Warrior Trading Blog

+$1.2k on a 75% Short Squeeze on $ZN

hot streak

+$1.2k on a 75% Short Squeeze on $ZN



Alright guys, time for our midday market recap. We’re gonna go over the trades from this morning. So far this has been a great start to the week, 1,200 dollars in the first hour, hour and ten minutes. And, for the most part, today I just sat tight, I waited for a quality setups, and at 9:50 I still hadn’t taken any trades, and I was thinking, “This might end up being, a day where I don’t take any trades.” But I kept saying, “Don’t force it. Wait for that A quality setup.” The month of June, has been a little sluggish, I don’t wanna get myself into a B or C quality setup only to take a loss. I rather close a day flat then [inaudible 00:00:41]

So, I sat patiently, sitting on my hands until I saw two good setups. The first one was on MOSY. Now, on MOSY and for those of you who are watching on Facebook Live, I’ll show you … there’s my PNL for the day, 1,208 dollars, and 91 cents. Two stocks. MOSY, I lost 47 dollars and 27 cents, no big deal. And ZN I made 1,256 dollars and 18 cents, which is pretty decent.

Alright this is my light speed account right here, those are my level two windows, I’ve got four of them set up. Alright so … so MOSY the first trade that I took today, was based on a five minute setup. Now, I made a note for myself, I moved it yesterday, or on Friday. Let’s see, I made a note to go easy on Thursday and Friday. I made a note, I can’t have another red day recap, emotionally. And I made a note, only trade the bull flags, and the micro pullbacks, don’t chase extensions. So I had these up on my monitor to remind me, basically just to be a little bit more disciplined. It’s easy to get caught, when you see a stock running up into that mentality of, “I’m just gonna jump in. And I know it’s extended but it’s so strong I’m just gonna buy it.” And in a strong market that works, but in a choppy market, you end up buying tops and selling on the way back down, and it doesn’t work.

This month would be a lot better if I haven’t had a one, 5,000 dollar losing day. Fortunately I made that back on last Tuesday with 4,200 of profit, made back most of it anyways. But when you’re in a market where you’re kind of grinding long, 500, 800, 1,000 days, you can’t afford 5,000 losses. That puts you back five, or eight days, and we only have about 20 days a month. Really we have to be very disciplined to trade the best setups every single day.

So, today MOSY, I see it on the five minute chart, and you know what, we’ve traded this one several times in the last four or five days, and I’ve done pretty well on it. So, when I saw it flagging here, I thought, “You know what? First account to make a new high is my entry.” I jumped in, 7,500 shares right here. I got filled at I think 216, a little high, or 215. It pops up to a high of 222, and I was up about 400 bucks. So, I was up a bit on it, but obviously it didn’t take the profit off the table. Let me reset the audio for you guys in the chat. Every now and then it cuts out. But you guys can watch on Facebook Live also.

So, anyways … MOSY got in at 214, popped up to 222. I was looking for the break over 225, and then continuation up to 230, 240 maybe 250. So I didn’t sell it when I was only at 5 cents, I was looking for more. Ended up stopping out with a 47 dollar loss, which is fine. To take 7,500 shares with a profit potential at 1,500 bucks, and only lose 47 dollars is fine, that’s good, that’s good risk management. No profit on that one, next one was the ZN. And ZN was funny because it hit the high day scanner, and when I looked at it I was like, “Well, this is like a 45 million share float stock. It’s not our typical, stock that makes big moves. It’s just a little bit higher on the float.” Two dollars and 50 cents, so lets look at the one minute chart.

When this one first hit the scanners, it popped from 220 up to 250, and at that point I was like, “Wow, obviously just made a big move. But, I’m not sure that it’s going to continue higher. The float is a little higher than usual. So I’ll wait for the first one minute pullback.” You can see here we have this first red candle, but this didn’t actually form a pullback, that was at 953. The second candle went higher so, just sort of continuing higher, this isn’t a pullback. And then we have a red candle, and then a candle that finally pulls back a little bit. And a third candle, so now we’ve got a little bit of a pullback, and so I think this is where some of you guys got in for the first candle to make a new high on the one minute setup, at 264. I didn’t because this red candle at 953 sorta threw me off.

So anyways, we broke from 64 up to a high of 75, 10 cents. And then on the next candle, we came back down to 61. So it was like a little bit of a false breakout. And then another little pullback at 62. And then this candle made the new high, and all of a sudden it goes up to 80. But then you’ve got this red doji where it popped to 80, dropped back down to 70, and then it goes up to 89, and then to three dollars! And then it pulls back off three just for a second, and at that point I was looking at this and I was like, “The one minute was not very clean. I mean yes, it’s made a move here from 260 up to three dollars. But sort of two little false pullbacks that weren’t as clean as I expected them to be, this red doji on the way up. I think it would be better to wait for a five minute setup.”

