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The Crash of Oil Could Lead to a Breakout in a Groundbreaking New Commodity

It's not a matter of "if"…It's a matter of "when"…

And experts agree: The day of reckoning is here… 

At this moment, oil is caught in an absolute death spiral … 

Already, billionaires have been dumping oil stocks at frenetic pace… 

- Warren Buffett dumped his ENTIRE Exxon position, worth $3.7 billion.

- Bill Gates unloaded nearly $1 billion worth of oil stocks.

- George Soros couldn't get out of oil fast enough, selling off whole stakes of multiple positions …

This mass exodus comes alongside oil's fall to seven-year low, dipping below $35 per barrel for the first time since the 2008 financial crisis. 

This situation is so severe, that legendary billionaire energy-trader John Arnold said that "half the U.S. energy industry will be bankrupt in 6 months". 

"This is the end of fossil fuels," states CNN. 

Pundits would have you believe a temporary "global supply glut" is to blame. 

They couldn't be more wrong… 

The real reason is much more ominous, and could push oil as low as $10 per barrel. 

Make no mistake: This will decimate Big Oil's greedy profits… make OPEC obsolete… and crush the Saudi Royals and their radical oil regime… 

Incredibly, this massive global shift all starts with simple grains of sand. 

These tiny granules have unlocked an unlimited supply of fuel... 

Enough fuel, in fact, to power the ENTIRE PLANET for over 36,000 years. And the cost of this fuel is zero. It’s free.

The incredible thing is, this is a “universal fuel.” It can be used for everything... 

- It can power your car...

- Light and heat your home...

- Run factories...Propel cruise ships...

- It can even power the ENTIRE U.S. electrical grid...

According to the International Energy Agency (IEA), this fuel could soon become the #1 source of energy on the planet... surpassing oil, gas, and coal power. 

USA Today says this fuel is “sizzling hot”... 

And Forbes magazine simply calls the opportunity “massive”... 

Jon Wellinghoff, one of the world’s top energy experts and Chairman of the Federal Energy Regulatory Commission (FERC), says the use of this fuel is... 

“...growing so fast it’s going to overtake everything... 

It could double every two years.” 

- Jon Wellinghoff, Chairman, Federal Energy Regulatory Commission 

That's Right. Take a look at sand.

Now, let's take a closer look...

Even closer still...

Thanks to a breakthrough in chemical engineering...

This fuel is so cheap – and so easily accessible – that Fortune 500 companies are rushing to set up their own “power companies.”

Google, for example, is investing $300 million to do it... 

Apple is investing nearly $1 billion!  

Everywhere you look, America’s biggest companies are going all in... including:  

- Facebook 

- Amazon

- AT&T 

- General Motors 

- Costco 

- Target 

- Kaiser Permanente 

- Johnson & Johnson 

- FedEx

And many more Fortune 500 companies are pouring money into this fuel at an almost unfathomable pace.

Why Are So Many Companies Jumping In?

Because it’s suddenly become so cheap, companies can invest millions UP FRONT, and still come out way ahead of the utility companies. 

In fact, Walmart’s investment in this fuel is so enormous – and so cost-effective – the global retailer is projected to SAVE as much as $1 billion annually on energy costs. And that’s just the beginning... This free fuel can be “harvested” in most parts of the world... in huge quantities... and WITHOUT drilling, mining, or growing grain for ethanol or any other crazy biofuel. According to data from the U.S. Department of Energy, this fuel is so plentiful and powerful that in one single week it can produce 1,000 times more energy than oil, natural gas, and coal do in a full year – combined! 

Harnessing the Sun’s Infinite Power

In 1954, there a solution to make generating energy from the Sun practical and affordable. 

Scientists working for Bell Labs created a new way to capture these energy particles and turn them into usable energy.

The way it works was a level of genius that would have made Einstein proud. The scientists fashioned a “solar cell” with metal conductors on the surface. 

When sunlight hits these conductors, energy particles are absorbed. And here’s where the magic happens. 

As the sun’s energy particles are absorbed, they knock the solar cell’s existing electrons loose. Because the solar cell is made of conductors, it is able to herd these electrons into a current and funnel it to an external device, such as a lightbulb. Creating the world’s first infinite source of electricity. 

The New York Times stated that this new discovery was: “The beginning of a new era, leading eventually to the realization of harnessing the almost limitless energy of the sun for the uses of civilization." Problem was, it was still so costly that it didn’t offer a viable alternative to oil, gas, or coal. 

Over the years, improvements were made. But still, harvesting energy from our nearest star was much more expensive than fossil fuels – roughly 110 times the cost of oil, gas, and coal. It worked fine for your handheld calculator, but it would never heat your home. Until now... Remarkable advancements in chemical engineering have helped cut costs by a stunning, 99%! 

Suddenly, sun power has – in many cases – become the CHEAPEST form of energy on the planet! Cheaper than coal. Cheaper than natural gas. And cheaper than oil. In fact, you could cut the cost of oil in half, over and over again, all the way down to $1 per barrel, and solar would still look cheap! 

You want a strong, thriving economy? You want American workers to keep more of what they earn, and put less in the pockets of the greedy utility monopolies? Well, this is the Holy Grail! Consequently, solar is growing leaps and bounds.

Solar capacity has jumped 20-fold in the U.S. alone. That’s a 2,000% increase! In addition, the industry added jobs 10 times faster than the rest of the economy. And while cloudy days were a problem in the past, one new technology is so effective it can collect solar power at NIGHT... while there is NO SUN! 

