Market Milestones: All About Risk vs Reward

[Image] Good morning ! Welcome to another beautiful and majestic Friday morning. Today is the day where we sit down and review the markets to see what transpired since we last talked and speculate about what may transpire before we meet again. If there is one thing we can say with 100% certainty it would be that this market is anything but boring. Last week on SPY, we were looking for the 5th wave in our down trend to end in the $380-$385 area. That is the level that bulls really needed to hold and boy did they ever! After Thursday’s epic candle the bulls are looking strong. SPY retested the 2022 bear trend line perfectly and bounced. SPY held the higher low at $378 that needed to hold. SPY just closed above the March 10th candle which had the biggest bear volume in the last 413 days. QQQ also got the famous Golden Cross for the first time since May 21st 2020, which was followed by a 74% epic bull run. QQQ also bounced perfectly off of the 200Wsma. Our Traders Plan portfolio went long on QQQ at $393.05 and is up 4% in 2 days with stops just below break even. If you want to get trade alerts like that sent directly to your inbox, check out the link below. [Check out The Traders Plan Newsletter]( As traders, we need great risk reward on all trades whether we are bullish or bearish. When a stock or an ETF get too extended in one direction, it usually retests, moving in waves. The old adage “buy low sell high” may seem like an over simplification of how to trade the market, but it can give you an idea of when you should and when you shouldn’t be entering a trade. As traders we can’t control a whole lot once we are in a trade, but we can control our entries. Let’s look at a recent example. On Monday March 13th, we were gapping down into support after two large bear days and a 6% bear move in a little over a week. Would the risk reward for a swing trade have skewed to the bull side that day or the bear side? The correct answer is the bull side and we don’t need hindsight to know that. That doesn’t mean every time we get extended in one direction or the other a blind buy or blind short is the right move. We should wait for our particular set up to show itself before we hop into trades. However, this method can at least help us with direction when planning and entering our trades. As far as the week ahead, I will be watching for a pullback of Thursday’s candle to take some bullish swings and see how far this bull run can go. The QQQ is much stronger than SPY right now because big tech is currently on an absolute rampage. The very best part about this current set up is that I know where I am wrong. Meaning, if we take out Thursday's candle or the low put in this week, I don’t want to be long any more. If we start closing above $408 on SPY, the $430 region comes back into play. We really should not break down below this weeks price action any time soon. If we do, the bearish count is in play and it is going to get bumpy out there. [Image]( ETF of the Week Our ETF of the week this week is JPMorgan Nasdaq Equity Premium Income ETF (JEPQ). You can learn more about JEPQ [here](. It tracks the NASDAQ and writes covered calls which allows it to pay out a large dividend. It is pays a 12.34% dividend but it's covered call strategy may hinder it's performance during bull markets. This might be a great options during sideways price action to get market exposure and also get a regular monthly dividend. It's chart currently looks very similar to the QQQ, which makes sense. It might work well to trade this one in a pyramid style strategy. Here is what I have set up on JEPQ. [Image] Enjoy your weekend, Yates Craig, RLT & TPP Market Analyst Disclosure: You are responsible for your own trading decisions. ALWAYS, do your own research before investing in any of the above securities. This is not a solicitation to buy/sell ETFs or securities. NEVER invest money in ETFs or stocks that you can't afford to lose. You can lose all of your capital by trading any securities mentioned. These ETFs/securities are very volatile and gain and lose value quickly. We reserve the right to freely trade in any mentioned ETFs or securities. We are not compensated by any mentioned companies. We trade ETFs and securities based on our opinion of intrinsic/possible future value only. We are not registered investment advisors, so always do your own research before buying any securities. Unable to view? Read it [online]( If you no longer wish to receive mail from us, you can [unsubscribe]( Sent from: Real Life Trading in Nashville TN 37221