The overall market this week has been sloppy…
Even with news that the government shutdown drama is on hold until December, the Nasdaq rallied midday Thursday, only to puke about 100 points into the close before gapping lower at Friday’s open.
I wouldn’t call myself a bear, but when I see a weak market like this one — where the internals don’t add up — I don’t hesitate to point it out.
It’s like an engine swap in a Ferrari — it runs, but something clearly isn’t right.
But as the saying goes, we can only trade the market in front of us…
So it’s best to stick with what works… And for us that means following institutional order flow, limiting our risk with a proper position size in trading and having the discipline to ride out the rough patches.
That strategy scored the Daily Profits Challenge War Room a win on Dollar Tree Inc. (Nasdaq: DLTR) on Wednesday…
And that same tenacity tagged a triple-digit gain on Friday for Blockbuster Breakout Calendar members!
The Importance of Position Size in Trading
I’ve said it before, and I mean it. Stop losses suck.
Yes, we need to protect against negative downside movement…
But you should know by now that stop-loss orders aren’t the only game in town when it comes to limiting risk.
I say scale down your position size… use proper risk management… and have conviction and confidence in your trades!
Back in August, Blockbuster Breakout Calendar spotted strong dip-buying in Merck & Co. Inc. (NYSE: MRK).
In addition to the bullish options flow, Merck’s new antiviral drug, molnupiravir, was set to release the findings of its Phase 3 study in November.
With that information, we took aim on some cheap out-of-the-money November options that captured the catalyst.
For the next several weeks, the stock was stuck in the mud and time decay took its toll on the premium…
But because I keep my position size manageable, I could confidently hold on for the news to hit… and man did it ever!
Merck decided to release its results early, saying molnupiravir reduced the risk of hospitalization or death by around 50% in COVID-19 patients.
Shares jumped 8.5% at the open, sending our November options soaring from $0.54 on Thursday to $3.50 Friday morning… and delivering Blockbuster members a 118% win in the process — BANG!