Dow ETF On Confirmed Bullish Trend

December 18th, 2020 Dow ETF On Confirmed Bullish Trend Dear Reader, Yesterday, we looked at a Daily Price Chart of the Direxion Daily Semiconductor Bull 3x Shares ETF, noting the ETF was making a series of higher highs and higher lows. For today's Trade of the Day we will be looking at an On Balance Volume chart for ProShares Ultra Dow30 ETF symbol: DDM. Before breaking down DDM's OBV chart let's first review the investment objective of the ETF. The investment seeks daily investment results, before fees and expenses, that correspond to two times (2x) the daily performance of the Dow Jones Industrial Average Index. Confirming a Price Uptrend with OBV The DDM daily price chart below shows that DDM is in a price uptrend as the current price is above the price DDM traded at six months ago (circled). The On Balance Volume chart is below the daily chart. On Balance Volume measures volume flow with a single Easy-to-Read Line. Volume flow precedes price movement and helps sustain the price uptrend. When a stock closes up, volume is added to the line. When a stock closes down, volume is subtracted from the line. A cumulative total of these additions and subtractions form the OBV line. On Balance Volume Indicator ● When Close is Up, Volume is Added ● When Close is Down, Volume is Subtracted ● A Cumulative Total of Additions and Subtractions form the OBV Line Volume flow precedes price and is the key to measuring the validity and sustainability of a price trend. We can see from the OBV chart below that the On Balance Volume line for DDM is sloping up. An up-sloping line indicates that the volume is heavier on up days and buying pressure is exceeding selling pressure. Buying pressure must continue to exceed selling pressure in order to sustain a price uptrend. So, On Balance Volume is a simple indicator to use that confirms the price uptrend and its sustainability. The numerical value of the On Balance Volume line is not important. We simply want to see an up-sloping line to confirm a price up trend.

Confirmed 'Buy' Signal for DDM Since DDM's OBV line is sloping up, the most likely future price movement for the DDM ETF is up, making DDM a good candidate for an ETF purchase or a call option purchase. Let's use the Hughes Optioneering calculator to look at the potential returns for a DDM call option purchase. The Call Option Calculator will calculate the profit/loss potential for a call option trade based on the price change of the underlying stock/ETF at option expiration in this example from a flat DDM price to a 12.5% increase. The Optioneering Team uses the 1% Rule to select an option strike price with a higher percentage of winning trades. In the following DDM option example, we used the 1% Rule to select the DDM option strike price but out of fairness to our paid option service subscribers we don't list the strike price used in the profit/loss calculation. Our initial price target for the DDM ETF is 61.73 per share.

Trade with Higher Accuracy When you use the 1% Rule to select a DDM in-the-money option strike price, the DDM ETF only has to increase 1% for the option to breakeven and start profiting! Remember, if you purchase an at-the-money or out-of-the-money call option and the underlying stock/ETF closes flat at option expiration it will result in a 100% loss for your option trade! In this example, if the DDM ETF is flat at 55.60 at option expiration, it will only result in a 8.9% loss for the DDM option compared to a 100% loss for an at-the-money or out-of-the-money call option. Using the 1% Rule to select an option strike price will result in a higher percentage of winning trades compared to at-the-money or out-of-the-money call options. This higher accuracy can give you the discipline needed to become a successful option trader and can help avoid 100% losses when trading options. The goal of this example is to demonstrate the powerful profit potential available from trading options compared to stocks/ETFs. The prices and returns represented below were calculated based on the current stock and option pricing for DDM on 12/17/2020 before commissions. When you purchase a call option, there is no limit on the profit potential of the call if the underlying stock/ETF continues to move up in price. For this specific call option, the calculator analysis below reveals if the DDM ETF increases 5.0% at option expiration to 58.38 (circled), the call option would make 36.3% before commission. If the DDM ETF increases 10.0% at option expiration to 61.16 (circled), the call option would make 81.5% before commission and outperform the stock return more than 8 to 1. The leverage provided by call options allows you to maximize potential returns on bullish stocks. The Hughes Optioneering Team is here to help you identify winning trades just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck's Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade. Start Trading Like a Champion Today I want to start sending YOU trades! And since you are a Trade of the Day subscriber I'm giving you a special discount on my trading service. Just call Brad at 1-866-661-5664 or 1-310-647-5664 to join and use the code "Optioneering VIP" to receive special pricing! Wishing You the Best in Investing Success,

Chuck Hughes Editor, Trade of the Day

© 2020 Tradewins Publishing. All rights reserved. The information provided by the newsletters, trading, training and educational products related to various markets (collectively referred to as the "Services") is not customized or personalized to any particular risk profile or tolerance. Nor is the information published by Legacy Publishing, LLC ("Legacy") a customized or personalized recommendation to buy, sell, hold, or invest in particular financial products. Past performance is not necessarily indicative of future results. Trading and investing involve substantial risk and is not appropriate for everyone. The actual profit results presented here may vary with the actual profit results presented in other Legacy Publishing LLC publications due to the different strategies and time frames presented in other publications. Trading on margin carries a high level of risk and may not be suitable for all investors. Other than the refund policy detailed elsewhere, Legacy does not make any guarantee or other promise as to any results that may be obtained from using the Services. Legacy disclaims any and all liability for any investment or trading loss sustained by a subscriber. You should trade or invest only "risk capital" - money you can afford to lose. Trading stocks and stock options involves high risk and you can lose the entire principal amount invested or more. There is no guarantee that systems, indicators, or trading signals will result in profits or that they will not produce losses. Some profit examples are based on hypothetical or simulated trading. This means the trades are not actual trades and instead are hypothetical trades based on real market prices at the time the recommendation is disseminated. No actual money is invested, nor are any trades executed. Hypothetical or simulated performance is not necessarily indicative of future results. Hypothetical performance results have many inherent limitations, some of which are described below. Also, the hypothetical results do not include the costs of subscriptions, commissions, or other fees. Because the trades underlying these examples have not actually been executed, the results may understate or overstate the impact of certain market factors, such as lack of liquidity. Legacy makes no representations or warranties that any account will or is likely to achieve profits similar to those shown. No representation is being made that you will achieve profits or the same results as any person providing a testimonial. No representation is being made that any person providing a testimonial is likely to continue to experience profitable trading after the date on which the testimonial was provided, and in fact the person providing the testimonial may have subsequently experienced losses. The cost basis for some of the options in a portfolio may be reduced by rolling over profits at option expiration which is one of the Hughes Optioneering Trade Management Rules. Some income figures presented represent the total amount of option premium collected during the referenced period. Actual profits were less. Open trade profit results may have increased or decreased when the trades were closed out. Chuck Hughes' experiences are not typical. Chuck Hughes is an experienced investor and your results will vary depending on risk tolerance, amount of risk capital utilized, size of trading position, willingness to follow the rules and other factors.

You are currently subscribed to tod as: indra21poetra@gmail.com. Add todaystrade@chuckstod.com to your email address book to ensure delivery. Forward to a Friend | Manage Subscription | Subscribe | Unsubscribe | Snooze