Bull vs. Bear Case: Will It Continue?files.meetup.com/81154/BIG Update + Risk Management.pdfeasy....

Bull vs. Bear Case: Will It Continue?

~and~ A Top-Down Trading Approach to Risk Management

Boston Investor’s Group: August 24, 2016 UPDATE from: May 26, 2016

By: Samantha LaDuc

Disclaimer: You are responsible for your own results. If I can teach you something, great, but I'm not responsible for your success or failure. Trading is guaranteed to have losses. Some out-sized ones if you don’t manage risk. In no way are my educational methods, analysis or trades suggesting a sure thing. Trade your own plan.

Good luck and remember: WE MAKE OUR OWN LUCK

1 LaDuc Capital LLC - www.LaDucTrading.com

@SamanthaLaDuc

About Me:

After selling my company, I started actively trading in 2008. Made 400% on my

$100,000 investment in the next six months; yes, mostly shorting. Then I spent the next few years learning how to trade. Biggest lesson learned: Trading is 30% intellect and 70% emotion. Controlling emotions controls the results.

I love analyzing, teaching and trading, on multiple time frames. With a chart pattern and volatility focus, I mostly advise day traders in the morning and asset managers in the afternoon. I prefer to anticipate rather than chase with options versus equities over days/weeks versus hours.

I use Intermarket Analysis to pull back in time and space to spot major trend reversals as investment themes. I don’t follow sentiment as much as I follow money flow. I believe price leads fundamentals and Outliers With Velocity Revert!

My favorite part about trading is the lawyering. I want to be able to take both sides of the argument or trade at any point. I like to be right more than fear missing out.

Each week I approach the market with my thesis or forecast of market activity (tide and boats if you will). Sector rotation is just a fancy way of saying, “there is a bull market somewhere”. Based on where I think money flow will go, I post weekly and daily watch lists as well as complete trading set ups, both long and short, both equities and options, both online and real-time via a private webinar/chat room.

WWW.LADUCTRADING.COM @SAMANTHALADUC [email protected]


@SamanthaLaDuc

http://www.laductrading.com/

mailto:[email protected]

The Hated Market Rally or

How to Climb the Recent Market’s Wall of Worry


@SamanthaLaDuc

This was my opening slide May 26 … Despite BREXIT: SPY +6.6% IWM +12% QQQ +10.5% SMH +22% IBB +12% XLK +10.6% XLF +3.6% XHB +6.6% XLE +6.2% EWG +5.5% EEM +14.7% EWJ +7% FXI +18%

Bull Case Became Bull Chase

SPY, IWM, QQQ (range contraction can lead to range expansion; I also like the chart pattern)

SMH, IBB, XLK (semis often lead reversals, bio spec babies follow, tech gets its momo back)

XLF, XHB, XLE (oversold or ‘undervalued’ plays also catch a bid; where was DOW 16K 2 yrs ago?)

Later: EWG (Japan – ½ way there), EEM (green shoots, ‘cheap’)

Digesting: USD, Oil, Gold, Commodities (at resistance short-term)


@SamanthaLaDuc

This is exact slide + rationale I posted based on Technicals, Intermarket Analysis, Fundamentals and Sentiment. Let’s revisit…


@SamanthaLaDuc

May 26 wrote: “State of The Market: Setting up for a Summer Surprise?” Here’s why I thought so in 5 basic charts…

Despite BREXIT: 3 months later… SPY +6.6% IWM +12% QQQ +10.5% SMH +22% IBB +12% XLK +10.6% XLF +3.6% XHB +6.6% XLE +6.2% EWG +5.5% EEM +14.7% EWJ +7% FXI +18%

Semiconductors as a Tell


@SamanthaLaDuc

This slide from 5/20: AMAT $22 now $30. NVDA $44 now $63, etc.

