How I Made $1.2 Million in Two Days in Beyond Meat
I want to do something a little bit different to start off this week’s Report.
Instead of going right into market analysis, I want to take a step back.
That’s because it occurred to me that in my webinars and my weekly Master Pattern Trader sessions (where we get together every week and I share my insights), trading comes to me very instinctively now.
I can just look at a chart and I see the music intuitively.
I often take for granted that many of you are just following my vision. So this week I want to drill down to the core simplicity of trading so you can understand how I think about things, not just the end results.
Hopefully I can phrase things in such a way that you can understand the markets in a different way.
So … I've been trading for decades now.
How am I able to make highly successful trades the way I do?
Most traders think in terms of entry and outcome: where am I going to get in? How much am I going to make?
Yet successful trading and very successful trading really comes down to understanding your risk.
If you don't understand your risk, you’ll be dragged along by the market and held hostage by it. You won't know where to get it in or out.
But if you can set up your trade in such a way that you understand your risk, the rest will take care of itself.
It works very well when you know how.
So I’ll share a couple of examples of some trades I've done over the last three or four months where I've hit it out of the park.
This is an email I sent out just a few days ago on Tuesday, May 25th.
I sent this email to our Elite members, who get an email every day with high quality setups like this one in Beyond Meat (BYND). The email included the chart plus an extraordinary risk/reward opportunity where I knew if I got into at the right point, I was exposed to a small risk in return for exposure to a very big profit.
I suggested that we put a buy stop at $120.50 with a stop loss just $4 below that.
That means we had a $4 downside for an $11 upside. Then I changed the take profit to $141 from $131 and we ended up taking $21 profit last week against a $4 risk. That's a 5:1 ratio.
And overall I made $1.2 million in two days. Here are some screenshots of my own personal account:
This is not a demo account. This is my own personal trading account. I bought 277 of the BYND calls with the strike price at 125, when the stock was trading around 123. I paid $3, which means the stock had to reach $128 for me to break even.
BYND ended up going to about $150.
(By the way, those 277 calls are basically a call on 27,700 shares because each call option contract represents 100 shares.)
I paid $35,000 for these calls. And just one day later, I was up nearly $50,000 on that $35,000 bet. That’s a 141% gain in just one day. I also bought BYND common stock: 5,000 shares at an average price of around $121. (At the time of this screenshot the market had already moved about $5 higher, giving me nearly $20,000 in profits just one day after making these purchases.
The very next day, BYND’s price exploded from $126 to $139.50. My 5,000 shares were now up $83,000 and my 277 call options were up $394,000. So from $35,000 I was up $394,000 on those call options.
That account was up almost half a million dollars in one day.
I also have another account in which I owned many more call options. In this case, I closed out some of those options, and that represented over $600,000 in gains in that account.
The next day, BYND went higher and I made even more money. So in about three days, based on just one extraordinary risk/reward setup, I made $1.2 million.
Now here’s the thing …
I’ve been doing these kinds of bets since the beginning of the year. In January, I bet on the stock of Lyft by buying the common stock and the call options on the premise that Lyft would go higher. I made $250,000 on this trade.
In February, I bet the NASDAQ was going lower and I bought put options. I plunked down $35,000 on a bet on these put options and made $195,800 in just two days in March.
I bet on GBPNZD (the British pound versus New Zealand dollar) and made just over $100,000.
And in May I had open profits from being short USDCAD (US dollar versus Canadian dollar) of over $200,000 before closing them out at about the same level:
I made over $100,000 in gold and silver around that time as well.
In May I also bet on the short side of a stock called Quantumscape (QS) and was up over $300,000 in this position:
I'm not just trying to show you my account and my profits.
I just want to offer you some proof that what I do really does work and I really do take the trades I recommend to members.
And ultimately, this Report is about the concepts that lead me to put on these positions with significant sums to make even more significant profits.
It always starts with understanding my risk going in.
Let’s look at Beyond Meat (BYND):
Now I recognize a lot of people may not be trading the stock market or have access to trading BYND.
But what counts here is the concept behind the trade because you can apply good trading principles to all kinds of instruments. That includes GBPNZD, USDCAD, and gold and silver (XAUUSD and XAGUSD, respectively) as I’ve just shown you.
I always apply the same methodologies and principles regardless of the asset class.
Here’s a bit of background: for the past six months, I've been saying to members that I was incredibly bearish on the price and the prospects of BYND based on multiple historical bear price patterns.
There were a pair of double tops, and frankly, once the second double top was formed, I was shorting the daylights out of BYND while also buying puts. I expected BYND to drop under its long-term neckline. After all, the stock had hit the $113 level multiple times.
That means it’s highly likely to drop once again for yet another retest.
On the last occasion, my thought was that BYND was going much lower.
