Master Trader Plan for Week 9-17-18

mastertrader.com/master-trader-plan-for-week-9-17-18

Dan Gibby September 16, 2018

In last Monday’s letter, I was expecting the broader

markets to take a stand, hold their current support
levels, and move up early in the week.

The prior week, prices had moved lower and

closed near the lows of that week. That created a
red candle (close below the open) in the weekly
time frame.

Considering that red candle at the time — that

could have resulted in prices moving lower, I suggested that the red bar (candle) should be
ignored.

When I say ignored, it isn’t to mean that we should not recognize it as a bearish event. What I
said was that, in an uptrend, red bars being ignored are normal.

Last Wednesday, during the Master Trader Live event where Dan and I discussed the use of
Multiple Time Frames (MTF), it was explained that in a time frame lower than the one where
the red bar has formed (the higher time frame), the transition from the red bar to the green
bar can be seen.

If you missed Wednesday’s event or the replay, here is the link.

We discussed many excellent concepts related to MTF and price patterns.

Where Are The Markets Headed This Week?

By the end of last week, the broader markets did ignore the prior week’s red bar on the
weekly time frame.

Some markets moved more than others and, surprisingly, the Dow Industrials weekly chart
looks the most convincing to move higher.

I’ll explain why when we get to a review of the Dow.

The S&P 500 on the weekly time frame looks the second best as to its ability to ignore the
red bar.

The NASDAQ 100 was less impressive because it was unable to completely negate its red
candle; however, that red candle was quite a bit larger than the other broader market
indices.

The Russell 2000 was the least impressive, and actually not impressive at all. It was unable to
retrace past the 50% mark of its red candle.

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Of the broader market indices that we review, the Transportation Index did not have a red
candle that prior week, but did have three Topping Tails (TT).

Those three TTs that proceeded last week’s trading in the Transports were suggesting lower
prices, especially since they were occurring at the prior high.

Rather than move lower, prices gapped higher near the highs of those TTs and continued to
move up. By week’s end, the Transports closed at an all-time high.

What could turn us bearish in the short term?

In the letter on August 27th, I wrote: “The Dow and the Transportation Index moving to
new all-time highs and the “wrong-way” options traders making big bullish bets at the same
time.

When and if that happens, we will sound the warning bells. Stay tuned.”

That has not occurred yet but it looks like it’s a strong possibility that it’s going to.

The Transports have already made a new all-time high. The Dow Industrials look poised to
move higher based on last week’s price action. And the market internal gauges that we
monitor gave a bullish signal early last week.

So, the alignments of these at this time are pointing to the probability of what I wrote on
August 27 coming together may happen.

Dow Jones Industrials

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Above is the chart of the Dow Jones Industrial Average that we review each week.

The beginning of the week started off with a bearish close on Monday, where we said to
expect lower prices on Tuesday.

On Tuesday at one point, it looked like the Dow was headed down toward the Major Support
(MS) level at 25,600.

But after about 15 minutes of what started off as panic selling at the open, the panic was
over and buyers stepped up aggressively again.

By the end of the day on Tuesday, buyers had taken full control — yet again — and we had a
large green candle that almost engulfed Monday’s red one. Very bullish!

The Dow moved higher over the next three days and while it was only able to move slightly
higher on Friday, it closed above the prior recent swing high.

Last week’s move up above that prior high has now formed a new reference point of MS just
below 25,800.

Ideally, any pullback this week will stay above 26,000 on a closing basis.

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The more bullish scenario would be that the Dow never takes out Friday’s low and moves
above its high to attack the prior all-time high. Stay tuned!

Dow Jones Industrials Weekly Chart

Above is the weekly chart of the Dow Jones Industrial average.

Prices had cleared the more recent resistance from the middle of the year and now look
headed toward the all-time high that occurred in January of this year.

Long-term subscribers will remember the warnings that we gave right after that high point in
the Advisory Letter at the time and why.

For those of you that are relatively new to the Master Trader Market Edge Advisory Letter,
here are links to the letters at the time of that high and this link is the week following.

The Dow has been consolidating its recent gain the last three weeks. Last week’s price action
on the weekly time frame suggests that that consolidation is over.

Notice that the current candlestick shown traded below the prior two weekly lows. It then
rallied to the top of the two prior week’s highs and closed above both of the prior closing
values. So, there is a new weekly high after breaking the lows.

Master Trader Tip: If the candle that breaks the prior candle's lows rallies back to the highs
of those candles — in the time frame being viewed within an uptrend — it signals the
continuation of the uptrend.

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The confirmation of the signal happens when prices trade above the reversal candle's high
with a stop loss placed under that candle's low.

As bullish as the signal is with an uptrend as a continuation, it's never a guarantee that it will
happen. That's why we always have a stop loss.

The confirmation or trigger of the continuation does not have to happen on the next candle,
but it should happen on the one after that, at the latest.

