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Options are still one of the most misunderstood opportunities.
They’re too hard. They’re far too expensive. You have to be rich to trade them. Those are just some of the excuses I’ve heard over the last 20 years. But to be very honest with you those excuses are laughable.
The Parabolic Stop and Reverse (SAR), commonly known as Parabolic SAR is a trend following indicator that highlights current price direction.
It also provides entry and exit signals as well with dotted lines.
I love when traders tell me technical analysis doesn’t work.
While they’re entitled to be wrong, the fact remains that technical analysis does work, sometimes by up to 80% of the time. Granted, there is no Holy Grail, but if we use the right indicators, we increase our odds of success. Especially if we apply those indicators to well known stocks that may only be down temporarily.
Let’s look at Raytheon (RTN) for example.
Markets are a fickle beast.
Even when the U.S. and China neared a trade deal, markets began to pull back in March 2019.
While many shifted blame to the President for the move lower, we had to consider that markets were technically stretched. We were overdue for a pullback.
If you pull a rubber band too far, too fast, what happens?
It snaps back, right? The same thing happens with stocks, indexes, and currencies. If they’re pulled too far in one direction, eventually they’ll snap back and revert to back to the mean. In fact, we see it happen all the time.
When it comes to technical analysis, moving averages are essential.
For example, for more than 20 years, I’ve relied on two specifically – the 50-day and the 200-day simply moving average. Not only am I looking for crossovers for golden and death crosses, I want to see if a stock is holding its own above them.