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 “Tuesday Trade” this week, I want to outline my trade in Advanced Micro Devices (AMD).
Identifying hot sectors in the market is a part of my everyday life as a full-time trader. One of those sectors that I choose to pay extra attention to is the semiconductor industry, and more specifically, AMD.
When I checked on AMD near the beginning of last December, I saw that it was in a squeeze. This is always a signal to me that there could be a viable setup. Next, I took a look at market sentiment as a whole. December was a bit of an odd month, with the first few weeks experiencing a fair amount of chop. With that information in hand, I decided to buy a butterfly — BUY +1 BUTTERFLY AMD 100 (Weeklys) 31 DEC 21 140/165/190 CALL @6.67 limit order (LMT).
The thought behind this trade was to target a return to previous highs with a target of 165. I chose to do this because typically when the market falls, semiconductors fall hard, too. Likewise, when the market picks up, semiconductors tend to rally hard. It was my hope to ride the market chop and use it to my advantage. My stop was set to 50% and I risked 2.2% overall.
Pictured below is my AMD setup with an oversold VZO setup, daily squeeze, and targets.
The following week I was checking on my trade and saw that AMD was bouncing at the 50 simple moving averages (SMA). These 50 SMAs were key lines in the sand and if price proved it could hold and bounce here. I knew I was in good shape. However, AMD still had more than two weeks before expiration so I held on to see what more I could squeeze out of this trade.
After another week, the market decided to shape up. Finally, on December 27, I waited for buyers to come in post-lunch and exited AMD near the market close for nearly double the profit — SELL -1 BUTTERFLY AMD 100 (Weeklys) 31 DEC 21 140/165/190 CALL @13.10 LMT.
Interested in trading alongside Danielle? Check out her Stacked Profits Mastery program. Here, Danielle provides real-time entry and exit points for trades just like these and provides expert commentary during market hours.