With new storage capabilities, it doesn’t take long to collect an inexhaustible supply of power. According to the U.S. Department of Energy, 10,000 times the world’s total energy use is generated every second by the sun... Every 40 minutes, enough energy-filled sunlight hits the Earth to power the entire world for one full year. And the cost? That’s the best part. You see, the sun’s power isn’t just cheap... it’s free.

A revolutionary fuel source is poised to decimate Big Oil's obscene profits, make OPEC obsolete, and
hand the United States 100% energy independence for the first time in 40 years. 

Find Out How to Get the Full Report Here

Own the Next Super-Major Energy Titan for Pennies on the Dollar!

Solar cells have always been big, bulky, and INEFFICIENT. In other words, they don’t capture much sunlight. And of the sunlight they do capture, only a SMALL PERCENTAGE is converted into usable energy. 

Consequently, the cost of solar power has been extremely high, as much as $76 per KWH. The company mentioned in the energy report has taken solar cells to a whole new level... helping bring the cost of solar power down by a stunning 99%. And the way it works is amazing. 

In fact, their patented technology turns grains of sand, right off the beach, into highly efficient, wafer-thin solar cells that deliver dirt-cheap energy. That’s right. Sand contains tiny particles of a bluish metalloid called “Si.” Research physicists have determined that Si contains 14 electrons, arranged in four different shells. This is a very unique molecular structure. In fact, Si is completely different than any other element in the entire universe, and IDEAL for converting sunlight into solar energy. You see, Si is able to SHARE its four outer-shell electrons with other atoms. The sharing phenomenon creates a chain-reaction that CONVERTS sunlight into usable energy. 

It’s a complicated process, and this company has taken it to a whole new level. You see, in its raw form, Si is full of impurities... These impurities inhibit the conversion process, making for expensive energy, once as high as $76 per KWH. That's what makes this company's patented technology such a remarkable breakthrough. First, raw Si is melted in a mono-crystalline electric furnace. During the melting process, a stream of Argon is pumped into the furnace to remove impurities and inhibit oxidation. The molten Si is then cast into square blocks and cooled. The blocks are then sliced into wafer-thin slices of pure Si… 

The technology is scientific genius and creates highly purified Si, ready to convert sunlight into ready-to-use power. In fact, this tiny company's patented solar cells set a NEW WORLD RECORD for power output. Incredible… and the big thing: the cost… Again, traditional solar cells delivered energy at a cost of $76 per KWH. This company's technology is so efficient, and creates such pure Si, they are supplying a utility company with solar at 5 cents per KWH. That's right. This company's technology is so significant that utility companies are throwing in the towel and buying solar power! Let me repeat that: This company is supplying solar at 5 cents per KWH!

Other Applications of New Solar Technologies:

1. Nighttime Solar An Israeli firm says it has developed a way to keep solar plants running at full capacity, 24/7, day and night!     This is a breakthrough that could revolutionize the solar industry.

2. Reverse Solar Imagine capturing “reverse sunlight” as it bounces OFF the earth and returns to space. This could double the     effectiveness of solar.

3. Liquid Solar Harvard’s done it again. This time, they’ve found a way to turn sunlight into liquid fuel. Sunlight-in-a-jug could       be coming soon.

4. Solar Paint Imagine slapping a new coat of paint on your house, and turning your home into a mini-power company. Now         imagine turning that dream into a reality for your car! That means no stops at the gas station because the fuel source is             literally painted onto your vehicle.

5. Ultra-thin and flexible solar cells A U.S. patent has been awarded for a solar cell that is 100 times thinner than a piece of       paper. Amazing. The solar cells are incredibly flexible and lightweight, making for endless applications in both the military           and commercial sector.

6. Solar Roads That’s right. No need for fuel. Your car could one day run on the power generated by the road itself! Each of         these Solar applications offers the potential for great wealth. Conclusion This article barely skims the surface of the potential     of harnessing the sun's energy. Many of these technology enhancements are already being deployed around the world,             offering a potential windfall investment opportunities. 

Find out how to get the full report by clicking below:

Back to Table of Contents

The Forex market is the largest financial market with almost limitless amounts of liquidity. That means the opportunities for financial gain are almost limitless as well. When it comes to average daily trading volume, almost $5 trillion is traded daily in the Forex markets. In contrast, $22.4 billion is traded on the New York Stock Exchange, $18.9 billion is traded on the Tokyo Stock Exchange and $7.2 billion is traded on the London Stock Exchange. The volume trade in the major stock exchanges is a fraction of the volume of transactions traded on the Forex market. Because of that, it’s no surprise that top banks and investors like Warren Buffett and George Soros trade the Forex markets.

Another advantage to trading the Forex market is that it’s open 24 hours a day, 5 ½ days per week. If you work a day job, and can’t trade from 9-5, you still have trading opportunities available to you when you’re off work. The table below shows the 24 hour cycle of the major global financial markets.

In the Forex market, you deal in pips. A pip has the same relationship to a penny that a penny has to a US dollar. There are 100 pennies to a US dollar, and in the Forex market, 100 pips make up a penny. When you trade Forex, you are buying or selling fractions of pennies. The value of your pips is measured on a much larger scale when you trade the Forex market. In this chapter, we are going to be working with an investment of $2,000 US dollars per trade. This is known as a standard lot investment. When you invest $2,000, every pip on average is worth $10 US dollars. If you make 10 pips on a trade, you will make $100. Conversely if you lose 10 pips, you will lose 100 dollars. Your $2,000 dollar investment is not your risk. Your risk is measured in pips and your reward is measured in pips.

The strategy being discussed today is designed to generate between 200-500 pips per month, which translates in to $2,000 - $5,000 of real money in your trading account. So we are using a $2,000 investment to generate $2,000 - $5,000 in income every month.

