Good morning, traders…
Do you feel like you’re doing everything right, but your trades still aren’t working?
Most traders get stuck at some point, wondering why their account won’t grow, no matter how hard they try…
The answer is usually simple: they’re chasing.
Inexperienced traders tend to buy calls when a stock is ripping higher (and puts when it’s pulling back).
They think they’re “trading with the trend.”
But in the options market, chasing momentum without a plan is a recipe for disaster.
By the time you jump in, the upside move is almost over. And when the chart starts to pull back, even just a little, your options premiums get crushed.
A small reversal can wipe out 30-40% of your positions in the blink of an eye.
If this sounds familiar, it’s time to stop what you’re doing.
Let Me Show You A Simple Way To Time Your Trades For Maximum Gains (While Taking Minimal Risk)…
The Healthy Pullback
As usual, I started my day by looking at the SPDR S&P 500 ETF Trust (NYSEARCA: SPY):
I immediately saw the pullback pattern on the 15-minute chart.
The index pulled back precisely to the 50-day exponential moving average (EMA) at a previous resistance level ($620).
When you see a pullback like this, it’s time to check the volume on the daily chart.
You want to see less volume on the pullback candle than on the average green candle…
That’s exactly what we see here: The pullback volume is lower than SPY’s daily average volume over the past four months.
It’s less likely the beginning of a leg lower, and more likely a signal that the index is heading higher.
We’re in a period of healthy consolidation on lower volume, a textbook pullback.
And that’s one of the best times to enter trades … period.
How Pullbacks Reduce Your Risk (And Improve Your Timing)
The best players don’t chase the game. They let the game come to them.
That concept stuck with me from my time as a Division I basketball player. And it turned out to be one of the best trading lessons I’ve ever learned.
Most people see a stock moving higher and think, “I need to buy this before it runs even further.”
But that isn’t trading, it’s chasing.
Pullbacks let the trade come to you.
When you learn to wait for the chart to retrace into a prior breakout area, rising moving average, or former resistance (now support) … you’re reducing your risk in real time.
Everyone wants to trade explosive breakouts. And sure, breakouts can work well.
But they’re situational. And they come with a cost: you’re always buying at a higher price.
It plays out like this: A breakout happens, volume spikes, and momentum kicks in. If you’re early, congrats.
But most people aren’t early. They’re late.
They read something online, see the move, and then enter the trade.
The chart’s already stretched. There’s no clean level to place a stop. Their risk is higher.
And if the move fades, they will have bought the exact top.
Contrast that with a pullback.
The stock already made its move. It’s already shown strength. Now it’s resting, digesting, resetting. You’re watching to see if buyers defend that key level.
If the level holds, you enter. If it doesn’t, you wait.
That’s proper risk management. That’s a trade you can make with supreme confidence. And that’s why I love pullbacks.
This week, as the major indexes are entering a textbook pullback, thousands of individual stock charts are doing the same thing.
Pay attention to the patterns.
While breakouts might seem more exciting, it’s the quiet pullbacks that build the best trades.
And trust me, there’s nothing boring about stacking gains.
Happy trading,
Ben Sturgill
P.S. Don’t be late to the best setups in the options market.
Join Danny Phee TOMORROW, JULY 10 at 7:00 p.m. EST for a LIVE WORKSHOP where he’ll go over our top trade ideas for the week.
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*Past performance does not indicate future results