Take a look at this example of a trade I just spotted. Finding great bargains that are overbought or oversold doesn’t have to be as hard as it may seem. Let me show you what I noticed on a chart of Royal Caribbean Cruises. (RCL).

Be sure to check out the update on a previous trade at the bottom of this message.

On the chart below, I included the Channel Commodity Index indicator which I use to help me spot powerful reversals that are setting up. If you want more information on the CCI click here.

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On the CCI at the bottom of the chart you’ll see highlighted areas that look like fins. These tell us there is a high likelihood that the price is heading DOWN.

In this example we want CCI on RCL to go DOWN to create a clear fin shape. We also want the price to go DOWN to at least $157.50 before entering a trade. The first target would be $150.

To buy stock shares of RCL today, price would be approximately $158.02. You would wait until the price found a bottom before buying stock.

That said, option trading offers the potential of a smaller initial investment and higher percentage gain even when price is expected to rise or fall. Let’s take a look.

If you bought one PUT option contract covering 100 shares of RCL with a Sept 20th expiration date for the 157.50 strike, premium would be approximately $4.35 today, or a total of $435 per contract.  If the stock price FELL the expected $7.50 the premium might increase approximately $375.00 to $810.00 per share on your 100-share contract. This is an 86% gain over a short time.

Options can offer a win, win, win trade opportunity. They often offer a smaller overall investment, covering more shares of stock, and potentially offer greater profits.

I love to trade, and I love to teach.  It is my thing.

Wendy

If you want to be a profit predator, this pattern is the key. See how to spot it here

Past potential trade update:

Last week we discussed buying APA Calls. It did not reach our target entry price.