This chart shows the GBP/JPY currency pair. As you can see, the Forex markets tend to have repeatable highs and lows on an uptrend, and it also has predictable lows and high on a downtrend. But here’s the most important thing to know, and it’s pretty obvious: Every trading day has a high and a low. And here is the essence of this chapter:

If you can become really good at identifying the daily low or high between 2am-5am, you have the potential to make a lot of money trading the GBP and its related currency pairs.

In this hourly chart, we see two yellow circles:
- On 7/1/14 the daily low was established at 2am EDT and the GBP/JPY went north for the rest of the day.

- On 7/2/14 the daily low was established at around 2am EDT, and the GBP/JPY headed north for the rest of the day

If you go back in time, you should be able to identify an obvious daily low or high on almost any day. In this example, neither of these days were small directional moves. The market rose over 75 pips. And 75 pips equals $750 in profits. Looking at the chart above, can you identify the low or high between 2am-5am for the previous three days? The bigger question is: How do we take advantage of this information to make money trading the GBP currency pairs? 

The next thing you need to know is that the distance between the daily low and high is the Average Daily Trading range (ADT). The ADT for the GBP in the summer months is about 100 pips. Since, the ADT is 100 pips, the goal is to make 50 pips per day per trade. 50 pips yields a $500 daily profit on a standard lot investment. 

Let’s begin within the opening of the trading day. The European markets open at 2:00am EDT, but London opens at 3:00am EDT. When the London markets open, what typically happens with the Bank of England? A wealth of transactions that have built up from the previous day need to be cleared. The majority of large currency exchanges are processed through the Bank of England every day. It’s the largest currency hub in the world. 3:00am EDT is also the final hour of trading in the Tokyo Exchange. The combination of activity in these two markets will usually result in a strong bullish or bearish directional move in the GBP and its associated currency pairs. 

The key to this strategy revolves around an hourly chart and the 3am bar. There are two ways to use this strategy: The “Blind Straddle” and the “Educated Straddle” 

“Blind Straddle”

Step 1 – Place a 10 pip Entry BUY Order above the one-hour 3:00am EDT candlestick wick high. With the Blind Straddle, you want to wait for the 3am hourly candlestick to close at 4am. The first step is to place an ENTRY BUY order +10 pips above the wick high of the 3:00am EDT closed candlestick. In this example, the entry buy is 174.04. This is not a market order. You are not physically in the market yet. An entry order is a pending order. You are making it a requirement that the market crosses over your specific price point before entering you in the market. If the market does not touch your specified price point, then your trade is never activated.

Step 2 – Place an Entry SELL Order -5 pips below the one hour 3:00am EDT closed candlestick wick low. The reason why you have an entry sell order -5 pips below and not -10 pips below the 3:00am EDT closed candlestick wick low is because of the bid and ask price. The chart above is a bid chart. That means you are only seeing the sell price. The ask price is also known as the buy price, and it is usually 2-5 pips above the sell/bid price. The above chart does not show the ask/buy price. So there is no need to compensate for the spread at an additional +5 pips when selling.

Step 3 – Once you are in the market, cancel the opposite order. The candlestick has crossed over your entry sell price. Your entry order is now an active market order. You are physically in the market selling. Once this happens, you want to immediately cancel your outstanding ENTRY BUY order, because you don’t want that order floating. It has served its purpose. Get rid of it.

Step 4 – Set your STOP +5 pips above the previous candlestick high.Your risk will be the distance in pips between your market sell order and your stop. In this example, your risk is 24 pips or $240 dollars.

Step 5 – Set your reward at 50 pips from your market SELL order.You’re done. You are risking 24 pips, or $240 to make 50 pips or $500. A very nice risk/reward ratio. In fact you would only have to win 4 out of 10 times to make money with this risk/reward ratio. Now we wait.

Step 6 – Collect your profit. This strategy uses an hourly chart. Notice that in just 5 hours, we cross our reward line. In just five yours, we close out the trade and pocket $500. And this strategy works over and over again with the GBP and its related currency pairs.

Note: If you click on the YouTube presentation at the end of this chapter, Joshua Martinez will take you through multiple examples of using the “Blind Straddle”, and it is well worth watching just to show you how repeatable this strategy is within a given month. 

Make Sure You Have a Profit Plan 

It’s also very important to have a Profit Plan with this strategy. A profit plan keeps you from flying blind in your trading. It is advisable to set up your profit plan on 10 trades. That’s about 2 weeks of trading time. Here’s what happens if you win four out of ten trades with an average profit of 50 pips and an average loss of 25 pips.

What if you win six out of ten trades? Then the Profit Plan looks like this:

In the first profit plan, we make $500 every two weeks ($1,000 per month), winning just four out of 10 trades. In the second profit plan, we make $2,000 every two weeks ($4,000 per month).

The London breakout strategy, if followed properly, works very well within your profit plan. The five major currency pairs this strategy produces the best results are: 

GBP/USD

GBP/CAD

GBP/NZD

GBP/AUD

GBP/JPY

GBP/CHF

“Educated Straddle” 

When evaluating these currency pairs, we are using an hourly chart, but it’s also important to take a long-term view of the market, since the long term history of a chart controls the short-term charts. Let’s look at the GBP/NZD on a monthly chart. What do you see? Is the market moving up, down or sideways?

When you plot support and resistance lines, what you see is this currency pair is range-bound within 1,848 pips for the past four years. That’s an $18,480 directional move that happens every six months on average. If you could take a $2,000 standard lot investment and generate over $20,000 in profits per year, would you consider that a good return on investment? Looking at the monthly charts can also provide some valuable insights into your current trading month.

