I want to talk a little about charts. There are people who are obsessed with charts and all the various “cup and handle”, “shrugging shoulders”, and “squirrel on a clown’s shoulder” patterns. This is all mostly silly in my opinion. A determined searcher can find any of those patterns in just about any chart by meticulously re-sizing the scale and length of time being examined. There are people who make good money that way and more who make good money by selling snake oil disguised as “technical analysis.”
There is something about chart patterns that is worth knowing though and it is resistant to scale manipulation. I’m going to share a very easy to recognize pattern with you: the trend. It is just like it sounds. You want to look at a 3 month and 6 month time period. Examine the dot on the far left. Examine the dot on the far right. One of them will usually be higher than the other. That is the “trend.” And it is powerful. Mind the trend, raptors. Tune out the rest.
There is one other chart pattern I like to see and that is the 1 year or 2 year “sideways” pattern. It’s easy to spot. A stock goes roughly nowhere over a couple years, maybe a few percent, with some volatility in between. This is the favorite direction of put and call sellers! Remember of course, that you only want to write options on the biggest and safest companies. Ones with a long history of increasing dividend payments, buying back shares, and/or paying down debt are a strong place to start. All three is even better. When you spot a stock like this that is also trading sideways, you want to spawn camp it. Write puts over and over. If you get assigned, write calls until you get relieved. Then write more puts. The market is giving you a strong low risk opportunity; take it.
Devour your prey, raptors!