Warrior Trading Blog

+2.8k Trading a Pharma Stock with News & Strong Daily Chart

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+2.8k Trading a Pharma Stock with News & Strong Daily Chart

 

 

Okay, so for those of you watching on YouTube, just jumping in here for the midday market recap. Like I said, I was fully prepared not to take any trades today. I wasn’t seeing anything that was very good on the gap scanners. If I pull back the charts here and show you the gap scanner from this morning, and then I go right-click and I choose, let’s see, historical time, and I scanned at 8:46 a.m. This is what the scanner looked like, it was all heavier float stocks, lots of white. And this is not the type of stuff that I like to trade. I look for the yellow and there wasn’t much in the way of yellow on the scan today. That’s how I knew right away pre-market, that this is not gonna be necessarily my go-to day. Probably not the day that I would have a really big winner.

But then, all of a sudden we had DMPI hit the scanners. Now when it first hit the scanners it was at $1 … let’s see, it was at $2.15, and I was like, “Okay, you know, $2.15, it’s a little on the cheap side, it’s just starting to pop up, it looks interesting but I’m not sure if there’s gonna be really anything there to trade.” But I checked the headlines on it. Why? Because there were 2, 3 things that I liked right away. The first thing I liked was the daily chart. This had room up to $2.47, which is the 50 moving average. Above that level, room to $3.75, which was the 200 moving average. And we have this little gap right here on the daily chart from about $3.20 to $3.75 at the 200, and the gap goes all the way up to $4.01.

So when I saw that, I saw this has a good daily chart, number one. Number two, I can tell just by looking at the name of the stock it’s pharmaceuticals and the IBB has been really strong. So I’m thinking sector strength, this is a stock in a really strong sector right now. Look at the IBB, from $2.94 all the way up to $3.21 in the last four trading sessions; it’s a really big move. So it has a strong daily chart, it’s a pharmaceutical stock so it’s in the hot sector, and the float is, I think it was 9 million shares so it’s a relatively low float stock. Now, the next thing I need is news because that’s what got me yesterday on DRAM. I jumped in DRAM and there was no news on it. Having said that, ZN on Monday had no news and went from $2 to $5, so it doesn’t mean you can’t have a great trade without news, but certainly helps to have a headline.

So I go onto MarketWatch and I’m like, “All right, what’s the headline on this? Is there anything on this today?” And I’m like, “Please let there be news on this,” because that’s gonna give me a reason to take this trade. Right now it’s looking pretty good, it’s got three out of the four criteria. I check and I see, let’s see, “Late stage study to lead product candidate VAL-083,” and this was a clinical trial, phase 3 clinical trial. So I’m like, “Okay, there’s news, that’s what I’m looking for.” So now we’re starting to knock off pretty much everything on my criteria of what I look for in a trade. The one thing that we are lacking is overall strength in the small-caps. The small-caps, as of the last month or so, have been a little on the weak side. A lot of the ones that pop up end up fading back down, and that is what happened on this. But, when we had that combination of the news, the chart, the sector, and everything else, I said, “All right, I’m just gonna take a stab at this.”

Now here is my concern: when it first hit the scanners, there was only like 38 … or there was 38,000 shares of volume on this candle. There was only about 89,000 shares of volume total. So I was like, “This is a very thinly traded stock.” This is not something I would feel comfortable putting out on alert on. I don’t really like to do that, I’d rather see more volume on it. So I was like, “All right, well you know what I’m gonna do? I’m gonna start taking a position, I’m gonna start accumulating a position. And if other people see this and they like the same setup, they’ll do the same.” So I start accumulating a position at $2.30, adding at $2.40, and adding at $2.56 when we had this micro-pullback. So this is one of the ones where I started adding as soon as I saw it popping up and it seemed strong. I started with 2,500 shares, adding another 2,500, adding another 2,500, adding another 2,500, and on this pullback here adding another 5,000. I had 17,500 shares with an average of $2.34.

So my average was right down in this area, $2.34, and as we popped up to a high of $2.73 I was up 40 cents with 17,000 shares. That’s nearly $7,000 in profit, but I didn’t want to sell there because I thought this could have been the one trade that could make my month. If this, on the first pullback — which I was totally fine to hold through this first pullback right here — had gone up on this candle and broken the high of 73 and gone into the 80s, $2.80, $2.95, $3, we didn’t have any resistance until $3.20 and then $3.75. This is a trade that potentially I could have made a full point per share, which would be $17,500, potentially. And with an average at $2.34 I didn’t feel that holding through this pullback was giving up profit necessarily. I mean, yes I gave back about $3,000 in profit from the high of day to the low of this pullback, and this is where I ended up stopping out was on this red candle as we retested the low of this pullback right here.

