Today was a masterclass in not being married to your expectations. I was looking for an opportunity to short Amazon (AMZN). For the last two weeks, we had been waiting for AMZN to break 3325, but it kept testing and rejecting, even as the market boomed overall. My gut told me it could plummet, if market run up failed. I was mentally locked and loaded to buy puts.
But then, lo and behold, it finally cleared 3325. Most people know I don’t like to chase, and noticed the play late, but I knew what this stock would do. Amazon was so pentup and ready to run. Having broken that barrier, my model( watchlist levels) told me it was likely to go to 3350, and if it cleared 3350 it was probably going to 3375 and maybe even 3400. I ditched my plan to go short and instead went long, snapping up AMZN 3330 calls for $13. It ripped through 3350 like it was nothing. Check out the action in this chart and how AMZN reacted with the dashed blue lines. UPDATE/Correction: I apparently started buying the 3330 calls at 5.50 yesterday not at 13. so on the volume hod break and in anticipation of the 3325 breakout vs after.
I had my sell orders set too conservatively definitely underperformed — but I made a plan for the 3350 level and executed to the plan. :). While bummed, I’m not upset about the profits missed, instead I’m focused on reviewing what happened during my trade planning. The bottom line, I didn’t make a plan for the breakout, and so I made a quick chase plan to the next level vs what I normally do — I was hyper focused the the planned trades on other stocks that worked out great.
Once the initial run happened, I was able to make a new plan for an afternoon run using 3375 as a support guide targeting 3400+. So here was my thinking, if I can get 3390c for $4 or less, then if hits 3400, in afternoon, I will likely be able to sell for $12+ (400-390=10+2 for the juice) and and maybe $20+. The planned worked out. Great example of the process I use and teach to focus on planning trades using the watchlist levels, to get great results. I choose 3390 instead of 3400 because what if it closed at 3400 or just under. How many times have we seen stock pin just over or under a target level?
If you had taken the 3330 calls when shared in our THT room, and held for the day, that $13 call would have been worth $77—a $64 profit per contract. Meaning for every $1,300 you committed, you would have taken $6,400 profit.
If you were more aggressive and took the 3375 when I got the 3330 calls using the watchlist level to choose which strike and targeting the next level above at 3400. 5 contracts at $2 or $1000 would turned into $12500 at 3400, or $17000 at end of day.
By using the watchlist levels(dashed blue lines) to help guide and plan trades, you can get outsized rewards to the risk. These plays don’t happen every day, but often enough to get educated about it.
Pre-market, I was looking to see if Tesla (TSLA) would break over 822. When it did, I alerted our members I’m buying TSLA 830 calls for $1-2. Those contracts are now worth $9. For every $1,500(average) you committed, you could sell for $9,000.
The best part—all the work you had to do to see it coming was done in the first two hours of the trading day—to see if it would break 827.5. When it did, my model predicted that you could ride that wave all the way up to 838 and beyond.
Tesla announces its earnings next week. If the market likes what it hears, I’m expecting all-time highs—900, even 1,000+. I like 880 calls for $4. If TSLA tests a $900, those calls will be worth $20. If it breaks past 900, those contracts could be worth $120 or more. Meaning if I commit $4,000, I could exit with anywhere from $20,000 to $120,000 and beyond. Not bad for a day’s work. These closed at $6.55.
Upstart Holdings (UPST)
Students may remember I planning to long on Upstart (UPST) with 320 calls at $10-$12 when it was under $300. Those contracts would be worth $80 if you held them today—meaning for every $1,000 you committed, you could sell for $8,000.
Well, UPST was closing in on 400 and, per my model. If you watched my Premarket Prep video this morning, that is where I planned to go short expecting a $10-15 drop. Sure enough, it peaked at 401 and broke bellow the 397 level and dropped like a stone. I didn’t make the trade(was busy with AMZN and TSLA), but my model predicted the move and if you had entered according to that plan, it would have been a quick and juicy profit with GREAT RISK/REWARD.
Premarket Highlights – What could you have done with $1000
Student Highlight of the Day
Edumomo student ryu2 grew his account a whopping 15% on the day trading AMZN in just two hours. Many of our members trade larger accounts so 15% is an amazing result. If you have read The Power of 1%, you know our goal is just that. Imagine 3 weeks of work in just two hours. Congrats, ryu2! You make us all look good.