How is your trading going? What metrics do you use to measure your trading success?

As we approach the end of the week, I wanted to bring some attention to the importance of knowing and improving one’s self in trading.

Whatever your flavor may be, position trading, swing trading, long options trading, spread selling, four-way options, day trading, scalping, algo trading, or a mixture of the strategies, there is always room for evaluation and improvement.

If I had to guess, and based on personal experience and the experience of other traders that I have gotten to know, I would say that using too much leverage and/or being a frequent buyer of short-dated options would top the list of trader pain. I get it. The markets are there, and they present an amazing opportunity to those folks that use the leverage properly and get the timing right. That’s the challenge. While it may seem that I am stating the obvious, human beings tend to get stuck in their ways (not just in trading) but in all aspects of life.

Trading successfully requires making adjustments in strategy and style. What may have worked last week or yesterday may not work well today. Options trading brings a whole other level of style adjustment. If you love trading long options (buying), that is great, but there are times when Implied Volatility is too high, and you are better off being an options seller. Markets rangebound? Selling credit spreads or butterfly spreads may be the right thing. My point is that employing a strategy when using leverage via options or even via margin has its time and place. It is not always a good idea, and many of the more successful and consistent traders arew well capitalized and avoid margin and/or long options at all costs. This gives them staying power.

Let’s face it, trading is not easy, especially when you start to buy options and use leverage. So, what can we do to improve? Just like anything else in life, taking small steps goes a long way. So, A good place to be mentally is “what can I do differently to improve”? If a trader is a short-dated long options trader and is constantly getting chewed up by theta (time decay), maybe just go out once expiration cycle to start. If you like to trade weekly options and find that the time decay is unbearable, go out another week. It takes some self-control and greed containment. It can be done. Yes, your returns will be lower when you get it right, but your risk and losses will be lower too. This gives you more staying power. What do you think? Are you a long, short-dated options trader?

When measuring trading success, of course it comes down to your PnL. THat is what matters - it is all about making money, right? What about how trading impacts the other aspects of your life? Does trading make you happy? Stressed (well it can)? Are you enjoying yourself with it or is it making you unhappy? Perhaps there are adjustments that can be made to an overall trading style to improve upon these areas.

These are just a few things that were on my mind today that I wanted to share with our Premium Subscribers. Taking a mental inventory like this can be even more profitable in the long-term versus a successful day in the markets.

I hope you enjoyed reading this message today. Have an excellent Thursday!

To sum up the current viewpoint and opinion:

I have BUY opinions for:

