Happy Friday, Evolvers! As usual, I’ll be answering questions from students…
I don’t know about you, but I’m happy to wrap up another head-spinning week of bear market action.
Hopefully, none of you got too chopped up in the carnage. I’m not gonna sugarcoat it … this market’s brutal.
Let’s recap where the major indexes stand (at the time of writing):
- The SPDR S&P 500 ETF Trust (NYSEARCA: SPY) is down 17% YTD…
- The Invesco QQQ Trust (NASDAQ: QQQ) is down 27% YTD…
- The iShares Russell 2000 ETF (NYSEARCA: IWM) is down 23% YTD…
- Bitcoin (BTC) is down 36% YTD…
When will this unstoppable sell-off find a bottom? No one knows for sure. But my spidey senses are anticipating some sort of bounce soon.
Even in the most bearish environments, you’ll always see ‘relief rallies’ — when the price action reverses sharply to the upside, often at the most unexpected moments.
All this to say, we must be prepared for anything the market throws at us in the coming weeks.
Enough small talk. Let’s get to the Q&A…
“It seems like you’re very discerning with your trades. Can you go into more detail about exactly what kind of setups you’re looking for?”
My strategy is based around shorting overextended momentum stocks.
These stocks provide the best volume, volatility, and price action for day traders.
I use certain technical indicators to determine when it’s time to buy puts…
Every time I try to trade setups outside of my strategy, I regret it.
That’s why I’m currently being patient, waiting for those ideal setups.
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So, how do I determine which stocks are right for my strategy?
My ideal setups check these three boxes:
- Above-average volume
- Volatile price action
- A major catalyst
Do yourself a favor — cut your watchlist down to the stocks that check these boxes.
Only focus on plays with the highest probability of success.
“What’s your thesis behind buying calls on WEAT? And what’s your price target?”
Ukraine currently has no access to its wheat supply…
Wheat shipments from Ukraine have been blocked for several months now as the Russian army has set up blockades in vital Ukrainian ports on the Black Sea.
Bottom line: This could lead to a global supply constraint the likes of which we’ve never seen before.
Look at what happened to oil stocks following the Russian invasion of Ukraine…
They went parabolic because the conflict threatened the global supply of crude oil.
Now, a similar scenario is brewing in the wheat markets.
I’ll go into more detail on this trade soon. But that’s my main thesis.
For levels, I’m targeting the $13 area initially — $14 if it starts running on high volume.
Meanwhile, I’m gonna be really careful around $12.50, where WEAT has previously hit some resistance.
“My goal is to make $100,000 in two years with a $10,000 starting account. Is that possible, or should I set a more realistic goal?”
I’ll let you in on a little secret … working toward financial goals will inevitably leave you disappointed. It can even be detrimental to your growth.
Take it from me, a millionaire trader. If you’re truly dedicated to becoming the best trader you can be, you won’t be satisfied just because you have a certain amount of money in your account.
Think about it. If you’re successful in 10xing your account, you’ll probably wanna keep trading from there … right?
After all, you will have proven to yourself that you can do it on your own.
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Plus, you’ll have a considerably larger account. That makes it easier to make money without risking a large % of what you’ve already earned.
Stopping your journey there would be a big mistake. So what’s the point of setting this financial goal?
‘Making it’ as a trader isn’t about money. It’s about gaining knowledge more than anything.
There’s a good reason why 91-year-old Warren Buffett is still studying the markets every day — even with $117 billion in the bank!
Imagine if the ‘Oracle of Omaha’ had decided $100,000 was the place to stop learning. He never would’ve become the greatest investor of all time.
My advice? Forget about the money. Focus on becoming the best trader that you can be.
Final Thoughts
I’ve said it before and I’ll say it again … this price action’s not for the faint of heart.
Be careful out there and make sure to study hard while the market’s closed.
Have a great weekend!
