JAN 2021: LRCX $500 – $505 Bull Call Spread
Stock
LRCX
Trade Structure
$500- $505 Call Spread
Trade Date
1/28/2021
Price Paid
$250
Expiration Days
03/12/2021
THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.
To participate in our live challenge and to access our online training, please click “Your Account” and upgrade to the “Live Trader” plan.
Trade Rationale
LRCX has now become a regularly traded stock in our group. It did have a pre-earnings runup like many earnings trade setups but sold off immediately after earnings. When this post-earnings profit taking happens, we just need to enter a trade at some kind of support level. I saw the support at $500 and entered there. Of course, with the broader market sell-off happening, LRCX got pulled back all the way down to $475 and many of our traders got into really low spreads, eg. $475 - $480. If the sell-off had continued, this could have been dragged down to next support at $460 too. Irrespective of how low it went and what happend, if it stays above $505, all trades will make the same amount of money.
Trade Selection Criteria
Overall market movement
We had a nice pullback in the entire market which allowed us to put on 18 trades this week.
No Earnings or Significant News
Earnings are behind us and were announced on 1/27
Bollinger Bands outside Keltner Channels
Bollinger bands are clearly outside the Keltner Channels.
RSI Analysis
This is a post earnings trade. Our regular indicators don’t apply here.
ADX Analysis
This is a post earnings trade. Our regular indicators don’t apply here.
Trade Analysis
Analysis will be updated when we close this trade.
Trade Outcome
PENDING
Profit/Loss
$N/A
Beginning Account Balance
$10,383
Ending Account Balance
$N/A
Hello, I have a question because I didn’t find it in the book (or overlooked it): what time-frame do you use in your charts? Is that 5 minutes? Greetings from Austria, Alex
I have mentioned it in the book. The time frame is always 3Month Daily timeframe for all my charts.
Just to make sure that I’m reading the support correctly, is the support at $500 coming from that last candlestick? It’s a clear hammer candlestick demonstrating a strong bull sentiment on that day. Is that right or is there another candlestick you are using for the $500 support?
Support comes from multiple touch points at a price level. The more times price/action bounces off of a support level, the stronger the support is. In this case there are 4 points in the past where price has flirted with $500 (including the latest hammer you are pointing out)