This was the problem that … this is where I stopped out, right down here. But had this gone up to $2.73, $2.80, $2.85, $3, which is what we would normally expect of a one minute pullback, this would have easily been a $10,000 trade. $12,000, $15,000 not out of this world. And considering the fact that last month I only finished with $17,000 in profit, if I could hit that with one trade right now, that would totally turn around my month.

I was being a little more aggressive on it, but I think I had good reason to be more aggressive because it met all of the criteria that I look for for a home run trade. So as it came back down I was very quick to bail out at $2.50 rather than let it break back down below the half dollar and stop me out break even. So as a result I’m taking $2,797 profit on this trade and that’s not a bad day, I mean it’s really not. That’s … that I’m okay with. I’m definitely not upset that I didn’t sell for $5,000 or for $6,000 because I know if this had gone, on that one minute pullback, up to 85 and 90 I would have been like, “Why? This had everything I look for. Why did I sell it for only 30 cents? That was stupid.” You don’t see an A quality setup all that often, so when you have one you want to really, you want to try to make the most of it.

So anyways, that was my trade on DMPI. Obviously it didn’t end up being the big trade that I thought it would be, and I think that’s a sign of the market that we’re in right now. Remember earlier this year, and also last year, we were in a market where when a stock like DRYS would start squeezing, all of a sudden we’d have 3, 4, 5, or 6 other stocks that would start popping up. And it was just like sympathy momentum, it was almost like a feeding frenzy. You have one stock go crazy and get halted on a circuit breaker, and then another one gets halted on a circuit breaker, and then another one. And what is that? It’s fear of missing out, it’s FOMO. It’s collective traders all around the world seeing these opportunities and jumping in this, and jumping in that, and jumping in the next one, and that created an opportunity where we were able to be incredibly profitable; $70,000 for me in the month of February, $50,000 in the month of January.

So I, of course, am waiting for that to happen again. If this had been one of those days where we had that feeding frenzy going on, I think this would have easily gone to $3, maybe $3.50, and I pretty easily would have made $10,000 on it at a minimum. So I’m setting myself up for these trades. Now it may be a couple more weeks until we start to see really good follow through, but I’ll be there, ready to position myself aggressively when I see that setup. And I will have that trade that gives me that $10-$15-$20,000 winner like I had earlier this year, it’s just right now we’re not in a market that’s giving those up very easily.

All right? So that’s about it for today. I didn’t get in at $2.20, I started adding at $2.30. $2.30, $2.32, or maybe it was $2.28, but not $2.20. It was as it was popping up over $2.25, so I think it was $2.28 that I first got in. But anyways, so some solid, one solid trade today and that’s all it takes to hit your daily goal really, so definitely pleased with that. I’m hopeful that we’ll have a decent trade, decent opportunities again tomorrow. Today’s gains gets me out of the hole from yesterday. So my week is not the $5,000 profit that I was hoping it would be, but we’ll see. Maybe I’ll have something on Friday, maybe not, maybe I’ve gotta wait until next week. But of course, if I have just one trade any time in the next five days that has this potential and actually does what I think it’s gonna do, that could be my $10,000 or $15,000 winner, and that one trade can completely turn around your month.

So I haven’t lost hope that this month could finish in pretty good shape, but it really just depends on what the market’s willing to give me. And the reality is, if it doesn’t happen in the next five days it’s not a big deal. If it happens on day six, that’s fine. If it happens on the first day of July, or the second, third, fourth, fifth day of July, that’s fine too. I’m here and ready, it’s just a matter of kind of that perfect storm coming together; the market being strong, strong catalyst, strong sector, hot sector, maybe global events, and that creates the opportunity. So I’m still in this kind of grinding pattern. Yesterday was a step back, today was a step forward, step back, step forward, step back, step forward. I’d like to get out of that oscillation and really start moving up a bit more, but like I’ve said, it’s … I’m a little bit limited in what I can do in this market without deviating away from my core strategy. If I start trading sub strategies and being more aggressive on reversals, or start branching into the higher priced stocks that’s fine, but my accuracy will decline because I’m not as good in those. And then that might turn into, instead of grinding, starting to go down in profits because those aren’t the stocks I usually hit home runs on.

Anyways, that’s about it for this morning here as we come into the lunch hour. All right, so I hope you guys did well this morning, and I will see you all first thing … those of you in the chat room I’ll see you first thing tomorrow morning. All right. Those of you on Facebook and on YouTube, hopefully I’ll see you at 1 p.m. in our webinar, which will be in about one hour. Okay? So I’ll see you guys soon. Thanks everyone.

Oh hey, I didn’t see you there. 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 email alerts any time I go live or upload new videos. Until then, happy surfing.