Assuming that the Dow follows through — and prices can make a new all-time high, the
August 27th letter scenario of new all-time highs for the Dow Industrials, Transports and the
alignment of our market internal gauges signaling a warning a correction will be complete.

Market Overview Video

NEW STOCK SWING TRADING IDEAS

Below is a daily chart of C.H. Robinson Worldwide, Inc. (CHRW).

Trade: Over $100.54, consider buying stock (note: ITM calls are too spready for
consideration).

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Technical Setup: Master Trader Buy Setup with a bullish engulfing bar above r20-MA daily,
bullish weekly and monthly, strong sector. Note: the 8/21 gap down bar is not real.

Stop Loss: Half under $98 and a half under $96.

Below is a daily chart of Kimberly-Clark Corporation (KMB).

Trade: Over $116.50, consider buying stock (note: ITM calls are too spready for
consideration).

Technical Setup: Breakout from bullish consolidation at 20-MA daily, Master Trader Buy
Setup with Bottoming Tail on the weekly.

Stop Loss: $114.38.

NEW OPTIONS TRADING IDEAS

Below is a daily chart of C.H. Robinson Worldwide, Inc. (CHRW).

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Trade: Over $100.54, consider shorting Oct (10/19) $95/90 bull put credit spread (32 DTE) for
a limit of $.46/share (closed at $.52/share).

Technical Setup: Master Trader Buy Setup with a bullish engulfing bar above r20-MA daily,
bullish weekly and monthly, strong sector. Note: the 8/21 gap down bar is not real.

Option Strategy: Bull Put Credit Spread (BPCS).

Stop Loss: $95.28.

Below is a daily chart of SPDR S&P 500 ETF (SPY).

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Trade: Over $291.27, consider shorting Sep (9/28) $289/279 bull put credit spread (12 DTE)
for a limit of $.80/share (closed at $.90/share).

Technical Setup: Breakout from 2-day consolidation and Bottoming Tail after gap breakout
from Buy Setup on Support and r20-MA daily, bullish and monthly.

Option Strategy: Bull Put Credit Spread (BPCS).

Stop Loss: $288.55.

Below is a daily chart of PowerShares QQQ ETF (QQQ).

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Trade: Over $184.95, consider shorting Sep (9/21) $183/178 bull put credit spread (5 DTE) for
a limit of $.60/share (closed at $.72/share).

Technical Setup: Breakout from 3-day consolidation after breakout from Buy Setup on
Support and r50-MA daily, bullish and monthly.

Option Strategy: Bull Put Credit Spread (BPCS).

Stop Loss: $183.18.

VIDEO ON OPEN TRADES AND ADJUSTMENTS

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 https://youtu.be/9dsWQN6vC9g

Because your success is vital to you – and us.

Before selling options or credit spreads, we urge you to review the valuable and detailed
information that we have provided for you in your Member’s Area.

You will find it by scrolling to the bottom of the page to Mastertrader Subscriber Resources.

The link is Money Management Considerations When Selling Option Credit Spreads for Income.

It explains Master Trader Money Management, Trade Management, understanding the use
of Contingent Orders, and much more.

If You’re in a Rush to Start

A quick simplified approach to calculating contract size is to simply base your contract size
based on the number of shares permitted in your Trading Plan as if you were trading the
stock or ETF.

The amount of money that you are willing to risk – divided by – the stop loss amount. For
example, $100 / .20 = 500 shares

Credit Spread example, if your Trading Plan allowed you to trade 543 shares of AAPL based
on the stop loss, then simply round down to the nearest hundred and short an equivalent
number of contracts of the option.

Since 1 contract represents 100 shares of the underlying, this would be five (5) contracts.

Thank you for being a loyal subscriber and feel to email us with any questions or comments
on anything.

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Learn how Master Trader Technical Strategies – MTS with Credit Spreads can make
consistent money

Click Here – to Access the Program that puts you on the Master Trader Income Path.

Master Trader and You Building Your Financial Future Together

Happy trading! If you have any questions or comments, please e-mail Greg Capra
at [email protected] or Dan Gibby at [email protected]

All the best,

Greg Capra
Managing Director of Master Trader
Trading the Pristine Method — Origin and End

Dan Gibby
Chief Options Strategist

Follow Greg on Twitter, YouTube, and StockTwits

Twitter: @GregCapra
Stocktwits: Greg_Capra

youtube.com/c/mastertrader

NOTE: Master Trader will show opening and closing prices of all stock and options trades.
We recommend that all traders and investors use proper share sizing for positions and
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trading style, risk tolerance, or account balance.

We urge you to calculate your own share/position size based on your individualized risk
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position and money management.

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advisor, or a registered broker-dealer. Options, futures and futures options are not suitable
for all investors. Prior to trading securities products, please read the Characteristics and
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