So I didn’t get in right here, and then of course it goes from 293 up to 314. And I think this is sort of the power of a stock that’s easy to short, because [inaudible 00:06:38] thinking, “Oh look its up 30 percent, this thing’s got no news its gotta come back down.” Next thing you know it’s at 290 and they’re getting squeezed out as it breaks over three dollars. Breaks over three, squeezes up to 323. Maybe short seller is covering more than anyone else. 322, a little bit of a pullback here, and again at this point I was like, “Look, if I’m the guy that buys this at 320, after it was just at 260, and I lose money, I’m gonna feel like an idiot. Cause I’m buying it so extended. I gotta wait for a pullback.”

And so here you go, all of a sudden it goes from 220, up to 243, 260, 269! And I’m like, “You gotta be kidding me. We just ran a point without me.” Pulls back here at 68, pops up to a high of 75, to 388, and now I’m thinking, “This thing’s gonna go four dollars.” But again, think about traders who are short, who short at the beginning at 3, and then 320, thinking this is up for no reason at all, it’s gonna come back down. They’re getting squeezed as this goes higher and higher. Finally we get this red candle, the red candle at 1,018, it engulfs the previous screen candle. So it went up, and completely engulfed it, it was a bigger candle and it was red, which is a big sign of weakness, and it was on high volume.

That marks the top, now we start to pull back and consolidate. And so at that point I was like, “Okay, now we’re starting to form what could be the five minute setup.” I’m watching for the first five minute candle and make a new high, and that’s where I jumped in right here. As we started to curl up we were holding the support of the 20 moving average, I knew the high of the last minute candle was 59, and I anticipated that if we broke over the half dollar, there’s a good chance we would go back to 59, and then we’d be first five minute candle would be making a new high. That’s what happened as we popped up to a high of 73. So, that’s where I captured my profit. It didn’t end up being a sustained move and we ended up selling off.

So, I did the right thing, I think which is wait for a five minute setup. And on this particular trade it didn’t really pay off as well, as if I had just chased it with an entry at three. And you know, that’s the luck of the draw, that’s one of the things that can be really frustrating is that, you don’t always get rewarded in this market for doing the right thing. Sometimes you take the right setup, but the stock at that point is already up 65, 70 percent, it’s too extended, and it can’t hold those levels. And that was kind of what happened in this example.

Earlier this year we were seeing this a lot. We were seeing stocks in the two, 250 to three dollar range that would just go all the way up to like four or five dollars, and then come all the way back down. And they never gave you a pullback. And so during that time of the year, I was jumping in aggressively on the one minute setup, knowing that we probably wouldn’t get a five minute setup. Well that hasn’t really been the case as much here in April, May and June. Jumping in on the one minute setup is more often, gotten me in too high, and then I have to hold through the pullback, kinda hoping it comes back up, and when it doesn’t I end up taking a good size loss.

So that’s conditioned me to wait for five minute setups. But if we start seeing this on a more regular basis, one minute stocks, one minute setups just getting really extended, I’ll be much more inclined to go back to getting in at the one minute pullback even if it is a little extended, knowing that we’re kinda having that feeding frenzy. Traders are just looking for any opportunity to capture profit, and jumping on stocks that are moving, chasing them higher, and those are gonna create short opportunities that I don’t wanna miss.

So, ZN today was a good example of that. If we see more examples this week that would obviously be awesome, and really it only takes a couple of trades a week to hit the daily goal. Last week I finished with about five thousand dollars profit, and the majority of that was from that one trade on Tuesday where I made like, 3,800. And then I had another trade I think on that same day that made up the rest of those gains. But, in any case … just being focused on looking for that A quality setup is really important. And that’s what I’m gonna do for the rest of the week. And if that means on some days that I don’t trade at all, or I only trade once or twice, that’s fine. The focus has to be A quality setups knowing that if I take an A quality setup with 10,000 shares, and I make 30 cents, I’m up three grand. If I can do that three times in a week I’m gonna have a 9,000 dollar week.

I only have to trade a couple times if I’m focused on A quality setups, and I’m being aggressive on those setups. I really believe in quality versus quantity. That’ll be the focus here for the rest of the week, we’ve got two weeks left in June. To try to make the most of what’s been a little bit of a slow month, and that means for these next nine days of trading now that today is in the books, I’ve gotta be really laser focused, in the zone on that perfect entry. That setup where I can feel confident taking 10,000 shares minimum size. Now I may start with 2,500, but I don’t wanna take a trade that I don’t think I genuinely can make really good money on and that I wouldn’t feel comfortable with 10,000 shares.

MYO is a great example of that today. MYO, I was watching this at like 1,750 this morning and I asked myself, “Would you feel comfortable taking 10,000 shares of this.” And the answer was obviously, “No way. I could lose two points like that. The spread is like 40 cents, I’ll be down four grand as soon as I get in.” So on this one I would’ve only taken like 2,000 shares, definitely reduce my size. And even then I still would’ve been risking 800 dollars, and that’s when I said, “You know what? This just doesn’t have the risk reward for me to justify the trade. I certainly wouldn’t take it with big size and with small size it’s not even worth it. I better focus on something else that is worth my time.”

