Options Trading Insights: Multiple Timeframes Are a Must!

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Hey, John Napolitano here with you at Top Trading Pros. How’s everybody doing? Just wanted to talk about a topic that just came up this week regarding multiple timeframes and how to use it in options. Basically a student came up to me that I teach, that I’ve been teaching for a while, and they basically approached me and showed me a stock that I was talking about a couple of weeks ago called ai.It has been absolutely. Fire. And what people keep telling me and what some of my students keep saying over and over again is, John, when can I short this thing? It is so overbought. It is absolutely ridiculous. And my answer is, this, markets could stay completely irrational longer than your pockets could.Solvent, and that’s a long wall Street term that people use. People have been saying that forever, and you know what? Years ago I would’ve probably not listened to that advice and tried to short this thing. I’m gonna show you exactly what I’m talking about and I’m gonna show you why it is so important as an option trader specifically to look at multiple timeframes when you’re making.Trading decision when you’re analyzing a particular trade, we get so obsessed and so caught up sometimes in a five minute chart. Or basically a one minute chart. Even if you are, if you are really a short term trader or if you’re an option swing trader like I do most of the time, it’s very easy to get caught up in in, in a daily chart.You’re just looking at longer term trends. The most important way to trade is to. All timeframes together in order to make a decision. So I’m gonna show you why this is so important. I’m gonna jump into AI right now. Let me just get in here really quick. So here we go. So here’s ai. The first thing I want to point out is this huge run on heavy volume that it obviously had here.I’m gonna make the screen big in a second, but what I really wanna show you first before I expand my screen, is I want you guys to just take note at the short float. The short float is 27%. That tells me that there’s a lot of people out there that are taking short bets on this thing, and the stock just keeps going higher and higher, and.And my guess is a lot of these short people here, these 27 percenters, they’re getting squeezed. And when they get squeezed, it’s only going to create a short squeeze, which causes the stock to go higher and higher. So if you look at the, if you look at this chart from this perspective, I threw on some secondary indicators, which I rarely do.By the way, if you are, if you spend some time with me in my classes at Top Trading Pros you’ll know that I keep things very simple. I analyze price, action, and volume. I come up with option strategies that make sense based on support and resistance and what. I perceive as my edge and my timeframe. I do look at secondary indicators from time to time when there are extreme examples like this one.So I wanted to point some stuff out to you, and this is why my students are going crazy and a lot of people are asking me about this one. If you look, if you’re a Bollinger Band person, which is basically the standard deviation here of the mean it’s obviously at the very top of its band, right?You could see that right here is where it closed, and it’s at the top of its Bollinger Band and an uptrend. So basically, you could anticipate a pullback. It’s very possible, but guess what? Bollinger Bands tend to catch up with price action. If the stock continues in an uptrend, it will continue at the top.Look at over here, it continued at its Bollinger Band at the outer edge of it for several weeks. So this is what I mean by the, it could stay illogical or irrational for a very long time, longer than you can stay. If you look at the Mac d, it looks overbought. If you look at the rsi, it’s above 70. It’s overbought.So you have three indicators, Mac, d, rsi, and Bollinger Bands all screaming at you at the same time, telling you to take a counter trend trade. Now, when you take a counter trend trade, you have to have an extra edge. There has to ha, there has to be a reason why you would counter trend trade. Maybe earnings are coming up.Maybe you’ll notice that the. Float is starting to disappear. Maybe volatility is decreasing. There are certain signs you can find that tells you that, okay, listen, maybe the wind is coming out of the sails, right? None of that is here. So even though these secondary indicators are screaming that you should be shorting this, Thing to me.10 years ago I would’ve jumped on that bandwagon and shorted. But I realize now, after been doing this for over 20 years, that stocks could continue to remain stubbornly high for a stubbornly long time. And when volatility is high, even if you’re correct in your assessment, to go against the trend and short this thing when it’s so extremely over.What usually happens is you’re overpaying for your option. So in my classes we talk about the right option strategy at the right time for the right situation. Spend time with us in our bootcamp. In our community and you will learn what strategy to use and when in this particular case. The last thing I want to point out and what I wanted to deliver on today was multiple timeframe analysis.If you went ahead and just focused on the daily chart or even the hourly chart or a 30 minute chart, you can see you are in a very long uptrend, right? But what. If we take a step back and we look at the weekly chart, which I’m going to put on my screen now, look at where this stock came from.Everybody this stock came from. Well over $160. It came from $180. It traded as low as $12. And I know this was a long time ago. I know this was too short years ago here, but look at the nasty spill that it had, and it’s only starting to break out again. So if you weren’t paying attention, if you were just paying attention to the hourly chart or a daily chart where you spend most of your time and you neglected the weekly, What you did was you did not realize that this stock can seriously run, it could run easily back to 60 bucks, easily, back to 80 bucks.The market rally, specifically, if there’s a specific momentum behind the AI industry, which there is right now. This thing is definitely a dangerous short, in my opinion. Now, I could be wrong tomorrow, the thing could be down 20%. Who knows? But in my opinion, there is no edge to necessarily go short this thing.And that’s because I’m looking at multiple timeframes and my multiple timeframe analysis has told me based on this chart that this thing has a long way to run. If it decides to run, it’s gonna run. So to me, this is a no-go area. I would much rather off go along a name like this, which, 10, 15 years ago I probably wouldn’t have done.But you know what? As a trader, I have to go with trend. I have to go with momentum, and that is what pays you. The trend is what usually pays you a countertrend trade. You have to have certain rules in place. We talk about when to counter trend trade. In a lot of my classes, we talk about certain situations that make sense.This ain’t one of. So I hope this small video is helpful. Remember, just as a reminder, whenever you’re making a trading decision, throw on a weekly chart, throw on a daily chart, look at the hourly chart. Try to look at three mo, three kind of timeframes at once so you can make it in. Form decision about support and resistance and about where you think something might be overbought and oversold, you might be really surprised at what you find.So I hope this video is helpful. Again, if you have any questions or if you want anything, you know where to find us, we’re at top trading pros.com. Sign up for my next boot bootcamp. We teach all these strategies. You’ll see all the curriculum online. You’ll be able to make a decision whether you wanna spend more time with us.If not, please subscribe to our YouTube channel. We have plenty of free information there with videos just like this, so I hope to see you all soon. Happy trading everybody and enjoy the rest of your day. Take care everybody.

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