In this exploded monthly view of the GBP/NZD, you can see a clear uptrend during the previous four months. The current month has broken the trend line, but there are still 21 days left in the month, and history suggests that there is still plenty of buying to do. If the trend reverses, there is still an 800 pip range between the last candlestick and the support line, offering an opportunity to pick up $8,000 possibly within the next five months.

Let’s drill down and superimpose a daily chart below a monthly chart. Remember the longer time frames always control the shorter time frames. What do you see? Will the market go up or down?

In this case, we see two levels of consolidation in the daily charts. A consolidation is when you see equal highs and lows over a period of time. Since Consolidation phases tend to bounce off support and resistance lines, it makes sense that the market will probably move up. But how can you confirm this? This is where analyzing wave patterns with Fibonacci tools helps.

Fibonacci tools are wonderful when you learn how to use them. They identify highs and lows and they will help you learn if the markets are in a retracement or an extension. We identify our first low (A) at the support line and our proper high (B) at the resistance line. That gives us our up A/B boundary. This chart illustrates a Fibonacci adage:

“As long as the market doesn’t take out the “A”, it has no choice but to go your way.” 

What this means is that once the market reaches the “B”, any retracement will be short term, and the market will be moving to the upside. For a more detailed view of Fibonacci analysis, click on the YouTube of this presentation and fast-forward to the 49:00 minute mark. 

The key to the “educated straddle” is to gather more information about the probable direction of the market on a daily basis. 

- Take a longer-term view of the GBP currency pair. The more information you have about the longer-term direction of the market, the more certain you will be about the direction of the market. Make sure to look at the monthly, weekly and daily and hourly charts to help make your decisions about the direction of the market.

- Learn how to use Fibonacci tools. The can help you identify market tops and bottoms, and whether the markets are set to retrace or extend their direction.

If you can master this information, and you know that the daily high or low will likely be established between 2am – 5am EDT, how much more confident will you be making trading decisions? 

Conclusion 

The London Open Breakout strategy has been successfully traded for many years. The rules are based on a very simple premise:

If you are able to successfully identify whether the market will form a low or high in the morning, and you know where to set your strike price, stops and reward targets, it is possible to make $500 per trade and $4,000 per month on a $2,000 standard lot investment.

THE MOVIE (1:14:28 in length)

Grab some popcorn. Josh will walk you step-by-step on how to tade the London Breakout strategy in this highly informative video.

THE SPECIAL OFFER

What is the Ichimoku Cloud?

The Ichimoku Cloud is a technical indicator I first encountered while traveling through Asia in 2006. Talking shop with other traders I had met on my travels, I quickly realized that this ‘Cloud’ they kept referring to was different from any other indicator I had ever used. I was also surprised at how simple and intuitive the Cloud was to use. While it may look confusing at first, the Ichimoku Cloud is actually one of the simplest indicators to use. Before we can approach the actual applications of the Cloud, let’s discuss what the Cloud actually is.

The Ichimoku Cloud is a technical analysis method that uses sets of moving averages to produce key levels in the past, present, and future. The Cloud helps traders identify at a single glance if a security or other financial product is trading in bullish or bearish territory. Ichimoku Kinko Hyo literally translates to ‘One Glance Equilibrium Chart’ because it can be used for analysis using only a glance. For this reason, the Cloud is one of the most efficient technical indicators available.

The Cloud is made up of 6 key components, each of which we will examine individually. When these 6 components are combined, they form the Ichimoku Cloud. Below is an image of the Apple Inc. (AAPL) on a daily chart with the Cloud. We can use the Cloud to identify key levels of support and resistance, determine trend, and determine the strength of the trend.

As can be seen below, the Cloud is actually a forward-looking indicator. The Cloud is projected 26 periods forward, so the levels under the current price were formed 26 days ago. The Cloud is unique in that is uses both past data and forward-looking levels. Since the levels are forward looking they tend to be more reliable than simple moving averages. The lagging indicator component also provides confirmation of breakouts by looking 26 periods back to determine if a stock is likely to break through levels. It is this concept of looking at the past, present and future that makes the Cloud so valuable. In the next section we will look at the individual components of the Cloud and how they are calculated

The 6 Components of the Ichimoku Cloud

The Ichimoku Cloud is made up of 6 individual components. Each is calculated and plotted differently and each one tells us something different. Here we will discuss how each component is calculated and what it is used for.

The 6 components:

1. The Tenken-Sen Line

2. The Kinjun-Sen Line

3. Senkou Span A

4. Senkou Span B

5. Kumo

6. Chinkou Span Line

Once calculated, these pieces form the indicator set known as the Ichimoku Cloud. In the image of the AAPL daily chart shown below, you can see the components clearly labeled.

Calculating the Components of the Cloud

The Tenken-Sen Line: Short term trend line similar to a 10 period moving average. It is known as the turning line and is a signal of a region of minor support or resistance. This component is calculated by taking midpoint between the highest high and the lowest low over the past 9 periods.

The Kinjun-Sen Line: Known as the confirmation line. This component also serves as a signal for support and resistance levels. Many traders use this line as a level for a trailing stop. It also serves as an indicator of trend. If price is above the Kinjun-Sen Line then the stock is in bullish territory, likewise if it is below the line it is in bearish territory. This line is calculated by taking the midpoint between the highest high and the lowest low over the past 26 periods.

Senkou Span A: This line forms one of the boundaries of the ‘Cloud.’ If the stock is trading above the line then the line will serve as a major support level. If price is below this line it will serve as a level of major resistance. This component is calculated by taking the average of the Tenkan-Sen and Kinjun-Sen lines. This line is unique in that the results of this calculation are plotted 26 periods ahead. This means that today’s Senkou Span A line was actually plotted 26 days ago.

