10/20 Saturday – Setting up for Monday
Ok so here is the deal. Bollinger Bands Squeeze play can be dangerous if it gets you whipsawed and takes you to completely opposite of the trade because the stock will move very fast once it breaks out of that Bollinger Bands.
If you can set it up right, it will be safe and fun.
Keep in mind that this is going to be 1-2 days trade set up once it breaks out of Bollinger Bands. It might take few more days to break but it will break. Also keep in mind that the earnings 25th before open so unless this thing happens like on Monday or Tuesday, I might not do it at all.
So here is how you play this game.
Obviously the Bollinger Bands must be squeezing and to define ‘squeeze’ you just have to look at the past activity and see if this is something that is very unusual squeeze. And in this case, we have this very very tight squeeze going on. I went back pretty far and have not seen this kind of squeeze on $CME. So when this breaks, I think we are going to see some huge price jump.
Also looking at the indicators on the chart above. Like DMI and ADX completely reset and just resting now. Waiting for it to move and good confirmation of this play.
You can see that Moving Averages are flattening out (moving sideways) and this is one big confirmation that we are in the consolidation and this supports the Bollinger Squeeze play.
We can see on my oscillators that they are just resting in the middle of the trading range. Especially Stoch and MACD really just hanging around in that middle ground which completely supports this Bollinger Squeeze play.
RSI however is pointing down but you know that RSI is very sensitive indicator and it is reflecting from last Friday’s price action so it’s irrelevant to our argument currently.
This is no Strangle or Straddle strategies if you are trading options. It’s separate triggers. Calls options and Put Options trigger putting in contingency order. As you know I am pretty aggressive with my triggers and they are pretty tight triggers and I like them like that. So if you want to be more safe, put your triggers little further out.
I’ve been playing this Bollinger Bands Squeeze for years and I never got burned before. There were times that I never got triggered but it never went against me yet so.. Also because I only get into bollinger squeeze that I think it will play out for sure. And in this case, I really do think it’s going to play out.
There are no targets on this trade setup because once it breaks out and depending on its move, I will get out pretty quickly on the same day or the next day.
Again if this thing does not break by Tuesday, I might abort the whole thing because of the earnings on the 25th.
(Some traders probably won’t even trade this stock in the week of the earnings so if you are unsure, please don’t play this setup)
10/22 Monday – Bearish Trigger Little Lower
Did not break yet this morning. We did dip lower than last Friday’s lows but nothing much happened. I did lower my bearish trigger just a tiny bit since we did dip lower this morning. I just want to make sure that I am not getting whipsawed or anything.
Again my triggers are usually very aggressive and for that matter I constantly change them depending on the price action. So I recommend putting the triggers where it’s safe and so you don’t get whipsawed.
*Thoughts – I may take this setup to the earnings
Hmm you know what. I may think about keeping this set up until the earnings day which is on the 10/25 before open if this thing does not happen before the ER. I would have to watch it very very closely in the morning to make sure I don’t get whipsawed crazy and both of my triggers get triggered or some shenanigans like that.
Again depending on the price action, I might have to get out right away or keep it for a day or two..
I’ve never seen a stock going into the ER with Bollinger Bands squeezing so hard. I think its going to be weird or SUPER FUN!
10/24 Wednesday – Taking It Into The Earnings
(9:47am CT – Earnings, tomorrow before open)
*Bollinger-Bands Squeeze break-out Play
So here is my updated set up. Again be very careful if you are going to play this setup with me and taking it into the ER tomorrow before open.
One thing I should warn you about is if in the event that we gap down or up, the decision has to be made quickly as soon as open because these are the TRIGGERS and not Strangle or Straddle strategies. These are separate Call Options and Put Options in contingency orders.
Tomorrow morning look at your BBands make sure we have confirmed break-out with a CANDLE not with a gap because we’ve all seen it happening before. Stock gaps up on earnings day and then it starts to tank. I don’t want that to happen because since we put a contingency order, our options premium will start to decline rapidly. So ff we break out with a gap and the stock starts to fall,you need to get out immediately. However if we gap up or down and it continues in that direction? Stay for a little bit and get out accordingly.
But ideally this is what I want to see. No gap but just straight candle action from the open so be cautious and be at your computer to close it out if necessary.
If everything works out well, we can TRULY bank on this.
10/24 Thursday – Broke Out
Broke out this morning.
Currently sitting on 100/200SMA so let’s see if we can push through it today.
Currently sitting on 100/200SMA resistance.. We need to push through it otherwise we could bounce here but we still have lots of bearish momentum so will see how it plays out through out the day.
Quick 1 hour trade played out well. Options value really jumped after 1 hour. 50% ROI when closed the trade.