{"id":227511,"date":"2025-07-21T09:19:54","date_gmt":"2025-07-21T13:19:54","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=227511"},"modified":"2025-07-22T03:52:26","modified_gmt":"2025-07-22T07:52:26","slug":"chart-advisor-measure-risk-first-then-look-for-strength","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/chart-advisor-measure-risk-first-then-look-for-strength\/","title":{"rendered":"Chart Advisor: Measure Risk First, Then Look for Strength"},"content":{"rendered":"\n<p>By\u00a0<a href=\"https:\/\/links.investopedia.com\/u\/click?_t=36ba8fa8372241d58b3bfc06997a4332&amp;_m=0786476a1d884291a6cbcb50117cdea9&amp;_e=YAPvIiIyp5eM29I7_60EWtWo_E7qpO2NxYxkc9csO7nBJuVYzdw-cZ51coI2_lvZgomyy_A3iEEhfFVeWXdL8drorfKNnpNOkEwb6g11mCJ0osmvr8QeA4f21bOYzkiy75HAiuylfKWG7DLgiA03CZ51UDyuL7bVCTzseG9oA2awgNECIMJul-yhSDBK21xC_plLObvObZb7lmI186jqxWL4W2J4gR3evVHnm9WfbkH9X_Apn_MwPMkpXti8wPEohKOLctxMMParAcBU29O4L57U-FYz9IvjONiY9Zg0gwZx6mO0xVMC9tJRk8RA3Uwd8MeawXd-CMUtPyel1fVtNqJxB79bu1PS0veyFLsWuUiXHPn5EWHwN0NO8NCNKH57DSRll6-Nj0pbLyAcPrIgRju8yDx11hEmiRazaQtOIBlLDRrUAmMUG-2T4Vsx_WwY2hUBGCt-SYPFWroWwlfMKCg0vPl6hL2wb2E7napRgX4%3D\">C. Theodore Hicks II, CMT, CFP, CKA<\/a><\/p>\n\n\n\n<p><strong>1\/\u00a0Measure Risk First<\/strong><\/p>\n\n\n\n<p><strong>2\/ Contrarian Trade, Logic and Trends<\/strong><\/p>\n\n\n\n<p><strong>3\/\u00a0What We Want \u2013 ITA<\/strong><\/p>\n\n\n\n<p><strong>4\/\u00a0What\u2019s Strongest &#8211; Crypto<\/strong><\/p>\n\n\n\n<p><em>Investopedia is partnering with CMT Association on this newsletter. \u00a0The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice. The guest authors, which may sell research to investors, and may trade or hold positions in securities mentioned herein do not represent the views of CMT Association or Investopedia. Please consult a financial advisor for investment recommendations and services.<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-1\">1\/<\/h2>\n\n\n\n<p><strong>Measure Risk First<\/strong><\/p>\n\n\n\n<p>After working in the retail money management industry for close to 30 years, I have absolutely developed a few strong convictions along the way. One of my convictions is that before we invest in a stock, ETF or any other vehicle, we should first assess the overall environment. If the overall environment is not rewarding risk-taking, why take the risk?<\/p>\n\n\n\n<p>After shepherding clients through both the dot com crisis and the Global Financial Crisis (and getting crushed along the way), I realized that what I had been taught in college was not working. Unfortunately, those same failed concepts that I was taught in college were widely preached throughout the industry. For the sake of brevity, just know that I was doing everything that academia and the industry preached. My clients were diversified. We were patient. But we still got crushed.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"541\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-1-1100x541.png\" alt=\"\" class=\"wp-image-227512 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-1-1100x541.png 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-1-700x344.png 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-1-300x148.png 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-1-768x378.png 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-1-1536x756.png 1536w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-1.png 1878w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/541;\" \/><\/figure>\n\n\n\n<p>Ultimately, this led me to the CMT Association and my CMT Charter. Through that work, I eventually developed a composite risk gauge which is shown in Chart #1. In short, this is one way my team and I measure the risk of the environment. It is also color coded. Here we can see that as of Friday, we are on a green candle.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-2\">2\/<\/h2>\n\n\n\n<p><strong>Contrarian Trade, Logic and Trends<\/strong><\/p>\n\n\n\n<p>Late last week, I had a brief exchange with someone on LinkedIn about TLT, the iShares 20-Year Bond ETF. Chart #2 is showing the weekly chart for TLT. While I do not recall how the conversation started, this individual stated that he liked TLT as a \u201ccontrarian trade\u201d. While he supported his idea with some logic, I simply looked at the chart. There\u2019s absolutely nothing on this chart that compels me to think we should be holding TLT. It has been in a clear downtrend since 2020. One could argue that it has found support and should move higher off the support. Fine. Go right ahead.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"541\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-2-1100x541.png\" alt=\"\" class=\"wp-image-227513 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-2-1100x541.png 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-2-700x344.png 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-2-300x148.png 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-2-768x378.png 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-2-1536x756.png 1536w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-2.png 1878w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/541;\" \/><\/figure>\n\n\n\n<p>If you consider yourself to be a Long-Term Investor, go ahead and buy TLT. As for me, I\u2019ll wait until we can see evidence that the trend has indeed changed. I\u2019m not investing client capital in TLT \u2018til we see the trend is positive.