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Why August Is My Trader Ego Challenge

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Trade of the Day Wake-Up Watchlist

"I want to focus on stacking up base hits and not worrying about having seven or eight different swing trades on at any given time."

Nate Bear, Lead Technical Tactician, Monument Traders Alliance

Nate Bear

Hey Gang!

Thursday's 200-point reversal proves exactly what I meant about August being a trader ego challenge.

I'm going to say this straight up: I called August tricky for swing trading, and seven days in, the market is serving exactly the kind of humble pie I expected.

Yesterday's Dow action - is Exhibit A for why I'm treating this month differently.

The Day Laborer Approach

Here's my mindset shift: I want to focus on stacking up base hits and not worrying about having seven or eight different swing trades on at any given time.

Think about it like this - where can I put some money to work and basically have the ticker be like a day laborer? I don't necessarily want to hire you. I don't want you to be part of my long-term growth plan. I just want you to come move some stuff around, help me make a little money today, and then I'm sending you on your way.

What that means in this environment:

  • Smaller bets and shorter time frames
  • In and out before the market can serve you another reversal sandwich
  • Base hits, not home run swings

The Statistical Edge I'm Watching

 

Here's something that caught my attention: When a stock makes a move 1.5X greater than its expected move, it tends to have huge follow-through.

Nvidia's CEO: "This Will Be a Multitrillion-Dollar Industry."

Nvidia's CEO believes Elon Musk's new technology could help launch an entirely new multitrillion-dollar industry.

According to Jeff Brown, the tech legend who picked shares of Nvidia in 2016 before they jumped by more than 22,000%…

It could also help send shares of this Elon Musk supplier skyrocketing higher.

Take Shopify (SHOP). It's a recent earnings winner, going from $127 to as high as $156 this week. The expected move for SHOP for earnings was 10.4% - that's what the options market was pricing in. But SHOP actually moved 22%.

That's more than double the expected move.

This is exactly what my Opening Bells Aftershocks strategy aims to capture.

We saw this pattern recently in META, where the expected move was 5.7% and the actual move was 11.3%. META hit a high after earnings of $774.89, then dipped the next day to as low as $745.31, and climbed back up to the $760s.

Real Trading, Real Results

I tried buying weakness on SHOP yesterday - had success with one trade and failed on my second attempt. That's the reality of trading in this environment.

Even with statistical edges, you're not going to bat 1.000.

But here's what I learned: After watching the Nasdaq sell off with everything else during yesterday's reversal, any trade I take will be in and out, very short-term focused.

Your Action Plan

If the Nasdaq can regain momentum above yesterday's highs, I think there's a way to make money long SHOP via call options. But given Thursday's market character - that violent morning-to-afternoon reversal - I'm treating every position like a day laborer job.

Get in, do the work, get paid, get out.

If you want to learn more about why I love trading these statistical edges in earnings winners, check out Opening Bells Aftershocks.

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