Targeting Fibonacci extension targets

A Tuesday Trade Edition: One of the most important concepts in trading is to review your work, and learn from the good and the bad. It’s critical to identify what’s working — to do more of it. Each week, you’ll get a trade from my trading journal, in which I explain my whole 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.

Let’s take a look at a ‘rinse and repeat’ strategy today. These are great when you’re looking to take advantage of some quick profits and you’re not necessarily wanting to learn a new strategy for whatever reason.

I love this strategy in particular because it does involve my favorite, a Five Star pattern.

So let’s take a look at this quick double in Salesforce (CRM)…

The Setup:

Salesforce is a favorite ticker of mine in general. But for this example, I picked it for a variety of reasons:

  1. It had a fantastic Five Star pattern.
  2. It’s a large cap stock, and a lot of the previous Tuesday Trades are either recent IPOs or volatile short interest tickers. This one is a little bit more stable than some of the others because it’s a large cap stock (it’s a ‘big name’).
  3. There was a run into earnings play.

How It All Played Out:

I got into the trade when the TrendStrength Candles showed me that we were pulling back, and then that we were starting to trade to the upside. A general rule for my trading: I like to get into my trades as a pullback starts to hook to the upside.

In this example, I placed a butterfly (a really cheap butterfly) for $1.45 per contract. Then I got out at $2.93 per contract. A really nice double on a trade that only cost me $1.45 and lasted only a few days. So like I said, this was a super cheap trade where I was able to make just about $300 with less than $300 to start.

Going Forward: On A Five Star Pattern…

Really what you’re doing is you’re getting in on a pullback and targeting the Fibonacci extension targets. So I went ahead and targeted 210. Now I was 5 cents off from my target price (210) when I exited. CRM hit 209.95 right at the end, so I was able to get a quick double once the price went directly to my targeted Fibonacci extension (the 1.272% extension).

This is a perfect example of a rinse and repeat strategy. Why?

Because right after I took profits on this one, I was able to set up another butterfly similar to this one in my Stacked Profits Mastery Program for those members to take advantage of. I talked more about small account, consistent setups like this one in my recent webinar about how options trading can change your life. Watch The Replay Here.

1 thought on “Targeting Fibonacci extension targets”

  1. Hey Danielle,

    Are you taking profits on your butterflies when they hit your target level regardless of the days till expiration?

    Thanks,
    Jay.

    Reply

Leave a Comment

Up Next...

Trade Review: Using a Neutral 0 DTE SPX Strategy

  In today’s Trade Review episode, I cover a quick SPX 0 DTE trade from last Friday at market close. In this video review, I cover: Why I decided to make a bet that the market would trade sideways into the close How I analyzed the options chain and technical chart patterns Why I decided … Read more

Read More

Butterflies + Put Credit Spreads Combined

A Bullish Earnings Call Last week, in the trading room, one of our members requested that I analyze the ticker AAP. This ticker belongs to Applovin, a company I’ve never traded before. This find is a prime example of the collaborative aspect of the trading room, and it’s why I appreciate our dedicated traders so … Read more

Read More

Walmart: Earnings in Focus

Walmart Earnings: May 16th Walmart is reporting earnings on Thursday, May 16th, before the bell. This is one of the most important earnings reports this week because it will show investors how the largest retailer in the United States and the world is faring. Between high inflation, consumer sentiment, and behavior, various factors could impact … Read more

Read More

Subscribe Today!

Want my up-to-date analysis, setups, top trading tips, and more? Be a Five Star trader, and join my free newsletter today!

Sign Up Now
all-as-seen-on-logos