Written by A.J. Brown

Text Book Trading Trainer Breakout Example

Stock Chart InventoryI was reviewing our ‘Charts our Interest’ videos from the last  couple of weeks to trace the volatility - the schizophrenic roller coaster ride, if you will - of the market.  (I create ~20 minutes of ‘Charts of Interest’ videos at the end of every trading session and distribute them to the members of our Trading Trainer Community through our members only website.)  This kind of inventory taking, looking at what I’ve been through in the last weeks, always serves to ground me to make solid trading decisions moving forward.

With that said, in reviewing our recent ‘Charts of Interest’ videos, one stood out.  It was one from the evening of January 22nd.  It was a follow up video on Waters Corp.  (We had been watching Waters Corp for weeks earlier.)  Waters Corp had been setting up for us in our Trading Trainer ‘Pattern Alteration’ template as a text book example.  A breakout, by the way, is a particular type of ‘Pattern Alteration’.  

On the evening of January 22nd, I had a received a handful of private messages from members telling me that they had gotten into Waters when our entry signal came and that they had, in just 48 hours, tripled and quadrupled their investment.  One member confided in me that she had invested ~$15K and was walking away from the trade with over $60K+.

That evening I created a ‘Charts of Interest’ follow up video on Waters Corp.  Below is that video.  (Note: because this blog is read by thousands, I uploaded the ‘Charts of Interest’ to Google Video.  Google Video can handle a ton more bandwidth - more simultaneous viewings of my video - without crashing compared to the Trading Trainer high resolution video server.  The drawback… there is a major drop in video quality.  That’s the compromise I took to post this video on my blog.)

 

 

As you watch this video, I want you to pay attention to the entry signal we received.  There was a lot of confusion because the entry signal came during amateur hour.  

My thoughts on the subject come from the actual makeup of a Pattern Alteration.  For the most part, they’re driven by equity traders like you and me acting on their emotions and acting on social proof in price movement.  To me, this trumps the reasoning for staying out of amateur hour when it comes to this type of trade… with caveats.

But, I want to know your thoughts on this subject.  So, please, if you feel compelled, comment below with your thoughts.  I’d love to read and learn from some different perceptions.  I appreciate all your different views.  Thanks in advance for your input.

Best regards always,

A.J.

 

P.S.  Have you checked out my other most recent posts on this blog?  If not, you should now.  Click here to check out what I’ve been talking about. 

 

Categories: Options / Strategies / Success / Videos

10 Responses to “Text Book Trading Trainer Breakout Example”

  1. Girish Turlapati @ 7:38 am:

    AJ, this was a great example to learn fast. I am new to options trading, but i have picked a lot of info, started doing virtual trading since last week
    we love you for your great job

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  2. A.J. Brown @ 4:56 pm:

    Girish!

    Yes. I have found letting people look over my shoulder in the form of these videos is an amazing way to teach.

    Glad it works for you.

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  3. KARL EPPS(G00DKARMA) @ 5:48 pm:

    Aj,

    This was excellent learning material. Thanks keep up the good work.

    Kind Regards,

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  4. KARL (G00DKARMA) @ 5:50 pm:

    oh yea please keep this stuff coming by email if you can

    thanks again,

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  5. A.J. Brown @ 9:05 am:

    Karl - Thank you for the compliment! There will be more training and articles to come.

    To be notified by email, make sure you’ve subscribed using the opt-in for in the right-hand column of this page. It says “Email Updates” right above the form.

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  6. Jeniece Buckley @ 11:22 am:

    Question:

    Are there best times of the month to buy call options, sell call options?

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  7. A.J. Brown @ 1:14 am:

    Hi Jeniece,

    The only hard and fast rule I have is that on the third Friday of the month, I get out of any positions I’m in that become “near term”.

    Otherwise, my entries and exits are governed by when I get validated signals with the appropriate follow through during the trading session if applicable.

    Great question!

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  8. Kevin Smith @ 6:28 am:

    This format (i.e., video examples on the blog) is great, thanks AJ.

    One note regarding this particular example, WAT came out with earnings the morning of 01/22/2008 and the markets negative reaction to those earnings created a huge gap down.

    When taking trades we should always be aware of when earnings are due out. In this case (and any other trade that a person chooses to hold thru earnings) the gap could just as easily been to the upside.

    Holding thru earnings is risky so be careful!

    Again, thanks to AJ for this blog and all the time he gives to help us all become better traders.

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  9. A.J. Brown @ 11:56 am:

    Kevin,

    Thanks for the positive feedback. I’m glad you like the video format. It is an excellent medium for teaching.

    I agree… holding a position when an earnings report is due to be released can be risky.

    Oh, and thanks for the compliment! :-)

    A.J. Brown

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  10. 12th Edition of the Carnival of Making Real Money February 10th, 2008 | Making REAL Money Blog @ 11:06 pm (Pingback)

    [...] Healy presents Option Trading: Textbook Breakout Example posted at A.J. Brown’s Options Trading Blog, saying, “Recently, we witnessed the [...]

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