Low-Beta stocks started to Pull-back:

‘Tell’ that money rotating into high-beta


@SamanthaLaDuc

My ‘Tell’ money would leave value and buy growth/speculative. MCD now $115

APPLE falling did not shake the market


@SamanthaLaDuc

My ‘tell’ market was too strong to go down: AAPL $92 now $110

Climbing with Protection


@SamanthaLaDuc

This slide from May was prescient: SPX rose ~ 2025-2020.

What’s Next?

• Power of Positive Surprises

• Range Contraction Leads to Range Expansion

• Volatility Divergence

• Market Direction Tells

• Vertigo Chart Patterns

LaDuc Capital LLC - www.LaDucTrading.com @SamanthaLaDuc

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Power of Positive Surprises (PPS)

1. EPS expectations ratcheted down. 2. Economic expectations ratcheted up. Consider this: • If you awoke today from a decade-long slumber,

and you were told that unemployment was under 5%, inflation was ~1%, gas was $2.15, mortgage rates were 3.5%, you could finance a new car for 2% and the stock market was at record highs…you would probably say the outlook for the economy looks really, really good!


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PPS: Back of Envelope Valuation

• P/E on 2017 S&P 500 earnings estimate=16.9

• We are in very low rate environment=near 0

• P/E historically runs closer to 20 in low-interest rate climates so…

If we multiply next year's consensus earnings estimate for the S&P 500 of $126.76 by 20 (where stocks could be valued), we get $2,535 for the S&P 500 by 2017—18% higher.


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PPS: Abe says Japan is only

“half-way there”

Macro themes are like tides lifting all boats. In this case, Japan can be the stimulus for equities going higher: there, here, everywhere.


@SamanthaLaDuc

Range Compression can Lead to Range Expansion


@SamanthaLaDuc

Volatility

• Investors' emotional viewpoints about assets move price more than the assets' fundamentals. • Studies show that when financial markets are volatile, investors pull their money out because they

emotionally detest uncertainty (think past 2 yrs). • When financial markets are calmly grinding higher (2011-2014 unrelenting uptrend, maybe now?),

investors tend to increase deposits because they feel calm and confident that nothing really bad is going to happen.

• Psycology 101: Investors sell when afraid and buy when greedy so… So with… • Record low rates, • Record hedging via puts and index shorts (hedgers short $55B of index futures, 2nd ATH), • ATH for market and ATL for volatility index, • Power of positive surprises both on earnings and economic fronts, • Coordinated central banks… Are we in the:

Don’t be the last one out the door stage of the rally? OR

No one believes=pain trade higher stage?


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My Market Direction Tells

My #1 Job is to Anticipate Volatility. Many fear and/or

hedge against the unknown of volatility. I base my trading process on anticipating what VOLATILITY will do next, on any timeframe.

• My STOCK-BOND-VOLATILITY charts: not bearish, yet.

• PUT-CALL_RATIO charts: not bearish, yet.

• MOMO charts: not bearish, yet. – The 5 largest companies in the world (by market cap) are US

tech co’s: Apple, Google, Microsoft, Amazon and Facebook.

– “If they are selling AMZN and FB, why would you buy anything else?” Great Twitter Comment

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Above Blue Line is Bearish;

Below Blue Line is Bullish. It’s still Bullish…


@SamanthaLaDuc

Put-Call-Ratio Trading: Caution?


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Green boxes+arrows=100pt rally calls! Red vert lines=SHORT. White arrow=??

Vertigo


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I want to see that moment on the chart when buyers look down and see how high they are…

Poster Child of Vertigo: NVDA


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Hedge Fund Hotel PSA: Outliers Revert: $275 then $225 now


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SPX Correction Roadmap?


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Big Picture


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Top-Down Trading Approach To Risk Management

• THESIS

• TREND

• TIMEFRAME

• TRADE SET-UP

• TALLY


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THESIS

As a Strategic Technical Stock Analyst, my trades start as a story I

(think I) understand and then I (try to) prove with price.

THESIS incorporates analysis from:

Technical, Intermarket, Fundamental, Sentiment, Insider Activity/UOA, Macro, Fed, Economic, Events/Rumors…

LaDuc Capital LLC - www.LaDucTrading.com

@SamanthaLaDuc 25

Thesis Examples


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TREND

TREND trading, on any timeframe, is based on whether price action is either a Reversal or Continuation move:

No Trend=No Trade.

