1/19 - ROKU BREAKOUT TRADE REVIEW
Hey, folks! Welcome to the first trade review. We'll try to do this as often as possible so that you get a feel for how best to use alGROWithm to your advantage! Today, we'll be reviewing an options day trade we took on a ROKU breakout, which we held for less than 5 minutes for a 25% return.
Before we jump into the trade tactics, it's important to understand why we were looking at ROKU in the first place. Every post- and pre-market, we go through lots of charts to find our favorite setups, and then compile a watchlist (which we post daily on our Instagram). The characteristics we look for in a watchlist candidate are:
- Consolidation under resistance on the daily and/or hourly charts (the longer the consolidation the better)
- Room to move above the resistance to the next supply. In other words, there needs to be enough juice for the squeeze
ROKU made it onto our watchlist because it had nice consolidation on the hourly, forming a supply zone over the past 3 or 4 trading days where price was trying to break through but continuously getting rejected. We were actually quite fortunate that ROKU had a down day during the previous trading session (1/15). You can see that price dipped down into the alGROWithm Trend Cloud and was promptly bought up by buyers during pre-market today (read this blog post for more tips on how to properly use the Trend Cloud).
This provided us with a perfect buying opportunity. There was no supply to hold us back in between the pre-market highs of $420 and the overall supply zone, leaving us with a measured potential of at least $4.50 back up to the supply zone (which, in options, is $massive). You can see in the picture below that alGROWithm precisely identified this supply zone of $424.52, which is indicated by the next Take Profit level.
When we enter day trades, we always zoom back in to the 5 minute chart to get a feel for price action and volume. alGROWithm gave us a Buy signal the moment the market opened, at which point we took a few seconds to assess price action and volume. We chose to take the 1/22 $430 calls to try to capture as much gamma as possible. Price then shot into orbit and actually broke through previous supply zone. We sold our entire position at the first TP - our option premiums went from $10.80 to $13.50.
- Do your post- and pre-market preparations! Try finding consolidation patterns and making your own watchlists. We're happy to review if you need input! Just email us what you think are good setups and we'll give you our 2 cents.
- Don't enter signals blindly! Have pa(y)tience. Assess the market. Check out the volume and look at price action. If you miss a trade - don't worry! There are opportunities everyday.
Hope this was helpful! If you have any questions, feel free to reach out to us at anytime (firstname.lastname@example.org).