Important Tips for Swing Traders -- with David Moadel
hi everybody and welcome to looking at the markets with David Modell I want to
give you some important tips for swing traders and by the way if you want more
help with trading investing swing trading any of that stuff you can email
me anytime at David Modell at gmail.com so here's tip number one today for you
before you buy or sell anything it's not a bad idea to in addition to all the
other research you're doing to check the insider buying and selling and there are
different places you can do that right now I'm just using thin viz fi n viz fin
viscom and on the home page if you click on the insider that'll tell you now
there are no guarantees I cannot guarantee the accuracy of fin viscom
they are not paying me to make this video or anything like that
so you know no guarantees that this is accurate or not but you know for example
looking right now I mean if I thought about buying Facebook for a swing trade
to hold on to it for a few days few weeks a few months something like that I
might think twice about it because check it out Mark Zuckerberg the CEO of
Facebook September 30 sell selling shares October 1st selling shares
October 2nd selling shares 3 trading days in a row or not trading days but
just three days in a row selling shares thousands and thousands millions of
dollars worth of shares he's selling them you know does that necessarily mean
that Facebook's in trouble not necessarily I mean you know people sell
for different reasons but if he really believed that the stock was going to go
up you know you got to wonder why is he selling so much in so many days in a row
I mean that's not a great sign or here's another one Twitter if I was thinking
about buying Twitter I might think twice because you have two different insider
people selling you know one day and then the next you have a director at Twitter
selling many shares and then the next day the very next day the chief
accounting officer at Twitter selling a bunch of share
and so you have two different people right in a row
you know insiders in the company selling shares that's probably not a good sign
you know Google you gots you know again a sale all right so it's not all
necessarily bad I mean you might have in owners and insiders buying as well and
that could be a good sign all right so these are things to think
about y'all I want you to add this to your list of things to consider and it
really doesn't take that long to check it I mean you could just on this site
you could just go to the page and just browse through it and see you know who's
buying and who's selling what all right so that's a tip for you right there in
addition to all the other research you're doing one quick point I wanted to
tell you about before you buy or sell anything whether it's stocks or options
whatever it is if it's on a company you want to check to see when their earnings
date their next earnings report is going to be that's super important and I'll
show you an example of why that is so here is khc Kraft Heinz Company and I'm
thinking about let's say selling a put option because I want to buy a hundred
shares of Kraft stock at a lower price right now it's 2659 let's say I want to
buy a hundred shares at $25 a share okay so I could sell a put option and I'm
looking at the expiration dates for the 25 strike puts that I want to sell and I
noticed that with the expiration date one month away 30 days away that's
November first I can sell for let's say $42 per
contract all right so I could collect $42 right now in my account for selling
a put option on Kraft Heinz that expires November first and then I noticed that a
week later I could sell I could sell for almost twice that amount not quite twice
but pretty close for a lot more $72 and I thought wow that's unusual
you know $42 for 30 days out or just a week later $72 that that's
quite a jump in price and I thought man I'll just sell this one get $72 you know
and I would just have to be in the trade for another 7 days let's say another
week but then I thought wait a minute why is this so much more expensive it's
because there's a lot more risk because look at when the earnings date is
November 7 that's the earnings announcement for
Kraft Heinz stock okay and so there it is November 8 yeah of course the
November 8 expiration date is going to be more expensive I'll fetch a bigger
premium you know because there's earnings in there on the seventh and
this expires the 8th so if I sell the you know the one from November first
then I won't have to deal with the possibility of a big earnings drop all
right and so this is the safer way to go and so I think I'd rather sell this the
one expiring before earnings and only get $42 per contract then sell the the
one that's after earnings so yeah I'll get more money up front but I'll have to
deal with a big risk because of the possibility of a sizable earnings drop
that happens sometimes on earnings announcements a stock can go up a lot it
can stay the same or it can go down a lot and that's usually a risk I would
rather not take if I can help it so whether you're gonna buy a stock let's
say you're thinking about just buying the stock and not you know dealing with
options okay I mean if earnings is coming up soon you
might not want to buy the stock because it could go up a lot yeah it could also
go down a lot and that sounds a little bit more like gambling and less like
investing if you're just speculating you know right before an earnings
announcement if you're thinking it's going to go up a lot it might not and no
one knows whether stocks going to go up or down
