 at 1:20 p.m. ET, Scott J. Redler was long ACB, TIGR, BAC, ZYNE, NFLX, FB, BAC calls, AMRN calls, BIDU calls, FB calls, TWTR calls
Continue Reading -->Scott Redler: Pinterest, Zoom, Lyft, and What’s Next
On Thursday, I appeared on the TD Ameritrade Network with my friend Nicole Petallides to discuss the big Pinterest (PINS) and Zoom (ZM) IPO’s. (click the play button to watch)We’re going to talk about what happened on Thursday. But before we get into that, I want to lay out the main principle from my ‘Art of the First Day’ IPO strategy. When it comes to judging new issues, I don’t focus on valuations or fundamentals. Instead, I look at supply and demand. The market action — especially the initial pivot highs — will tell you which IPO’s are hot, and which ones aren’t. Lyft (LYFT) failed early because there were too many shares up for sale. It quickly lost its initial lows and fell apart:Now let’s look at a recent IPO that had more demand than supply. Jumia (JMIA) is a perfect example of too many buyers not chasing enough shares. This is what F.O.M.O. looks like:Zoom priced its deal at $36. And in 1999-style, it opened at $65 and put in a high at $66. This may be a case of too much, too fast. The low was $60.32, and it closed at $62.Here’s how I’m looking at ZM now: it already made a massive move and there’s a lot of room between here and the $36 IPO price. Right now, I want to stay flat. If it breaks $60, the lucky longs could get nervous and start cashing in. And shorts might step up too. If it can hold for a few days, I might buy on a close above $66. Now let’s talk about Pinterest. Pinterest priced at $19. The stock then opened at $23.75. It hit a high of $25.18, a low of $23.05, and it closed at $24.54.Now it needs to hold that $23.05 low. If that breaks, I’ll have to reconsider my long. If it can get above $25.18, perhaps there’s a multi-day run. Positions Disclosure: As of April 22, 2019 at 9:07 a.m. ET, Scott J. Redler was long ACB, BAC, ZYNE, AAPL, PINS, TWTR calls, AMRN calls
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