Hey there, fellow VWAP nerds!
For those of you who don’t know much about me yet, know this: I’ve been in the trading game for DECADES, and in that time, there’s ONE single setup that’s proven itself time and time again…
It doesn’t happen EVERY time, of course – nothing in the stock market is ever a guarantee, BLANCHE – but it’s been consistent enough that I can easily call it the most successful, repeatable trade I’ve ever seen…
And the name I’m talking about could be especially important THIS week, which is the biggest of the season for earnings…
I’m talking about the Invesco QQQ Trust (QQQ), of course! Better known as simply “the Qs.”
Michael’s been paying attention! Nice!
What’s more, the Qs are unique in a couple ways:
- The shares rarely go down on a day-to-day basis
- They now feature more options expiration series than EVER, which is great news for day traders like me
And today, I want to show you the QQQ setup that’s been my bread & butter, and how I might play it with options this week.
Plus, we’ll do a quick review of some of the VWAP earnings breaks we witnessed LIVE this morning, and how an early QQQ win can provide the ammunition to trade more earnings names each day.
My Bread & Butter QQQ Setup
As far as I’m aware, in my lifetime, I have yet to see the QQQ lower 18 months out from any point.
That’s not to say the QQQ NEVER goes down, because obviously “always” and “never” rarely, if ever, apply to the stock market.
But typically, as long as the ProShares Ultra VIX Short Term Futures ETF (UVXY) is moving in the right direction (which is lower) and nothing crazy is sinking stocks (like a global pandemic), the QQQ will be on the rise.
Weekly chart of QQQ over past year – courtesy of StockCharts
Because I trade around the 1-minute VWAP, I’m usually laser-focused on the 1-minute intraday chart…
And it’s there that I often spot QQQ opportunities.
Those of you who watched my LIVE trading hour at 9:30 a.m. ET today witnessed in real time exactly what I’m talking about.
While the QQQ rarely goes lower on daily and longer-term charts, occasionally you find the shares Dipping & Ripping on an intraday basis…
And when I see QQQ breaking back above the 1-minute VWAP, that’s where I want to be a buyer!
QQQ broke back above the 1-minute VWAP (blue line) this morning
See, most options expire at the closing bell on Fridays – whether they’re weeklies, standard monthlies (expiring the third Friday of the month), or LEAPS (expiring each January).
But the Qs now have options expiring each Monday, Wednesday, and Friday.
In Thinkorswim (TOS), go to the Options tab to find available contracts
As a day trader who abhors holding any stock overnight, having a wider selection of expiration dates is extremely beneficial to me.
And as a day trader looking to stay nimble, I never want to pay for time I don’t need.
For instance, this morning I walked you through what it would look like had someone bought near-the-money QQQ $368-strike call expiring at today’s close.
This option – shown on the ToS chart below – could’ve been bought for around 50 cents at the early 1-minute VWAP break… and it MORE THAN DOUBLED in less than an hour!
QQQ $368-strike call expiring at the close today
Specifically, many of the QQQ components – which are based on the Nasdaq-100 Index (NDX) – report earnings this week, including Apple (AAPL) and Microsoft (MSFT).
That will likely mean extra volume for the ETF, and as someone who trades based on Volume-Weighted Average Price, this could be big.
It could also mean, however, that QQQ option prices run hotter than usual this week, due to heightened implied volatility (IV) around earnings, so just keep that in mind.
But if I do get a chance to buy QQQ breaking back above the 1-minute VWAP this week, the profits from this trade alone could fund the other patterns I’m stalking this week: EARNINGS REVERSALS.
For instance, someone who profited on QQQ this morning would’ve had more ammunition to trade any of the reversals we discussed LIVE today, including PetSmart (PETS) or Hasbro (HAS)!
HAS earnings reversal worked like a charm
In closing, the takeaway today is twofold:
- When I have a chance to buy QQQ breaking back above the VWAP, I DO IT
- If you watched the earnings reports and waited for VWAP breaks today, you got paid
Going forward, please keep both of these in mind – especially this week – and we’ll see what the stock market gods have in store for us bright and early tomorrow.
Make sure you catch me on Money Morning LIVE at 8:30 a.m. ET, followed by my hour of LIVE trading at 9:30 a.m., where we may find ourselves discussing earnings names like Tesla (TSLA), 3M (MMM), and General Electric (GE), among others.
Talk to you soon!
Kenny “The Warlock” Glick
6 responses to “The Most Consistent Trade of My Life”
July 26 2021