So that was the right decision on MYO, and it’s something I talked about earlier this month. One of the things I did last year in June, June was my best month of the year last year. And what I did was I told myself I was gonna do two things. I was only gonna trade A quality setups, number one. And number two, I was gonna trade double my position size on every trade. By doubling my position size, I of course was taking more risk. But, it inherently made me more selective about the stocks I was willing to trade because, double the risk just makes you more careful, you don’t wanna take a trade that you’re not totally confident on.

So as a result in that month I traded a lot less, but I made a lot more, because I was trading better quality setups. So when I put myself into my trader rehab when I was in Italy earlier this year, I was conscientiously bringing down my share size because I’ve gotten myself used to taking ten and 15,000 shares, and I was just being way too aggressive, and my losses were like five, or seven thousand dollars, and I was like, “I just need to pull things back, the market’s not behaving.” And even on setups that I thought were A quality, taking big size and then losing. And, so I was like, “I just need to scale back a little bit, the market’s not really being very easy for me and, I think I just need to slow down, clear the slate or whatever it is and then come back when I feel refreshed and get aggressive again.” And that’s kinda where I’m at now.

So today, average share size between 7,500 and 12,500 shares, that felt fine. I have no problem taking 25, 30,000 shares if I see a good setup. We just haven’t had that setup this month, yet. But, if I see it, and I can capture a dollar per share with 30,000 shares, that’s 30,000 dollars profit. My goal this year is to have a 30,000 dollar day. So far my best day is 22,000, which is good. But, the worst day I’ve ever had I loss 30 grand. I really wanna match that with a green day. So my best day will be equal to my worst day. Maybe I can even do better. T

hat might not happen here in June, I think what we really need is a hot sector, and that’s what we had through November, December, January, February, we had a really hot sector which was the shipping sector of all things, the cargo ships. DRYS, DryShips, EC, DCIX, GLBS, those are four or five of them. Earlier in 2015 we had some, or what is 2015 or, end of 2014? We had the Ebola stocks, were really strong. So, I’m waiting for that sector that will be really strong. Maybe from global events, like something like Ebola or it will be, the shooting in Ferguson, that brought a lot of volatility into the stocks, like Taser, and DGLY, Digital Ally, the maker of those body cameras that police officers wear.

So who knows what the [inaudible 00:16:11] might be, but that’s kind of what I’m waiting for is, some stock just to go from zero to, or two dollars to 30 dollars in three days. That’s what’s gonna spark this next round of momentum. I just didn’t expect that we would have to wait three months for that stock. Now ZN today, up 65, 70 percent, that’s fantastic. It’s a great opportunity and a great move. And it may spark more momentum through the rest of the week, it may. But, unless it continues for multiple days, it’s probably not going to be that stock that really brings a lot of momentum back into the market, I could be wrong. But, I think what we need is a multi-day, momentum, multi-day run to really get traders excited again.

So, anyways that’s kind of where we’re at right now. Sort of like, just in this treading water pattern until things pick back up, treading water being up to 1,200 bucks, which is fine, that’s a good day. And I’ll take what I can get right now. But definitely going to be excited when we start to see that big follow through again. We had it in November and December, we had it last summer, we had it in January and February and a little bit in March. But April, May and June, these last three months have been on the slow side. So, as I said last year at this time I was only up 47,000 dollars on the year, right now I’m up 150. So, it’s been a great start to the year, it kinda was a really great start, has slowed down for a couple months, and I’m just kinda waiting for it to pick back up and hopefully that’ll be soon.

But, in the meantime I just gotta continue to focus on best quality setups. And that might mean I don’t trade every single day. Obviously I wanna trade every day, I’m a day trader. But, if we don’t have the opportunities, we don’t have the opportunities, I can’t force it. And when I force it, that’s when I get myself into the position to have a big draw down. So, obviously wanna avoid that as much as I can. I can’t really afford to have those big red days when I don’t have the big green days to match them.

Alright so, that’s about where we’re at here today. It’s coming up on lunch hour, so I’m done for the day, throwing in the towel. I put in my two hours, and now I’m tapping out and I’ll be back at it first thing tomorrow morning, 9 A.M. pre-market analysis and hopefully we see some good opportunities tomorrow. Mondays, Tuesdays and Wednesdays, the days where I usually do the best. So, fingers crossed that we have some more good trades tomorrow and Wednesday. Okay so, that’s it for now and I will see you all, those of you in the chat room, first thing tomorrow morning. Those of you on Facebook, I’ll see you tomorrow at lunch time, and those of you watching on YouTube, I’ll see you I guess for our pre-market YouTube Live around, 9 A.M. Okay, I’ll see you guys soon. Bye!

Oh hey, I didn’t see you there. Well I was just working on the dream board for my next home run trade, hopefully it comes soon. Until then, make sure you subscribe to get e-mail alerts anytime I go live, or upload new videos. Until then, happy surfing!