• Defiance Quantum ETF (QTUM) between $44.00 - $49.50. Update 06/24: This one is still in the upper area of our buy idea zone. Look for pullbacks for entries near the 50-day SMA (currently $47.76). Always use a stop loss level that caters to your individual risk tolerance.
• Amplify Transformational Data Sharing ETF (BLOK) between the 200-day moving average and $40.00 200-Day Moving Average is currently $40.32 Update 06/24: Bitcoin and crypto have gotten slammed, but I am in no rush. There could be another shoe to drop. Patience. Always use a stop loss level that caters to your individual risk tolerance.
• Invesco MSCI Sustainable Future ETF (ERTH) between $65 and $66. Update 06/22: Important note on ERTH: This one had me scratching my head on the open yesterday and then I quickly discovered that there had been a $9.95 dividend issued. You can read about the dividend on Invesco’s website here. Call your broker if you have any questions about how the dividend was applied to your account. This dividend was abnormally high for ERTH based on the past. Since $9.95 came out of the stock price in the form of a dividend, we must adjust our pricing outlook by $9.95. I like this name for the longer-term around $65-$65.80 (dividend adjust price) at this time. Update 06/24: I like the theme of this ETF. Look to enter on pullbacks between $65 and $66.00. Always use a stop loss level that caters to your individual risk tolerance.
• Invesco Exchange-Traded Fund Trust - S&P SmallCap 600 Pure Value ETF (RZV) on pullbacks. Update 06/22: This one touched the 50-day MA on Friday (we were waiting for that!) and tacked on 2.51% in yesterday’s session. If you didn’t catch the big pullback, look to enter on any pullback from $93 - $94.90. Update 06/24: I think this has legs. If not on board yet, look for intraday pullbacks in the low to mid $95’s. Always use a stop loss level that caters to your individual risk tolerance.
• iShares Global Timber & Forestry ETF (WOOD) Initial buy idea zone between $79.07 and the 200-day moving average ($79.82 as of 06/16 close). Update 06/16: Given the price action in the lumber futures described in today’s alert, consider an entry into ½ of a normal position size between $86.50 - $87.50. Should it pull back further, we can look to add another ½ position size. Update 06/17: WOOD provided the entry opportunity levels that we were looking for on Wednesday and even finished higher on the day. What a great sign. Look to be long on this underappreciated ETF. Update 06/21: WOOD traded through our first tranche level between $86.50 and $87.50. It closed Friday @ $84.15. I am looking at the above-mentioned price levels between $79.16 and $79.82 - $80.00 for the second tranche. See Above. Update 06/22: Wood tacked on 2.33% yesterday. Hold longs and look to add between $79.16 - $80.00. Update 06/24: Hold existing longs and look to add between $79.16 - $80.00. Always use a stop loss level that caters to your individual risk tolerance.
• Invesco Solar ETF (TAN) between the 50-day moving average ($80.32 as of June 14th) and $81.50. Look for an intraday pullback for entry. Update 06/16: We wanted a pullback, and we got a big one on Tuesday, with the range being $78.00 - $80.69. Ideally, this was taken advantage of on this pre-Fed meeting day. There could have been some “sell the news” price action with the SEIA report being released yesterday. Although we are below the 50-day MA, I like the previous consolidation and would look to be long at these levels. Update 06/17: TAN tacked on 1.51% in Wednesday’s overall down session. Great sign. I like this one and I think there is still time to get on board. Always use a stop loss level that caters to your individual risk tolerance. Update 06/21: We really nailed this entry and I am looking for continued upside. I think there is still time to get on board - look for pullbacks near the $81.00 level. I like this for a longer-term holding with price appreciation potential north of $100.00. Update 06/22: I think there is still time to get on board: look for pullbacks approaching the 50-day SMA of $79.75 - $81.00 for long entries. I like this one for a longer-term move above $100.00. Update 06/24: I love TAN. This one has been up and up. If you are still not on board, look for pullbacks and do not chase. The current 50-day SMA is $79.67. $80 - $82 would be a nice level to initiate or add. Always use a stop loss level that caters to your individual risk tolerance.
• First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID). GRID has traded through our idea range of between $86.91 and $88.17. Update 06/17: GRID closed at $91.50 yesterday, moving lower on the overall down day. I see no major technical damage and like this one over the longer run. Opinion: hold existing longs and/or look for entries on pullbacks. Update 06/22: Another one that briefly touched the 50-day SMA. Did you get it? If not I like it anywhere below $91 - look to enter on pullbacks. I am looking for $100 level or maybe higher in the longer term. Update 06/24: I love GRID too. It has been a steady Eddie. Do not chase though, perhaps we get a pullback to the $90 level if you are not long yet. Always use a stop loss level that caters to your individual risk tolerance.

I have SELL opinions for:

NONE

I have a HOLD opinion for:

• Update 06/23: This is approaching the sale date on June 28th, regardless of price. iShares Trust Russell 2000 ETF (IWM) for an index reconstitution trade. At this time, I would be looking to be long and then exiting upon the actual reconstituted index going into place on June 28, 2021. Buy the rumor, sell the fact type of trade. Buy Pullbacks. For equity-bearish folks, see the IWM/SPY spread idea in the May 27th publication. Always use a stop loss level that caters to your individual risk tolerance. Update 06/24: this one is approaching our exit date of June 28th.

Thanks for reading today’s Stock Trading Alert. Let’s continue with our theme of patience, discipline, and execution. Have a great day!

Thank you,

Rafael Zorabedian
Stock Trading Strategist