Hey 5-Star Trader,
“Tuesday Trade” Journal: One of the most important concepts in trading is to review your work, and learn from the good and the bad. Identifying what is working is critical — to do more of it. So, to lead by example, each Tuesday, you’ll get a trade from my trading journal, in which I explain my thought process from start to finish. Trading is all about finding something that works, and applying it over and over again. That’s how you find trading success. So study up on this “Tuesday Trade” and let’s get to work.
For this week’s “Tuesday Trade,” I want to outline my trade in Google (GOOGL).
Throughout tumultuous conditions 2021 has brought us, FAANG stocks (Facebook, Apple, Amazon, Netflix, and Alphabet – formerly Google) have been some of the most consistent tickers. So when I saw GOOGL setting up with a 195-minute squeeze I wanted to seize the opportunity and sold two contracts ─ SELL -2 VERTICAL GOOGL 100 (Weeklys) 24 SEP 21 2850/2845 PUT @2.15 limit order (LMT).
Because this trade was placed in the middle of September, I also wanted to take seasonality into account. September is typically weak, so I put my risk at slightly less than 2% with a 50% stop below the 34 exponential moving average (EMA) on the daily chart.
Two days into my trade and the market was looking choppy. I wasn’t too surprised by this since we were coming up on a monthly expiration and a quad-witching on top of that. However, despite the health of the overall market, GOOGL was still setting up nicely so I decided to hold it through the weekend.
The market opened the following Monday and conditions seemed to have worsened. We were experiencing high volume selling and key support zones were breaking down. GOOGL was able to hit the 50 simple moving average (SMA), but it was absolutely critical that it stay that way if we were going to see a bounce. Putting my faith in what GOOGL was telling me, I held.
The next day things were beginning to look up. There was an overnight gap higher and the market was beginning to turn itself around. I was watching the New York Stock Exchange tick index (TICK) closely and saw that the low TICK on the day was 647, which is still indicative of strong buying. With the information I had, I held the position.
Unfortunately, the market was not able to make a full recovery to the upside and it chopped around instead. By Wednesday my GOOGL trade was no longer behaving how I wanted it so I made the decision to cut it loose. However, the market had other plans for me! I was not able to get filled on my GOOGL exit so I was left still holding GOOGL by market close.
It wasn’t until Friday that I was finally able to exit my trade — BUY +2 VERTICAL GOOGL 100 (Weeklys) 24 SEP 21 2850/2845 PUT @4.75 LMT. Overall, my trade was close to hitting its target, but because of the gap down on Monday it ultimately ended up $15 shy of my goal.