Has anyone ever said to you, “You want to trade the stock market? What are you, crazy?! That’s just gambling!” Not only have I heard that before, but I’ve even heard it from many of my own family members.
CHERRY PICK YOUR TRADES
As you are probably well aware, the market is quite far from gambling. Using technical analysis, a conditioned trader can have an entry, target and stop based on the stock’s price and movement. You can further increase the odds of trading profitably by carefully “cherry-picking” only the best trades.
STOCK PICK
Speaking of gambling and trading, let’s analyze a company that is based on providing entertainment in various forms, gambling being one of them, Las Vegas Sands (LVS).
Honestly, I absolutely love trading LVS…it’s an incredible stock. It’s great for covered calls, it’s great for credit spreads, and “fundies” (my nickname for traders who only focus on the fundamentals of a stock) love it because it pays dividends.
SET UP
LVS has had strong support at $37 and around $41. We have recently bounced off of both of those strong supports (shocking, I know).
THE TRADE
Personally, I would place a contingency order through my broker with the following conditions: if the time is after 3:45pm EST AND if LVS is greater than $45.08, I would enter into this trade. I would buy to open October calls, along with potentially purchasing some December calls for some of my higher targets. In the example below, I have highlighted my two targets ($48 and $52) in green.
CONFIRMATION
We also have a potential inverse head and shoulders pattern. Recently, on 9/5/2012, we have what could be considered a test of the neck line. That gives credence to the bullish perspective. In addition, we are also above the 50 period exponential moving average, which should provide some solid support.
RISK MANAGEMENT
If this trade triggers, I would place an initial stop at 43.08. Therefore, I am risking $2 to make $3 and potentially as much as $8 on this trade. I think that’s a nifty risk/reward ratio, which is something important to consider before entering into any trade.
Looking for more trading ideas? Read our daily Markets section here.