Senkou Span B: This line forms the other boundary of the ‘Cloud.’ This line serves as a second level of support or resistance and is calculated by taking the midpoint between the highest high and the lowest low over the past 52 periods. Like the Senkou Span A line, this is also plotted 26 periods ahead. This line is similar to a 50% Fibonacci retracement.

Kumo: This is the shaded area, located between the Senkou Span A and Senkou Span B lines, that is used to form ‘the Cloud’ itself.

Chinkou Span Line: This line is also known as the lagging indicator. This line is the current bar’s closing price plotted 26 periods back. The lagging indicator is often used as confirmation of signals and can also serve as a support and resistance level. The lagging indicator can also assist a trader in confirming the direction and strength of trends.

Why Use the Cloud?

With so many indicators included in charting packages, why should a trader focus on only one indicator? The Cloud is unique in the fact that it has current, past and future components that can be used as key levels, and can project potential future price action. Although this is the main reason I love the Cloud so much, there are other important reasons as well.

One of the best things about the Cloud is that not very many people know how to use it. Everyone uses Bollinger bands and moving averages but the Cloud is used far less in practice. Why is this good you might ask? In the age of algorithmic trading, many high-frequency trading firms will try and run the stops of weaker traders. They target levels based on where they believe people will have stops in place. Since people tend to put stops in at levels derived from other, more common studies, it is easier for the high-frequency trader to take them out. If a trader uses the Cloud to set stops and targets, it is not likely there are a lot of other traders at those same levels. This means that stops won’t be targeted as much as they would if a trader used more popular studies.

The flexibility of the Ichimoku Cloud is also one of its greatest qualities. The Cloud is applicable to any product on any time frame. This means that any trader can use the Cloud effectively. The Cloud can be used for trading stock, options, futures, and currencies. All of the products will have a time frame that they work best on, but the Cloud can be used to trade any of them. Later on we will discuss what time frames work best for what asset classes.

Trading Options with The Cloud

I have been trading equity options for the past 12 years. While I often trade stock and other products like currencies and futures, I still consider equity options to be my bread and butter. When on the trading floor I didn’t use charts. I would focus all of my attention on order flow and implied volatility. After I left the floor and moved upstairs I realized that my trading plan would benefit from an addition of technical analysis. The Ichimoku Cloud has proven itself to be the most effective technical indicator I can use as an options trader. Here we will discuss how I apply the Cloud to my proprietary trading plans and why it works so well.

As an options trader, I base the vast majority of my trades on what I call ‘unusual option activity.’ Unusual option activity is a large block trade that takes place at a multiple above the average daily option volume in a specific stock. These unusually large trades are placed by large institutional market participants and can represent the flow of the ‘smart’ money in the options market. Simply put if I see big institutional players betting heavily on upside or downside in a specific stock, I try and follow that trade.

The key to trading unusual option activity is being able to infer what, if anything, the institutional trader’s underlying stock position might be. Remember that the majority of options market participants are hedgers. This means that orders cannot always be taken at face value. If I see a large put buyer it’s possible they are hedging a large long stock position rather than trying to get short. Likewise, when I see calls being bought, it is possible the trader is hedging a short stock position rather than trying to get long. Determining if a bet is speculative or a hedge is my number one goal when trading unusual option activity, and the Ichimoku Cloud helps me do this.

The Cloud is an excellent indicator of trend and the strength of the trend, so when I am trying to determine the motives behind a large block trade, I see the Cloud as being extremely helpful. If the Cloud is indicating a strong bullish trend in a stock that I see puts being bought in, it is much more likely the institutional trader is hedging a long stock position. When I’m trying to determine if a trade is speculation or a hedge, I need to perform my analysis very quickly, in a matter of seconds. The Cloud helps with this as well. Thousands of trades hit the tape in any given day so I am constantly looking at charts of stocks I am seeing action in.

Being able to determine if a stock is in bullish or bearish territory at a single glance is essential to being able to analyze stocks very quickly. Using the Cloud for trading unusual options activity really boils down to a single concept: if institutional traders are buying puts in a stock above the Cloud, I do not want to get short. Alternatively, if they are buying calls in a stock below the Cloud, I do not want to get long.

Using the Cloud to weed out all of the false signals and traps has greatly increased the profitability of my trading plan. The Cloud helps guide me into the best possible set ups. While I’ve given only a handful of examples of how I apply the Cloud to my trading plan, I truly believe the Cloud is versatile enough to work for anyone.

Using the Cloud to Trade Stocks: When using the Ichimoku Cloud to trade stock, one of the most important considerations I must make is deciding what time frame I must use. Generally, I believe stock trades best with the Cloud on the daily chart. This is not to say intraday equity traders cannot still use the Cloud successfully. However, it will produce more traps when used on tighter time frames.

The Cloud for the Day Trader: Using the Cloud on an intraday basis can show a trader where intraday levels of support and resistance are. A day trader can also use the Cloud to find the highest probability setups.

The Cloud for the swing trader: Using the Cloud can help the swing trader avoid trading against trends and can help steer them away from stocks that are in neutral territory. Using the Cloud can also point them to stocks that are near breakout points.

The Cloud for the long-term trader: Using Cloud pullbacks can point out opportunities to enter or add to positions. The long-term trader can use the Cloud to determine when it is time to exit a position. Since the Cloud is forward looking, the Cloud can also give a heads up before trend might turn the other way.