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-3\">3\/<\/h2>\n\n\n\n<p><strong>What We Want \u2013 ITA<\/strong><\/p>\n\n\n\n<p>Chart #3 is an example of what we want to be holding. Unfortunately, we missed this trade, so we are not holding this right now. (Nor am I recommending that you buy this right now.) But this is a clear example of what we want to be holding. ITA clearly has some\u00a0<a href=\"https:\/\/www.investopedia.com\/terms\/r\/relativestrength.asp?hid=6b90736a47d32dc744900798ce540f3858c66c03&amp;did=18655778-20250721&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=072125\">relative strength<\/a>\u00a0over the rest of the market.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"541\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-3-1100x541.png\" alt=\"\" class=\"wp-image-227514 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-3-1100x541.png 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-3-700x344.png 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-3-300x148.png 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-3-768x378.png 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-3-1536x756.png 1536w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-3.png 1878w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/541;\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-4\">4\/<\/h2>\n\n\n\n<p><strong>What\u2019s Strongest \u2013 Crypto<\/strong><\/p>\n\n\n\n<p>Chart #4 is an example of how we enter a position in our Sector Rotation model. To be clear, we are not currently holding IBIT. We are, however, holding a couple of other crypto related ETFs. But, again, I am not recommending that you buy this or any other position.<\/p>\n\n\n\n<p>In this chart, I\u2019ve added a blue-gray rectangle to illustrate what we viewed as classic resistance. In our studies of the stock market, when a stock or ETF breaks through an area of resistance, it can really start to move. Furthermore, if that resistance has been in place for some time, that move higher can be explosive. Nothing is guaranteed of course. But that\u2019s the theory.<br><\/p>\n\n\n\n<p>You will also see two dates marked on this chart along with a down-trendline.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"541\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-4-1100x541.png\" alt=\"\" class=\"wp-image-227515 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-4-1100x541.png 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-4-700x344.png 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-4-300x148.png 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-4-768x378.png 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-4-1536x756.png 1536w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/07\/2025-0721-Monday-Chart-4.png 1878w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/541;\" \/><\/figure>\n\n\n\n<p>The first date represents, in our view, the first place we would enter this trade. Technically, the position is moving into that area of resistance. However, it is breaking above the highs from the last couple of days. That is the first area where we would consider buying this position.<\/p>\n\n\n\n<p>As the ETF broke through the resistance, it then consolidated sideways with a downward slant \u2013 hence the black down-trendline. That second date marked is the second spot where we would typically initiate a position.<\/p>\n\n\n\n<p>While it is still early in this trade, this is how we want to enter a trade. Hopefully, the trend will end up looking like ITA in Chart #3. But we cannot know that in advance. What we can know is that:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>We are in a risk-on environment.<\/li>\n\n\n\n<li>IBIT is already demonstrating some demand.<\/li>\n\n\n\n<li>Now that it is pushing through all-time highs, there is limited supply.<\/li>\n\n\n\n<li>Increasing demand and limited supply means it should go higher.<\/li>\n<\/ol>\n\n\n\n<p>P.S. If I could, I would trade Pokemon cards for clients. I\u00a0<a href=\"https:\/\/www.linkedin.com\/posts\/theodore2hicks_do-we-put-bitcoin-in-client-portfolios-would-activity-7348309143520223232-jt52?utm_source=share&amp;utm_medium=member_desktop&amp;rcm=ACoAAAA5Yn0B0V59DZmjdY7JZMAVWwY9NtFB_Xc&amp;hid=6b90736a47d32dc744900798ce540f3858c66c03&amp;did=18655778-20250721&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=072125\">posted this on LinkedIn here<\/a>. You are welcome to connect with me there.<\/p>\n\n\n\n<p>&#8212;<\/p>\n\n\n\n<p>Originally posted 21st July 2025<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By\u00a0C. Theodore Hicks II, CMT, CFP, CKA 1\/\u00a0Measure Risk First 2\/ Contrarian Trade, Logic and Trends 3\/\u00a0What We Want \u2013 ITA 4\/\u00a0What\u2019s Strongest &#8211; Crypto Investopedia is partnering with CMT Association on this newsletter. \u00a0The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice. The guest [&hellip;]<\/p>\n","protected":false},"author":186,"featured_media":227512,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":true,"footnotes":""},"categories":[14,16727,15,18,6,8,9,22,23,3],"tags":[17138,207,6609],"contributors-categories":[13686],"class_list":{"0":"post-227511","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-etfs","8":"category-etps","9":"category-fixed-income","10":"category-macro","11":"category-north-america","12":"category-region","13":"category-securities","14":"category-stocks","15":"category-technical-analysis","16":"category-traders-insight","17":"tag-ibit","18":"tag-spx","19":"tag-tlt","20":"contributors-categories-investopedia"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v27.3) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Chart Advisor: Measure Risk First, Then Look for Strength<\/title>\n<meta name=\"description\" content=\"After working in the retail money management industry for close to 30 years, I have absolutely developed a few strong convictions along the way. 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