no one knows whether it's going to be a beat or miss with the earnings and so
that's just a quick point that I wanted to make right now here's another
point I wanted to make you don't want to buy at a high price even though
everybody's going to tell you to not everybody but a lot of people if you go
on social media if you go in some chat rooms message boards newsletters
sometimes that people send out I'll give you an example all right oil ok WTI west
texas intermediate crude oil has been trading in a range from $50 a barrel to
$60 a barrel for a long time and so you've been able to buy in the low 50s
or at 50 and then sell when it gets up near 60 you could just rinse and repeat
that do it over and over but what did so many people in chat rooms and message
boards and on social media do when oil got up to 60 when it broke through 60
people got so excited as you can see on this chart went up to around 63 or so 62
or 63 everybody got excited they said it was a breakout it's breaking out of the
range that's not how it works folks it went right back down this was based on a
drone strike on Saudi oil facilities but if you're going to play the range play
the range if you're gonna buy it around 50 and then sell it around 60 and just
rinse and repeat that over and over that's what you got to do if you listen
to the people who say oh when above the range one above sixty it's 60 to 63 now
it's going to go higher well now you're buying at the top of the
range you're buying high and you're going to end up selling low if you
listen to those people now they're telling people to sell some of those
same people all right so you're gonna end up buying high and selling low I've
got a better idea if you missed the run up to 60 or 60 to 63 it's okay you know
no one could have predicted that there was going to be a drone strike on Saudi
oil facilities I mean come on who could have who could what trader could have
known that that was going to happen and it says so you say okay look it's at the
top of the range I'll wait until it gets back to the bottom or until it
establishes a new range I mean if it went way above 60 and then it started to
bounce between I don't know seventy and eighty over and
over that would be the new range but right now it's at the top of the range
and then it went back to the bottom now it's getting closer if it gets around
fifty it's right now it's it's in the low 52 s could easily get closer to 50
and then I might start buying you know it could be either us Oh which is an ETF
that represents oil or you could buy XLE which is an energy ETF that's another
way to play it way to play that or you can buy companies like ExxonMobil or
Chevron something like that the purest play would probably either be get into
the end of the futures markets and buy oil futures contracts or us oh okay this
is just a chart of WTI crude oil per barrel price all right and as you can
see it is down and you know that's what you get for buying at the top okay I
mean sometimes it keeps going higher but that's not how this works not how the
game works if you're gonna buy low and sell high so that's just a point I
wanted to make don't be listening to people who tell you to buy when
something is at the top of the range or breaking through the top or top of the
range necessarily unless there's a good reason to do so and obviously there was
not in this case there are exceptions to this of course all right so just wanted
to make that point I just wanted to make a really quick point here about the
three trading day weighting rule which I talked about so much here's an example a
textbook example this is Schwab SCH W and yesterday Schwab announced that
they're going to do they're going to have free commission free trading which
is pretty cool I use Schwab so I'm happy about that but as you can see the
investing community was not happy about that at all look at the size of that red
candle okay and as I like to say whenever you have a big red candle
there's a pretty good probability not always but a pretty good probability
that the next trading day is going to have a medium sized red candle and then
the next trading day is going to have a small red candle and that this is
textbook right here it is happening because not everybody reacts
to the news the same day some people wake up the next day and check their
portfolio and see that the stock is down and then they panic sell or they might
do it two days later and I mean two trading days I'm talking about trading
days here so weekends and holidays don't count all right so did I jump in and buy
Schwab on this day no and I'm glad that I did not okay I'm going to if I'm going
to get in then I'm gonna wait until at least three trading days have passed and
since the big drop and that so like today is day one after the big drop and
does that mean that I'm necessarily going to buy you know three trading days
after the big drop no that just means I'm gonna look at it and I might
consider buying it then but maybe not if it's still falling probably not okay so
that just means that I don't even consider buying anything that has had
such a huge drop in one day such a big red candle until I don't even look at it
until at least three trading days later then I look at it and reevaluate and
maybe consider buying it possibly or scaling into it all right so that's just
a point that I wanted to make all right so I hope you enjoyed these swing
trading tips I hope they were helpful to you once again if you would like help if
you want some coaching with trading investing charts fundamentals all that
good stuff you can email me for the coaching at David Modell at gmail.com
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