{"id":22019,"date":"2024-07-29T07:30:45","date_gmt":"2024-07-29T11:30:45","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=22019"},"modified":"2024-07-29T07:30:45","modified_gmt":"2024-07-29T11:30:45","slug":"how-we-traded-julys-nasdaq-pullback-for-a-69-gain","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/how-we-traded-julys-nasdaq-pullback-for-a-69-gain\/","title":{"rendered":"How We Traded July\u2019s Nasdaq Pullback for a 69% Gain"},"content":{"rendered":"

Managing Editor’s Note:<\/strong> Today, we’re handing the reins over to colleague Larry Benedict – a market wizard and legendary hedge fund manager.<\/p>\n

The tech-heavy Nasdaq is booming, but there can be pullbacks that you can profit from if you can see them coming… Larry shares how he does it to secure great gains…<\/p>\n

Here’s Larry…<\/p>\n

\n

The Invesco QQQ Trust Series 1 (QQQ)<\/strong> bottomed out in late October last year. Since then, it has been on a tear…<\/p>\n

Potential rate cuts, Big Tech profits, and the AI frenzy helped push QQQ to a 47% gain earlier this month.<\/p>\n

But despite QQQ’s big rally, there have been strong pullbacks along the way.<\/p>\n

Two of those pullbacks generated big profits for my One Ticker Trader<\/em> subscribers…<\/p>\n

A couple of months ago, we traded the first of QQQ’s major retracements for an 89% gain.<\/p>\n

Today, I want to share how we profited from QQQ’s current retracement.<\/p>\n

We were slightly early with the trade. Yet we exited last week for a blended 69.3% gain.<\/p>\n

So let’s check out how we did it…<\/p>\n

An Overheated Nasdaq<\/h2>\n

In the chart below, QQQ retraced from March into April (when we generated our 89% profit).<\/p>\n

But buying momentum returned, as shown by the Relative Strength Index (RSI) in the bottom half of the chart.<\/p>\n

And QQQ resumed its longer-term rally…<\/p>\n

<\/p>\n

Invesco QQQ Trust Series 1 (QQQ)<\/strong><\/p>\n

\"Image\"<\/p>\n

Source: eSignal<\/em><\/p>\n

QQQ’s rally coincided with the RSI bullishly breaking up through resistance (green line) and into the upper half of its range.<\/p>\n

Plus, the 10-day moving average (MA, red line) accelerated above the 50-day MA (blue line).<\/p>\n

But in June, we saw signs that QQQ was overheating. The RSI made an inverse “V” at “A” and then tracked lower.<\/p>\n

This saw QQQ pull back briefly before a rising RSI pushed it higher again.<\/p>\n

The RSI jumped well into overbought territory once more. And it looked likely to pull back again.<\/p>\n

So we entered a short position on July 3 by buying a put option. (A put option increases in value when the underlying stock falls.)<\/p>\n

But it wasn’t just the QQQ chart that triggered the trade.<\/p>\n

Heavyweight stocks like Nvidia and Apple had run into solid resistance and looked vulnerable to a pullback.<\/p>\n

At the time, we saw similar patterns forming in Amazon, Meta, Netflix, and Microsoft too…<\/p>\n

Plus, the much-anticipated rate cuts had been continually pushed back due to persistent inflation and strong economic data.<\/p>\n

Yet even with all these factors in play, we entered our trade a little too early…<\/p>\n

Instead of turning lower, the RSI recovered and rallied, sending QQQ higher too.<\/p>\n

Then the RSI formed a lower high at “B” (orange line).<\/p>\n

When the RSI tracks lower like this (while QQQ rallies), we know that it will eventually pull the stock price lower too.<\/p>\n

And that’s what we saw…<\/p>\n

Take another look:<\/p>\n

<\/p>\n

Invesco QQQ Trust Series 1 (QQQ)<\/strong><\/p>\n

\"Image\"<\/p>\n

Source: eSignal<\/em><\/p>\n

The RSI fell back toward support (green line). And it pulled QQQ down with it too.<\/p>\n

That put our position back into the green.<\/p>\n

Our position was in good profit when the RSI tested support. So we closed out half our position on July 18 for a 63.5% gain.<\/p>\n

We left half our position open to capture any further move down. That turned out to be the right call.<\/p>\n

Our position went further into profit. But momentum appeared to be rebuilding, so we closed out the remainder of our position the following day for a 75% gain.<\/p>\n

Together, that resulted in a blended 69.3% gain in a little over two weeks.<\/p>\n

<\/p>\n

\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/p><\/div>\n<\/div>\n

<\/p>\n

As you can see, options can magnify returns compared to just trading shares.<\/p>\n

Yet options have a finite life. Time decay always eats away at an option’s value.<\/p>\n

If the planned move doesn’t come off, and you hold your option to expiration, your position can expire worthless.<\/p>\n

But that’s the risk you take to generate these outsized gains.<\/p>\n

And as this trade shows, options can help you trade reversals against a major trend for handy profits… even if you don’t always time your entry exactly right.<\/p>\n

Happy trading,<\/p>\n

Larry Benedict
Editor, Trading With Larry Benedict<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Trading against major trends can hand you great profits if you when to get in and out\u2026<\/p>\n","protected":false},"author":55,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[58],"newsletter-type":[],"ticker":[],"class_list":["post-22019","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-larry-benedict"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/22019","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/55"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=22019"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/22019\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=22019"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=22019"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=22019"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=22019"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=22019"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=22019"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=22019"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}