But it was what it didn't do as much as what it did do that led me to reverse course and load up on the upside of BYND instead.
You see, when I look at a chart, I have a certain expectation. When I see historical bear price patterns including the descending wedge and the way BYND fell through its long-term neckline, I expected it should have continued its merry way lower.
But the market had other ideas, and I always surrender to the market. The market is always right.
So when BYND stopped going down, that got my attention. Then it exploded back above the neckline.
Now I was thinking that this was a bear trap. Anybody who chased the lows was going to be trapped. And whenever the market sets up these traps, it tends to trigger a short squeeze. Not only does the market go the other way, it often does so very quickly.
I won't get into the mechanics of it, but when you go short, you have to borrow the stock. And when covering your short position, you buy the stock back. Therefore the sharp rise in BYND was a combination of people trying to cover their shorts, as well as people buying the stock on momentum. It created an explosive move higher.
But that wasn’t enough to get me into the market … yet.
I entered my trades on Tuesday when I saw the risk/reward relationship was highly favorable because of an inside day bar.
An inside bar is when the entire bar lies within the high and low of the previous bar. It represents stored energy. You can surmise where that energy will uncork by virtue of earlier price action, such as the bear trap already in place.
So I bet BYND was going to explode to the upside from that inside bar, so that’s why I bet when and where (and as big as) I did.
What looked like a large, risky and reckless bet to some was something I was very excited about because I understood my risk. That risk was the low of that inside day bar.
That’s why my stop loss was just $4 per share.
If I was wrong (the price broke below the inside day bar, not above), that was my risk.
And if I was right, then the market would take care of the rest. And that's exactly what happened here.
So I always go in understanding my risk. That's what leads me to make big bets knowing I have very small risks when I go in.
Risk is a function of how much you bet on each trade, and sometimes it's also a function of the market setup. Certain markets setups are highly rewarding because once you understand your risk is very small going in, then you can take bigger bets.
And that’s the story of BYND this time around.
Let’s examine Apple (AAPL) as a bellwether of the NASDAQ.
AAPL is a significant part of what’s kept the NASDAQ at or near all-time highs.
But AAPL’s behavior is suggesting something that may give us a clue to how the indexes will behave over the short term.
AAPL has not eclipsed its high for over a year now. It's been traveling sideways and it looks like it's hanging on a precipice.
That precipice is the long-term trend line. It’s my theory that once AAPL pokes through that line, it’s not going to hold as it has before. And the price action of this bellwether stock could be a preview of coming attractions in the NASDAQ.
Note the head and shoulders, inverted cup and handle, and rounding top. All are bearish.
The head and shoulders has been the governing pattern and all these bear patterns add up to very heavy conditions under which Apple stock is increasingly under pressure.
If you're an aggressive trader, get short here.
Certainly look to get short under recent lows after the trendline has been pierced. There may very well be a retest of that trendline. But to my mind, this is a preview of coming attractions in the NASDAQ and perhaps other stock indexes.
The NASDAQ stock index approximates the tech sector in the United States.
Back in February, I made a huge profit shorting the NASDAQ based on an ascending broadening price pattern combined with key reversals at the top of the pattern:
When I saw those reversals, I surmised the NASDAQ was going to break down. That led to a seven-figure profit for me at the time after buying puts.
So what’s happening right now? The NASDAQ looks like it’s trading with an even bigger long-term ascending, broadening price pattern.
Last week I said there still be a further poke to the upside here, but increasingly I'm feeling more strongly that the NASDAQ will roll over very soon.
And based on what I'm seeing in Apple, that could happen as early as next week.
There’s a subtle double top price pattern and then the price has come back to re-test the neckline of that pattern.
Just like AAPL, the long-term trendline is near and increasingly under pressure.
I'm thinking that it's not going to hold this time. That could open up a broad move lower, one that could drop all the way to the beginning of the pattern at the 10,000 level. That represents a 30% drop.
Just be forewarned.
And that’s why I bought a whole bunch of puts in the expectation that the NASDAQ is going lower.
Now onto the forex markets …
I’m very interested in Japanese yen correlated trading pairs right now.
In this chart, I'm looking at USDJPY (the US dollar versus Japanese yen):
Just like Beyond Meat, I'm looking at this chart not so much for what it’s doing but instead for what it’s not doing.
As always, I draw my structure, then defer to the market and see how it's behaving.
USDJPY has had a history of dropping after periodic rallies. It’s been like shooting ducks in a barrel. Every time the price rises to the trendline of the descending triangle pattern, I shorted it reflexively.
But now I'm thinking this time is going to be a little bit different.
Instead of rolling over, increasingly it looks like a small V bottom has formed and the price has once again punctured the upside of the trendline.
So I have to respect what the market is telling me. It was my anticipation USDJPY would go lower, but by not going lower, the market is suggesting it’s ready to go the other way.
