Today, the market opened up pretty weak ahead of this week’s FOMC meeting. This weakness should validate the trade we have set for today with Lam Research (LRCX). For this trade, we are looking at a particular zone, instead of a level, between 640-650. This zone has acted as both resistance and support in the past, but given this market, we expect it to once again act as resistance.

LRCX has nasty breakdown last week and a bit of a rally to kick off this week, which has us looking for a short if the price moves back into zone. If price moves through and holds above the zone exit the trade as a way to manage your risk properly. In the event this happens, you can technically look to go long, but only if the overall market decides to push.

Remember, there is an FOMC meeting tomorrow, so be careful of this trade as it is difficult during these events to gauge what the market will do. We fully expect Powell to be hawkish and try to tank the market as he does not want asset prices to continue to push higher.

However, the market doesn’t really care what he wants and may continue to act some what irrationally as large institutions and retail investors buy up dips. You can leave this trade on watch until after the meeting or you can enter the trade if price makes it back into this zone with smaller size should the market pull an about face.

This is an effective way to manage your risk ahead what is likely to be a volatile event. It is also important to note that you should never feel the urge to take every trade we talk about or chase a move one way or another. The market is not going anywhere and there will always be more opportunities to put on high probability trades.

You can’t do that with a blown account. Keep that in mind next time you feel the sudden urge to hit the buy or sell button. Our job is to manage our risk to the best of our abilities and preserve our capital the best we can. This is how you avoid being another statistic of traders who have failed. Capital preservation is the key to a long-lasting trading career.

If you like The Profit Machine (TPM), then you will really like my Wednesday Profit Room trading service. Same high-quality options action, as well as more world-class trading education. As I say, the more screen time and education you expose yourself to, the better. Give it a try for one month here and if you don’t find even more value, cancel anytime. Your success as a trader is on the other side of hard work and education, will you be willing to put in the work with me as your guide? Give it a try today!

Good Luck With Your Trading!

Christian Tharp, CMT