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.
This week I want to talk about my trade in Taiwan Semiconductors (TSM).
It is a well-known fact that most of us utilize televisions, smartphones, personal computers, in our modern-day lives. What some of us don’t know is that all these devices — and us — are highly dependent on semiconductors. These small components are essential to making our tech “tick” which makes semis are one of the market’s “hot” sectors… and the reason why TSM is one of my favorite tickers to trade.
Near the end of June, I was scanning the market for a trade and saw a “run into earnings” setup in TSM and went in ― BUY +1 TSM 100 16 JUL 21 117 CALL @4.45 limit order (LMT).
At the time of purchase, it was at resistance so I only bought a single in the money (ITM) call. My price target was $125 so there was about $5 of upside potential and about $5 of risk —simple risk to reward of 1:1.
Several days later we were gearing up for the long 4th of July weekend. TSM was still looking good and in a squeeze. It was a low-volume trade day so I felt comfortable “setting and forgetting” this trade through the holiday weekend.
Fast forward to July 13, and I finally decided to close out my TSM trade ― SELL -1 TSM 100 16 JUL 21 117 CALL @7.45 LMT.
I closed this trade because I wanted to take profits before TSM reported earnings on July 15.
The reason I wanted to highlight this trade was not that it was my most profitable, but instead to show you that not all “run into earnings” trades are extreme overnight moves. Sometimes, you can “set and forget” your trades and make them work for you!
Interested in Danielle’s earnings tool? Check out her “Hot Zone Indicator.” This tool helps Danielle see a ticker’s fundamental backing and gives her a better idea on where a stock might end up next.