Whenever JC is out, the Morning Show becomes the Strazza Show.
I invite some of my closest friends on for the guest segment, and we bring the analyst team members on for a free-for-all market discussion. It’s a blast.
Today, we had an extra special guest, David Lundgren.
I’ve learned so much from my conversations with Dave over the years.
One of the big lessons I credit to him is the importance of outlier trades. We spent a good chunk of time discussing this on my Off The Charts podcast a few months back.
But, I’ve also learned the importance of having big winners first-hand over the years. Figuring this out has been quite the journey, and it has made all the difference for my trading.
I believe in being overly aggressive and making as much money as possible in bull markets.
You need to make hay while the sun is shining. These environments don’t last forever.
The idea is to add exposure and lever up on my favorite positions as they are experiencing rally phases or up-legs within the context of their primary uptrends.
But 95% of the time, I’m already in these positions via common stock.
So rather than add and reduce my common stock position for the tactical trend, and have to pay short-term capital gains tax, I use options.
But first, the way I trade the common stock is simple. I buy primary trend reversals. They look like this one in Affirm $AFRM:
I’m looking for a checklist of things to confirm the trend reversal:
Path of least resistance is higher = rising 200-day MA
Leadership/ relative strength = rising 200-day MA on relative trend
Momentum in bullish regime
Clean & clear polarity zone to define risk
I’ve marked up the chart above to show these things are in place for Affirm.
So, I got in on a break of the polarity zone around 52, and plan to hold these shares for the duration of the primary trend.
But, look at how AFRM is set up right now! I want to own more. I want to have a leveraged position in anticipation of a big move.
This is a textbook bull flag.
While the rounding bottom or primary trend reversal is my favorite pattern for the long-term trend, the bull flag is the best for tactical trends.
Resolutions from these coils often result in the most explosive up-legs. And they don’t always happen coming right out of a base; they usually occur along the way, in the middle innings of the trend.
So, I leave my common stock position alone. It’s all good. And I add AFRM calls in a situation like this.
Now I can trade the tactical trend and treat it as a different position entirely from how I’m trading the primary trend.
I’ve created a system to do this with some simple rules and best practices.
I take this research personally, because these are all the same trades I am putting on in real time. This is my kicker portfolio. These are the “cherry-on-top” trades. They are the outliers. The home runs. They make all the difference.