No matter which of the above categories you might fall into, you will be able to benefit from using the Cloud. As a trader I mostly fall mostly into the first two categories. Most of my stock trades are either day trades or swing trades. Using a shorter time frame may change the way I use the Cloud but the basic concepts stay the same. I use the support and resistance levels the Cloud provides as levels for stops or profit targets. The Cloud also tells me when I should enter or exit a trade. Look at the image below and take note how the Cloud provides me with my entry and a level to place a trailing stop.

Look at this older setup in AAPL:

These same levels can be used on any time frame. The chart above is showing AAPL stock on a daily chart, but I would be looking for the same things on a 15, 5, or even 1-minute chart. The time frame I’m using can also depend on the product I am trading. Some securities trade much faster than others and require a shorter time period chart. Likewise, some securities are slower and produce too many traps on a lower time frame chart. In the next section, we will discuss how to determine the best ways to use the Cloud no matter what product you are trading.

The Best Way to Use the Cloud

The setup described above can be used to trade breakouts in any product on any time frame but a trader must understand which time frames they should be using for each individual product type. As we have explained previously, the Cloud is one of the most versatile technical indicators available. Its applications are wide and as long as a trader realizes what the best uses are for the Cloud they can easily apply it to their trading plan. Even though the Cloud can be used for trading any security it is not a ‘one size fits all,’ indicator. If used on a less than optimal time frame for a specific product, the Cloud can produce many traps. A trader must always consider what they are trading and how fast that security tends to trade. Below we will explain the use of the Cloud in several of the more popular products traders trade.

Stocks- The best signals come from the daily chart. Using the daily chart will provide the best setups for swing traders and longer-term players. Stocks can still be day traded using the Cloud, but on an intraday time frame, using anything faster than a 15-minute chart will produce many traps.

Currencies and Currency Futures - Trade best on a 4-hour bar. Currencies trade very well on the Cloud but as with equities, the Cloud produces the best signals on a longer time frame. The Cloud can be used for intraday trading of currencies but using anything faster than a 15-minute chart will have the potential to produce many traps.

Crude Oil Futures- Trade very fast. When trading crude oil futures or any other fast moving product we can still use the Cloud on shorter time frames. A trader can use a chart as fast as the 5-minute bar and still be effective with the Cloud.

Treasury Futures- Treasury Futures often trend well intraday. A trader can use the Cloud very well when trading these. Time frame depends on the specific product being traded. In general, products that tend to trend rather than sit in a range are the best products to trade on the Cloud.

There are several considerations a trader must make when using the Cloud. The Cloud can be used on any product, but in general we want to focus on trending products. Keep in mind that one security might trade differently on a different time frame, and we must always consider this when using the Cloud.

Look at the short side breakout example below:

SUMMARY

We always say that there are no shortcuts in this game. There is no such thing as a sure thing. All we hope for is a way to increase our chances of success. After more than a decade of trading experience I have learned exactly what tools I am able to make the most of and which strategies and resources don’t work for me. When I say the Ichimoku Cloud is my hands-down, most favorite technical indicator I am not joking. I’ve been using it for years and regret having not discovered it earlier in my career. It is one of the most versatile tools a trader can have access to and its ease of use and overall accessibility make it a great resource for traders of all skill levels.

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In today’s economic climate, investors are faced with a multitude of different sources of information, from Facebook, stock twits, business news, stock newsletters and anyone who is willing to give you their opinion – which is everyone.

Unfortunately, statistics show that over 85% of investors generally lose money. In fact, in a recent documentary I watched discussing the value of ‘experts’, it was reported “economists have studied the wrongness rate in economic journals and have concluded it’s very close to 100%”. In conclusion, “virtually all the studies published in economic journals are wrong”.

Therefore, how does an investor know how to find the true story of what is going on? More importantly how can you find good investment ideas knowing that the likelihood is that 85% of them will be wrong?

The most valuable method I have found to predict major market moves and capture significant profits is by tracking the smart money, how it moves and the key indicators signaling which way the money is flowing. In this e-Book we will discuss the ways in which we do this and key elements and checkpoints.

A complimentary workshop discussing the concepts and patterns discussed in this e-Book will be provided at the end.

MARKET STRUCTURE AND DYNAMICS

Firstly, to set the premise of the ideas set out in this article, we must first look at the nature of how money moves through the stock market in today’s modern age. It is currently estimated that as much as 80% of volume in the stock market is accounted for by buy and sell decisions made my computerized trading. These powerful systems of algorithms make investment and trade decisions almost entirely based on certain patterns. These patterns occur in the charts of a stock and follow extremely precise pre-determined buy and sell targets based on the relative rules for the algorithm being used. Often fundamentals won’t be factored into the decision making at all.

Love it or hate it, we therefore feel that regardless of what opinions we may have of the fundamentals of the market, or what we feel ‘SHOULD’ happen next, it is far more important to track what the patterns are saying. Once we know the pattern we can then utilize quantifiable indicators to look at what the’ smart money’ is doing. Based on this approach, we can observe how some of these techniques predicted the market crash of 2008 long before so called ‘experts’ even started talking about it.

We will break down the reasons into several categories.

1. THE POWERFUL PATTERNS

Upward Channel Break

The most easily identifiable pattern on the S&P 500 is that of the longer term upward channel which can be observed by looking at a monthly chart dating back to the lows of 2011. While this is an upward moving pattern the rules almost always dictate that after three touches of the support line there is a very high probability of a breakdown correction to occur. As indicated in the chart below (fig 1) it can be seen that we have indeed touched three times and on the fourth touch on the week ending Friday Aug 21st , we broke through support and have confirmed this bearish move by rallying back to this line and being unable to break above it.

