In my opinion, one of the most valuable skills a trader can strive towards is the ability to nail both the upside and the downside of a chart.
I hear some traders say they ‘only buy puts on this stock’ or ‘only buy calls on that stock’ … but this is a dead wrong approach.
You’ve gotta be nimble, ready to strike on both sides of the momentum cycle.
If you can time the rally by buying calls early and selling them into strength, then follow through by buying puts near the blow-off top — that’s a nearly perfect trade.
And the inverse play can be just as profitable…
If you can buy puts near the top of a run, then profit off of a bounce at a near-term bottom, you can make a fortune.
The latter is exactly what I was attempting to do over the weekend with the ProShares Bitcoin Strategy ETF (NYSEARCA: BITO) by buying 6/30/2022 $14 Calls.
After turning less than $50,000 into $280,000+ on BITO puts last week, I’m now making an over-the-weekend bet on a near-term bullish reversal to $14+.
In other words, I’m playing both sides of the chart. Keep reading and I’ll show you how you can do the same in your trading…
WARNING: Don’t Try This at Home!
Before I go any further, I should warn everyone that trying to call the bottom on an ultra-bearish chart (like BITO) should be reserved for experienced traders only.
I’m making a speculative bet on a potential bounce, nothing more than that.
Additionally, I’m not oversizing on this play because there’s no guarantee that a bullish reversal will occur within my timeframe.
But if I’m right and BITO does bounce to $14 or $15 in the near term, the rewards could be huge. Just look at my last BITO trade.
How to Nail the Upside and the Downside
The key to trading both sides of a chart is to remove emotions from your mindset. Don’t EVER fall in love with — or hold a grudge against — any particular stock.
I see this all the time with inexperienced newbies. They’ll have blinders on of sorts, only looking to trade calls or puts and not seeing the opportunities on the other side of the options chain.
But it’s not just new traders who fall victim to emotional trading. I’ve admittedly been guilty of it myself from time to time…
Earlier this year, I kinda tried to ‘revenge trade’ Tesla Inc. (NASDAQ: TSLA) puts while I was still emotional from a previous TSLA loss.
All this to say, if one side of the chart doesn’t work out — don’t close your mind off to potentially trading the opposite.
Taking a Look at the BITO Chart
If you wanna learn how to play both sides of a chart, you’ve gotta start with great charting software. That’s why I tell all of my students to check out StocksToTrade, my favorite trading platform (with the cleanest-looking charts).
So, what am I seeing in my technical analysis that’s supporting my trade thesis?
Let’s look at the chart…
BITO YTD daily chart — courtesy of StocksToTrade.com
Pretty ugly, right? But in my experience, when there’s blood in the streets you wanna be going against the grain. Or at least taking a shot at it.
I’m betting that the low from last Wednesday at $12.26 will hold and lead to a further bounce.
Additionally, last week was the first green week for BITO. The fact that the weekly candle held green on high volume is notable.
Finally, there’s a clear gap to fill — giving me an obvious price target between $14 and $15.
If BITO can make a little run next week and fill that gap up to my target area, I’ll be out with another decent win in the bag.
While I need to stress again that I don’t want Evolvers chasing this bounce play, I do want you all to start thinking about trading both sides of a chart.
If you’re riding the upside, and you have a good grasp of the chart’s personality, there’s no reason you shouldn’t buy puts near the top.
Don’t be closed-minded. Options allow us to buy puts without risking as much as shorting common shares, and to buy calls with more potential upside than any long share position.
Do you know this mystery man?
He’s just discovered one of the most powerful ways to take on this bear market as a trader…
All from exploiting one tiny niche of the stock market (only 4% of stocks) that can bring in 2x, 5x, even 10x BETTER returns than penny stocks.
And he just went live on camera to talk with the public for the first time.