Can You Predict A Catalyst?


If you ever visited The Octagon – our live trading room where I and Jason Bond trade – you’d know we both think stock catalysts are very important. 


Ben Sturgill holds very similar views, as those of you frequenting The Workshop – Ben’s own live trading room – can attest to. 

The significance of catalysts is very simple – they bring in new information, forcing the market to re-evaluate an underlying stock. 

Whether positive or negative, all major catalysts have one thing in common – they bring in volatility and outsized moves and that’s all we, traders, care about.

I know that we generally use catalysts to find active stocks to enter.

But can you anticipate a catalyst beforehand? And use it for an outsized exit?

Ford Joining the EV Hype

Ford Motor Company (F) is not just the iconic car-maker. 

It’s also a stock we, Raging Bull trades, have been talking about for months now. 

Here’s an excerpt from Jason Bond’s watchlist from back in May (!!!):

The stock is now trading above $24 – not too bad of a call on Jason’s end!

We’ve all mentioned F numerous times since for one simple reason – Ford’s EV announcement was simply too massive and the EV sector too strong!

We knew the market would react in some shape or form!

Ben’s Recent F Trade

Speaking of much more recent times, though, Ben noted Ford a few weeks ago, right as it was consolidating at the highs:

The stock clearly wanted higher, but was struggling to gain traction. 

Ben’s general thesis was simple – a fundamentally sound company, with a compelling growth story, a strong uptrend, in a very strong sector and a possibility of future EV announcements/catalysts.

From the technical standpoint though, Ben saw a failed breakout higher after a long consolidation. 

Still, he believed that if support held, the breakout will be retested again in fairly short order. 

So he picked some Call Options on yet another dip below $20, with a very tight stop: 

Fast forward a few weeks, and the technical setup was working just like he had anticipated:

As of yesterday, the stock was going for a re-test of the breakout area and actually climbed past it to nearly $22.

Ben began scaling out of the trade. 

And then today came, and Ford announced that it’s doubling its production goal for the electric version of the F-150 Pick-up truck. Shares soared:

And so Ben took off his remaining Calls:


Bottom Line

Neither I nor Ben or Jason would advise you to trade in anticipation of a catalyst. 

From our experience, these trades generally don’t pay well.

In Ben’s case – he wasn’t anticipating the catalyst. The trade was already great PLUS he knew there was potential for future announcements.

Hence, don’t bet on it, but if you find a stock where the market is clearly supporting a higher valuation, the story is hyped up, and you get a great technical setup in it – an unexpected catalyst may really rush things in your favor! 

 



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