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Fractals Give Early Signal Where Markets Are Heading

by | May 13, 2020 | Editorial | 0 comments

Ever since the Fed and Treasury announced they’d be injecting trillions of dollars into the economy…

Stocks have gone straight up. 

But many are starting to worry that move has been too fast, and are now in overbought territory. 

If you’re trying to time the market…

You’re playing the wrong game. 

Instead, try to identify how strong or weak the trend is. 

It will give you hints on how much further this rally has…

And when it may break down.

Unsure on how to do this? 

No worries…

Because I’m about to show you one of the most powerful math equations known to man. 

Most importantly… 

How it can be applied to making money in the stock market…

And the best strategy to maximize its potential. 


Fractal Energy


Fractal Energy is considered the most powerful mathematical equation that is used to solve the unsolvable.  Fractals are used in defining coastal patterns and snowflake designs.  

A fractal is a never-ending pattern. Fractals are infinitely complex patterns that are self-similar across different scales. They are created by repeating a simple process over and over in an ongoing loop. 

When searching for ways to tap into the inner workings of the stock market, I knew right away Fractal Energy would do the job!


Fractal Energy Indicator


The power of fractals allows me to determine the strength of trends and how much “life” is remaining in a stock’s movement.  

And I must say, there are some ominous signs coming out of the fractal indicator. 

But first, there are 2 main components of Fractal Energy that you need to know.

Two components:

  1. Markets Fractal Pattern
  2. The Internal Energy 

Fractals are found throughout everything in nature, from plants to shorelines… and even the financial markets!

Energy is the term used to describe the stored or potential energy a stock has built up.  Like a spring that is compressed, it stores potential energy and erupts when you release the force that is keeping it held together.

And by combining those two different components you create a single indicator that is able to successfully determine the strength or weakness of a trend on any stock.

Fractals tap into the inner strength of every stock across every time frame giving you the most comprehensive understanding of what a stock is going to do in the future.


Source: Tradingview


This is an example of how Fractal Energy combined with Bollinger Bands was able to pick the bottom on the SPY after the massive selloff!

And Fractal Energy is signaling the next big move in the markets.


Higher Time Frame Have Mixed Signals


But it’s not such a promising story.

The markets have rallied back to the moving average on the Bollinger Bands on the weekly time frame and the fractals are still indicating a weak or exhausted signal.


Source: Tradingview


In the SPYs Monthly chart, you can see that the stock behaved similarly to the weekly chart.

The SPY sold off below the lower Bollinger Band and rallied back up to the moving average similarly to how the price action occurred in the beginning of 2019.

But which direction is the market going to be heading?


Source: Tradingview


Unlike the previous market rally, the fractals are actually fully exhausted on this recent rebound.  And even though the markets rebound back to the simple moving average it doesn’t necessarily mean that it will continue higher without momentum behind it. 

So what’s this mean for the SPY?

This means that the stock is at a point where it needs to rebuild some of that energy it has spent.  

And like most trends, the SPY needs to go through cycles of regenerating energy after expending energy.  But we cannot continue this trend too much longer since the upper time frames are not supporting this move much longer.  

So, in order for the move to continue higher – regeneration can be done by either a pause or a slight pullback in the SPY.    

But in this case, there is a high possibility that the markets are going to head lower.

The trade setup I’m looking for is SPY’s Fractal Energy to regenerate back up and become fully charged up again to drive the market in its new trend.


Selling Options and Credit Spreads


In order to get long or short the markets, a trader is left with only a handful of choices, and those are selling stock or buying puts.

And to be honest, both are usually a terrible idea and there are times when you could be right on the direction and still lose on the trade because of other factors such as Implied Volatility decreasing the price of the stock on you.  

One strategy you might not have heard of is a credit call spread, and that’s the trade we are going to focus on when looking to short the stock.

Definition: A credit spread, or net credit spread, is an options strategy that involves a purchase of one option and a sale of another option in the same class and expiration but different strike prices. It is designed to make a profit when the spreads between the two options narrows.

Simply put – a credit spread strategy will make you money, while a debit spread strategy will cost you money.  

This is the house vs the gambler.

And at Options Profit Planner, I want the house odds in my favor as the business owner and expect to have steady money coming in, not going out!

A credit spread involves selling a high-premium option while purchasing a low-premium option in the same stock and option type.

As a credit trader, you have 4 strategies to generate income for your business.

The 4 main trades are:

  1. Short Put
  2. Short Call
  3. Short Put Spread
  4. Short Call Spread

In order to trade the SPY short, it would be best to implement a credit call spread.  

This trade will allow me to take advantage of the expected stalling out to slight pullback in the stock price in the near future.  


Wrapping up


A fractal is a never-ending pattern and is repeatable and found across everything in nature, such as coastlines, pine cones, and snowflakes. 

Fractals are created by repeating a simple process over and over in an ongoing loop. Meaning that a pattern working on a weekly time frame will work all the way down to a 1-minute time frame.

And when you are selling options, you put the house odds in your favor!

Only then do you then have a winning combination that can give you the best shot at making money in the markets!

Now – start tapping into the inner workings of the stock market and make Fractal Energy a cornerstone of your trading business!

To get started, Click here to sign up for Options Profit Planner now! 

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