This ‘Rule of Three’ not only applies to upward channels but also to other highly traded patterns such as ascending and descending triangles, head and shoulders, rising and falling wedges and almost all other oscillating patterns.

Often investors are sucked into buying support they have seen touch multiple times feeling the more times support has been respected the better, however, it is quite the opposite. By understanding this rule, we can anticipate when big money is about to step in and short the stock and avoid getting sucked into buying into perceived support at the worst time.

Head and Shoulders

While this pattern is harder to recognize for many beginner traders, this pattern is one of the most highly probable and profitable bearish patterns to occur in a bull market. Normally signaling the top of the market is what makes it so effective. This is a pattern designed to fool investors and traders into thinking the stock is making new highs resulting in investors being lured into buying the stock right before it begins its downward decent.

A head and shoulders pattern is characterized by a stock creating a symmetrical triangle up and down forming the left shoulder. This is followed by a larger symmetrical triangle representing the head and then a final right shoulder triangle usually of equal size and shape as the first. When this forms, it is assumed the stock/index will then breakdown to the amount of at least what the measurement of how large the head was. Also note that the breakdown occurs after three touches of the support line.

In the market meltdown of 2007-2008 the top of the market was characterized by a series of this exact head and shoulders setup. (see fig 3 below)

In other words, experts and news aside, the ‘chaotic’ breakdown of 2008 was in fact a drop that was highly predictable and in fact where it dropped to and where it reversed from were levels that were almost exactly what the pattern of the head and shoulders had predicted. This illustrates how vital it is to understand the role such a powerful pattern plays in predicting big money moves.

An example of how this pattern can be applied in current markets we can use it to observe the way the S&P 500 has been currently moving in recent times. As you can see in the chart it appears to be forming the beginning of yet another head and shoulders pattern and is perfectly timed with the other factors we will discuss later. If this were to continue, we have projected out what this would look like over the months to come. This would mean a likely 1600 target level on the S&P 500 at some time during the first or second quarter of 2016. These are rough measurements used but a prediction of what a head and shoulders would look like if this pattern were to confirm by breaking down from the area displayed in the chart.

A break much above the 2000 level would indicate a failed head and shoulders and that smart money is going a different direction. This would indicate us to go long and could see a test of the 2,100 level or a retest of the upward channel at 2,250 as it extends upwards to the right.

Understanding the Patterns of the chart is one of the most vital aspects of trading in being able to determine where the money is moving and also tells us the key levels at which the pattern dictates us to buy and sell with highest probabilities.

2. THE SMART MONEY

A) Money Flow

There are two critical factors that we as technical analysts observe to track where the smart money is going. The first is an indicator called Twiggs Money Flow and is similar to Chaikin Money flow with a few adaptations to account for gapping and some other factors.

Developed by Collin Twiggs, it is a method of tracking if a stock has the key factors that define a true uptrend.

These qualities include:

· price making higher highs and higher lows

· higher amounts of money or volume trading in the stock each day

· closing higher and higher in its daily trading range

· whether the range is expanding or contracting

If all of these qualities are in play traders agree this confirms an uptrend is truly in place and therefore the smart money is likely accumulating a position in the stock/index the indicator is applied to. If this is taking place the indicator will rise in value and continue to make new highs along with the stocks movement.

However, if we see that the levels of the market or a stock is increasing and this indicator is in fact going the opposite way, it could quite likely indicate that a bubble is building. This is called the distribution zone and means the rally that the stock or index is enjoying is likely the smart money off loading their positions to the public before a big drop takes place.

Inversely, if we see that the price levels of a stock or the market are dropping but the Twiggs Money flow is moving opposite this, in the upwards direction, than this indicates accumulation is going on an a possible strong reversal could be coming in the stock.

So let’s apply this indicator to the previous scenario discussed regarding the Head and Shoulder pattern during the market crash of 2007-2008 . See below a chart of the S&P 500 with the Twiggs Money Flow indicator charted underneath the stock. Note, that as the market climbed higher and higher, eventually going into a sideways movement and then the head and shoulders pattern, the Twiggs Money Flow indicator was actually making substantially lower highs and lower lows and diverging (moving the opposite way).

Now if we compare that to a weekly chart of the S&P 500 you will notice a strikingly similar image.

Of course we do not only apply this to the market but also for also for finding highly potentially powerful moves in stocks.

We will discuss some recent trade setups we alerted our students to recently where the Twiggs Money Flow played a key role in being able to predict the major move in the market.

In the below example you can see a chart of BBOX where you will notice a strong downtrend in place from the 21st of October 2015 onwards and you will notice that the money flow was dropping along with it. However as of the 17th of December all of sudden the Money Flow takes a sharp change to the upside and continues to make higher highs and higher lows as the stock continues to decline.

This divergence tells us that accumulation is going on and that the smart money is starting to shift in the bullish direction. Now of course the trick is to pick the right timing for entering this trade. This perfect entry point occurred on the 2nd of February. Not only did the Money flow continue to diverge, but it also crossed above 0 making it an even stronger signal. At the same time we also had perfect pattern confirmation with the stock breaking its downtrend line as well as the 9 day exponential moving average and the 20 day simple moving averages that were previously holding this stock down. The resulting move produced almost a 50% profit for anyone entering the trade.

This divergence can also occur over a shorter period of time. For example below is a trade we took on BCRX. After a massive drop the stock was going sideways yet the money flow was going up sharply. We therefore took advantage of getting into the trade on the 2nd of March. If you were a stock trader and entered in at the open this would of a resulted in a 20% intraday profit. Instead we opted to go for the June $2.00 calls which had a 60% intra-day move.

