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JAN 2021: LRCX $500 – $505 Bull Call Spread

Stock

LRCX

Trade Structure

$500- $505 Call Spread

Trade Date

1/28/2021

Price Paid

$250

Expiration Days

03/12/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

LRCX has now become a regularly traded stock in our group. It did have a pre-earnings runup like many earnings trade setups but sold off immediately after earnings. When this post-earnings profit taking happens, we just need to enter a trade at some kind of support level. I saw the support at $500 and entered there. Of course, with the broader market sell-off happening, LRCX got pulled back all the way down to $475 and many of our traders got into really low spreads, eg. $475 - $480. If the sell-off had continued, this could have been dragged down to next support at $460 too. Irrespective of how low it went and what happend, if it stays above $505, all trades will make the same amount of money.

Trade Selection Criteria

Overall market movement

We had a nice pullback in the entire market which allowed us to put on 18 trades this week.

No Earnings or Significant News

Earnings are behind us and were announced on 1/27

Bollinger Bands outside Keltner Channels

Bollinger bands are clearly outside the Keltner Channels.

RSI Analysis

This is a post earnings trade. Our regular indicators don’t apply here.

N/A

ADX Analysis

This is a post earnings trade. Our regular indicators don’t apply here.

N/A

Trade Analysis

Analysis will be updated when we close this trade.

Trade Outcome

PENDING

Profit/Loss

$N/A

Beginning Account Balance

$10,383

Ending Account Balance

$N/A

To follow along the strategies we use in the $25K challenge, we recommend that you get the strategy book which explains the whys and wherefores of our method. Get it here=> https://amzn.to/2MUOCE5

4 Comments

  1. Alexander Gruebling

    Hello, I have a question because I didn’t find it in the book (or overlooked it): what time-frame do you use in your charts? Is that 5 minutes? Greetings from Austria, Alex

    Reply
    • Nishant

      I have mentioned it in the book. The time frame is always 3Month Daily timeframe for all my charts.

      Reply
  2. Carey Rouse

    Just to make sure that I’m reading the support correctly, is the support at $500 coming from that last candlestick? It’s a clear hammer candlestick demonstrating a strong bull sentiment on that day. Is that right or is there another candlestick you are using for the $500 support?

    Reply
    • Nishant

      Support comes from multiple touch points at a price level. The more times price/action bounces off of a support level, the stronger the support is. In this case there are 4 points in the past where price has flirted with $500 (including the latest hammer you are pointing out)

      Reply

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