Good morning, traders. This is Jake from jakethestockguy.com. Let’s get right into today’s charts and take a look at what I’m looking at. I like to use MarketWatch. They have a pre-market screener. I look at leaders, laggers, and most active. We’re going to jump over and take a look at what I’m seeing this morning pre-market. We’re going to get right into the charts.
I’m going to knock this out because the market will be opening really soon. Let’s just go blast through the charts, and I’ll see you later in the Slack group. COTY, I noticed that on MarketWatch that it’s a lagger this morning. There’s a lot of pre-market volume. Let me blow up my screen, so you can see what I’m looking at on the charts. You can see here [01:26]. I think it had an earnings report. On the year to date on the daily time frame, you can see we’re a little stretched on the stochastic, including the RSI, the Relative Strength Index.
We might get a little bit of a bounce here [01:41], but I think we have got some more selling to do to the downside. You can see here [01:46], it tried to break out of this channel. Couldn’t do it. Didn’t have the volume, didn’t have the strength, and now we’re back down. It looks like we will be heading to the lows of this channel if not coming all the way down to this [02:02] gap fill window at $3.78.
Let me go back to MarketWatch. What else was catching my eye this morning? I’m looking for pre-market volume. Those are always a clue as to where a lot of the actions, all the fast, smart money piling into what name. It’s got news, or there’s a catalyst, or there’s a rumor. The higher the volume, and relative to the average volume, the better. I think that’s always a good indication for where the action’s going to be where we can take advantage of some volatility.
I like the weed stocks right now. I think with Joe Biden as President, we’re going to see a lot more action in the clean energy names, solar names, EV names, weed names. IOVA, I’ll take a quick look at that. CHGG, I like this name. It’s a biotech company. I always tell this to my members. If it’s not MRNA, I just stay away from the biotech names. It’s all just pump and dump price action. It’s not a really well-established name like Google, or Facebook, or any of the FANG stocks. It’s almost impossible to lose money.
If you take any name, any stock ticker on the daily time frame if you’re looking at the year-to-date charts. I use the stochastic, just out of the box, standard package, no modifications. I buy when it’s right here [04:15] off the 20, which is indicative of oversold conditions. We had this high [04:21] and then we had this low [04:22], so sell. Broke through this [04:27] 50-day simple moving average. It’s the only moving average I use. It’s funny how it matches to this [04:36] previous high, just visually, without looking too much. The RSI isn’t at 20, so you could get spanked here [04:44]. I do like that the stochastic was off the 20.
You take your options, go out a month with a strike price. You can determine it based on previous highs, or you can look at the options chain and figure out what strikes have a lot of volume and open interest. Go out a month, two weeks, a month depending on what expirations they have. You want to sell at the top of this [05:11] range. If I go to the five-minute time frame. I don’t like these biotech names just because there’s not a lot of volume or open interest in the options chain. You don’t have that liquidity to get in and out of a trade really easily.
That happened to us yesterday with HAS. Unfortunately, my limit order didn’t get filled. I ended up with a slight loss because there isn’t enough volume in open interest or otherwise known as liquidity in the name. It’s hard to get in and out with market fill orders. You want the tight spread. You want a lot of volume and open interest for the liquidity.
What do I think about WKHS? I like it. I traded it many times. I’ll jump over here [06:19] and look at it really quick. What do I think? I like it. I like this name. Looks like we’re coming off some good support here [06:57]. I would get the 40-strike price, maybe go out a month, something like that [07:10]. You can always go here [07:14] to the options chain on a particular name. You can see these have this name, WKHS, they have weekly and monthly expirations. You have to do a little bit of homework. What you can do is look at that [07:30]. See how the open interest, 408, 400. 869, 2,400, 1,100, 409, and then all of a sudden 11,700 in the open interest at the 40-strike price for this week with three days till expiration.
That tells me something. It doesn’t give me the full picture. It’s like forensic science. Maybe a bunch of people are piling into this [07:57] open interest and this strike price because they think they have a lot of confidence that it’s going to move towards the 40, or even go in the money, but these [08:06] could be short sellers. These could be people who are selling the options. You have to watch out for that. If you look at the put side, there’s literally no open interest. You know it’s not a calendar spread. You know it’s not an iron condor or a butterfly. It looks to be more on the bullish side.
If you get the 40-strike price with this week’s expiration, three days until expiration, you’re going to have to be quick with taking profits. With weekly expiration options, these things move really fast in both directions. What I like to say is no stop loss, and just 1 to 3% position size for whatever trade we take as far as risk management. Hopefully, we catch some good ones.
I can’t get through all the names this morning because markets will be opening in about 15 [09:04]. I can go through them. I can do a live training in the mornings. We can look at all the different names that people want me to look at. I can give you my honest feedback on what I think. That will be it for me today. Thanks so much for being a member. I really do appreciate it. God bless, and I’ll see you on the charts.
