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All right, today I want to talk about whether or not the stock market is topping out here, which will be a very big bull trap in the rearview mirror after the fact. So, I want to talk about all of those scenarios today. But first, we need to look at the Apple trade because we did hit the price target on that last week on Friday.
This was that trade idea we've had all the way back in the late May and early June time. And while this trade did take a very long time, relatively speaking, to play out, it did play out very well with the proper riskreward ratio. And this is something I want to focus on today because even if you're not in the Apple trade or took the Apple trade, this will be relevant for the discussion tonight about whether or not the stock market is topping out.
Because every trade you take in the stock market requires you to have some kind of edge. Otherwise, you might as well just flip a coin and place any trade at any given moment for no specific reason if you are not focusing on where your edge is in trading. And all your edge means is that you have a slightly higher probability to either win a trade or get the direction of a trade correct because you see something that sets it apart from any other given day in the stock market.
So when we looked at this Apple trade, it was over a 2:1 riskreward ratio, which automatically means it's at least in the realm of profitability because if you lose these trades, your losses will be offset by the times you win these trades because the riskreward ratio is large enough. And I teach you to never take anything less than at least a 1.5x reward for all of the risk you are taking.
So for every time you make $150 when you win a trade, you're only losing $100 when you lose a trade. And that over time will allow you to be profitable. So looking at the Apple trade, we hit all of the profit taking targets. We were looking for the 220s and we hit all of those targets. If you want to swing trade this longer term, that's completely fine.
But in my opinion, this is a time to take profit in Apple. We've hit all of the profit taking targets and the edge is no longer there. But if you're in a low-risk position with a low cost basis and you want to continue to swing trade it, that's completely fine. But I would at least take a lot of your partial profits here at the profit- takingaking target.
So when I talk about having an edge in trading, Apple is a great example of that. Yes, it took time to hit the profit- taking target, but the edge was always there all along and the trade worked perfectly. So, let's jump back over to SPY because if we're going to talk about the possibility that the stock market is reaching a top, this is going to be a very important level to watch on SPY, which is right there at that previous all-time high just below 640.
And anything below 640 is a failure to break out to a new high, which would be a bull trap rejection that would send us a lot lower down towards 600. Now, at this point, the retracement is so deep, we've almost hit the previous all-time high, but we haven't broken out to a new one. So any failure to break here could even also now be considered as a double top which easily gets us down to the profit target at 600.
And that will require the break of this neckline down here right around 620 to 619. So it is a real trade when we're talking about having an edge and having the proper risk ratio that if you started to short from here and your profit take was down there right around 600 to 604. You can easily see how this trade has anywhere between a 1.5 to3 risk ratio.
And that alone is giving you the edge as a bear or even a bull just looking to take profits to look at this as an opportunity to either short the market or exit your long positions and getting ready for the market to head down lower. Now, if you don't think this is possible, the market will remind you very quickly that the elevator down is exactly what happens in the stock market.
Even though we've been going up and it seems like we're in the elevator up, do not forget about how quickly the stock market dropped back here in February, March, and April when the stock market was taking the elevator down. It happens very quickly and you'll never know the reason. The news will always get the credit on why the market is going lower.
But I'm telling you right now, the charts are already allowing for it and it's definitely something I would be having on your radar when we talk about having an edge in trading. you need to be looking at the possibility there is a lot more reward to the downside for the short traders or a lot more risk to the downside for the long traders than there is reward to the upside for those same long traders.
So all it takes for somebody to either want to get out of the stock market or get out of their positions is a little bit of fear. And that fear can happen very quickly. And when it starts you will get that elevator down very quickly. And I will not be surprised if we're having this conversation in three to four weeks from now and SPY is down there at 600.
So this isn't to scare you. If anything, this is more just to prepare you. Do not forget about this edge in trading. And do not forget that it is now starting to favor the bearish positions, which are either going to be shorting this market or exiting their long positions at an increased rate, which is going to add selling pressure and send the market lower.
So be prepared for this. Now, if it doesn't happen, at least you are prepared for it. I'm not saying you need to go sell all of your long positions right now. But if the price action on this chart starts showing a rejection here, do not rule out the possibility of this lower high rejection or even double top look that is going to send spy down to 600.
And it is very low risk. If you did want to consider shorting the market, just set up a proper risk ratio like I showed you right here, which gives you plenty of margin and room for error if the market goes a little bit higher. Your risk is completely controlled and you know exactly where your reward is down there between 600 and 604.
So look at this now. This is something I would be taking very seriously. It is a real possibility and I would even say the highest probability that this is what occurs over the next 1 to two months. And that means it's at least worth having on your radar and part of your trade plan so that you are prepared for it in the event it occurs.
Now if I am wrong and the stock market just continues to go higher within this powerful bull trend, you will have a small loss. And that's why if you don't want to short the market, nobody is sitting here telling you that you have to. But if we do indeed start heading higher and we're getting that very nice climb higher on low volume, do not fight the trend.
There's no reason to. And there's really no telling how high this can go. So, I'm not trying to say we need to try to call for a top or put a limit on how high the market can go. But I'm just telling you reading the charts, this is the time to have a very real expectation the market's ready to come down.
And if there was ever a time to do that, it is going to be in the next couple of months. So, take it seriously. Again, I'm not trying to scare you. I would much rather this just be on your radar and you prepare for it now. And it doesn't take a lot of preparation. Just have a plan on what you're going to do, how you're going to manage your risk if the market starts to come down rapidly all the way down towards these lower targets or even how to profit from it during the event we start to go down quickly.
You'll know exactly how you can make profit on it. If you know how to successfully set up a short trade with the proper risk ratio, jumping over to the NASDAQ 100 triple Q's, we have the same exact thing as SPY with the very real possibility of a double top here. And again, this is only increasing the probability that we are indeed going down towards 532 to 534.
And again, that is going to be the breakdown of this previous high, the rejection, the breakdown below today's low, which will be down below 571. And then the continuation lower towards that support at 551. And then if we break that, we have the confirmed double top, and we're at least going to 532 or possibly even lower.
So again, these are real possibilities. you have very low risk to short these markets right now because if you are shorting the triple Q's and you are setting your profit taking target down there right around 532 to 534. You can very easily see how this is a favorable riskreward ratio and that alone means that there will be traders that are just waiting for this trade to show a rejection here and then we could get that elevator down very quickly which means we could go down even faster than we went up because you know that saying that the bulls take the stairs up and the bears take the elevator down which means we usually move down quicker than the time it takes to move up which means we could erase all of the last couple of months of gains in just a few short weeks of selling.
So, it could happen very quickly. So, again, be prepared for it. It doesn't mean it's a guarantee it's going to happen, but I do give it the highest probability chance based on my analysis. And again, highest probability chance does not mean it's a guarantee. It just means if I'm flipping coins and I can find any edge to hit heads more times than I'm hitting tails, then that's what I'm looking for as I'm setting up a trade because I want to win more than I lose.
And when I win, I want to make more money when I win and lose less money when I lose. And that is the discipline of a profitable trader. So, plan for it now. Be prepared. Again, there's no guarantees in the stock market. This is simply what I see as the highest probability with the best risk and reward.
And then very quickly, we'll check in on our performance year-to- date. We are now up 23.18%. So, we are absolutely crushing this market and beating all of the indices by doubledigit percent returns because even the S&P 500 is only up about 10% year-to date. So, we are absolutely crushing this market.
And remember, you can have the same exact performance because this is my trade alert service called TSC trade alerts that I am trading for the TEQ and the SQ. You can find out how to join TSC trade alerts . Now go crush this
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