What’s more, it could go the other way very quickly. Again, this is instinct. It's not so much what the market is doing, but what it isn't doing that has me changing my thinking here.
Well, that and the fact that other yen pairs have already started to take off. In fact, it appears the yen is now in a secular paradigm shift. For years, USDJPY was going lower.
Now it looks to be the opposite. However, I’m more likely to bet on the prospects of the other yen pairs than on USDJPY itself.
So let’s look at EURJPY (the Euro versus the Japanese yen):
When you see charts that seem to be in wide, meandering trading ranges, look for the governing price pattern. What price pattern is going to govern the long-term trajectory?
I was unclear for many weeks as to which was the governing price pattern in EURJPY.
For several months, it looked like the double top had that honor. But by now, it looks like the double bottom (as part of an inverted head and shoulders) is the governing pattern because it punctured the neckline at 127.
That was the indication that the pair was breaking out.
EURJPY has since been adhering to a very orderly uptrend line. We may get a pullback, but I would look at any pullbacks as an opportunity to get long.
EURJPY has now reversed the implications of the double top and the next resistance is around 137 – 138.
Take very small positions and look to build a larger position over time.
That’s because once you understand the trajectory of a market, then it’s important to get in sync with that market. Instead of being scared of any pullback, greet it as an opportunity to add to a long position.
Yen pairs look to be going considerably higher.
That’s certainly the case with GBPJPY (the British pound versus Japanese yen):
For the past five years or so, GBPJPY has established a huge rounding bottom, and now it’s about to challenge the neckline of that bottom.
That’s a large foundation from which this market is about to launch. The bigger the base, the more into space.
There’s also a double bottom, and then an inverted head and shoulders with the neckline around the 135 area.
Typically when markets break above the neckline, they pull back and retest the neckline.
When they successfully retest it and then make a new high (as we see here), this confirms the game is on. Up is the true direction for GBPJPY.
The next resistance is likely at 160 and 164. We're about 500 pips away from one and nearly 1,000 pips away from the next. I think we’ll break them both eventually.
As with EURJPY, any pullback now or in the future is to be bought and not something to be afraid of.
Now here’s the weekly chart of XAGUSD (spot silver):
All the major patterns and price action are suggesting higher levels. That includes the inverted head and shoulders and an intermediate double bottom that held at $22.
The path of least resistance has been higher.
That being said, there’s a lot of overhead resistance at the $28 - $30 level. Silver could continue to a bump and grind for a considerable period of time before breaking out.
However, the more it consolidates between $28 and $30, the healthier the platform for a subsequent push above those levels.
While everything indicates you should be long silver (and I've made a lot of money on the upside), I'm on the sidelines for now.
I’m waiting to see just how silver copes with that overhang of resistance.
This is the weekly chart of XAUUSD (spot gold), which has similar prospects:
For the past several months, I've been looking at gold through the prison of a long-term ascending, broadening price pattern and speculating from the mid $1,900 levels that the yellow metal would pull back to the support line around $1,650 to $1,700.
And that's exactly what happened.
Gold came back to $1,671 and traced out a very nice double bottom together with very bullish key reversal price action. That suggested that this market was going to head higher.
Now the real question is where does XAUUSD go from here?
Earlier in this Report, I showed you how I've made enormous profits in BYND just last week. Plus Lyft in January, the NASDAQ in February, GBPNZD in March, USDCAD and QS in May, and so on.
I was so successful with those trades -- and I felt so comfortable taking bigger positions -- because I could quantify my risk very closely while also having a vision of where those trades were going to go.
But not with gold.
Even though I feel gold is going higher, it's hard for me to establish a suitable risk/reward parameter right now. There’s no convenient or obvious entry point where I can definitely say I’m wrong and then place my stop loss just beyond that.
In other words, the risk/reward relationship isn’t clear to me as it was in those other trades.
And as I said, successful trades come down to how comfortable you are with the risk/reward relationship.
Here’s another view of gold:
Gold broke below its descending triangle, put on the double bottom and rebounded just like BYND.
The double bottom was the trap play and we made some nice profits on that.
However, even though the path of least resistance still seem higher, I can't load up on this position again because I can't understand where my risk is.
There’s resistance at $1,950 levels and with gold at $1,900, that’s not much of a reward against a vague and arbitrary level of risk.
I want a very small risk for a very high reward. That's how I'm able to make enormous rips in the market on a selective basis. Gold and silver don’t offer that kind of opportunity … yet.
So I hope that was helpful to you.
To summarize, I’m bearish on the NASDAQ, bearish on the yen (and therefore bullish on JPY pairs), and cautiously bullish on the precious metals too.
I wish you a very healthy and prosperous trading week.
Mark "AAPLOfMyEye" Shawzin