Now let’s take a look at a short setup. In the chart below we see a similar type of setup on LGF but with the opposite occurring. As you can see from the 23rd of June 2015, LGF continues to climb higher and higher in an upward channel. Now of course as we discussed earlier in this book we have already identified that an upward channel while it movies in an upward trend actually warns us of an impending break to the downside making it in fact a bearish pattern.

Notice as the stock climbs higher and higher in its channel the smart money is in fact moving completely the opposite way. Once again the key is timing the trade and what you will notice in the chart below is that LGF touches the bottom trend line a total of three times (re-enforcing the value of the rule of three) before breaking below it strongly along with the Twiggs Money Flow breaking below 0.

This was not only a great potential stock trade but a trade where we alerted our students to the value of purchasing long dated put options on the stock that have since moved over 1000% as the stock dropped from $38.00 to its recent low of $18.00.

B) Bond Traders

The second key factor we look at when determining big moves of ‘smart’ money is following the High Yield Corporate Bonds using one of the relevant ETFs ‘HYG’. Typically speaking in a strong bullish market money will flow into corporate high yield bonds showing confidence in Corporate America. If you observe the chart below you will notice that HYG indeed correlated with the S&P in 2008 perfectly.

It followed the market down in 2008 during the crash and reversed with it from the lows of 2009. However, in the middle of 2013 while Quantitative easing pumped more and more money into stimulating the market, the big money started to move the opposite way. This divergence was a key factor in how we predicted the crash of 2008 on June 6 along with the recent crash of the S&P back in July of 2015. Watching for when HYG is moving in the opposite direction of the S&P 500 is a fantastic way of predicting when big money moves are about to come and reversals in either direction of the indexes.

3. OPEN RANGE

One of the most incredible pieces of the puzzle to predicting big money moves in the market is one of the best kept secrets of stock traders but one of THE MOST POWERFUL methods I have ever discovered. So much so that it is up to 80% accurate in predicting the direction of the S&P 500 and major indexes for a 1-3 week period! The strategy is called Open Range.

While there may be other interpretations of this term as it applies to the stock market this specific strategy is applied by observing the daily range of trading on the S&P 500 on the first trading day of the month as well as the monthly options expiration Friday. After the range on one of these days is set we are then watching for where the market closes in the days following to determine the bias of direction for the market.

In the days following the Open Range day we are looking to see if the S&P 500 closes more than 3 points above or below the range set. Whichever direction this occurs in first will set the bias for the market direction until the next open range day occurs.

So for example let’s take the month of February of 2016. On February 1st the trading range of the S&P was a high of 1947.20 and a low of 1920.30. The following day the S&P 500 closed at 1903.03, more than a 3 point close below the open range.

What this signal means in practice is that the markets bias should be negative. This could mean the market could continue dropping straight down, or at the very least it should close below the top of the range set by the 1st of the month i.e. close below 1947.20.

When the next Open Range day occurs on the third Friday of the month the Open range is considered to be reset and we are now looking for whether the market breaks higher or lower than this new Open Range to determine the bias for the next leg of the market between Options Expiration and the first trading day of the following month.

This is a key signal to us to decide which direction we will scan for high probability setups in for the immediate trading days/weeks following these breaks. Our research over the last several years shows this to be up to 80% accurate in prediction market direction.

SCANNING FOR THE PERFECT STORM

Of course in this book we started off by discussing the critical importance of understanding the pattern is in order to know how to trade it. Ultimately trading should never be about guess work or going to bed stressed over positions that feel more like unhinged gambles than educated, well managed trades.

Of course this is the whole purpose of understanding how to correctly identify what pattern a stock is in, and then of course to be able to decide whether that pattern is one of the highly probable and profitable patterns worth trading, or a more unreliable one we are better of passing over.

This is where scanning becomes an extremely powerful asset in our trading arsenal. Once we know what the highest probability patterns are we can scan specifically for only those.

However this is only the very beginning , we can also build into the scan all of the above conditions discussed throughout this book to search for opportunities where we not only have one of the highest probability patterns, but where all the other factors discussed are coming together in a perfect storm to predict a major money move.

By utilizing scans it allows us to therefore specialize in only the highest probability setups and strip away all the noise that distracts us into bad trades. We can also then become highly effective in knowing the exact rules of how to trade a small handful of patterns rather than trying to be an expert at everything, which is almost impossible.

SUMMARY

As market technicians we are basing the ideas of the book on rules and measurements drawn from practices that have proven to work over 1000’s of other setups just like this, however the key to any long term success in this market also relies on the ability of an investor or trader to know when the idea has been proven wrong and never lock oneself into any one mindset that can’t be changed if the data goes the other way. We are therefore always watching closely to how the markets perform and key dates such as Open Range to anticipate whether we are on the edge of another large drop or a huge rally.

Once again, for those of you wanting to learn more about the charting techniques and smart money calculations we use along with other key techniques to track smart money activity, you can simply follow the link below to receive instant access to our workshop on this topic along with ways to profit from a major market correction.

THE SPECIAL OFFER

For taking the time to subscribe to this e-Book we would like to grant you complimentary access to a very powerful recent workshop we put together which breaks down all of the key components we look for in identifying a high probability trade setup and a live application of the issues discussed above.

In this workshop we will teach you:

· A step by step method to determine the direction of the market for the coming weeks

· The two most important days each month that you must know

· Developing scans to find the highest probability trade setups

· The stock patterns that work and live examples for your watch list

· The major market threats that the talking heads have not told you yet.

· Our smart money indicators and what they are saying.

· One of the most powerful methods of predicting market direction for the week ahead.

- How to find the highest probability crash setups on stocks.

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