What is the best setup for new traders to trade? A Changing Fundamentals Trade. One day the fundamental strength about the name is substantially different than just the day before. These trade setups outperform the market. They trend intraday. They can trend for 1-3 days for those of you who are swing traders. It’s this new news catalyst, a significant change in fundamentals, that propels so much opportunity. These trading opportunities can make your trading month!
For example, last week, we saw an example of changing fundamentals in Macy’s, stock symbol $M, and the stock plummeted.
On May 11, Macy’s (M) plunged 15.2 percent after reporting a 7-plus percent drop in sales, its fifth consecutive quarterly sales decline. Forward guidance was cut as well. Earnings came in at 40 cents (vs. 36 cents expected) while sales totaled $5.77 billion (vs. $5.95 billion expected). Same-store sales dropped 5.6 percent.
In our new training program, The Winning Trader, we will teach 10 trades for you to add to your trading PlayBook, and one of them is the Changing Fundamentals Trade.
I explained the Changing Fundamentals Trade in this video here, with a specific trade that I made:
Another excellent example of this trading setup is when a company suspends their dividend, as I wrote about in a recent Seadrill trade, an offshore driller.
Yet another example of this setup was when Lumber Liquidators, stock symbol $LL, saw 60 Minutes do a hit piece questioning the safety of a laminated lumber product they sold, the company’s fundamentals significantly changed, and the stock did this……
For a recent training class, I mandated that new traders only trade setups with significant changing fundamentals. For our latest class, traders must place changing fundamentals trades at the top of their list for stock selection. They start first with these trades during their AM preparation. They must share with me all stocks that have a significant change in their fundamentals overnight. We want them focusing on these stocks as they start their trading career.
This setup is an excellent trade to add to your trading PlayBook.
*no relevant positions
One Comment on “The Best Setup for New Traders: A Changing Fundamentals Trade! ($ERJ)”
Bella – excellent example of a high odds setup with key criteria present– these “fundamental changes” are the precursor to what often causes a “daily complexion change”– which can be a close below an MA…a BO of a channel…a trend change etc– which bodes for high odds follow thru on Day 2s.
U have very beneficial knowledge and wisdom to share– thank u for all your contributions–I certaintly owe a good portion of my success & knowledge gained to u & “The Playbook”– which I talk up often to new and/or struggling traders.
It is however quite a shame…that while u have no problem sharing beneficial info– u have extreme difficulty being open to receiving it with an open mind for subsequent critique/review to an ultimate end conclusion/judgement. Instead – the “flight” response kicks in. True character reveals itself in very subtle… yet profoundly undeniable ways.
Good luck to u and continued success.