The Squeeze

2018-07-20 | Allison Ostrander

Simpler Summary

As a trader, the chart is your road map, but sometimes it can be a confusing map to read. This is why traders look at different indicators and studies, to help identify times when the chart is entering a potential trade setup.

One of the most successful indicators our Simpler Trading Team uses is the Squeeze. This indicator helps you determine when a chart might be ready to experience a greater than expected move. Depending on the bars printing, this can either be a Squeeze to the upside or downside. When the Squeeze is setting up on multiple time frames, it only increases the possibility of the move to be greater than expected. Our Simpler Trading Team found this to be a staple within chart reading.  

You can use several different strategies when a Squeeze setup is forming based on your trading style. The most common strategy is to look at a long call or put, depending on the direction it’s setting up for. If you are concerned back capital risk, you could also look at a Long Debit Vertical Spread or a Short Credit Vertical Spread. Both of these strategies would still be set up in the direction the squeeze is getting ready to fire, but typically requires less capital risk. Unlike a Long Call or Put, it does have limited profit potential as well, so it is important to evaluate your Risk vs Reward on a Vertical Spread Trade before jumping into it.

Learn more about how to scan for a Squeeze >>>  

Some great Squeeze setups we have seen work out this week are FIVE and MRTX. Some setups still printing a Squeeze setup are BBY, M, and WING

Simpler Sentiment

Bruce  Marshall— We have had an amazing run in the indexes with the S&P rallying over 100 points in the last 2 weeks. I have been saying that it is critical that we get over the SPX 2800 level and we did cross it, although it was a weak showing. We are in a market that will be determined, at least in the short run, by earnings. Over the next several weeks I am anticipating good earnings and higher prices in the indexes. The wild card is whether earnings will be good and also the nagging trade war concerns. How to play it? I have been and continue to be bullish, however as we go higher, I am ratcheting up stops and watching for signs of weakness in earnings. Stay bullish and cautious. have a great weekend.

Henry Gambell — Some of our best setups this week were those that revolved around 78 and 130 minute charts. I’ve always enjoyed these time frames as I think they do a good job of breaking up the daily session evenly, but they’re also helpful because not everyone is looking at them. HD and LMT were great in this way, and they’ll be worth keeping an eye on next week. Past that the high SKEW reading gives me reason to move into some cash over the weekend, hold a few that are still holding daily Squeezes like BBY and TGT and see where we open up on Monday.

Danielle Gum  — The Nasdaq made new highs again this week, and the strength we have seen in MSFT, GOOGL, and AMZN is undeniable. The S&Ps broke a key level to the upside that hasn’t been broken since March, which was $2809. The S&Ps didn’t follow on to make new highs, however, with this most recent high (except for the major high in January at 2884.5) this move solidified the idea for me that the S&Ps will make another new high by year end. When is that going to happen? Well, I doubt it’ll be this week, because we’ve had a nice run and now are seeing Ready, Aim, Fire sell signals in the index. That tells me we may get a pullback to the mean next week. What am I doing here? I’m pretty light on trades, and I’ll wait for a pullback, that’ll give us another buying opportunity at the end of next week.


Danielle Gum says:

See the original setup HERE

Expert: Danielle Gum

Setup: Setup on DBX

Update from Danielle: I initially entered DBX due to the 195 min squeeze and because the previous daily squeeze worked nicely. However, after DBX traded below the 50 SMA for four days in a row, while the market chopped around, I decided to exit and look for another entry next week – IF the bullish trend that was, corrects itself.