FAVE LONG SET-UPS:

BF=Bottom Fishing: extremely OS reversal, esp off S on higher timeframes. Look for trend change, short-covering, sector rotation. PBB=Pullback+Bounce: uptrending stock that PB to S + takes off (hopefully to new highs). BO=Break-Out: pattern BO with PB to S (shallow not deep) then BO for continuation long.

FAVE SHORT SET-UPS:

OTR=Over The Rainbow: extremely OB reversal, esp at R on higher timeframes. Look for trend change, shorts/profit taking, sector rotation. BPB=Bounce+Pullback: downtrending stock that bounces to R + fails (hopefully to new lows). BD=Break-Down: pattern BD with bounce to R (shallow not deep) then BD for continuation short.


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BO Trend Example


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BF Trend Example


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PBB Intraday Trend Example


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TIMEFRAME

TIMEFRAME is personal but TIMING is everything. Entering trades is easy. Timing the direction, volatility and duration of the trade is not.

1. Choose a Timeframe to trade that matches your personality: Investing, Swing, Intraday…Focus on your strengths vs. Follow someone else’s. 2. Trends trade strongest within Timeframe Congruence: Pull back to look from Larger to Smaller timeframes. Swim with the current not against it. 3. Volatility events TRIGGER price movement: This goes back to your Thesis: Why did you enter the trade? 4. The other side of Volatility: If the market doesn’t shake you out, it will wait you out. Timing the Duration of a trade is just

as important as Direction. 5. There is no such thing as throw-away capital: We will be wrong a lot. The trick is to fix the mistakes quickly.


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Timeframe Guideline

Entry, Profit + Loss Price Targets should be based on SAME chart timeframe.

My Timeframe Congruence:

• CHASE: 15min (5+ 60/4h support)

• FORECAST: H (15 + D/W support)

• TREND: Daily (H + W/M support)


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Trend Timeframe Example


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TRADE SET UP TRADE SET-UP is largely Technical in Nature.

TRADING is the Ultimate Confidence Game

• Successful Trading: Planning in advance how to react to being right AND wrong.

• Predetermined: Low-Risk Entry Price with identified Stop Loss and Profit Target.

• Trading Mindset: Wrong=Gone. Right=Hold Tight.

• Risk Management: It is as important to Preserve Emotional Capital as Financial Capital.

• Rules of Thumb:

– Lock in profit! Autoset profit exit at 100%, buy spread, tighten stop.

– Sell out of all weeklies by Wed eod and/or roll into next wk/mo.

– No lottos into Friday but can trade lottos on Friday.

– Add more time than you think you will need!!!

– No more than 10 open positions: 3 chases/7 swings. (I suck at this.)


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Trade Set-up Example


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General Trading Plan Guidelines for Options


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TALLY

TALLY up the good, bad and ugly. Learn from the mistakes! Manage risk the same way you manage your emotions—with compassion, a plan, perseverance and seek help when you need it!


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How Can I Help?

• With a chart pattern and volatility focus, I advise day traders through asset managers.

• My mentoring helps clients “fill in the gaps” between guessing and knowing when to enter and exit an options or equity trade.

• Weekly Swing Newsletter: $150/mo: Coming This Fall

• Mentoring by the Day: $50/day in private chat room

• [email protected]


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mailto:[email protected]


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Open Discussion

• How do you manage risk?

1. Whether you forecast or chase,

what method of technical analysis do you use that produces your edge?

2. Timeframe is personal and yet Timing is everything. How do you find low-risk entries with defined stops and profit targets, based on a given timeframe?

3. There are lots of ways to make money. What tricks do you use not to lose it? (risk-on/risk off indicators, TA, option tactics…)

• Chart Requests?


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Bull vs. Bear Case: Will It Continue?files.meetup.com/81154/BIG Update + Risk Management.pdfeasy....

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